FORMATION OF CONTRACT

OFFER AND ACCEPTANCE

PART DEALING
“OFFER ”
CHAPTER 2
PAGES 47 - ONWARDS
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CASE LAW - NOTES
 LECTURE OUTCOMES
 Explain - relevance of the rules of offer in the Law of
Contract.

 Explain what is meant - offer & its legal effect.

 Set out the requirements - valid offer.

 Explain the impact of the CPA 68 of 2008 - offers

 Explain the circumstances in which an offer terminate/s.

 QUESTIONS TO PONDER

You go to the supermarket to buy your groceries, the

question in this senario, is who make/s the offer and
who accepts the offer.
 Is it the supermarket that makes the offer,
Is it you who make/s the offer,
 Or is it an invitation to do business,
 Or is it addressed to you only,
 Or is it to the general public,
Or is it addressed to pensioners only
 Who is the offeror and who is the offeree.
 WHAT IS AN OFFER?
1) Declaration of intention by the offeror to the offeree,
indicating the performance that s/he is prepared to make &
terms on which s/he will make it – Hutchison.

2) Or an invitation from the offeror to the offeree to create

legally binding obligations.

3) Is a proposal by one person of certain terms of performance

- simply a proposal to contract - Wille’s.
FORMATION OF A CONTRACT BY COURTS

Courts often use OFFER & ACCEPTANCE (as a form) to

determine, for example;

 WHETHER - contract has been formed.

 WHEN & WHERE - contract was concluded.

 Doesn’t mean that all contracts can be broken down into

OFFER & ACCEPTANCE - For example – deed of
donation, surertyship, cession & marriage????????
 FORMS - OFFER

Offer — Offeror
(made to a specific Auction - Makes an
person/s with the offer to a particular
purpose of eliciting class of persons
response) Offer of reward—
Made to the
public at large
 LEGAL EFFECT OF AN OFFER

An offer can’t in itself give rise to legally binding

obligations;

PRACTICAL EFFECT: places the offeree in a position

whereby a unilateral act of acceptance, s/he can call the
contract into being.

Until such acceptance, the offeror can withdraw the offer.

Exception: OPTION CONTRACT requires that the offer be

kept open.
 REQUIREMENTS FOR A VALID
OFFER
 THE OFFER MUST BE FIRM

 THE OFFER MUST BE COMPLETE;

 THE OFFER MUST BE CLEAR & CERTAIN;

REQUIREMENTS FOR A VALID OFFER
1) THE OFFER MUST BE FIRM

 Must be made with animo contrahendi - the intention

that its acceptance will give rise to a binding contract - or
intention of being accepted by the person/s.

 Without this intention, there is no valid offer - Offer

made as a joke – not an offer.

 An invitation to negotiate or a tentative declaration of

intent??? - I must first ask my wife if I can sell / get
permission
REQUIREMENTS FOR A VALID OFFER

2) THE OFFER MUST BE COMPLETE;

 All the material terms should be set out in the offer.

 If there are still outstanding issues to be negotiated, no

contract exist yet.

 ‘NOTHING IS AGREED UNTIL EVERYTHING IS

AGREED’

 In complex negotiations - the preliminary agreement may

constitute a binding contract if that - intention of the parties.
REQUIREMENTS FOR A VALID OFFER
3) THE OFFER MUST BE CLEAR & CERTAIN;

 Offer must be “sufficiently certain” ie ascertainable.

 Must be possible to determine the content of the obligation.

 If the offer is vague – in that it fails to provide a reasonably clear

indication of what the offeror had in mind — it may be void for

vagueness

 None acceptance cannot create binding obligations.

 NOTE - Offer must be addressed &
communicated to the offeree
 OFFER CAN BE ADDRESSED TO A PARTICULAR PERSON,
YOU & I

 CLASS OF PERSONS, GROUPS, JURISTIC PERSONS &

ORGANISATIONS

 PUBLIC - for example - REWARD, ADVERT & AUCTION

SALE
 OFFERS TO THE PUBLIC
Offers to the public = eg reward, advert & auction sale:

i)Present/s various legal problems — void for vagueness, no

animus contrahendi (mere invitation to negotiate).

ii)Offer can be addressed to the public or segment & a

contract is concluded with persons who respond to the offer.

iii)Relevant case law: Carlill v Carbolic Smoke Ball Co

[1893]1 QB 256, Steyn v LSA Motors 1994 (1) SA 49,
Bloom v ASW, Crawley v Rex
 ADVERTISEMENT/S – IS THIS AN
OFFER?
General rule: merely an invitation to do business – Crawley v
Rex 1909 TS 1105.

Extended to tenders, display of goods in shops & notices in

shop windows.

Correct position: depends on whether the offer meets the

requirements eg INTENTION

The danger that the offer will be accepted by more customers

than the shopkeeper can supply is curtailed by the phrase “while
it lasts” / “while stocks lasts” / “while the sale lasts”
Goods on display in shops are generally not
offer/s but an invitation to do business.
The customer makes an offer to purchase the goods. The trader
will decide whether to accept the offer. [SA follows English
law-matter hasn’t been decided].
 CURRENT POSITION

In some instances an advert can amount to an offer:

Carlill v Carbolic Smoke Ball co [1893] 1 QB 256

 Discussion of the case

 Carlill v Carbolic Smoke Ball Co

 The advertisement constituted an offer being made to any

member of the public.

 The offer was accepted by the plaintiff when complied with

the conditions mentioned in it.

 Held, in unilateral contracts there is no requirement that

the offeree communicates an intention to accept, since
acceptance is through full performance.

 Court decided in favour of the Plaintiff.

 Consumer Protection Act 68/2008

 The offer must be plain & understandable – ie to the class

of persons to which it is being made - s22

[Consumer with average literacy skills & very little

experience could be expected to understand the content,
significance & import of the notice.]

 The offer must disclose whether goods are reconditioned or

gray market goods (S25) - ie remade/rebuilt or
reconditioned.
 Consumer Protection Act 68/2008

NEGATIVE OPTION MARKETING: S31

Supplier may not promote any goods or services on the basis
that the goods are to be supplied unless the consumer declines
eg monthly magazine.

Induces a consumer to enter into a contract - Such

agreements are void.

Right to cooling off [s16]—consumer can rescind contract

within 5 days were goods have been marketed directly. See
the impact of catalogue marketing.
Bait marketing [falls under advertisements]

Bait marketing is the practice of luring customers to a shop

or a service for a non-existent special offer.

CPA (S30) proscribes bait marketing.

A consumer is misled or deceived as to the actual

availability of the products.

Consumers end up buying costly goods.

 BAIT MARKETING (S30)

 A supplier must not advertise any particular goods or

services as being available at a specified price in a manner
that may result in consumers being mislead in any respect
relating to the actual availability of those goods or services.

 A supplier must make the goods or services available at the

advertised price.

 Inserting ‘while stock lasts’ protects the supplier.

 AUCTIONS
 Simple auction: bidder makes the offer to the auctioneer —
can accept/reject- must comply with - s45 (3) of CPA.

 Auctions subject to conditions (1) Auction with reserve i.e.

reserve price is set — thing sold to the highest bona fide
bidder provided the offer is not lower than the reserve price

The auctioneer is considered to make invitations to make

offers.

The bidder then makes an offer to purchase.

 AUCTION/S – WITHOUT RESERVE

(2) Without reserve — article is sold to the highest bona

fide bidder —

Bona fide bidder is a person who bids in good faith.

Auctioneer is considered to be making an offer to sell to

the highest bidder by calling for bids.
EFFECT OF AUCTION CONDITIONS ON
- CONTRACT
 The conditions may be advertised beforehand ie newspaper or
catalogue.

 Or maybe announced at the auction itself.

 What happens when auctioneer changes the conditions? Can he

be held liable based on contractual liability?

 First contract: contract binding bidder to the auction conditions.

 Second contract — is the substantive contract of sale.

 TERMINATION OF AN OFFER
1) Revocation — offeror whithdraws offer - Has to be communicated to the
offeree - What happens when the offer is accepted before revocation
reaches the offeree? – TO DO SOME THINKING?????????????

2) If offeror/offeree rejects the offer, the offer falls away - counter-offer

constitutes rejection. It must be communicated to the offeror.

3) Expiry/effluxion of the prescribed time or reasonable time. Offer lapses

automatically.
4) Death of either party — an offer doesn’t create obligations — doesn’t
affect the estate of the deceased.

5) Loss of legal capacity to act.

6) Acceptance of offer by offeree. The offer terminates.

 WORSHEET – 2022.
John offers to sell his car only to Jane. Does a valid
contract of sale arise in the following circumstances?
1(a) Where Jane accepts the offer, but the parties agree to
determine the price at a later date.
(b) Where the price is determined, but the offer is jointly
accepted by Jane and Fred.
(c) Where the price is determined and Jane accepts the offer,
but requires that John install a new compact disc player in the
car.
2. Mention any of the requirements relating to an offer.