OFFER

A: WAS AN OFFER MADE?

Firstly, it must be determined whether an offer was in fact made. An offer is an indication by one
party to another of his or her willingness to enter into a contract with that person on certain terms.

In determining whether an offer has been made, it must seem to a reasonable person in the position
of the offeree that an offer was intended. (Objective test.).

Carlill v Carbolic Smoke Ball Co Principles:

• An offer can be made to a single person or the whole world. The offeror has the power
to say who can accept.
• An offer in a unilateral contract can be accepted by any person who performs the
conditions on the faith of the advertisement.
• An offer must not be “mere puff.” (Reasonable person test).

B: WHAT WAS THE NATURE OF THE OFFER?

1) INVITATION TO TREAT:
An offer can be distinguished from an invitation to treat, which is an invitation or request for offers
or to engage in negotiations with a view to sale. An invitation to treat is not contractually binding.
(Gibson v Manchester City Council). Other invitations to treat can be seen as:

• Display of Goods For Sale:

The display of goods for sale constitutes an invitation to treat and not an offer. Customers are
regarded as making an offer when they present the items to the cashier for purchase, and no contract
is intered into until the cashier has accepted the offer. (Pharmaceutical Society v Boots Cash
Chemists).

EXCEPTION TO THE DISPLAY OF GOODS FOR SALE RULE:

In the case of ticket sales, the ticket only represents an offer made to the passenger, which he
accepts by presenting himself for travel. No contract is formed by the purchase of the ticket alone.
(MacRobertson Miller Airline Services v Commissioner of State Taxation (WA)

• Auctions:
The holding of an auction will generally be treated as an invitation to treat. Each bid constitutes an
offer, and the auctioneer communicates acceptance of the final bid by the fall of the hammer.
Hence, a bidder is entitled to withdraw his or her bid prior to it being accepted. (Payne v Cave).

2) MERE PUFF:
Mere Puff is a statement, which by its nature, and in the context in which it is made, is not intended
to constitute a contractual offer nor be taken seriously. (Carlill v Carbolic Smoke Ball Co).

C: WAS THE OFFER WITHDRAWN OR CANCELLED?

Withdrawn:
An offer may be withdrawn at any point in time prior to it being accepted (Goldsborough Mort Co v
Quinn) however revocation of the offer must be communicated to the offeree. (Dickinson v Dodds).
An offer in a unilateral contract can still be revoked after the offeree has embarked on performance
however, provided that the performance is not complete and that an ancillary contract is not in place
that prevents the revocation from taking place. (Mobil Oil v Wellcome International).
Options:
If consideration is given for a promise to keep the offer open, an “option” is created. An option is an
agreement between an option holder and a grantor under which the option holder is entitled to enter
into a contract with the grantor on the execution of the option, prior to the expiry of the option
period. (Goldsborough Mort Co v Quinn).
Lapse:
An offer will lapse either after a reasonable time has passed or after a specified time, where the
offer is expressed to be available for acceptance for a period of time. Whether a period of time is
reasonable will depend on the facts and context of each case, including the nature of the subject
matter and the form in which the offer was made. (Ramsgate v Montefiore).

Counter-Offer or Enquiry:
The making of a counter-offer is treated as a rejection of the original offer and, therefore,
extinguishes the original offer. (Butler v Ex-Cell-o-Corp). Close attention is required, however, in
considering whether the supposed “counter-offer” was not in fact an inquiry relating to an alteration
of terms – in itself something that would not extinguish an offer. (Brambles Holdings Ltd v Bathurst
City Council).

Rejection/Revoked:
An offer, once rejected, is no longer available for acceptance. (Dickinson v Dodds).

ACCEPTANCE
A: WAS THERE CONDUCT INDICATING ACCEPTANCE?

The offeree effectively accepts an offer if they behave in a way which a reasonable person would
believe that the offeree were assenting to the terms of an offer. (Lucy v Zehmer). Acceptance must
be unequivocal and accepted in reliance of the offer. (Crown v Clarke).

B: HOW WAS THE OFFER ACCEPTED?

Expressly Communicated:
As a general rule, acceptance is only effective once it has been communicated to the offeror. That
is, there is acceptance once the offeror has been notified that the offeree accepts the offer. (Carlill v
Carbolic Smoke Ball Co). Assuming the contract is bilateral, acceptance must be communicated
unless the offeror waives this right or specifies another method of acceptance. (Latec Investment v
Knight).

Implied Acceptance (Silence & By Conduct):

An offeror cannot stipulate that a lack of response on the part of the offeree will be treated as an
acceptance. (Felthouse v Bindley). HOWEVER, this rule is subject to two qualifications. (Empirnall
Holdings Pty Ltd v Machon Paul Partners Pty Ltd):
• if an estoppel can be raised against the offeree; or
• the conduct of the offeree amounts to an implication that he/she has accepted the offer.

In such cases, an objective test is used. (Whether a reasonable bystander would regard the conduct
of the offeree, including silence, to indicate to the offeror that the offer had been accepted.)
(Empirnall Holdings Pty Ltd v Machon Paul Partners Pty Ltd; Brogden v Metroplitan Railway).

Postal Acceptance Rule:

Acceptance takes place at the time a letter of acceptance is posted, not the time at which the letter is
received. (Household Fire & Accident Insurance Co v Grant). This rule also applies to telegrams,
though NOT telephone communications or faxes. (Reese Bros Plastics Ltd v Haman-Sobelco).
An offeror can exclude the operation of the rule at any time the offer is made, however, ny
specifying that the only mode of acceptance will be by another method of communication. (Bressan
v Squires).
Electronic Communications (as per Electronic Transactions Act 2000 (NSW):
AUTOMATIC ASSUMPTION: a contract formed automatically is not invalid, void or
unenforceable because there was no human review or intervention
TIME OF SENDING: the time of dispatch of notification of an offer or acceptance when distributed
electronically (i.e. via email) occurs at the point in time when the electronic communication leaves
an information system under the control of the party who sent it. (S13(1)(a)).

TIME OF RECEIPT: the time of receipt of the electronic communication is the time when the
electronic communication becomes capable of being retrieved by the addressee at an electronic
address designated by the addressee OR when the addressee is capable of retrieving it at another
address and is aware that the communication has been sent to that address.

Offeror Dispenses With The Need For Communication (UNILATERAL CONTRACT)

The requirement of express communication indicating acceptance can be waived by the offeror,
permitting acceptance to arise without communication of having taken place. Such dispensation can
be express OR implied. (Carlill v Carbolic Smoke Ball Co). In the case of unilateral contracts, given
that performance required by the offeror constitutes the act of acceptance, the need for express
communication of acceptance in such cases is impliedly waived unless otherwise specified.
(Carlill).

C: WHICH OFFER WAS ACCEPTED & ON WHAT TERMS?

Acceptance must correspond precisely with the offer. If the offeree attempts to vary the terms
proposed, then this will give rise to a counter-offer rejecting the initial offer, rather than accepting
it.

Battle Of The Forms:

This is a situation where two parties exchange inconsistent standard forms during contractual
negotations and then reach agreement on the principal terms without deciding which standard form
should prevail.

The sending of the last form will be usually regarded as a counter-offer, and so the “last shot” will
prevail, provided the recipient of the counter-offer can be taken to have accepted the terms proposed
by the other sender. Terms that are complimentary but not contradictory can be construed together
in some cases, while conflicting terms may be replaced by a term from reasonable implication.
(Butler Machine Tool Co Ltd v Ex-Cell-O-Corp).

CONSIDERATION
Consideration is the price paid for a promise. The doctrine of consideration requires that something
must be given in return for a promise in order for it to be binding – also known as a “quid pro quo”
relationship. (Dunlop Pneumatic Tyre Company Ltd v Selfridge & Company Ltd). An agreement
unsupported by consideration on both sides is said to be nudum pactum (a naked agreement) and
hence legally unenforceable.

A: WHAT WAS NATURE OF THE CONSIDERATION BARGAINED FOR?

Consideration may consist of either an incurred benefit as a result of the other party's promise, or a