FORMATION OF CONTRACT –

Offer & Acceptance

Chapter 7, Shenoy and Loo, Principles of Singapore Business Law
1. INTRODUCTION

What is a contract?
Why do we have contracts?
When will a contract fail?
DRAFT A SIMPLE CONTRACT:
Seller selling lap top to Buyer for $800.
1. INTRODUCTION

• Contract = a legally binding agreement

• Forms?

• written
• oral
• conduct

• Which form is the best?

1. INTRODUCTION

 Requirements of a Contract:
i. meeting of the minds (consensus ad idem) - offer &
acceptance
ii. consideration and intent to create legal relations
iii. capacity to contract

 How do you know if requirements are met?

 Objective Test = the reasonable man
2. OFFER

 “An expression of willingness to contract on specific

terms, made with the intention that it is to become
binding as soon as accepted by the person to whom it is
addressed” ~Treitel
 Offeror
 Offeree
Carlill v Carbolic Smoke Ball Company
[1893] 1 QB 256, CA:

“100l. reward will be paid by the Carbolic

Smoke Ball Company to any person who
contracts the influenza after having used the
ball three times daily for two weeks according
to the printed directions supplied with each
ball. 1000l. is deposited with the Alliance
Bank, Regent Street, shewing our sincerity in
the matter.”
Carlill v Carbolic Smoke Ball Company
[1893] 1 QB 256, CA:

 Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256,

CA:
• Not mere puff - $1,000 deposit
• Offer can be made to world at large - unilateral offer
 Unilateral offer (offer to public at large)

• Bilateral
• Unilateral
• offeror’s part completed
• up to offeree to promise to act
• Offeree’s act = acceptance and consideration

• Need notification of acceptance ?

 You have lost your pet dog and put up a sign
offering a reward. Must all interested parties send
notification of acceptance your offer?
Bowen LJ at p 270: “ … are all the police or other persons whose
business it is to find lost dogs to be expected to sit down and write
me a note saying that they have accepted my proposal? Why, of
course, they at once look after the dog, and as soon as they find
the dog they have performed the condition. The essence of the
transaction is that the dog should be found, and it is not
necessary under such circumstances, as it seems to me, that in
order to make the contract binding there should be any
notification of acceptance. It follows from the nature of the thing
that the performance of the condition is sufficient acceptance
without the notification of it, and a person who makes an offer in
an advertisement of that kind makes an offer which must be read
by the light of that common sense reflection.”
Is this an offer?
Is this an offer?
Invitation to treat

 What is it?
 Advertisements
 Display of goods
 Online sale
 Auction
 Tender
 Soon KokTiang and others v DBS Bank Ltd and another
matter [2010] SGHC 360 - “offering”/launch of “DBS High Notes 5”
during “offer period” – an offer?
 Invitation to treat

Pharmaceutical Society of Great Britain v

Boots Cash Chemists (Southern) Ltd
[1953] 1 QB 401:
Customer – wire basket- selects items –
cashier’s desk – pharmacist supervises
sale of drugs – Was “the sale … effected
by, or under the supervision of, a
registered pharmacist”?
 Invitation to treat

 Pharmaceutical Society of Great Britain v Boots Cash Chemists

(Southern) Ltd [1953] 1 QB 401, at 406:
“in the case of an ordinary shop, although goods are displayed
and it is intended that customers should go and choose what
they want, the contract is not completed until, the customer
having indicated the articles which he needs, the shopkeeper, or
someone on his behalf, accepts that offer. Then the contract is
completed.”
 You are at a store. A shirt you have been eyeing is on
sale and you bring it to the cashier. The cashier refuses
to sell it to you as it has been wrongly priced.

What if this had been a tactic by to draw customers into the store?
CP(FT)A – unfair practice
 Invitation to treat

 Chwee Kin Keong v Digilandmall.com Pte Ltd [2004] SGHC 71: 6

friends ordered 1,606 HP laser printers @ $66 each on website –
778 others had placed orders - actual price $3,854 - automated
email response: “Successful Purchase Confirmation from HP
online”- D realized mistake and remove advert
 Has contract been made? Paras [134]-[138]
 Chwee Kin Keong v Digilandmall.com Pte Ltd
[2004] SGHC 71, VK Rajah JC:

 contract law applies to internet contracts [91]

 Internet advertisements = [93]-[94]
 Availability of stock [95-6]
 “151 The claims by the plaintiffs are audacious, opportunistic and
contrived. There is no larger noble principle, such as the sanctity of
contracts, to be observed or protected in these proceedings … This is not
a case about bargain hunting – which is a time honoured and perfectly
legitimate pursuit. This is a case about predatory pack hunting.”
 Chwee Kin Keong v Digilandmall.com Pte Ltd
[2004] SGHC 71, VK Rajah JC:

“152 … [T]he function of the court is to try as far as

practical experience allows, to ensure that
the reasonable expectations of honest men are
not disappointed ...”
 Invitation to treat

 S 14 Electronic Transactions Act (Cap 88), 2010 enacted:

Invitation to Make Offer:
A proposal to conclude a contract made through one or more electronic
communications which is not addressed to one or more specific parties, but is
generally accessible to parties making use of information systems, including a
proposal that makes use of interactive applications for the placement of orders
through such information systems, is to be considered as an invitation to make
offers, unless it clearly indicates the intention of the party making the proposal
to be bound in case of acceptance.
 Chwee Kin Keong v Digilandmall.com: para [92]
3. TERMINATION OF OFFER

Can an offer be terminated?

When?
3. TERMINATION OF OFFER

a. Revocation
b. Rejection / counter-offer
c. Lapse of time
d. Failure of condition
e. death
 a. Revocation

 Offeror must communicate to offeree

 When?
 telegram, postal rule – acceptance when sent
Cf. when received for instantaneous communication eg.
telephone, fax : Entores v Miles (1955)
 emails – instantaneous?
 a. Revocation

 By reliable source, 3rd Party - implied revocation

 Dickinson v Dodds (1876) 2 ChD 463 – offeree’s property
agent

 Can withdraw before given deadline: Routledge v Grant

(1828)
 use of separate option eg. Option to Purchase, 1% sale
price, 14 days

 Subsequent offer
 a. Revocation

 Unilateral contracts –
 how to communicate revocation?
 can revoke once performance has begun?
 Daulia v Four Mill Bank Nominees Ltd [1978] Ch 231, Dickson
Trading v Transmarco [1987] SGHC 59:
1. main offer
2. implied offer not to revoke main offer once offeree has
commenced performance within a reasonable time
 b. Rejection and counter offer

 Express / implied rejection by offeree

 Counter-offer – 2 effects

 Hyde v Wrench (1890) Beav 334: D offers to sell

farm to Pl at £1,200 - Pl counters at £950 - D refuses
- Pl accepts at £1000. Is there a contract?
 cf Request for information
 Stevenson v McLean (1880): D offered to sell iron
to Pl – Pl asks for credit terms – D doesn’t reply -
Pl accepts terms but D has sold to someone else -
Can Pl enforce contract?
 b. Rejection and counter offer

 Overseas Union Insurance Ltd v Turegum Insurance Co [2001] SGHC 147,

Judith Prakash J:
“An offer, once made, may be terminated in various ways. One of these ways
is by rejection. As Treitel states (at p 41) an offeree who attempts to accept
an offer on new terms, not contained in the original offer, may be rejecting
the original offer and instead making a counter-offer. Such offeree cannot
later accept the original offer. To accept an offer, the offeree must …
“unreservedly assent to the exact terms proposed by the offeror. If, while
purporting to accept the offer as a whole, he introduces a new term which
the offeror has not had a chance of examining, he is in fact making a
counter-offer.” When such a counter-offer is made, no contract will result
unless the counter-offer is accepted by the offeror.”
c. Lapse of time

 The rule
 Panwell Pte Ltd & Anor v Indian Bank (No 2) [2001] SGHC
315: extension of deadline, reminders to accept
 No time limit specified?
Lapse after reasonable time
type of commodity
d. Failure of condition

 Offer subject to express or implied conditions eg state

of goods
e. Death

 Effect
 Offeror - personal services
 Offeree’s knowledge
On 1 February, Sam offers to sell a Maltese puppy to Ben for
$500 and promises to keep the offer open for 7 days.

Scenario 1: On 2 February, Ben says:

a. “My wife prefers a Chihuahua instead. Easier
maintenance. Same price?”
b. “Is the Maltese house trained?”

Scenario 2: On 3 February, Sam’s wife meets Ben’s wife in

the gym and says, “By the way, the Maltese has just been
sold. Someone offered us $1,000. It was too good to turn
down, sorry!”
4. ACCEPTANCE

Definition?
4. ACCEPTANCE

Unconditional agreement to all terms of offer

making parties legally bound
Oral, writing, conduct
While offer still open
Objective test
i. Final & unqualified

 agreement to all terms cf counter-offer

 look at continuum of facts – Midlink Development Pte Ltd v
The Stansfield Group [2004] SGHC 182:
10 units leased by D fr 1995-2001 – common
termination date 30 June 2002 – meetings in 2002 – July
2002, credit note for reduction of rental deposit – new
Tas not signed by D but they paid reduced rental - D
served notice in Jan 2003 – Pl claimed outstanding rental
for 2 years – D said nothing signed – was there an
agreement? [36]
Midlink Development Pte Ltd v The Stansfield Group
[2004] SGHC 182 , VK Rajah JC:

“48 Acceptance in a contractual setting must be

ascertained objectively. Acceptance can be signified
orally, in writing or by conduct. When there is a history of
negotiations and discussions, the court will look at the
whole continuum of facts in concluding whether a
contract exists.”
i. Final & unqualified

 whole correspondence in context of offer and

acceptance, less mechanistic approach – Gay Choon Ing
v Loh Sze Ti Terence Peter and another appeal [2009]
SGCA 3
 No need precise correspondence between offer and
acceptance, just no new terms
ii. Communicated to offeror

General rule – actual notice, form of notice

 Conduct: Brogden v Metropolitan Railway (1877) 2 App
Cass 666 – B had supplied coal for many years without
formal agreement – railway gives draft to B who alters
and marks “approved” and returns it – railway company
never expressly approves it - continued supplying coal –
disagreement arose - B denied any agreement and
refused to supply coal
 Was there a contract?
ii. Communicated to offeror

• Rule in instantaneous communication eg telephone, telex –

Entores v Miles [1955] 2 QB 327 – Pl in London made offer to buy
copper cathodes by telex to agents in Holland – acceptance
received in London by offeror
• Lord Denning (CA):
- 2 people shouting across a river and aircraft flies overhead
- 2 people on telephone and line goes dead
- The contract is only complete when the acceptance is received
by the offeror: and the contract is made at the place where the
acceptance is received.
ii. Communicated to offeror

 Approved by HL in Brinkibon Ltd v Stahag Stahl [1983] 2

AC 34 – telex from London to Vienna accepting counter-
offer – contract made in Vienna this time
 Caveat : senders/recipients are servants/agents with
limited authority, out of hours, 3rd P operating machine,
fault at recipient’s end
 Resolution by?
ii. Communicated to offeror

“Postal Acceptance Rule” (and telegrams) exception–

acceptance at point of posting (cf receipt) – Adam v Lindsell
(1818)

 S 13 ETA:
Time of despatch: time when it leaves originator’s IT
system
Time of receipt: time it is capable of being retrieved by
addressee
ii. Communicated to offeror

 1L30G Pte Ltd v EQ Insurance Pte Ltd [2017] SGHC242: D

had given Pl a performance bond – Pl made demand on
26 Oct 2015 & D paid out on 29 Oct 2015 – 19 Jan 2017 Pl
made 2nd demand – D said bond expired on Oct 2014
and demanded refund of 1st payment – bond
automatically extended unless D gave Pl 90 days written
notice of intention not to extend – D claimed letter sent
on 27 June 2014 – Pl never received letter
ii. Communicated to offeror

 1L30G Pte Ltd v EQ Insurance, Lee Seiu Kin J:

 D posted notice on 27 June 2014 but misfiled, Pl did not
receive it – subsequent conduct consistent
Parties did not intend postal rule to apply - “notice” in cl 3
(like termination clause, allowed D to give notice of non-
renewal)
“Postal acceptance rule” historic – only applies when
parties intend
General rule – notice required
ii. Communicated to offeror

 Carlill v Carbolic Smoke Ball Co

On 1 February, Sam offers to sell a Siamese cat to Ben for
$500 and promises to keep the offer open for 5 days. All this is
done via Whatsapp. What if:

a. That same day, Ben posts a letter to Sam accepting

the offer and enclosing a cheque for $500. The letter is
lost in the mail. On 6 Feb, Sam sells the cat to Jane; or

b. In the morning of 2 Feb, Ben posts a letter to Sam

accepting the offer. At lunchtime, he Whatsapps Sam and
says, “I’ve changed my mind. I don’t want the cat.”
iii. Silence

Can it amount to acceptance?

iii. Silence

 Mere mental assent: Felthouse v Bindley (1818) –

Pl/Uncle wanted to buy nephew’s horse and wrote to
him – nephew wanted to sell but did not reply –
auctioneer mistakenly sells horse – was there a
contract?
iii. Silence

 Cf Midlink Development, VK Rajah JC at [50]:

“Silence is a midwife that may ultimately deliver a contractual
offspring that is stillborn or live. Silence and implicit acceptance are
not invariably antagonistic concepts. Silence can signify affirmation at
one end of the spectrum, disinterestedness or abandonment at the
other end of the spectrum. It is a chameleon utterly coloured by its
contextual environment. Silence will usually be equivocal in unilateral
contracts or arrangements; in bilateral arrangements or negotiations
on the other hand, there will usually never be true or perfect silence. In
many such cases, while there may not be actual communication of
acceptance, the parties’ positive, negative or even neutral conduct can
evince rejection, acceptance or even variation of an existing offer.”
iii. Silence

 Midlink Development at [51]:

“It is always a question of fact whether silent inactivity after

an offer is made is tantamount to acceptance.”
iii. Silence - Broadley Construction Pte Ltd v
Alacran Design Pte Ltd [2018] SGCA 25

“28 The law has always been cautious in ascribing legal

significance to a party’s silence ... Silence, being passive
conduct, and inherently lacking the definitive quality of
an active statement, is rarely considered sufficient to
amount to a representation. But the courts have also
made it clear that silence can in appropriate
circumstances acquire a positive content and amount to
a representation. Such cases have been characterised as
situations where there is a duty on the alleged
representor to speak or disclose certain facts …”
iv. Ignorance of offer

 R v Clarke (1927) – reward for information on murder of

2 policemen – free pardon to accomplice for info –
accomplice gives info for pardon without thought of
reward – can he claim reward? HELD:
v. Cross- offers

 Identical offers that cross

v. Battle of standard forms

 Butler Machine Tool Co Ltd v Ex-Cell-O Corporation [1979] 1

WLR 401: sale of machine tool – 23 May, seller’s standard
terms had price variation clause – 27 May, buyer replied with
own standard terms without price variation cl and tear-off
acknowledgement for signature and return which accepted
order “on terms and conditions thereon” – Seller returned
acknowledgement with covering letter that delivery
according to quote of 23 May – HELD?
 Majority – offer & acceptance rules
 Lord Denning: “I think that the documents have to be
considered as a whole.”
vi. “Subject to contract”

Effect?

Cf. obligation to “in good faith endeavour to

agree”: HSBC Institutional Trust Services
(Singapore) Ltd v Toshin Development Singapore
Pte Ltd [2012] SGCA 48
9. Electronic Transactions Act (Cap 88)
(“ETA”)
 Facilitates e-commerce – electronic records = written
records
 S 3 purpose of ETA
 S 4 exclusions in First Schedule eg. wills, contracts for sale
of land
 S 5 party autonomy
 Legal effect of electronic records – ss 6-8
 Do traditional contractual rules apply? Chwee Kin Keong v
Digilandmall.com Pte Ltd
9. Electronic Transactions Act (Cap 88)

 Ss 11-16
 S 11 – offers and acceptances can be made electronically
 S 13 – time of despatch = time it leaves info system or
time it is received (when it is capable of being retrieved)
 S 14 – invitation to make offers unless otherwise
intended
 S 16 – error in electronic communications – right to
withdraw if early notification and no material benefit