#19854 - Offer And Acceptance Bilateral Contracts - Contract Law

Offer and acceptance: Bilateral Contracts

For a contract to be formed, the following requirements must be satisfied:

1. There is an agreement

2. The agreement is certain

3. It is made with the intention to create legal relations

4. It is supported by consideration (or is made by deed)

No offer and acceptance does not necessarily mean no contract. In Clarke v Dunraven, each competitor made a written agreement to the club that he would pay an injured competitor for damage he caused in breach of the rules. BUT, the injured competitor sued. His claim succeeded – in effect the court held each competitor made a contract with every other competitor saying ‘if I damage ur boat when breaking the rules, I’ll pay for it’. There was no obvious offer and acceptance, but there is a bargain.

A Promise

An offer should contain a promise by the offeror, otherwise there is no offer. In Gibson v Manchester CC, the council said ‘the corporation might sell you the house at purchase price of x… complete the form to make an application to buy the council house’. HL said this is not an offer to buy the house – the council had not promised to sell the house. This is an invitation to treat – the council was inviting Gibson to make an application to buy the house.

The test to decide whether something is an offer with a promise or simply an invitation to treat is one of the objective intention of the offeror. If the offeror intended to be bound upon the offeree accepting the terms, this counts. (This is not strictly true actually: there is an objective test so what we really ask is ‘did the person on the receiving end of the offer reasonably think the person offering was promising to be bound if the reasonable person accepted the offer’). If they did not, there is no contract.

Advertisements in newspapers are generally invitations to treat rather than offers (Partridge v Crittenden). But, if the ad said something like ‘first come, first served’ and offered goods for sale at a particular price, it is probable someone who accepts this would be creating a contract.

Display Goods in Shops

This is again an invitation to treat – Pharmaceutical Society of GB v Boots. There is no offer until the customer takes the goods to the counter. Otherwise:

• A customer who took something from the shelf and put it in their basket would be forced to pay for it – they could not change their mind and put it back

• The seller would lose the right to refuse certain customers from buying things

• Sellers would be obliged to supply goods to everyone who accepts, even if they run out of stock

So unless the shopkeeper indicates otherwise, merely displaying the goods is not an offer but an invitation to treat.

Auctions

The auctioneer is inviting potential bidders to make offers; the auctioneer is not bound to accept any offer. But where the auctioneer says the auction is ‘without reserve’, they have to sell to the person who makes the highest bid. Saying it’s without reserve is an advertisement to the whole world; an offer to the whole world.

In Barry v Davies the auctioneer refused to accept C’s bid because he thought it was too low, in breach of his promise to sell it to the highest bidder. C was awarded damages.

The promise is that if the auctioneer puts goods up for sale and says the auction is without reserve, they are bound to sell it to the highest bidder. If they advertise to put up goods for sale, they are under no obligation to actually do so (Harris v Nickerson).

Invitation to Tender

A tender is a bid for a contract. Whether it is an offer or not depends on the terms of the invitation – Spencer v Harding. If it asks the tenders for the supply of goods of a type ‘as we see fit’, it is not an offer because there is no promise to order anything. But a tender stating the prices at which the tenderer will supply the goods is an offer, which is accepted when an order is placed.

As the offer is open for a year, it’s a standing offer. The tenderer can revoke the offer at any point provided they don’t affect any orders (acceptances) already made, as they will have no consideration for the promise to keep the offer open.

If the invitation to tender says the invitor will require certain goods and asks for tenders to supply them, a tender is an offer capable of acceptance.

What if the person doesn’t consider a tender? The courts have taken the invitor to impliedly promise ‘if you submit a tender subject to my conditions, I promise to consider it’. This is a unilateral contract which is accepted when the person submits the tender. In Blackpool and Fylde Aero Club v Blackpool BC, the council invited tenders. The claimant submitted their tender on time in the council’s postbox, but the council did not check their postbox and thus the tender was not considered. This was a breach of contract as per CA – implied promise to consider all tenders properly received.

Accepting an offer

You have to intentionally communicate you wish to accept an offer. So, if you and a friend were debating whether to accept a merchant’s price, and the merchant happened to hear you both agree to, he could not at that point claim the offer had been accepted. You have not intentionally communicated your acceptance to the merchant. Likewise if someone who happened to be passing by told the merchant what he heard, this would not work as they are unauthorised to communicate the offer (unless that person had ‘ostensible authority – they were someone you and your friend had lead the merchant to believe had authority to speak on your behalf).

Cross-offers

What if A and B post an offer in identical terms? In Tinn v Hoffman, the judges thought there would be no contract. If offer and acceptance is essential, there is no acceptance here by the recipient.

Referential bids

In Harvela Investments v Royal Trust Co of Canada, referential bids are not valid offers unless (a) the recipient has expressly allowed them, and (b) they are capped at a maximum amount (Lord Templeman).

Acceptance through silence

You can’t say ‘If I don’t hear from you within 3 days, I will take you to have accepted my offer’. Similarly, you can’t say ‘if you turn up to work on Monday morning as usual, you’ve accepted my contract’. You can’t restrict someone’s liberty and they shouldn’t feel compelled to avoid doing things to not bind themselves in contract.

But want if you want to accept an offer through silence? This might not work. In Felthouse v Bindley, there was no contract because even though the receiving party wanted to accept through silence, as the offer had communicated, this is not allowed.

Contracts made through the post

The Adams v Lindsell rule says acceptance is complete (= contract) when A posts a letter of acceptance. Note this only says posts – it does not matter if the letter never arrives (Household Dire Insurance v Grant). Why? The post office was B’s agent to receive the acceptance. This is clearly bs. It’s just a convenient rule (Brownlie v Four Seasons Holdings – Lord Sumption). It’s easier than saying the acceptance is complete when the acceptance letter is read/delivered because we don’t easily know when this would have happened.

The rule in Adams v Lindsell has narrow limits. It is only relevant to the acceptance of offers. The post office is not considered agent enough to be able to receive any other type of communication – this shows why the agent theory is bs. Judges have struggled with the posting rule only applying to acceptances. Lawton LJ asked if a stockbroker who is holding shares liable because he didn’t sell in accordance to a letter which was posted but he never received? No he’s not because the letter wouldn’t be accepting an offer of a contract, so the Adams v Lindsell rule doesn’t apply.

The rule can be overruled by the contracting parties themselves. If I indicate acceptance must be properly communicated, the person must actually read the letter. The postal rule is an exception to the general principle that acceptance needs to be actually communicated. For some reason, it only applies to letters sent via Royal Mail and only to offer acceptances. The rule is not relevant to revocations of offers. If A sends B an offer in the posts and wants to withdraw it, they can’t just post another letter and call it withdrawn from that point. There must be actual communication – Byrne v Van Tienhoven

If A sends the offer to the wrong address, the postal rule does not apply – need actual communication in this instance (Korbetis v Transgrain Shipping).

Instant Communication

In cases of email etc, actual communication is needed when talking about offer acceptance. In Entores v Miles Far East Corp, an acceptance was sent by telex from the Netherlands to London. The contract was formed in London because acceptance needs actual communication, the recipient of the acceptance read it in London. This rule works because with email, you know if the other person has received it or not – you will either get a bounce-back email or nothing, indicating it’s gone through.

Parties become bound when they intend to be

Principle comes from Eccles v Bryant, from Lord Greene. A is allowed to say to B you must light a candle at midnight in this grove and place the letter of acceptance by it to accept my offer. B must comply with this to accept. So, if B says you must give the letter of acceptance to me personally, giving it to B’s solicitor is not effective (Holwell Securities v Highes). If B makes it very clear only that specified method of accepting will do, the court will probably interpret the offer to mean any other method of acceptance is...