Lecture 3 Offer and Acceptance

Composition of an agreement
An agreement is:
• generally characterised by an ‘OFFER’ by one
party and an ‘ACCEPTANCE’ by another
Is there agreement between the
parties?
• For the agreement to stand there must be a
‘meeting of the parties’ minds’, and one must ask
whether there has been a firm offer and
acceptance of that offer in this light.
• The ‘offer and acceptance’ approach is not the

only approach. The courts sometimes use a
‘global approach’ examining the acts and conduct
of the parties (Integrated Computer Services Pty
Ltd v Digital Equipment Corp (Aust) Pty Ltd
(1988) 5 BPR 11,110).
Rules relating to offer
1. There must be an intention or willingness to be bound or it
may be an invitation to treat
2. It must be a firm promise or it may be a request for

information
3. It must be communicated to the offeree
4. It may be made to one person, a group or to the world at

large
5. It may be kept open if supported by consideration
6. All terms must brought to the notice of the offeree and

followed exactly
7. It may be terminated
Making an offer
It is necessary to distinguish an offer from the
following:
• a mere supply of information
• an invitation to treat
• puffs
An offer can be addressed to any number of offerees.

Has an offer been made?
Facts:
• Smith owns an organic farm.
• Jones wants to buy Smith’s farm.
• Jones emails Smith asking: “Will you sell me your

farm? Let me know your lowest price.”
• Smith emails back saying: “The lowest price for my

farm is $350,000.”
• Jones then responds by saying: “I agree to buy your

farm for the sum of $350,000 asked by you.”
What are the legal issues?
Issue:
Did one party (the offeror) make an offer?
Did the other party (the offeree) accept that offer?

Harvey v Facey [1893] AC 552
Facts:
– Facey (F) owns Bumper Hall Pen (BHP).
– Harvey (H) wants to buy BHP.
– H sent a telegram to F asking: “Will you sell us

BHP? Telegraph lowest cash price.”
– F responded: “Lowest price for BHP £900.”
– H then responded: “We agree to buy BHP for

the sum of £900 asked by you.”
Harvey v Facey
Facts (continued):
– F refused to proceed with the sale.
– H sued for breach of contract.
Issue:
– H argued that F’s response constituted an offer
that H had then accepted.
Harvey v Facey
Decision:
– The Privy Council rejected H’s argument.

– F was merely supplying information as
requested.
– There was no intention to make an offer.
– The only offer was, in fact, made by H.
– There was no contract between the parties.
Supply of information
Principle:
A person who is merely supplying information in
response to an inquiry is not making an offer.
CASE: Harvey v Facey [1893] AC 552

Offer or invitation to treat?
An invitation to treat:
• is not an offer but an invitation to other persons to
make an offer or an offer to consider offers; and
• cannot create an agreement if there is a purported
acceptance.
Invitations to treat can include:

Advertisements
CASE: Partridge v Crittenden [1968]
Price lists, circulars and catalogues

CASE: Grainger & Sons v Gough (1895)
Auctions
Principle:
Where there is a ‘reserve price’, the auctioneer calling for
bids is not making an offer but is asking for offers from
prospective purchasers.
If there is no ‘reserve price’ the auctioneer becomes the
offeror and must sell the goods to the highest bidder.
CASE: Harrison v Nickerson [1873]
Tenders
Principle:
Tenders are not normally offers unless the tender states its
exact needs, as distinct from what it may only require.
CASE: Spencer v Harding (1870)
Goods in shop windows and on shelves
CASE: Pharmaceutical Society of Great
Britain v Boots Cash Chemists
(Southern) Ltd [1953]
You need to look at the intention of the parties.

Number of offerees
Principle:
In the case of unilateral contracts, the offer will
normally be made to the world at large.
CASE: Carlill v Carbolic Smoke Ball Co [1893]

Options
An option arises when the offeror promises to keep
the offer open for a specified period. However, it will
be unenforceable unless it is supported by the
offeree’s consideration (e.g. money in the form of a
deposit).
CASE: Goldsborough Mort & Co Ltd v Quinn

(1910)
Termination of an offer
Termination of the Offer
Revocation/ Rejection/ Lapse of Death Failure of

(Withdrawal) counter-offer time condition
Subject to Condition precedent Condition subsequent

condition (before contract formed) (after contract formed)
Revocation of an offer
Principle:
An offer can be revoked by the offeror any time
before it is accepted.
Exception – Where a promise to keep the offer open

is made and is given in exchange for consideration
A revocation is not effective until the offeree
becomes aware of it.
CASE: Dickinson v Dodds [1876]

CASE: Byrne & Co v Leon Tienhoven & Co
[1880]
Lapse of time
Principles:
Where the offer contains a time limit, the offer lapses
upon expiry of the time.
Where no time limit is specified, the offer will lapse

after a reasonable time.
CASE: Ramsgate Victoria Hotel v Montefiore

[1866]
Lapse of offer due to death of party
Principle:
An unaccepted offer terminates on the death of either
the offeror or the offeree.
Exception – If the offeree dies, an offeror who is

unaware of the death can still accept unless the offer
requires personal involvement by the deceased.
CASE: Carter v Hyde (1923)

Lapse due to change in circumstances
(e.g. failure of condition)
Principle:
An offer will lapse if it expressly or impliedly
depends on a particular state of affairs that ceases to
exist prior to acceptance.
CASE: Financings Ltd v Stimson (1952)

Rejection of an offer
Principle:
If the offeree rejects the offer, the offer is terminated
and cannot later be accepted.
CASE: Hyde v Wrench [1840]

Rules relating to acceptance
The acceptance:
1. must be made in reliance of the offer.
2. must comply with any conditions in the offer.
3. must be communicated to the offeror.
4. cannot be a cross-offer or counter offer.
5. can only be made by the party to whom the offer was

made.
6. must be absolute and unqualified.
7. cannot be revoked without the assent of the offeror.

Reliance on the offer
Principle:
The acceptance must be made in reliance on the offer.
CASE: R v Clarke (1927)

Communication of acceptance
Principle:
Acceptance is only effective when it is communicated
to the offeror.
CASE: Felthouse v Bindley (1862)
Exception – Acceptance of a unilateral offer need not

be communicated.
CASE: Carlill v Carbolic Smoke Ball Co (1893)

Who can make an acceptance?
Principle:
Acceptance must be conveyed by someone with
authority.
CASE: Powell v Lee (1908)

Unqualified acceptance
Principle:
Acceptance must be absolute and unqualified. If a
purported acceptance introduces any qualifications or
new terms, it is a counter offer, which destroys the
previous offer.
CASE: Masters v Cameron (1954)

Who may accept?
Principle:
Only the person to whom an offer has been made
may accept.
CASE: Tinn v Hoffman & Co (1873)

Form of communication of acceptance
An exception to the communication principle is the
postal rule, which states that where it is appropriate to
use the post as the method of communicating
acceptance:
• an offer is effective on receipt by the offeree;
• revocation is effective on receipt by the
offeree;
• the acceptance takes effect at the time of
posting by the offeree (even if the offeror
never receives the letter).
CASE: Adams v Lindsell (1818)

Form of communication of acceptance
The postal rule does not apply to ‘instantaneous’
methods of communication (e.g. facsimiles).
Principle:
Where the communication of acceptance is
instantaneous, the contract is effective when the
acceptance is received.
CASE: Entores Ltd v Miles Far East Corp [1955]

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Composition of an agreement

• The ‘offer and acceptance’ approach is not the

2. It must be a firm promise or it may be a request for

3. It must be communicated to the offeree

4. It may be made to one person, a group or to the world at

5. It may be kept open if supported by consideration

6. All terms must brought to the notice of the offeree and

An offer can be addressed to any number of offerees.

• Smith owns an organic farm.

• Jones wants to buy Smith’s farm.

• Jones emails Smith asking: “Will you sell me your

• Smith emails back saying: “The lowest price for my

• Jones then responds by saying: “I agree to buy your

Did one party (the offeror) make an offer?

Did the other party (the offeree) accept that offer?

– Harvey (H) wants to buy BHP.

– H sent a telegram to F asking: “Will you sell us

– F responded: “Lowest price for BHP £900.”

– H then responded: “We agree to buy BHP for

– The Privy Council rejected H’s argument.

CASE: Harvey v Facey [1893] AC 552

Invitations to treat can include:

Price lists, circulars and catalogues

You need to look at the intention of the parties.

CASE: Carlill v Carbolic Smoke Ball Co [1893]

CASE: Goldsborough Mort & Co Ltd v Quinn

Termination of the Offer

Revocation/ Rejection/ Lapse of Death Failure of

Subject to Condition precedent Condition subsequent

Exception – Where a promise to keep the offer open

CASE: Dickinson v Dodds [1876]

Where no time limit is specified, the offer will lapse

CASE: Ramsgate Victoria Hotel v Montefiore

Exception – If the offeree dies, an offeror who is

CASE: Carter v Hyde (1923)

CASE: Financings Ltd v Stimson (1952)

CASE: Hyde v Wrench [1840]

1. must be made in reliance of the offer.

2. must comply with any conditions in the offer.

3. must be communicated to the offeror.

4. cannot be a cross-offer or counter offer.

5. can only be made by the party to whom the offer was

6. must be absolute and unqualified.

7. cannot be revoked without the assent of the offeror.

CASE: R v Clarke (1927)

CASE: Felthouse v Bindley (1862)

Exception – Acceptance of a unilateral offer need not

CASE: Carlill v Carbolic Smoke Ball Co (1893)

CASE: Powell v Lee (1908)

CASE: Masters v Cameron (1954)

CASE: Tinn v Hoffman & Co (1873)

CASE: Adams v Lindsell (1818)

CASE: Entores Ltd v Miles Far East Corp [1955]

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