OFFER AND ACCEPTANCE-CIMA


OFFER AND ACCEPTANCE

The particular significance of offer and acceptance is that

a)       new terms cannot thereafter be introduced into the contract unless both parties agree; and

b)       the terms of the contract appear from the offer and acceptance rather than from , unexpressed intentions of the parties.

Requirements OF A Valid OFFER

1.An offer is a definite promise to be bound on specific terms. It cannot be vague.

case: Gun thing v Lynn 1831

The offeror offered to pay a further sum for a horse if it was lucky’

Held: the offer was too vague.

However, if an apparently y2gue offer can be made certain by reference to the parties’ previous dealing or the customs of the trade, then it will be regarded as certain. This point is taken in Chapter 8 on terms of the contract.

2. An offer must be distinguished from

a)       the mere supply of information;

b)       an invitation to the other party to enter into negotiations; or

c)        an invitation to make an offer.

3.Only an offer in the proper sense (made with the intention that it shall become binding when accepted) may be accepted so as to form. a binding contract.

Case: Harvey v Facey 1893

A telegraphed to B”will you sell us bumper hall pen? telegraph lowest cash price. ”B replied “lowest price for bumper hall pen 900”,A telegraphed to  accept what he regarded as an offer  B made no further reply.

Held: B’s telegram was merely a statement of his price if a sale were to be agreed, It Was not an offer which A could accept. No contract had been made.

3.but if, in the course of negotiations for a sale, the vendor states the price at which he will sea, that statement may be an offer which can be accepted.

case: Bigg v Boyd Gibbons 1971

X in the course of correspondence rejected an offer of 20,000 by y and added `for a quick sale I would accept 26,000 …, if you are not interested in this price would you please let me know immediately’ (so that X might open negotiations with another potential purchaser). y accepted the offer of f 26,000 and X acknowledged his acceptance stating that he had given instructions for the sale to his solicitor.

Held: in this context X must be treated as making an offer (at f 26,000) which Y-had accepted. .

4.To display goods in a shop window or on the open shelves of a self-service shop (with a price

tag), or to advertise goods for sale is to invite customers to make offers to purchase, or an ‘invitation to treat’. It is not an offer to sell case: Fisher v Bell I961,a shop keeper was prosecuted fo5 offering for sale an offensive weapon by exhibiting a flick knife in his shop window.

Held: ‘the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale.’

Case: Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) 1952 Certain drugs containing poisons may only be sold under the supervision of a qualified pharmacist.’ It was alleged that this rule had been broken by Boots who put supplies of these drugs on open shelves in a self-service shop. Boots, however, contended that there was no sale until a customer brought the goods which he had selected to the cash desk at the exit and offered to buy them. A qualified pharmacist was stationed at this point.

Held: Boots were correct in their analysis of the situation. The court commented that if it u were true that a customer accepted an offer to sell by removing goods from the shelf he could not then change his mind and put them back; it would be breach of contract, plainly neither . : Boots nor their customers intended’ such. a, result.

5.The use or absence of the word offer’ u not conclusive. For example, a. company is said to make an offer’ of its shares when it publishes a prospectus (Companies Act 1985 s744) but this is in fact an invitation to the public to make offers. the company has only a limited number of shares available and cannot intend to allot whatever number the public may apply for. In addition it has already been shown that an offer may be made although it is expressed as a willingness to accept as in Bi r Boyd Gibbons).) It may therefore be difficult to distinguish between an offer and an invitation to treat since the distinction-depends on the criterion of intention.

6.An offer may only be accepted by a person to whom the offer has been made. But it is Possible to make an offer (which may be in any form) to the members of a group or even to the public a large for acceptance by those persons who wish to do so.

Case: Carlill v Carbolic Smokeball Co 1893

The manufacturers of a patent medicine published an advertisement by which they undertook to pay `£ l00 reward …, to any person who contracts . influenza, colds, :… after having used the smoke ball three times daily for two weeks.’ The advertisement added that £ 1,000 had beer, deposited at a bank `showing our sincerity in this matter! C read the advertisement, bought the smoke ball at a chemist’s shop, used it as directed for eight weeks and while doing sc contracted influenza; she then claimed her £ 100 reward. In their defence the manufacturer! argued that the offer was so vague that it could not form the basis of a contract; it specified no period of immunity after, use;

  1. it was mere sales promotion, or ‘puff, not intended to create legal relations, -
  2. it was not an offer to make a contract which could be accepted since it was offered to the whole world;
  3. C had not supplied any consideration; and
  4. C had not communicated to them her acceptance of their offer

Held: it was an offer to the whole world which C could accept and had accepted. Points (2) and (4) are explained in later chapters. Point (1) did not succeed since the court found that t terms of the offer were sufficiently clear – they were not vague

TERMINATION OF AN OFFER              .

1.An offer may only be accepted (w as to make a contract) while the offer is still open. An offer is terminated (and can no longer be accepted) in any of the following circumstances:

a)       if it has expired by lapse of time,

b)       if the offeror has revoked it;

c)        if the offeree has rejected it:

d)       if the offer dies or (usually) if the offeror dies.

2.An offer may be expressed to last for a specified time.It then expires at the end of that time. If however, there u no express time limit it expires after a reasonable time. What is reasonable depends on the circumstances of the case, on what is usual and to be expected.

case: Ramsgate Victoria Hotel Co v Montefiore 1866.

M applied to the company for shares and paid a deposit to the company’s bank. Five months later the company sent him an acceptance by issue of a letter of allotment. M contended that his offer ‘had expired and could no longer be accepted.                               .

Held: M’s offer was for a reasonable time only and five months was much more than that. The offer had lapsed.

3.The offeror may revoke his offer at any time before acceptance. If he undertakes that his offer shall remain open for acceptance for a specified time he may nonetheless revoke it within that time, unless by a separate contract (an option agreement) he has bound himself to keep it open for the whole of the specified time.

case: Routledge v Grwit 1828

G offend to buy R’s house, requiring acceptance within six weeks. Within the six weeks G withdrew his offer.

Held: as there was no option agreement (for which consideration must be given), G could revoke his offer at any time.

4.Revocation may be an express statement to that effect or by an act of the offeror indicating that he no longer regards the offer as in force.

But however he revokes it, his revocation does not take effect (and the offer continues to be available for acceptance) until the revocation is communicated to the offer by the offeror or by any third party who is a sufficiently reliable informant

case: Byrne v Van Tienhoven 1880

The offeror was in Cardiff: the offeree in New York. The sequence of events was:

1 October-  Letter of offer posted in Cardiff.

8 October- Letter of revocation posted in Cardiff.

11 October- Letter of offer received in New York and telegram of acceptance sent; this was confirmed by letter posted on 15 October.

20 October-Letter of revocation received in New York. The offeree had meanwhile re-sold the a contract goods.

Held: the letter of revocation could not take effect until received (20 October); it could not revoke the contract made by acceptance of the offer on 11 October. Simply posting a letter does not revoke the offer until it is received.

Case: Dickinson v Dodd’s 1876

A, on 10th June, wrote to B to offer property for sale at £ 800, adding `This offer to be left open , until Friday 12 June, 9.00 am.’ On Thursday I 1 June B delivered a letter of acceptance to an I at which A was no longer residing so that A did not receive it. A later sold the property to another buyer. C, who had been an intermediary between A and B, informed B that A               . la to someone else. On Friday 12 June, before 9.00 am, C delivered to A a duplicate of B’s letter of acceptance.

Held: A  was free to revoke his offer and had done so by sale to a third, party. B could not ~ the offer after he had learnt from a reliable informant (C) of A’s revocation of the offer to B.

5.An offer may be rejected outright or by a counter-offer made by the offeree. Either form of rejection terminates The original offer. If a counter-offer is made the original offeror may , accept it, but if he rejects it his original offer is no longer available for acceptance.

Case:Hyde v Wrench 1840

W offered to sell property to H for £ 1,000. H made a counter offer of £ 950 which W rejected three weeks later. H then informed W that he (H) accepted the original offer of f 1,000.

Held: the original offer of £ 1,000 had been terminated by the counter offer of £ 950; it could not therefore be accepted.

6.Death of the offeree terminates the offer. Death of the offeror terminates the offer unless the offeree accepts it in ignorance of the offeror’s death, and the offer is not of a personal nature.

Case: Bradbury v Morgan 1862

A offered to guarantee payment (up to f 100) by X in respect of goods to be supplied by B on credit to X. A died and B, in ignorance of his death, continued to supply goods to X. Held: A’s offer was a continuing commercial offer which B had accepted by supply of goods after A’s death.

REQUIREMENTS OF A VALID ACCEPTANCE

1.Acceptance may be by express words or by action (as in Carlill’sCase). It may also be implied from conduct.Case: Brogden v Metropolitan Railway Co 1877.For many years B supplied coal to M. He suggested that they should enter into a written agreement and M’s agent sent a draft to him for consideration. B made some alterations and additions and returned the amended draft to M’s agent indicating that he (B) approved it. M’s agent took no further action on it. B continued to supply coal to M and the parties applied to their dealings the special terms of the draft agreement. But they never signed a fair copy of it. B later denied that there was any agreement between him and M.

Held: the draft agreement became the contract between the parties as soon as M ordered and B supplied coal after the return by B of the draft to M’s agent.

2.There must, however, be some act on the part of the offeree to indicate his acceptance. Mere passive inaction is not acceptance, Case: Felthouse v Bindley 1862.

After previous negotiations had produced an agreed price P wrote to J offering to buy a horse for £ 30.75, adding `If I hear no more about him, I consider the horse mine at that price’. J intended to accept but did not reply and owing to a misunderstanding the horse was sold at auction to someone else. P sued the auctioneer for conversion (misappropriation) of P’s property.

Held: there could be no acceptance by silence in these circumstances – the offeror cannot impose acceptance merely because the offeree does not reject the offer.

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.3 The offeror may call for acceptance by specified means. Unless he stipulates that this is the only method of acceptance which suffices, the offeree may accept by some other means (if it is equally advantageous to the offeror).

Case: Yates Building Co v R J Pulleyn & Sons (York) 1975

The offer called for acceptance by registered or recorded delivery letter. The offeree sent an o:dinaryUetter wh;:h atriced without delay.

Held: the offeror had suffered no disadvantage and had not stipulated that acceptance must be made in this way only. The acceptance was valid.

In Tinn v Hoffman 1873 it was said that a telegram or even a verbal message could be sufficient acceptance of an offer inviting acceptance ‘by return of post’.

Use of the post

4.The offeror may expressly or by implication indicate that       expects acceptance by letter sent through the post.

The acceptance is then complete and effective as soon as a letter (if it is correctly . addressed and stamped and actually put in the post) is posted„ even though it may be delayed or even, lost altogether in the post.

Case: Adams v Lindsell 1818

L made an offer by letter to A requiring an answer ‘in course of post’. The letter of offer was misdirected and somewhat delayed in the post. A posted a letter of acceptance immediately. But L assumed that the absence of a reply within the expected period indicated non-acceptance and sold the goods to another buyer.

Held: the acceptance was made ‘in course of post’ (no time limit was imposed) and effective when posted.

5.The intention to use the post for communication of acceptance may be deduced from the circumstances – for example, if the offer a made by post – without express statement to that effect.

Case: Household Fire and Carriage Accident Insurance Co v Grant 1879

G handed a letter of application for shares to the company’s agent in Swansea with the intention that it should be posted (as it was) to the company in London. The company posted an acceptance (letter of allotment) which was lost in the post.

Held: the parties intended to use the Post Office as their common agent and delivery of the letters of allotment to, the Post Office was acceptance of G’s offer.

6.In a case such as Grant’s, the offeror may be unaware that a contract has been made by acceptance of his offer. If that possibility is clearly inconsistent with the nature of the transaction (and of course if the offeror so stipulates), the rule (complete acceptance by posting) is excluded and the letter of acceptance takes effect only when, received.

Case: Holwell Securities v Hughes 1974

Hughes granted to HS an option to purchase land to be exercised `by notice in writing’. A letter giving notice of the exercise of the option was lost in the post.

Held: the words’ notice in writing’ must mean notice received by the vendor: hence notice had~ not been given to accept the offer (i.e the option).

7.Unlike revocation of an offer, which can be communicated to the offeree by any reliable person (as u Dickinson v Dodds), acceptance of an offer may only be, made by a person authorised to do so.

Case: Powell v Lee 1908

P applied for a job and after a series of interviews the management decided to give it to him; however, no decision was made as to how the appointment was to be communicated. Without authorisation, P was informed of the appointment. Later, it was decided to give the post to someone else. P sued for breach of contract.

Held: since communication of acceptance was unauthorised, there was no valid agreement and hence no contract;

AGREEMENT WITHOUT OFFER AND ACCEPTANCE

1. Offer and acceptance are merely a means of establishing the fact of agreement. But it is doubtful whether an agreement effected by any other means suffices to make a contract This view’ is supported by the House of Lords decision in Gibson v Manchester City Coc-tci11979 when the House over-ruled the Court of Appeal, disagreeing with Lord Denning who had said `there is no need to look for strict offer and acceptance. You should look at the correspondence as a whole and at the conduct of the parties.’ In general therefore offer and acceptance are essential to make a contract.

2 Problems arise in this respect in the following circumstances:

(a)reward cases;

(b) cross-offers;

(c)collateral contracts.

These are discussed in sequence below.

3.If A offers a reward to anyone who finds and returns his lost property and B, in ignorance of the offer, does in fact return it to him, is B entitled to the promised reward? ‘there is agreement by conduct, but B is not accepting A’s offer since he is unaware of it. There is no contract by which A is obliged to pay the reward to B (R v Clarke 1927).

4.However, acceptance may still be valid even if the offer was not the sole reason for it being  made.

Case: Williams v Carwardine 1833

A reward was offered to bring criminals to book. W, an accomplice in the crime, supplied the information, with knowledge of the reward but moved primarily by remorse at her own part in the crime.

Held: as the information was given with knowledge, the acceptance was related to the offer despite the fact that remorse was the prime motive.

5.after an inconclusive discussion, X writes to offer to buy property from Y and Y at the same time writes to offer to sell the property to X on the same terms, these ‘cross offers‘ establish agreement, but neither offer has been accepted. It has been held (Tinn v Hoffman 1373) that cross offers cannot constitute a contract, although this was a split decision and may still be challenged.

6.If there are two separate contracts by offer and acceptance between A and B and A and C on terms which involve some concerted action between B and C, there may be a contract between B and C. “this is explained as an instance of ‘collateral contract‘(`preliminary’ would be clearer). In contracting with A, B and C look forward to the possible relationship between them (B and C) which will result, and are deemed to offer and accept the terms of the relationship – there is a contract between B and C despite the absence of direct communication between them.

case: Clarke v Dunraven 1897

B and C were competitors in a yacht race and each (by his entry form) agreed with the race organiser (A) to pay ‘all damages’ caused by fouling. B fouled C’s yacht and caused her to sink. Held: there was a contra between B and C under which B must pay for the damages to C’s yacht.

Case: Shanklin Pier v Detel Products 1951

B gave assurances to A, the owner of a pier, that paint manufactured by B would be satisfactory and durable if used in repainting A’s pier. A, in his contract with C for the repainting of the pier, specified that C should use B’s paint. The paint proved very unsatisfactory and the remedial work post £4,127.

Held: the contract between A and C requiring the use of B’s paint (to be purchased and supplied by C) was the consideration for a contract between A and B, by which B guaranteed that B’s paint was of the quality described.

SUMMARY

Offer and acceptance as prerequisites of a binding offer are frequently the subject of examination questions. You must be sure to be aware of their significance (no new terms may be inserted after acceptance, and the terms included in the promises are held to be binding) and of the rules surrounding them – communication and termination are particularly important.