Offer and Acceptance

The test whether there has been correspondence between offer and acceptance is not
subjective but objective. This raises 3 issues;
1.) Why is it an objective approach? If the contract is about the enforcement of
promises voluntarily made why does the law not concentrate on the subjective
intentions of the party?
.) There are issues in the broadness in definin! this "objective theory of contract.
3.) Third issue relates to the role of the subjective intentions of the parties to the
contract# are they irrelevant or do they have some endurin! si!nificance?
When deciding whether or not a contract has been concluded the courts
generally look for an offer made by one party that has been accepted by the
other. Not every contract can be analysed in terms of offer and acceptance and
indeed this model has been criticized for its rigidity and the fact that it is out of
step with commercial practice.
$n offer is a statement by one party of a willin!ness to enter into a contract on the
terms that he has put forward. $n offer is !enerally contrasted with an invitation to
ne!otiate %or an invitation to treat) which is no more that an invitation to the other
party to enter into ne!otiations on the terms proposed. The distinction between an
offer and an invitation to ne!otiate has proved to be a difficult one to draw in certain
circumstances such as advertisements# the display of !oods for sale in shops and
auctions. $n offer can be terminated by revocation# rejection by the person to whom
the offer has been made# lapse of time# the occurrence of a stipulated event and#
possibly# the death of one or other party to the contract.
$n acceptance is a final and un&ualified e'pression of assent to the terms of an offer.
The &uestion whether an offer has been accepted has !enerated a considerable amount
of case law and the outcome of which can be e'pressed in the form of a number of
different rules# some of which have !iven rise to considerable difficulty in practice#
particularly in connection with the battle of the forms.
The offer and acceptance rules are applicable to all contracts and not just a selection.
(ontracts can be bilateral % parties to the contract promise each other that they will
carry out their respective obli!ations) or unilateral %only one party ma)es a promise to
another# e.!. classic e'ample if offerin! reward for lost property).
$dvertisements
The !eneral rule applicable to advertisements is that %at least in bilateral contracts) an
advertisement constitutes an invitation to ne!otiate and not an offer. The reason for
this is said to be the need to protect the party placin! the advertisement from incurrin!
a liability in contract to every person who is willin! to purchase the !oods at the
stipulated price. (ould have been approached differently# could have been done by
treatin! the advertisement as an offer but then implyin! into that offer that it can only
be accepted "while stoc)s last*.
Unilateral contract Carlill vs. Carbolic Smoke Ball Company (189!
The defendants advertised that they would !ive +1,, to anyone who still contracted
influen-a after usin! their special smo)e ball as directed on the printed instructions.
The plaintiff purchased and used the product as directed and still contracted influen-a.
.he succeeded# the defendants appealed and were rejected# it was constituted that the
terms of the advertisement constituted an offer# the terms of which were accepted by
the plaintiff.
$ number of issues of law were raised by the facts in (arlill# these issues are
%i) /id the defendants intend to be bound by the terms stated in the advertisement?
%ii) /id 0rs (arlill validly accept the offer contained in the advertisement?
%iii) /id 0rs (arlill provide any consideration for the promise contained in the offer?
In terms of offer and acceptance# how and when did 0rs (arlill accept the offer
contained in the ad1was it when she purchased the smo)e ball# when she used it for
the first time or only when she completed the course?
The second problem concerned the communication of acceptance1this rule was held
not to be applicable to 0rs (arlill because the terms of the offer demonstrated that the
need for communication has been waived by the defendants.
2inally the defendants ar!ued that there was no consideration for their promise#
basically both parties must have contributed somethin! towards the a!reement. The
(ourt of $ppeal held that there was consideration on !rounds# the first was the
benefit that the defendants !ained as a result of the use of the smo)e ball %sales) and
the second was that the use of the smo)e ball for an e'tended period of time
constituted a detriment so that she provided consideration for the defendant*s promise.
Tenders
The practice of invitin! parties to tender %bid) for particular objects is not an
uncommon one. It is# perhaps# most fre&uently encountered in construction projects.
The !eneral rule is that the invitation to tender is not an offer but an invitation to
ne!otiate althou!h cases can be found in which the courts have concluded that the
invitation to tender did in fact contain within it an offer.
".#. Blackpool an$ %yl$e &ero Cl'b (t$ v. Blackpool Boro'#h Co'ncil
The %appellant) council invited tenders for a concession to operate pleasure fli!hts
from the local airport; amon! the recipients of this invitation was the %respondent)
club which has held the concession since 1345. The date6time stipulated was 14
0arch 1373 at noon. The club submitted its tender on the 14
th
as re&uested but the bo'
was not chec)ed until the followin! day# the 17
th
. The council refused to consider the
club*s tender on the !round that it has been received late. The club then brou!ht an
action for dama!es a!ainst the council.
The jud!e resolved the contractual issue in favour of the club. The counsel for the
appellant raised four main submissions#
1.) $n invitation to tender in this form was well established to be no more than a
proclamation of willin!ness to receive offers; the council would not have been
bound to accept the hi!hest tender or any tender.
.) 8n a reasonable readin! of this invitation to tender the council could not be
understood to be underta)in! to consider all timely tenders submitted.
3.) The court should be no less ri!orous when as)ed to imply a contract than
when as)ed to imply a term in an e'istin! contract.
9.) The warranty contended for by the club was simply a proposition "tailor made
to produce the desired result*.
$ factor which may also have been of some si!nificance in :lac)pool $ero is the fact
that the defendant was a public authority.
$uction sales
The auctioneer ma)es an invitation to ne!otiate %treat). The offer is then made by the
member of the public who ma)es a bid for the lot; this bid is not usually accepted
immediately. $cceptance is the fall of the hammer.
;roblem comes when there is an auction without reserve# e.!. Barry v )avies <,,,= 1
W.>.?. 13@# !oods didn*t !et any where near what they were worth1bid +,, and
won and the value was actually li)e +19#51. The claimant was successful.
The bidders sued for a breach of contract# contracts. 2irst contract is that the
auctioneer must accept the bid from the hi!hest bidder. .econd contract is between
the owner of the !oods and the hi!hest bidder. The contract found to e'ist on the facts
of :arry was one between the potential buyer and the auctioneers; the effect of the
auctioneer*s actions was to prevent a contract bein! formed between the seller and the
buyer.
What constitutes an acceptance?
$n acceptance has been defined as "a final and un&ualified e'pression of assent to the
terms of an offer*. The &uestion whether an offer has been accepted has !enerated a
considerable amount of caseAlaw.
0ust the acceptance coincide e'actly with the terms of the offer?
The !eneral answer is that an acceptance must be an "un&ualified e'pression of
assent* to the terms proposed by the offeror.
:utler 0achine Tool (o >td v. B'A(ellA8 (orporation %Bn!land) >td %1343)
The ;laintiffs %:utler) &uoted a price for a machine tool of +45#535 to be delivered
within 1, months. There were terms and conditions which stated that there would be
an increase in price if there was in increase in costs and so forth. It was delivered in
1@ months and by that time the price had !one up by +#73. The jud!e held that the
price variation in the sellers was consistent throu!hout the dealin!s between the two
companies.
0ust the acceptance be communicated to the offeror?
The !eneral rule is that an acceptance# to be considered valid# must be communicated
to the offeror. There are some e'ceptions li)e the (arbolic .mo)e :all case.
".#. "ntores (t$ v. *iles %ar "ast Corporation+ the plaintiffs %based in >ondon) made
an offer by tele' %li)e fa') to the defendants# a company based in $msterdam who
acted as a!ents for an $merican corporation. The defendants sent their acceptance of
the offer by tele'. The plaintiffs applied for leave to serve a writ on the $merican
corporation in Cew Dor). Where was the contract made? When the defendant sent
their acceptance by tele' %in $msterdam) or was it made when the tele' was received
on the plaintiff*s machine %in >ondon). It was held that the contract was formed when
the communication of the acceptance was received by the plaintiffs in >ondon so that
the Bn!lish courts has jurisdiction.
;rescribed method of acceptance
It is open to an offeror to state in the terms of his offer that an acceptance must
assume a particular form or be sent to a particular place.
(an silence amount to acceptance
The !eneral rule is that silence does not amount to an acceptance and the rule is a
!ood one. The issue that must be considered is the followin!# E sends D an offer and
states that he# E# will re!ard the offer as havin! been accepted unless D informs him
to the contrary within 4 days. D decides to accept the offer but does not communicate
his acceptance to E because he believes that he does not need to. E subse&uently
informs D that no contract has been made as a result of D*s lac) of communication of
his acceptance.
%eltho'se v Bin$ley %17@) 11 (.:.%C...) 7@3# 2elthouse offered to buy his nephew*s
horse# he said if I hear no more about the horse then the horse is mine. The nephew
didn*t answer however the nephew told :indley %an auctioneer) that the horse had
already been sold yet :indley mista)enly sold the horse to another party. 2elthouse
sued for conversion %an action when someone infrin!es your ownership). 2elthouse
was not successful.
.ilence is ambi!uous# needs to be communicated to offeror.
The postal rule
Bn!lish law has adopted that acceptance ta)es place upon the postin! of the letter of
acceptance.
The offeror is bound before he even )nows it %while it*s in the post)# he is bound even
if he doesn*t receive the letter and he cannot revo)e the offer after the contract has
been formed and posted.
The postal acceptance rule is rather controversial and is subject to &ualificationsF
,enthorn v %ra-er <173= ch. 4 G must be reasonable for person sendin! the acceptance to reply on
postal rule
,o'sehol$ %ire an$ Carria#e &cci$ent .ns'rance Co (t$. v /rant %1747A43) >.?. 9 B'. /. 1 A
specification that "letter must arrive *
,ol0ell Sec'rities v ,'#hes <1349= 1 W.>.?. 155; <1349= 1 $ll B.?. 1@1 A acceptance by "notice in
writin!* prevented operation of the rule.
(1 2orbetis v 3rans#rain Shippin# B4 <,,5= BWH( 1395 G where offeree incorrectly addresses the
letter postal acceptance rule li)ely to be displaced %obiter $icta).
$cceptance of Inilateral (ontracts
The rules relatin! to acceptance must be modified in their application to unilateral
contracts. 8ne modification is that the courts may readily imply# as they did in
(arbolic smo)e ball case# that the offeror has waived the re&uirement that the
acceptance be communicated to him. 2urther difficulties include#
The first relates to the identification of the act that constitutes the acceptance.
The second issue relates to the time at which the offeror can withdraw his offer.
$cceptance in i!norance of an offer
The !eneral rule is that performance of the re&uested act does not amount to an
acceptance unless the party performin! the act did so with )nowled!e of the e'istence
of the offer. The difficulty in this area is unilateral cases.
(onclusion
In essence the approach of the courts is first to see) out an offer and# havin! found it#
see whether or not there has been a matchin! acceptance. In practice of course the
process is much more comple'. >ord /ennin! stated that the offer and acceptance
approach was "out of date* but he failed to persuade his collea!ues of the merits of his
view. ?ather than abandonin! this approach the courts have decided to apply it with a
de!ree of fle'ibility to the facts of individual cases.