Copyright Guy Harley 2008 1 Week 4 Law of Contract Offer and Acceptance

1Copyright Guy Harley 2008

Week 4

Law of Contract

Offer and Acceptance


Contract

An agreement between two or more persons that will be enforced by law

May be In writing Oral Partly in writing and partly oral Implied


Writing

Contracts need not be in writing Exceptions

Sale of Land Guarantees Credit contracts Other statutory requirements


Analysing a Contract

Is there a contract?

What are the terms?

Is it valid & enforceable?

Has it been discharged?

Has there been a breach?


Six Elements

1. Offer

2. Acceptance

3. Consideration

4. Intention to create a contract

5. Contractual Capacity

6. Certainty


Offer

An offer exists only where a reasonable person would conclude on the facts that the person was willing to be bound in a court of law

Distinguish Statements of future intention Puffery Negotiations Invitation to treat Provision of Information in response to

enquiry


Statements of Future Intention

A mere statement of a present intention to do something in the future is not an offer

Harvey v Facey (Graw 3.2.2) Australian Woollen Mills v Commonwealth

Harris v Nickerson Kelly v Caledonian Coal Co

Often called “a mere promise”


Puffery

Sales talk Exaggerated statements that no reasonable

person would believe to be true


Negotiations

An indication of a willingness to negotiate is not an offer

An offer will not arise merely because parties have reached agreement on one aspect of the deal

Implied (or express) understanding that parties not bound until formal contract executed

Heads of Agreement


Invitation to Treat

An invitation to Negotiate Make an offer

is not an offer but an “Invitation to Treat” The distinction lies in the objective intention of

the person making the offer or invitation to treat.


Invitation to Treat

Retail Displays Advertisements Auctions Tenders


Retail Displays

Fisher v Bell (Graw 3.4.2) Pharmaceutical Society v Boots In most circumstances the retailer does not

make an offer by displaying goods for sale, even where the goods are marked with a price

But Display of goods in an automatic vending

machine is an offer Thornton v Shoe Lane Parking (Graw 3.2.2)


Advertisements

If the advertiser was making an offer then it would be bound by every acceptance even if their stock was exhausted.

Depends on circumstances Carlill v Carbolic Smoke Ball Co (Graw 3.5.1) But note legislative restrictions e.g. Trade

Practices Act


Auctions

Bidder makes the offer Auctioneer accepts S64 Sale of Goods Act (Vic) Auctioneer announces terms at start Anyone who bids then offers on the

auctioneers offer as to terms


Tenders

Person submitting the tender makes the offer Body calling for tenders accepts any tender

Not bound to accept lowest BUT, the request for tenders may be an offer

to deal with tenders in a certain manner Hughes Aircraft v Aeroservices Australia


Provision of Information

A statement supplying information may not be an offer

Harvey v Facey (Graw 3.2.2)


Termination of Offer

Revocation Rejection Lapse of time Failure of condition Identical cross offers Death


Revocation

Can be withdrawn before accepted A contract is made when the offer is accepted The withdrawal of the offer must be

communicated to the offeree Byrne v Van Tienhoven (Graw 3.10.3) Dickinson v Dodds (Graw 3.10.4)

Would a reasonable person in the position of the offeree conclude that the offer had been withdrawn?


Revoking a Unilateral Offer

Involves a unilateral promise e.g. Carllil v Carbolic Smoke Ball Co

If offeree has acted on the promise then offeror cannot withdraw until offeree has had a reasonable opportunity to complete


Rejection

Restating the offer when accepting is not a counter offer

Asking for clarification is not a counter offer Reasonable person test examine all circumstances


Rejection

Once rejected, an offer cannot be accepted Hyde v Wench (Graw 3.8.2)

A counter offer is a rejection Any material alteration is a counter offer A conditional acceptance is a rejection May be rejected expressly or by implication Implied

Offeree’s actions are inconsistent with an intention to accept


Lapse Due to Time

Express time limit Otherwise, offer remains open for a reasonable time What is reasonable time depends on:

Method by which offer made Nature of the transaction Terms of Proposed Contract Actions of parties between offer & purported

acceptance Intimations as to time by offeror

Promise to keep offer open for certain time is unenforceable unless consideration given (e.g. option)


Lapse Due to Death

Due to death of either party if involves personal skill or service by the deceased


Terms of Offer

• All terms of offer must be brought to attention of offeree before acceptance– Causer v Browne (Graw 10.3.2)– Olley v Marlborough Court (Graw 10.3.8)


Accepting the Offer

Acceptance must be final & unqualified Must be made with knowledge of and in reliance

on offer R v Clarke Fitch v Snedaker (Graw 3.7.1)

Only person to whom the offer was made may accept

Must be communicated to the person who made the offer


Subject to Formal Contract

1. There is a contract & one of terms is that documentation be prepared

2. There is a contract but nothing can happen until contract prepared

3. There is no contract


Acceptance Must be Communicated

Express Communication of Acceptance is not necessary where Implied from past dealings between parties Industry custom Acceptance indicated by conduct

Brogden v Metroploitan Railway (Graw 4.5.5)

Unilateral contracts Postal rule applies


Accepting the Offer

Silence is not acceptance Communications after acceptance are irrelevant


Method of Acceptance

If Offerror stipulates method of acceptance Must be in form stipulated by offeror, or Must use equally expeditious method

Presumption that acceptance in same form as offer


The Postal Rule

Applies where offeror has expressly or impliedly accepted post as the means of communication of acceptance

Acceptance occurs at time of posting not receipt even if lost Household Fire & Carriage Accident

Insurance Co v Grant (Graw 4.5.11) Applies to all situations where non-

instantaneous communications are used Often determines jurisdiction


The Postal Rule

Does not apply where Negotiations protracted - Tallerman v Nathan’s (Graw

4.5.9) If would lead to manifest inconvenience or absurdity Where offeror requires actual communication of

acceptance – Holwell Securities v Hughs (Graw 4.5.10)

Acceptance not delivered due to fault of acceptor – Getreide-Import Gmbh v Contimar SA Compania (Graw 4.5.12)

Instantaneous communications used – Entores Ltd v Miles Far East Corp (Graw 4.5.13)


Has an offer been made? No Contract

Did the offeror intend to revoke

the offer?

Did the offeror communicate revocation?

Has the offer lapsed?

Has acceptance been received by

the offeror?

Was acceptance made under the

postal rule?

Contract

No

No

No

No

No

Yes

Yes

Yes

No

Yes

Yes

Yes

Documents

Copyright Guy Harley 2008 1 Week 4 Law of Contract Offer and Acceptance