#5389 - Offer Acceptance Certainty Intention. - Contract Law

Offer & Acceptance, Certainty & Intention

The following are features of the rules laid down by the courts in this respect:

1. The rules claim to be of general application;

2. The rules purport to give effect to the intention of the parties, albeit objectively ascertained;

3. The rules are in practice, often interlinked;

4. The rules appear to attach significance to the precise time ate which the contract was concluded;

5. The reception of offer and acceptance rules is linked with the will theory of contract, which has been the subject of criticism.

1. Offer & Acceptance

(i) Offer & Invitation to Treat

• Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256: On an advert for medicinal balls, D claimed that in the event that anyone using the balls contracted flu, they would be paid compensation. The advert further claimed that money had been set aside for this specific purpose.

  • The fact that money had been put aside indicated that statement more than a mere puff.

  • Does not matter that not addressed to a particular person as anyone who performs accepts.

  • Acceptance need not be communicated; person gets notice with the performance of the condition.

  • Question is how the ordinary person would understand the advert.

• PSGB v Boots [1952] 2 QB 795: Issue as to whether display of products on a shelf was an offer to sell.

  • The exposure of goods for sale by a shopkeeper indicates to the public that he is willing to treat but does not amount to an offer to sell.

  • Ordinary principles of common sense and commerce must be applied to the matter.

• Partridge v Crittenden [1968] 1 WLR 1204 : Advert in paper for birds, with stated price. Prosecuted for offering birds for sale.

  • Insertion of an advert as well as a display in a window are simply invitations to treat.

• Gibson v Manchester CC [1979] 1 WLR 294: A received letter from council stating a price at which they ‘may’ be willing to sell his house. Details of a mortgage firm provided, but was no offer of a mortgage. Council took house off of their own repair list and A began to do repairs thereafter. Following a change of political control said would only allow sales to go through where contracts had already been concluded. A claimed that his was concluded.

  • Court of Appeal: Lord Denning thinks that it is a mistake to think that all contracts can be analysed in terms of offer and acceptance. Thinks there is no need to strictly look for it but should look at everything to see whether there was agreement as to all that was material. So, would allow A to succeed in his claim in this instance.

  • House of Lords (Lead by Lord Diplock):

    • There are certain types of contract which do not fit easily into the normal offer and acceptance analysis. But, a contract alleged to have been made in an exchange of correspondence is not one of them. Should adopt the conventional approach in cases such as this (exchange of correspondence cases).

    • ‘May’ is fatal to the finding of an offer. To hold that there was an offer would be to disregard the evidence.

• Harvela Investments v Royal Trust Co of Canada [1986] AC 207 : Owner of shares invited bids from two people for shares. B submitted an offer of ‘X amount, or Y more than A offers’. Issue as to whether could accept.

  • A promise to accept the highest bid may be binding as analogous to Carlill v Carbolic.

  • An invitation to tender can be seen as an offer. The contract was made with the highest fixed bid- could not accept the referential one.

• Blackpool & Fylde Aero Club Ltd v Blackpool BC [1990] 3 All ER 25: Council sent invitations to tender with a date for receipt. Staff member failed to pick up A’s tender.

  • Where tenders are solicited to known parties, and where there is a clear and orderly prescribed procedure, the invitee has a contractual tight when he conforms to those conditions to have his tender considered.

  • The fact that only open to a small class of persons was of significance in finding a contract in this case.

(ii) Acceptance

(a) Communication of Acceptance

• Felthouse v Bindley (1862) 11 CBNS 869: There had been a misunderstanding between parties as to the sale price of a horse. A wrote to B to say that X would be the price, saying that if he heard nothing in Y time then he would assume that it was sold to him. B brought action when horse accidently sold.

  • Silence cannot amount to acceptance of an offer as the intention to accept must be communicated to the offeror.

• Household Fire Insurance v Grant (1879) 4 Ex D 216: D applied for shares in company. They were allotted to him and he was sent a letter to that effect. The letter was never received.

  • Bramwell LJ (Dissent):

    • The rule is that acceptance must be communicated, therefore the letter must be received to constitute acceptance.

    • There can only be departure from the general rule where there is a special agreement by the parties to do so.

    • There is no good reason for an arbitrary rule relating to postal acceptance. It only works to create hardship for the offeror.

    • Disagrees with the notion that the post office is an agent for both parties as it is not clear on what basis this can or should be so.

  • Thesiger LJ:

    • A contract formed by correspondence through the post is accepted as soon as the letter is posted and the acceptance is not put to an end in the event of a letter never being delivered.

    • Two competing principles: (1) minds of two parties must meet to make a contract and unless it is concluded at the moment when the continuing offer is, in fact accepted, it is difficult to know when they are ever otherwise brought together; (2) minds must be brought together by mutual communication.

    • The way to reconcile the principles is to treat the post office as an agent of both parties. This may lead to hardship for the offeror but there can be no way to make the consequences of the mistake of a mutual agent fall upon both parties evenly.

    • An offeror may still make acceptance conditional upon actual communication.

• Byrne v Van Tienhoven (1880) 5 CPD 344: D wrote to P to offer goods for sale. P immediately accepted by telegram and posted a letter a few days later. In the interim D had posted a letter revoking the offer.

  • The postal rule cases are based on the principle that the writer has expressly or impliedly assented to treat an answer to him by a letter duly posted as sufficient acceptance and notification to himself i.e. the post office is his agent.

  • However, the rule does not apply where revocation is concerned.

• Henthorn v Fraser [1892] 2 Ch 27: S gave P option to purchase for 14 days. On next day S posted withdrawal which did not arrive until 5pm. Acceptance posted at 3pm.

  • A person who has made an offer must be considered as continuously making it until he has brought the knowledge of withdrawal to the mind of the person to whom the offer was made.

  • Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of acceptance (in this case distance between parties was a factor), the acceptance is complete as soon as it is posted.

• Entores v Miles Far East Corp [1955] 2 QB 327: Offer made by telex and acceptance communicated in that way. (CA).

  • Denning LJ:

    • Communication by telex and telephone are instantaneous and so stand on a different footing from the post. Gives examples of acceptance being drowned out by aircraft or the line going dead; no acceptance.

    • Where a man does not know that acceptance has been received, but reasonably believes that it has, the offeror will be bound where he did not receive it owing to his own fault.

  • Birkett LJ:

    • Postal rule is an exception to the ordinary rule which need not be extended to instantaneous methods.

  • Parker LJ:

    • Since the requirement of communication is for the benefit of the offeror he may waive it expressly or by impliedly accepting the postal method on grounds of expediency.

    • There is no need for a rule of convenience where the parties can communicate instantaneously.

• Holwell Securities v Hughes [1974] 1 WLR 155: D granted P 6 month option to purchase to be exercise ‘by notice in writing to D’. Letter was sent but never reached the address.

  • Russell LJ:

    • Prima facie, acceptance must always be communicated. Before that principle is displaced, it is necessary that the terms of the offer are consistent with the displacement and is not one which points in the direction of actual communication for acceptance.

    • The requirement of ‘notice to’ is language which should be taken to assert the ordinary situation in law that acceptance requires communication and is inconsistent with the theory that acceptance can be constituted by an act of posting. Also in this case, s196 Law of Property Act 1925 says notice must be served for this kind of instrument (that is one which conveys title in land).

  • Lawton LJ:

    • The postal rule does not apply if, having regard to all the circumstances, including the nature of the subject matter in consideration, the negotiating parties cannot have intended that there should have been a binding agreement until the party accepting the offer or exercising the option had in fact communicated the acceptance or exercise to the other.

• The Brinkibon Case [1983] 2 AC 34: Question as to whether when acceptance is sent by Telex the contract is deemed to have been formed in an issue over jurisdiction.

  • The postal rule is based on convenience.

  • Accepts the decision in Entores as stating a general rule as it has generally received positive comment.

  • However, no universal rule can cover all...