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CONTRACT AS AGREEMENT-

OFFER/ ACCEPTANCE/REVOCATION 

Professor Anu Arora
Slides 1-130
2014-15

How is Contract Formed:
• Generally no formal requirements:
written/ oral contracts all enforceable
...

• 19 th Century English contract theory
emphasised the idea of contract as a
‘meeting of minds’
...


• This ‘meeting of minds’ approach focuses
on the subjective intentions of the
parties, what did the parties intend –
difficult to determine
...
It is impossible to
get inside the heads of contracting parties
...

• Consumers responded to advertisements;
standard form contracts proliferated (e
...
on
the railways, in the banking sector); model
contracts were used in different business
sectors (e
...
the stock market); workers were
forced by necessity to accept employment
contracts on a take it or leave it basis
...
Court said test is whether the party
who wishes to deny the contract acted so that
‘reasonable man would believe he was assenting
to the terms proposed by the other party
...

• The efficient working of the market and the legal
system, as well as the need of others to rely on
your conduct with certainty, means that
sometimes your free will is disregarded
...
2
...


• Statements prior to bargaining need to be
classified: some will constitute offers
capable of being accepted and thus
generating contractual obligations
...
For instance, advertisements
or notices asking the public to make
offers themselves
...

• The intention to be bound is determined
objectively, so that it amounts to
examining the language used
...

• MCC selling council houses - G sent off letter
indicating price he was prepared to pay – received
letter from MCC indicating they may be willing to
sell and to fill in application form
...
Council control went
to Labour which reversed policy and said would only
sell those houses for which there was agreement
...
Lord Denning:
• ‘look at correspondence as a whole and the conduct
of the parties and see from there if the parties have
come to an agreement…’

• HL rejected Denning’s approach –language in
the Council’s letter not definite enough to
amount to an offer – simply an invitation to
treat
...


• Lord Diplock stated: The words ‘may be prepared to
sell’ are fatal to a valid offer - so the words are an
invitation
...
It
is… a letter setting out the financial terms on which the
council would be prepared to consider a sale and
purchase in due course
...
’
• Held Document from the Council was
sufficiently certain to amount to an offer
which S had accepted
...

• Under most circumstances, there is no
promise that the contract will be given to the
lowest or highest bidder
...


• Rooke v Dawson [1895] 1 Ch 480
• Similar situation as to Spencer v Harding:
unless specified as “awarding it to the
highest bidder/scorer”, there was no
implied contract to award it to the
highest bidder/scorer
...
The
requestor was entitled to awarded to
anyone within the reasonable margin
...


What is an offer?
• Trietal:
• An offer is an expression of a willingness to
contract on specified terms made with the
intention to be legally bound as soon as the
offer is accepted by the person to whom it is
made
...

• An apparent intention to be bound may
suffice --- the alleged offeror (A) may be
bound if his words or conduct are such as to
induce a reasonable person to believe he
intends to be bound - even though he has no
such intention
...

• Sir John Chadwick: “the correct approach is to
ask whether a person … B (having the
knowledge of the relevant circumstances
which B had), acting reasonably, would
understand that A was making a proposal to
which he intended to be bound in the event of
an unequivocal acceptance
...
e
...

He was charged with offering the knife for sale
contrary to the Restriction of Offensive Weapons Act
1959
...


Pharmaceutical Society of G
...
v Boots
[1953] 1 QB 401, CA
• The display of goods on a supermarket’s
shelves was merely an invitation to
customers to make offers to buy
...


Pharmaceutical Society of G
...
v Boots
• Lord Goddard:
• “There is a self-service scheme - the
customer is informed that he may himself
pick up an article and bring it to the
shopkeeper with a view to buying it, and if,
but only if, the shopkeeper then expresses
his willingness to sell, the contract for sale
is completed
...


• So Question:
• Supermarket advertises:
• Sale of goods and describes it as ‘Special
Offer’ -To make commercial sense imply that
obligation remains whilst stock lasts
...
’ Does that make a
difference?

See US case: Leftkowitz v Great Minneapolis Surplus Stores
(1957) 86 NW 2d 689


• Newspaper advertisement stated Def store
willing to sell fur coat worth ‘$139
...
00, first come, first serve
...
Deg shop therefore making
an offer
...


• Treitel also suggests that (in England) a
supplier’s list of good sent on request to a
possible customer may be treated as an
offer - because the seller is implying he
has adequate stocks
...
The defendant had made the
highest bid but had withdrawn it before
the hammer fell
...

• Every bid is nothing more than an offer on
one side, which is not binding till it is
assented to – in auctions by the hammer going
down
...

• Otherwise auctioneer would be compelled
to reimburse costs of travel etc to anyone
who turned up expecting certain items to
be auctioned
...

• In the present case, unless every declaration
of intention to do a thing creates a binding
contract with those who acted upon it, and in
all cases after advertising a sale the
auctioneer must give notice of any articles
that are withdrawn, or be liable to an action,
we cannot hold the defendant liable
...
’ Discovered owner
being allowed to bid to increase price below
which plaintiff could not afford
...

• Though action did not succeed on
technicality – court said he would have been
successful if properly pleaded
...


Barry v Heathcote Ball & Co (Commercial
Auctions) Ltd [2011] All ER 944
• Claimant bid for 2 machines at auction
‘without reserve’ – each machine worth
about £14,000
...

• Claimant sued auctioneer
...

- Will depend on the context the
advertisement appears in – ad on a bill
board, newspaper or TV commercial will
not be regarded as an offer




Partridge v Crittenden [1968] 2 All ER 421 (criminal)


• Plaintiff had inserted an advertisement in a
periodical which read “Bramblefinch cocks &
hen, 25s each”
...
 
• Held: the advertisement was an invitation to
treat, not an offer for sale
...


Grainger v Gough [1896] AC 325
• Circular by wine merchant
• Held to be invitation to treat
• But what about the view expressed by
Treitel? He refers to supplier’s list sent on
request – what about the uninvited
circulars?

• Harris v Nickerson (1873) LR 8 QB 286
• Defendant advertised auction to sell
certain furniture
...
Brought
action for breach of contract
...
Advertisement was a mere invitation

Compare Partridge with Carlill:
• Carlill v Carbolic Smoke Ball Co
• The exception to the general rule: where the
contract is unilateral
...

• Advertisement stated £1,000 had been placed in a
separate bank account in order to meet any
claims made
...


• CA held - advertisement constituted an
offer since it requested performance of
an act as the acceptance (using the smoke
ball as directed and catching influenza)
...


Thornton v Shoe Lane Parking
• Offer is made when the proprietor of the
machine holds it out as being ready to receive
the money
...

• Terms of the offer are contained in the notice
placed on or near the machine stating what is
offered for the money
...
He is not bound by
the terms printed on the ticket if they differ from
the notice, because the ticket comes too late
...
g
...
To what extent will it be
bound to follow these
...

• The requestor is free to accept or reject any
tender to purchase goods within such a
margin he is willing to adopt, even if it is the
highest bid
...

• Held: Defendants obliged to sell to
highest bidder – invitation to tender
amounted to a unilateral offer – offer was
accepted to the submission of the highest
bid

Blackpool & Fylde Aero Club Ltd v
Blackpool BC 

[1990] 1 WLR 1195

• Plaintiff and others invited by Council to tender for a
concession to operate flights from the airport
...
00pm on 17 March 1983
...
Letter box not cleared
...
Council decided to carry out whole exercise
again
...

• Club sought damages for breach of warranty, arguing
Council had promised that tender would be considered
if it was received by deadline
...


it is
• Once an offer is established capable of acceptance
...


• Once valid offer is established – has to be
matched by an acceptance
...


• Read the following:
• Unger, J
...

• Winfield (1939) ‘Some aspects of offer
and acceptance’, 55 LQR 499
...

• Unilateral contracts are formed when A
promises B that he will pay B to do a certain
act – A will pay B £100 if he walks from London
to York
...
Acceptance
• Acceptance is what turns a specific offer, made with the
intention to be bound, into an agreement
...
the expression of intention to assent to the offer
must be in response to the offer and match the terms
of the offer precisely (mirror image rule)
...


• 2
...

• No valid acceptance if the mirror image rule is
not satisfied – instead there may be what
amounts to a mere request for further
information or a counter-offer
(Hyde v
Wrench –D offered to sell farm for £1,000 – P
said he would buy for £950
...

• Equity – not allow buyer to take advantage of
mistake – custom of trade showed – universal
practice that price fixed by piece and buyer
had previously negotiated to pay price by
piece

 
• As a bilateral contract is made by an
exchange of promises - follows that there
could be no acceptance in law until –
 
• (1) the offer had been received - no contract
is formed where there are only cross-offers
 




Tinn v Hoffman (1873) 29 LT 271


Blackburn J stated
• When a contract is made between two parties,
there is a promise by one in consideration of
the promise by the other--- there is an
exchange of promises
...


(2) Acceptance has been received - general rule is that
some objective evidence that acceptance has been
communicated to the offeror is required
...

• Held - no contract since the defendant’s acceptance of
the plaintiff’s offer of service had been defectively
communicated – one of the panel members without
authority communicated decision to appoint
...

• Some external or objective manifestation
of acceptance required

Entores v Miles Far East Corp
ALWAYS THE STARTING POINT

• Where parties are talking each other (instantaneous
communication) the acceptance must be heard to be
communicated
• Lord Denning in Entores illustrating the importance of the
communication of an acceptance to the offeror said:
Suppose: I shout an offer to a man across a river or a
courtyard but I do not hear his reply because it is drowned
by an aircraft flying overhead - no contract at that moment
...
Not until I have his answer am I bound to that
contract
...
It is his own fault that he did not get it
...

• Common law takes a strongly objective
approach - for reasons of certainty and
business convenience
...
on posting, or
• Ii
...
on reading

Where acceptance is communicated by post – contract
formed as soon as letter is posted even if it never reach
offeror
...

Acceptance consequently delayed and the goods had
already been sold when the acceptance reached the
offeror
...

• Why: Postal service so slow that to hold otherwise would
delay contract;
• Post office acts as agent of the offeror -posting
completes the contract
...
D 216


• Defendant applied for shares in plaintiff’s company
...

• Company went into liquidation and liquidator
claimed the balance of the purchase moneys from
him
...

• Held: contract entered when the letter of allotment
had been posted to defendant despite the fact that
it had never arrived
...

• Postman delivering letters is not so
authorised and the handing a letter of
acceptance to him would take effect only
when actually communicated to the
offeror
...
Holwell Securities Ltd v Hughes [1974]
1 All E
...
161, CA
• Postal rule would have no application if
this would result in “manifest
inconvenience and absurdity”
...
Where words used oust the postal rule
• Holwell Securities Ltd v Hughes
• Defendant granted Plaintiff – option to purchase land exercisable by notice in writing at given address within
six months
...

• CA held: Option had not been validly exercised and,
accordingly, there was no contract
...
Words
amounted to a stipulation that notice must reach the
offeror – general rule applies - communication of
acceptance required
...
Henthorn v Fraser [1892] 2 Ch 27


• Stated that the postal rule applied only
where it was reasonable for the offeree
to use the post as a means of
communication
...


• Think of these cases in terms of risk - Courts
recognise that communication is a fraught
process particularly where parties are not
both present
...
Courts have to decide as a
matter of fairness and policy who should bear
the risk (ie the cost) of this failure in
individual case
...

• Rule can be justified for both benefit of
both parties, eg:
• Can be argued that postal rule helps the
offeree so that he can know when the
contract is actually formed
...
As stated by
Lord Wilberforce in the Brinkibon case: “no
universal rule can cover all such cases; they
must be resolved by reference to the
intentions of the parties, by sound business
practice and in some cases by a judgment
where the risks should lie”
...


Guidance for Postal Rule
2
...
Did offeror 4
...
Would
application of
postal rule
produce
‘manifest
inconvenience
and absurdity?

Adams v
Linsdell

Household
Insurance v
Grant
Henthorn v
Fraser

Holwell v
Hughes

Adams v
Lindsell
Household
Fire v Grant
C o n t i m a r ’s
Case

Lawton LJ
Holwell
Securities v
Hughes

If not postal
rule doesn't
apply –
acceptance
valid when
received

Postal rule
Postal rule not
doesn't apply – apply –
acceptance
acceptance
valid when
valid when
received
received

Postal rule not
apply –
acceptance
valid when
received
posted

If Yes –then
postal rule
will not apply
– acceptance
takes place
when received
If use of post
would not lead
to
inconvenience
then postal
rule doesn't
apply

Question

1
...
(1966) ‘Retraction of letters of
acceptance’, 82 LQR 169
...
(1992) ‘Trashing with Trollope:
a deconstruction of the postal rules’, 12
OJLS 170

• Where an acceptance is instantaneous - actual
communication is required and postal rule does not
apply
...
General principle is – if
offeree has done all he might reasonably be expected to
do to get his message through - acceptance should take
effect when offeree might reasonably expect it to be
communicated to the offeror
...
Held – contract had been
concluded where telex acceptance had been received Vienna  

• Lord Fraser: ‘an acceptance sent by telex
directly from the acceptor’s office to the
offeror’s office should be treated as if it
were an instantaneous communication
between principals, like a telephone
conversation
...

• Therefore convenient that the acceptor, being in
the better position, should have the responsibility
of ensuring that his message is received
...

• But the general rule will not cover all the many
variations that may occur with telex messages
...
R
...


Manchester Diocesan Council for
Education
• Offeror required that offeree’s acceptance letter
be sent to the particular address
...

But offeree had sent the acceptance to offeror’s
surveyor and not to the address specified in offer
...


Conditional acceptance

-- Neither a full acceptance nor a counteroffer
...





Eccles v Bryant [1948] Ch 93 CA


• Vendors agreed to sell to purchaser a house
correspondence said ‘subject to contract
...

• Vendors changed their minds and did not send their
part in exchange
...


• Held: no binding contract
...


• There may be many communications between
the parties intended not to operate as
counter-offers but merely as attempts to
clarify the extent and terms of the offer, or
to ascertain whether the offeror would
consider changing certain aspects of the
offer
...


Stevenson v McLean (1880) 5 QBD 346
• Defendants offered to sell iron to plaintiffs at 40s per ton
...

• Later that day plaintiff sent a further telegram accepting
original offer
...

• Held: first telegram was a mere request for information not a
counter-offer
...


How to distinguish a counter-offer from a
request for further information?
• (1) is offeree purporting to accept but at the same time
changing the terms (counter-offer) or is he trying to decide
whether he can accept by seeking to negotiate on the offer
terms (request for further information)?
• (2) how certain is the language used in the response? For
example: A offers to sell B his car for £1,500
...
e term that
would be implied into the contract, e
...
, by operation of
law or business traditions) there would be a valid
acceptance of offer
...
But the validity of this argument
remains to be confirmed in cases
...

Butler Machine Tool Co v Ex-Cell-O Corp [1979] 1 All E
...
965, CA
• Sellers sent quote price of goods - issued on basis that sellers’
conditions to ‘prevail,’ and which included a price variation
clause
...
At the bottom of the order form - tear-off
slip expressly subject to the buyer’s term
...
Sellers claimed to be entitled to vary the contract
price
...


Trentham Ltd v Archital Luxfer [1993] 1 Lloyd’s
Rep 25
• Dispute as to whose standard terms applied to
contract – Def’s had carried out work but dispute
related to contribution from Def’s under a
penalty clause
...
Approach to issue of contract formation is
‘objective’ so does not take into account
‘subjective expectations and unexpressed mental
reservations of the parties
...
’

2
...
Fact contract is executed – precludes argument that
there was not intention to create legal relations
4
...

• Valid contract – even if cannot be identified
in terms of offer and acceptance – contract
came into existence during performance
• Steyn’s view look at expectations of
businessmen – similar to Denning in Gibson

RTS Flexible Services Ltd v Molkerel Alois Muller Gmbh
& Co KG (UK Production) 2010

• Terms of contract including price agreed
but only letter of intent signed which
stated no binding agreement until
contract signed
...

• Supreme court – looking at the overall
communication and actions of the parties
– biding contract intended to be governed
by those terms settled in negotiations

• Requirement for written agreement had
been superseded by subsequent events
...


Unilateral Contracts
• A unilateral contract is a contract where
one party (the promisor) binds himself
upon performance of a stated act by the
promisee
...
It is
sometimes referred to as the ‘if
contracts
...

• Ad - not too vague to be an offer
...

• No notification of acceptance required
...


Must offeree know of offer before
performs requested act? Reward cases:
• Required act must be carried out in response
to the offer of a reward so that there can be
no acceptance where there was no knowledge
of the offer:
Williams v Carwardine (1833) 5 C & P 566
• Defendant offered a reward to any person
giving information leading to the discovery of
murderer
...

Believing she had not long to live and to ease
her ‘conscience,’ - gave information which
led to Williams’ conviction of the murder
...

• Littledale J
...
It does not say,
whoever will come forward in consequence of
this handbill
...





R v Clarke (1927) 40 CLR 227


• Reward offered for information leading to the
arrest/conviction of the persons who
murdered two police officers
...


• The difference between Williams v
Carwardine and R v Clarke relates to the
knowledge of the offer
...


• Clarke - established that knowledge, or
understanding, of the offer is important because
that constitutes the consent required of parties
...
Without that there is no
contract
...


• There cannot be assent without knowledge
of the offer, and ignorance of the offer is the
same thing whether it is due to never
hearing of it or to forgetting it after hearing
...


• Hudson (1968) 84 LQR argues that on
grounds of policy the law should
encourage rather than penalise people
who do not know about a reward and
who act under a sense of moral duty
...

• The requested act must be carried out in
response to the offer of a reward so that
there can be no acceptance where there
was no knowledge of the offer
...

• Plaintiff, police officer, had already communicated
required information to a colleague, X with
instructions to forward it to Penn
...

• Information reached Penn on 30 May, which was
after the time the handbills had been distributed to
police stations
...
X
and his superior were plaintiff’s agents for
the purposes of conveying the
information
...
Acceptance was the
supply of the information to Penn, and at
that time plaintiff knew a reward had
been offered
...
Offer may be
terminated in a number of ways:

1
...

• In order for the revocation to be effective,
notice of the withdrawal of the offer must
be communicated to the offeree
...





Routledge v Grant (1828) 4 Bing 653


• Defendant offered to buy claimant’s house
saying he would give him 6 weeks to think
offer over
...

• Held: no contract – promise to keep offer
open was ineffective unless supported by
consideration (process known as purchasing
an option)

Re v o c a t i o n o f o f f e r m u s t b e
communicated – postal rule has no effect
(could mean a postal acceptance becomes
effective if posted before revocation by
post is received – though actually posted
after the revocation)

Byrne v Van Tienhoven (1880) 5 CPD 344 
• Defendants (Cardiff) wrote to claimants (New
York) on 1 October offering to sell 1,000tons of
tinplate at a fixed price
...

• 11th October claimants received offer letter and
immediately telexed acceptance - confirmed by
post on 15th October
...

• Held contract into existence on 11th October
(postal rule also applies to telegram/telexes)
...


Revocation must be communicated to offeree need not be communicated by offeror
•

Notice of the revocation – not effective if it came to the offeree’s attention by way of
mere rumour or supposition
...


• Dickinson v Dodds (1876) 2 Ch D 463
• 10 June - defendant offered to sell his house to the plaintiff for
£800 adding - offer to be left open until Friday 12 June, 9am
...

• Same evening plaintiff delivered formal letter of acceptance to
defendant’s house and followed this up with a duplicate at 7 am
next morning
...

• Held: plaintiff’s action should fail since he was aware at the time
he accepted offer that Dodds no longer intended to sell to him
...
Lapse of timeoffer may lapse where
offeror indicates it will only be open for a
limited period – not possible to accept after
that time - Manchester Diocesan case 
• 3
...
Express or implied term –Financings Ltd v
Stimson [1962] 3 All ER 386 – offer to sell car
was subject to implied condition that it
remained undamaged

Where you have a series of communication
with different terms and prices mentioned:
• Contract formed on basis of last offer:
• Parrs Technology Ltd v City Link
Transport Holdings Ltd [1999] EWCA Civ
1822
• Parties negotiating to settle earlier dispute
...
55 plus VAT
...
55 plus VAT was accepted
...

• CA: whole correspondence should be looked at
– took view claimant had merely been trying
to say what def had offered but in a different
way
...

• Claimant’s letter had expressly stated Def’s
offer was accepted but then stated it
differently

Rejection and counter-offer


• Offer comes to an end when the offeree
rejects it
...
334
•
Defendant offered to sell his
farm for £1000
...

• Defendant refused to complete the sale and
plaintiff brought an action against him for
specific performance
...

Offeror whilst valid gives offeree power to accept it
...

• Unilateral arrangements - is revocation possible after
A has started performance - leads to a waste of
resources, which is inefficient in social terms
...
 
• Until the required act has been completed,
no consideration for the promise of the
reward will have been provided
...

• HL rejected idea of implied promise
...
Agent found purchasers but sale did not
take place
...


• Held: as the commission was payable only
on completion, the nature of the offer
contemplated that the offeror reserved
the right to revoke at any time before
completion
...
Father died
...

• Question - whether the daughter-in-law could
be forced to surrender possession of the house
...

• It could not be revoked by him once the
couple entered on performance of the
act but it would cease to bind him if they
left it incomplete and unperformed…
...


• (iii) Doctrine of estoppel: may protect an
aggrieved party
...

• Example of promissory estoppel: A promises B
- he would not enforce his legal rights and B
acts and relies on that promise - equity would
not allow A to renege on his promise to B
...
Some issues for assessment:

• Is a particular statement an offer or an invitation to
treat?
• Is there a counter-offer or is it merely an enquiry?
• When does a posted acceptance fall outside the postal
rule?
• Was the offeror or offeree free to have second thoughts?
• When is a telephone call recorded on an answering
machine actually received?
• When is an email received?



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