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Ariel - Offer

Contract law (University of London)

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Offer and Acceptance

Offer and invitation to treat: In order to form a valid contract, there must be a valid
offer made by the offeror which will be accepted by the offeree. An offer is an
expression of willingness to enter into contract on specified terms made with
the intention that it shall become binding as soon as it is accepted by the
person to whom it is addressed. It can be made orally, in writing or by conduct. On
the other hand, an invitation to treat is an expression of willingness to enter
into negotiations which will lead to the conclusion of a contract at a later date
(Gibson v MCC).

Bilateral offer: Made to one person or group of people. Only that particular person or
group is capable of accepting this offer.

Unilateral offer: The effect of classifying an offer as unilateral is that acceptance can
be made by fully performing the requested act. There is no need to give advanced
notification of acceptance.

Different forms of offer and acceptance:

1. Display of goods: The general rule is that the display of goods in a shop
window is an invitation to treat rather than an offer (Fisher v Bell);
(Pharmaceutical Society of GB v Boots). So the offer is made by the customer
when he presents the goods at the cash desk, where the offer may be accepted by
the shopkeeper.

2. Advertisements: The general rule is that a newspaper advertisement is

an invitation to treat rather than an offer (Partridge v Crittenden).
Accoding to Lord Parker CJ, if newspaper advertisements are treated as offers then
the advertisers might find himself contractually bound to sell more goods than he
actually owned.

However, an advertisement can also be regarded as an offer rather than

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an invitation to treat (Carlill v Carbolic Smoke Ball Co.) The defendants

issued an advertisement in which they offered to pay £100 to any person who
caught influenza after having used one of their smoke balls. The court held that
the advertisement was an offer made to the whole world.

3. Auction sales: The general rule is that an auctioneer, by inviting bids to

be made, makes an invitation to treat (British Car Auctions Ltd v Wright).
The offer is made by the bidder which is accepted when the auctioneer strikes the
table with the hammer.

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4. Tenders: The general rule is that an invitation to tender is an invitation to

treat (Harvela Investment Ltd v Royal Trust). The offer is made by the person
who submits the tender and the acceptance is made when the person inviting the
tenders accepts one of them.

Acceptance of an offer
An acceptance is an unqualified expression of assent to the terms proposed by
the offereor. Acceptance can be made by words as well as by conduct. However,
conduct will amount to an acceptance only if it is clear that the offeree did the act with
intention of accepting the offer. It is an objective test (Day Morris Associates v
Voyce).

Counter offer: A counter-offer is an offer made by the offeree to his offeror relating to
the same matter as the original offer and proposing a substituted bargain differing from
that proposed by the original offer (Hyde v Wrench). The effect of a counter-offer is to
kill off the original offer so that it can not subsequently be accepted by the offeree. A
counter-offer itself is a new offer capable of acceptance or rejection.

However, a mere request for information does not amount to a counter-offer

(Stevenson v McLean).

Communication of acceptance: The acceptance of an offer must be communicated to

the offeror. Otherwise the acceptance will not be valid. So the acceptance will be valid
once it is brought to the attention of the offeror (Entores v Miles Far East Corp).

In case of instantaneous communication such as telephone and telex, the acceptance

takes place at the moment the acceptance is received by the offeror (Brinkibon Ltd v
Stahag Stahl).

Acceptance in ignorance of the offer: A person who, in ignorance of the offer,

performs the act or acts requested by the offeror can not claim that he has accepted the
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offer (Gibbons v Proctor). Before performing the required act, he must be aware of the
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existence of the offer. The offer must have been present in his mind when he did the act
which constituted the acceptance (R v Clarke) .

Method of acceptance: The offer must be accepted by using the method prescribed by
the offeror. So if the offeror asked the offeree to accept the offer through a letter, the
offeree must use letter to accept it.

Where the offeror has not used sufficiently clear words, the offeror will be bound by the
acceptance which is made in a form no less advantageous to him than the form he

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prescribed (Manchester Diocesan Council v Commercial and General

Investments).

Acceptance by silence: The general rule is that acceptance of an offer will not be
implied from mere silence on the part of the offeree (Felthouse v Bindley).

Postal rule (Exception of the communication of acceptance rule): The rule that
acceptance of an offer must be communicated is not a strict one. There may be
instances where the terms of the offer demonstrate that the offeror does not insist that
the acceptance be communicated to him. In such a case, the acceptance need not be
communicated (Carlill v Carbolic Smoke Ball Co.). However, the major exception to
the rule of communication of acceptance is the one called postal rule. According to
postal rule, the acceptance takes place when the letter of acceptance is posted by the
offeree (Adams V Lindsell). So the offer is accepted once the letter of acceptance is
posted, even if the offeror is not aware of it.

In case of postal rule, once the acceptance has been posted, the offeror can no longer
revoke his offer.

What if the letter of acceptance gets lost?

A contract is concluded on the posting of the letter of acceptance even where it gets lost
in the post. However, where the reason for the loss of the letter is that it has been
incorrectly addressed by the offeree, acceptance does not take place on posting
(Korbetis v Transgrain Shipping).

Limitations of postal rule:

1. It must be reasonable for the offeree to use the post (Henthorn v Fraser)
2. Postal rule will not be applicable where the offeror states that acceptance will be
effective only when it reaches him
3. Postal rule is confined only to non-instantaneous forms of communication
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(Entores v Miles Far East)

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What if the offeree tries to revoke the acceptance by a faster method of

communication after accepting the offer? The English law is not clear on that point.
However, there are two contrasting cases. According to the Scottish case of Countess
of Dunmore v Alexander, such revocation is permitted. However such an approach is
regaded as inflexible. According to the South African case of A to Z Bazaars v Minister
of Agriculture, once the letter of acceptance is posted, the contract is completed and

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there is no possibility of altering the effect of the letter of acceptance by a faster method
of communication.

Termination of the offer: There are five principal methods by which an offer may be
terminated:

1. Revocation of offer by the offeror: The offeror can revoke or withdraw the offer
at any time before it has been accepted (Payne v Cave). However, revocation of
the offer must be drawn to the attention of the offeree (Byrne v Van Tienhoven).
The revocation need not be communicated by the offeror personally; it is sufficient
if it is done through a reliable third party (Dickinson v Dodds)

2. Rejection by the offeree: An offer can be terminated by a rejection by the

offeree (Hyde v Wrench)

3. Lapse of time: An offer can be terminated by lapse of time. An offer which is

expressly stated to last only for a specific period of time can not be accepted after
that time (Ramsgate Victoria Hotel v Montefiore)

4. Condition: An offer which is stated to come to an end if a certain event occurs can
not be accepted after that event has actually taken place

5. Death of the offeror: An offer may be terminated by the death of the offeror.
However, if the offeree does not know of the offerors death and there is no
personal element involved, then the offer may still exists (Bradbury v Morgan)
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