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Contract Law - Offer and Acceptance (1) - Coggle Diagram
Contract Law - Offer and Acceptance (1)
4 requirements for a contract to be formed
Existing agreement
Certain and complete
Intention to create legal relations
Consideration
Objective test of intention
Looks at what a reasonable person would have understood the party’s intention to be
Smith v Hughes (1871) / Spencer (1973)
Depends on context
Addressee objectivity: standpoint of the person to whom the relevant words or acts adressed to have understood what the other to mean (reasonable person at the receiving end)
Avoidance of evidential difficulties, fraud, certainty
Offer
An offer is an indication of a willingness to enter into a contract with the party to whom it is addressed as soon as the addressee signifies acceptance of the terms.
terms proposal + expression of willingness to be bound as soon as the offeree accepts (every form)
To be effective,
an offer must be communicated to the offeree.
It follows that there can be no acceptance in ignorance of an offer.
Offer and invitation to treat
expression of willingness to enter into negotiations with a view to potentially reaching an agreement at a later stage. :red_cross: intention to be bound upon acceptance.
Gibson v Manchester City Council [1979] :red_flag:
Wording of the statement not conclusive
Particular situations, distinction between the 2
Display of goods for sale
Pharmaceutical Society of GB v Boots Cash Chemists [1953] :red_flag:
Advertisements
Bilateral contracts: advertisement which is intended to lead to the making of a bilateral contract is an invitation to treat, not an offer
Partridge v Crittenden [1968] :red_flag:
Unilateral contracts might count as offers
Carlill v Carbolic Smike Ball co Ltd (1893) :red_flag:
Automatic vending machines
Thornton v Shoe Lane Parking Ltd [1971] :red_flag:
Auctions
An advertisement that an auction will take place on a specific date is an invitation to treat, not an offer to hold it
When the auctioneer invites bids to be made = invitation to treat.
The bidder makes an offer.
The highest bid represents the final offer.
Hammer on the table, she accepts the final offer and is taken to have rejected all preceding offers.
= :check: contract is formed.
Ad without reserved
Barry v Davies [2000] :red_flag:
Tenders
Gen rule, a statement inviting tenders for a particular project or for the sale of goods is not an offer, but an invitation to treat. It merely indicates readiness to receive offers.
Submit tender = offer
Invitation to tender = "highest bid will be accepted"
Harvela Investments Ltd v Royal Trust Co of Canada [1986] :red_flag:
Offer to consider conforming bids
Blackpool and Fylde Aero Club v Blackpool BC [1990] :red_flag:
Timetables
When a contract to transport a person is concluded is one to which the law currently gives no clear answer.
Wilkie v LPTB (1947) / Cockerton v Naviera Aznar SA (1960) :warning:
Termination of offer
(a) By the offeror
The offeror can withdraw the offer at any time before it is accepted.
Brought to the attention of the other party before he accepts
Dickinson v Dodds :red_flag:
Byrne & Co v Van Tienhoven :red_flag:
(b) By the offeree: If the offeree rejects the offer, this will terminate it, so the offeree cannot later accept it
(c) By the passage of time: If only for a set period, it will terminate upon the expiration of this period. If not specified, it will terminate after a reasonable time has passed.
(d) By the death of one party? Suggested yes in Dickinson but far from clear (if provided / personal considerations making it inappropriate: eg Coulthart v Clementson (1870), eg painting)
Acceptance
:check: if
Correspondence of acceptance with offer
Unequivocal and unqualified acceptance
Mirror the offer, without any reservation/qualif otherwise >
Counter-offer
New offer, not exact mirroring, previous offer cannot be accepted then
Hyde v Wrench (1840) :red_flag:
Counter-offer vs request for information/clarification (thin line)
In response to the known offer
Offer cannot be accepted by someone who is ignorant of the existence of the offer or does not have the offer in her mind when she purportedly accepts.
When to know bound ?
Reward cases
Offer must be present in offeree’s mind when she does the act which constitutes acceptance -> R v Clarke (1927) :red_flag: + Gibbons v Proctor (1891) :red_flag:
Hudson, ‘Gibbons v Proctor Revisited’ :closed_book: -> acceptance in ignorance of an offer :check: in unilateral (eg rewards) but :red_cross: in bilateral. BC encourage socially valuable acts, contrary to own offerors expectations to deny the reward, unfair for offerror to receive for free what she was prepared to pay for
BUT P Mitchell and J Phillips, ‘The Contractual Nexus: Is Reliance Essential? :closed_book:
Acceptance :check: offeree knows about it, but contrary to RvClarke, no requirement to rely on it ( :check: Williams v Carwardine) = motive is irrelevant (difficult to say one motives)
Motive is irrelevant where there is knowledge of the offer: Williams v Carwardine (1833) :red_flag:
Appropriate method
Words, oral or written, or conduct that objectively show that the offeree intended to accept the offer are enough. A signature of a contractual document = clear example of acceptance.
Brogden v Metropolitan Railway Co (1877) :red_flag:
Need clear words if prescribed method of acceptance (otherwise can be deemed otherwise)
Acceptance by silence :red_cross: (ambiguous, protect from unwanted contracts)
Felthouse v Bindley BUT C Miller suggests that the decision is probably wrong :closed_book: for facts issues
Exceptional cases (house insurance renewed, cf context)
Communicated to the offeror
In general, an acceptance is validly communicated when it is brought to the attention of the offeror (i.e., when it is received by her).
Entores Ltd v Miles Far East Corporation [1955] affirmed by Brinkibon Ltd v Stahag Stahl [1983] :red_flag:
Justifications -> Offeror is entitled to know whether a binding contract has been concluded + In general, any failure of communication would be obvious/apparent to the offeree, reasonable to expect her to try again
Instant method of communication
Two way - instant
acceptance takes effect when it is brought to the offeror’s attention (simultaneous, no delay), any failure will be detectable immeditately (eg tel in Entores)
One-way (mail, text)
Acceptance takes effect when it is brought to the offeror’s attention, i.e., when it is received
arrives on the offeror’s fax machine. Whether the fax etc is read by the offeror is irrelevant
Subject to know whether it was sent during ordinary business hour (then directly effective) or not (effective for next working hour)
eg Analogy reasoning: Mondial Shipping v Astarte Shipping Ltd [1995] :warning:(notice was received when the charterer’s office reopened for business :warning:)
Failure of communication
Following propositions derived from Denning LJ in Entores and Lord Fraser in Brinkibon :closed_book:
offeree knows or should know that the communication has failed or his resp = no ct
offeror bound by acceptance if failure to receive is due to his fault/resp
Neither is at fault/resp = no contract
Acceptance by email
No direct judicicial determination, doctrinal consensus = same way as fax... when received (server/inbox, D Nolan (2010) :closed_book: but said that it should be regardless of business hours but pb to be subjected to emailed acceptances even though greater certainty) = business hours + resp for not receiving
Non instant -> see postal rule
Waiver by offeror of the need for communication of the acceptance
Expressly or impliedly waived (usually for unilat: Carlill, but also bilat in Brogden, except in unwilling offeree)
Acceptance by post
Acceptance takes effect when the letter of acceptance is posted, not when it arrives (Adams v Lindsell 1818 :warning:)
Justifications
No convincing reasons
Historical context: belief that would reach the destination, good as delivert (not so much now, with competition of other forms)
Royal Mail as agent of offeror (but no power to contract on his behalf)
Offeror initiated postal negotiations, so should assume the risk (but not always true)
Offeror best placed to discover that something has gone wrong (waiting for resp, likely to check, not always true)
Offeror can ask for the acceptance to reach her (rule out the rule possible)
Without it, offeree is exposed (timing left to offeror, may lie about receiving, revoke it...) but exposes the offeror with a contract before he knows it
Practical consequences
Risk of delay or loss of letter
Lies with the offeror
Household Fire and Carriage Accident Insurance Co Ltd v Grant (1879) :red_flag: -> injust results (but offeror set the process, and could avoid the risk by saying another rule BUT the offeree could have checked whether it arrived)
Rule not applied if offeree's fault (stamp, address) (Korbetis v Transgrain Shipping BV [2005] :warning:)
No revocation of offer by offeror after acceptance is posted
Withdrawal of acceptance by offeree after acceptance is posted
Eg: rejection or withdrawal reach before the acceptance: No english case
Strict application: contract formed (eg South Africa, New Zealand, but offeree bound to a contract that he doesn't want while it causes no procedure to the offeror that didn't know the acceptance (no reliance)
Effective, no contract is formed (India, Scottish decision Dunmore v Alexander, favoured by academics) but allow offeree to take advantage of market fluctuations and speculate
Exceptions
Postal rule confined to non-instantaneous methods of communications (Entores)
Postal rule does not apply where it has been expressly or impliedly excluded in the offer (Holwell Securities ltd v Hughes :red_flag:)
Postal rule applies only where it is reasonable for offeree to accept by using the post (nature transaction, practicalities) (Henthorn v Fraser (1892) :red_flag:)
Postal rule ought not to apply where it would lead to manifest inconvenience and absurdity (said in Holwell)
Abolish the gen rule?
Acceptance in unilateral contracts
exchange of a promise for a completed act -> When the contract is formed, only one party has outstanding obligations.
No need for communication of acceptance (performance = acceptance, offeror deemed to have waived this need) (Carlill)
Timing of acceptance
The difficulty lies in determining when an offer can be withdrawn, which depends on when the offer has been accepted.
Issue: preventing revocation of the offer (revoke after starting)
Possible solutions
Offer accepted by commencing performance: unilat offer accepted as soon as the offeree has unequivocally commenced performance of the stipulated act (or abstention of something) (eg in Errington v // or Soulsbury v //) BUT
Partial perf sufficiently unequivocal to constitute an acceptance
Not clear how this works when no positive act
Consideration = starting rather than completing act
Offer accepted upon completed performance but offeror has an implied obligation not to revoke the offer once the offeree has commenced performance (support:
Daulia v Four Millbank Nominees [1978]
, O'Sullivan, N. Andrews), seperate contract implied by the court ? -> artificial
Different Q -> when offeror bound to perform /
When will the court protect the offeree by preventing revocation of the offer?
Errington v Errington / Soulsbury v Soulsbury [2007] :red_flag:
Contrast: Luxor (Eastbourne) Ltd v Cooper [1941] :red_flag:
Difference: protection for the two, not the last? = factors:
Nature/Extent offeree's relience, offeror may be unjustly enriched, risk accompanying the activity in this field...
Termination of offer
Revocation by the offeror
At any time before accepted. After too late
Need for communication of revocation to the offeree (when it is). :red_cross: postal rule
Byrne v Van Tienhoven (1880) :red_flag:
When is revocation brought to the attention of the offeree?
same rules for instant methods of communication an acceptance (The Brimnes (1975) :warning: withdrawal effective when received on the telex machine during office hours)
Who can revoke the offer: an offer can be revoked by a reliable third party acting without the offeror’s authority.
Dickinson v Dodds :red_flag: = uncertainty (reliable?) (can discuss the application today where reasonable to doubt the information
Rejection by the offeree
An offer is terminated as soon as the offeree communicates her rejection or has made a counter-offer killing the original offer.
Lapse of the offer
(i) the stipulated period for which the offer is open has expired.
(ii) because an express or implied condition other than time has lapsed
(iii) a reasonable period of time has passed (where no limit or other condition has been imposed, the court will impose a reasonable period of time).
Death of offeror or offeree
The death of the offeror or the offeree usually (but not always) terminates the offer (espe. if personal considerations)
Battle of forms
When parties purport to make a contract by an exchange of competing offers contained in their standard terms.
Solutions
Last shot approach
the courts must be able to find an offer by one party which is unequivocally accepted by the other
If yes, contract formed on the last offer terms (otherwise, no contract)
Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979] :warning: traditional ‘mirror image’, last offer whether it had been accepted
Lord Denning's two-step approach
Formation of the contract ? Court determine if agreement on material points despite the diff on less important points
Content of the contract -> court determine terms by considering all relevent doc = discretion to fill the gaps, if reasonable = imply terms (# from the orthodox position (necessary))
Position in English law
Tekdata Interconnectors v Amphenol Ltd [2009] = Butler = last shot as default rule
BUT can be displaced if doc/conduct show for a common intention otherwise (must be v clear) (eg, long course of dealing)
Assessment
Disadvantages of last shot approach
Unjust solution, rigid, all or nothing, no compromise = chance
Encourages to exchange their standards terms in hope of getting the last shot. But burden is usually on the buyer.
Not reflect ccial reality (expectation that no pb will arise, ease and self-interest tu put them, fear of losing the deal)
Masks the real basis of decisions: Court will try to find a contract and impose liability to not leave the matters already started unregulated, and a contract is wanted anyway
Advantages of last shot
Certainty: default rule, clear, predictable, wanted in ccial relation
Pb with Lord Denning's alternative analysis
More flexible, accomodate inconsistent terms and may reach a just compromise (support UNIDROIT) BUT (R Rawlings :closed_book:)
Uncertainty, what are material and residual terms (little guidance how to determine agreement)
Offends principle of party autonomy (imply terms, making contract for the party, danger).
Approach rejected by HL (Gibson v Manchester City :warning:)
Offer and Acceptance and its limits
(a) Offer and acceptance as the main framework of analysis and its application
Difficulties of analysis
One framework cannot accomodate every situation
Several perfectly sensible answers when apply O/A (eg timetable, boarding a bus)
Useful to retain O and A as the main framework of analysis in formation. Degree of certainty, working method.
Practical application of the framework of offer and acceptance
Analysis artificial. It involves an element of ‘forced’ fitting and a a degree of ‘backward reasoning’, i.e., the judges do not apply the rules of offer and acceptance mechanistically, but reason back from their sense of the ‘right’ solution to ‘find’ the presence or absence of O/A necessary to justify that solution.
(b) Limits of the framework of offer and acceptance
Sometimes ‘forced’ fitting may not be enough. There may be situations at the margins where the courts analyse formation of contract without recourse to the O/A framework
sign the same doc, clear agreement
exceptionnaly found agreement in circumstances cannot be prop fitted within the framework (Clarke v Earl of Dunraven 1897 :warning:)