Offer and Acceptance

A) Offer
An offer is a statement by one party of a willingness to enter into a contract on stated terms,
provided these terms are, in turn accepted by the party or parties to whom the offer is
addressed. There is generally no requirement that the offer made in any particular forms, it
may made, orally, in writing or conduct.
An invitation to treat is simply an expression of willingness to enter into negotiations, in
which, hoped will lead to the conclusion of the contract. In order to distinguish between both,
two aspect has to be considered, i.e., did the maker of the statement intend to be bound by the
acceptance of his terms without further negotiations? Or did he intend his statement to be part
of the continuing negotiation process?
In Gibson v Manchester City Council, the trial judge and Court of Appeal held that there is no
contract had been concluded between the parties. Lord Denning held dissenting judgement.
Lord Denning held there is a contract concluded between the parties because there was a
agreement between the parties on all material points, even though the precise formalities had
not been gone through. The House of Lords took a different view and held that there is no
contract concluded. It was held that the letter written by the treasurer, which stated that the
council may want to sell, it is not an offer as it did not commit the council to selling the
house. It was simply an expression of willingness to enter into negotiations for entering into a
contract for the sale of the house and was not an offer which was capable of being accepted.
This has followed by the evidence of the fact that Mr Gibson was invited to make a ‘formal
application’ for the house. In contrary, the decision made in Storer v Manchester City
Council, had concluded that there had been a contract made between the parties.
Display of goods for sale
There are three different approaches which could be adopted to the display of goods for sale
in shop or supermarket. First approach is, to hold that the display of goods is an offer which
is accepted when the goods are picked by the prospective purchaser and put it into his grocer
bag. However, such conclusion would have ended up in undesirable consequence that the
prospective purchaser would be bound as he picked up the goods and then could not change
his mind and return the goods on the shelves without being breach of contract.
Second approach is to hold that the display of goods is an offer which is accepted when
purchaser takes the goods to the cash desk. This solution avoids the weakness of the first
approach but it has been criticised under three reasons. The first criticism that levelled against
this solution is the shop is a place for bargaining but not for compulsory sale, and hold that
display of a good as an offer will take away the shopkeeper’s freedom to bargain. This
argument can be countered pointing out that, apart from second-hand shop, bargaining is not
a reality in the shops of today. Goods are basically displayed on a ‘take or leave’ basic. The
second criticism lies on, it can be argued that this approach will take away the shopkeeper’s
freedom whether or not to deal with a particular customer. It would compel the shopkeeper to
trade with its worst enemy. However, it is submitted that, in current era, shopping in vast
store has become a common place, such argument cannot longer be regard as conclusive.
Thirdly, it has been argued that treating display of goods as an offer might result in the
vendor bound to a series of contract which he could not able to fulfil. This objection can be
encountered by holding that the shopkeeper’s offer is subjected to the limitation that it is only
capable of acceptance ‘while stock lasts. (Patridge v Crittenden 1968)
The third approach is that a display of goods constitutes an invitation to treat and that offer is
made by the customer when he presents the goods at the cash desk, where the offer may be
accepted by the shopkeeper. This conclusion preserves the freedom of the shopkeeper to
decide whether or not to deal with a particular customer, but it can fail adequately to protect
the interest of the customer. For example, a customer who takes the goods to the cash desk
may be told that the price of the goods is in fact on sale at a higher price than the display
price. In such case, the shopkeeper might be subjected to criminal sanctions under the
Consumer Protection from Unfair Trading Regulations 2008 if it has provided a misleading
information of the price or manner to the customer in which the price is calculated. The
consumer may also has the right to redress under the 2008 Regulation.
The general rule is that, the court have decided that goods in display in the window of a shop
is an invitation to treat rather than an offer. (Fisher v Bell). The application in this rule can be
precisely seen in a celebrated case, Pharmaceutical Society of GB v Boots Cash Chemist. The
defendant organised their shop based on self-service basis. They are charged with the breach
of Pharmacy and Poison Act 1933, which required that the sale of drugs take place under the
supervision of a registered pharmacist. There was no pharmacist present close to the shelves,
but a pharmacist supervised the transaction at the cash desk and was authorised to prevent a
customer from purchasing any drug if he though it is fit to do so. It was held that the sale took
place at the cash desk and not when the goods are taken from the shelves; the display of the
goods for sale are invitation to treat rather than an offer therefore the breach of the Pharmacy
and Poison Act 1933.
However, a rigid adherence to the principle in Boots could lead injustice in certain cases. An
instructive case which illustrates that the principle in Boots can lead to injustice is provided in
an American case of Lefkowitz v Great Minneapolis Surplus Store (1957). On two occasions,
the defendant placed on an advertisement in a newspaper. The both advertisements stated that
the first customer will be getting a promotion, buying their product from a great deal, based
on first come first served basis. The claimant was the first person at the store on both
occasions. Initially, the defendant refused to sell the product to clamant. The reason given
was a ‘house rule’ that the offer is intended for women only. The second occasion was he was
informed that he knew the ‘house rule’. The claimant brought a claim for damages for breach
of contract. His claim in relation to the first advertisement was unsuccessful and dismissed on
the ground that the value of the fur coats was too speculative and uncertain to found a claim.
But his claim for the second advertisement, and he was awarded with the damage. The
Supreme Court in Minnesota held that the advertisement was an offer and not an invitation to
treat because the defendant was not entitled to confine their offer to women only because no
such restriction was explicit in the offer itself.
But an English court will conclude that these advertisements constituted an offer. In
Chapelton v Barry UDC, it was held that the display of the desk chair for hire at the beach
was an offer.
Advertisement
The general rule is that a newspaper advertisement is an invitation to treat rather than an
offer. A celebrated case, Patridge v Crittenden, the appellant advertised cocks and hens for
sale. He was charged with the offence of ‘offering for sale’ wild live birds contrary to
Protection of Bird Act 1954. It was held that the advertisement was an invitation to treat
rather than an offer, subsequently, the appellant was acquitted. Lord Parker CJ stated that
there was ‘business sense’ in treating such advertisement as invitation to treat because if there
are treated as offer, the advertiser might find himself contractually obliged to sell more goods
than he actually in fact owned. However, this argument is not conclusive. This argument can
counter by holding that the advertiser’s offer is subject to limitation that it is only capable of
acceptance until ‘while stocks last’.
Nevertheless, there are certain cases where an advertisement can be interpreted as an offer
rather than an invitation to treat. The landmark decision in Carlill v Carbolic Smokeball Co.
the defendants who were manufacturer of the carbolic smoke ball, issued an advertisement in
which they offered to pay $100 to any person who caught influenza after having use their
smoke ball in the specified manner and they deposited $1000 into the bank to show their
good faith. The claimant caught influenza after using the smoke ball in the specified manner.
She sued for $100. It was held that the advertisement was not an invitation to treat but was
offer to the whole world and those contracts were made with those who performed the
condition ‘on faith of the advertisement’. Therefore, the claimant was entitled to recover the
$100.

B) Acceptance
An acceptance is a final and unqualified expression of assent to the terms proposed by the
offeror. There is no rule that acceptance must be made by words or verbally; it can be made
by conduct (Carlill v Carbolic Smokeball Co). Occasionally, it may be difficult to pinpoint
the precise point in time which the conduct is sufficient to evidence the existence of the
contract. This difficulty tends not to arise where the contract is formed by an exchange of
promise. But, where in the case where the acceptance is said to take the form of the conduct,
some steps may be said to be preparatory to the conclusion of the contract rather than
evidence of its existence. Conduct will only amount to acceptance if it is clear that the offeree
did act in question with the intention, objectively assessed, of accepting the offer. (Day
Morris Associates v Voyce 2003).
A purported acceptance which do not accept all the terms and conditions proposed by the
offeror which in fact introduce new terms is not an acceptance but a counter-offer, which is
then treated as a new offer which is capable of acceptance or rejection. The effect of a
counter-offer is to ‘kill off’ the original offer so that it cannot be subsequently accepted by
the offeree. This rule can be seen in the operation of the case of Hyde v Wrench. The
defendant offered to sell some land to the claimant for $1000 and the claimant replied by
offering to purchase the land for $950. The defendant refused to sell for $950. So the
claimant subsequently wrote to the defendant agreeing to pay $1000 for the land but the
defendant still refused to sell. It was held that there was no contract existing between the
parties. The claimant’s offer for $950 was a counter-offer which killed of the defendant’s
original offer so as to render it incapable of subsequent acceptance. Lord Langdale held, no
contract exist when the claimant killed of the original offer stated by defendant.
The ways of communication of the acceptance
The general rule is that an acceptance must be communicated to the offeror. The acceptance
is generally only validly communicated when it is actually brought to the attention of the
offeror. A contract is a consensus ad idem – meeting of minds. A meeting of minds con not
happen unless there is a knowledge for the offer agreed bargains. The operation of this rule
was illustrated by Denning LJ in Entores v Miles Far East Corp (1955). He said when a oral
acceptance is drowned out by an overflying craft, such that the acceptor cannot hear the
acceptance, then there is no contract unless the offeree repeats his acceptance once the
airplane has passed over. We can draw another analogy here by a telephone line goes dead
instance. When two people make a contract by using telephone, and the line goes ‘dead’ so
that the acceptance is incomplete, then the acceptor must telephone the offeror to make sure
that the offeror has heard the acceptance. Where, however, the acceptance by the acceptor is
made clear and audibly, but the offeror did not hear the acceptance, the contract is
nevertheless concluded unless the offeror makes clear to the acceptor that he had not heard
what was said. In the case of instantaneous communication, such as telephone or telex, the
acceptance take place at the moment whilst the acceptance is received by the offeror and at
the place which the offeror happens to be. (Brinkibon Ltd v Staghag Stahl).
Acceptance in ignorance of the offer
It is well-known that an offer is effective when it is communicated to the offeree or meeting
of minds exist in both parties. Some controversy arises when the problems come in
acceptance of ignorance of the offer. Let’s draw an analogy here. X offers $100 for safe
return for his dog. Y returns it but unaware of X’s offer. Is Y entitled for the money? This
issue has always been a controversial one. X already got what he wanted, and there is no
reason in justice why he should not get paid what he has publicly promised to pay, and Y at
the same time performed a socially useful act in returning the dog, he should be eligible for
the reward for doing so.
On the other hand, in case of bilateral contract which imposes mutual obligation upon the
parties, the effect of such rule would be to subject the ‘accepting party’ to obligation of which
he was unaware. For instance, X offered to sell $100 for someone whoever finds his dog and
return it, unaware of the offer, should not thereby be held to have accepted an offer to
purchase the dog in $100. In the light of these considerations, it has been argued that the best
solution to adopt is to hold that, knowledge of the offer in reward cases in not necessarily but
knowledge of the offer in bilateral cases is required. Professor Hudson backed this statement
by holding that there should be an exception with regards to reward cases, where the offeree
should be entitled for the reward in the ignorance of the offer. This is because the offeree was
not prejudiced by the conduct of the offeree. The offeror has benefited from the offeree’s
conduct and he himself suffered no detriment.
However, the general rule which has been adopted in English is that a person who, ignorance
of the offer, performs an act requested by the offeror is not entitled to sue as a contract. The
case of Gibbons v Proctor, which was though to stand for a contrary proposition, appears on
closer examination of the case where the person claiming the reward knew the reward only
when the information at the time given to the police. It must be for the party definite offer
which is mirrored by a definite acceptance.
For the same reason, cross-offer which are identical did not create a contract unless or until
they are accepted (Tinn v Hoffman).
Once is shown that the offer has been communicated to the other party, a person who knows
the offer may do the act required with some motive other than that of accepting the offer. In
William v Cawardine, Mrs William claimed on a reward from Mr Cawardine for giving the
information that led to the arrest of her husband, Mr William who was had murdered Mr
Cawardine’s brother, Walter Cawardine. At the moment she was giving out the information,
she did not point out the culprit was her husband, instead saying other fact which do not led
to the culprit of her husband. Shortly after, she was beaten by her husband. Thinking that she
will be dying soon, and apparently ease her conscious, Mrs William gave more information
which led to the conviction of her husband. She went for Mr Cawardine for claim, Mr
Cawardine refused. Arguing she knew the fact of the whole case, but yet did not giving it out
completely. At trial, Denman CJ held, as the plaintiff is within the terms, of the handbill, she
is entitled for getting the reward. Parke J backed up Denman CJ’s argument, by stating the
motive was the state of her personal feelings, which is immaterial.
Prescribed method of acceptance
Where the offeror prescribes a specific method of acceptance, the general rule is that the
offeror is not bound by the contract unless the prescribed methods of acceptance is complied
or abide by the offeree. However, the offeror who wishes the state that he will be bound only
if the offer is accepted in a prescribed method, must use clears words to achieve this purpose.
Where the offeror has not used sufficiently clear words, a court will hold the offeror bound
by an acceptance which is made in a form which is no less advantageous to him than the form
which he prescribed. This can be seen in the case of Manchester Diocesan Council for
Education v Commercial and General Investment Ltd 1969. The claimant decided to sell
some property by tender and inserted a clause in form of the tender stating that person who
bid was accepted would be informed means of letter sent to the address given in the tender.
The defendant completed form of the tender and sent it to the claimant. The claimant decided
to accept the defendant’s tender and sent a letter of acceptance to the defendant’s surveyor
but not the address on the tender. It was held that communication to the address in the tender
was not the sole permitted means of communication of the acceptance and that therefore a
contract has been concluded. The defendant was not disadvantaged in any way by notification
given to his surveyor.
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 and that an offeror cannot impose a contractual obligation upon the offeree
by stating that, unless the offeree expressly rejects the offer, he will be held to have accepted
it. The rationale behind this rule is that it is thought to be unfair to put the offeree to time and
expense to avoid the imposition of unwanted contractual obligations and it protects the
offeree where its application will suffer hardship. In Felthouse v Bindley (1862), the claimant
and his nephew entered into negotiations for the sale of nephew’s horse. The claimant stated
that if he heard nothing furthering from his nephew then he considered the horse was at his
price of $30 15s. The nephew did not respond to this offer but he decided to accept it and told
the defendant’s auctioneer not to sell the horse because the horse has already been sold.
Nevertheless, the auctioneer mistakenly sold the horse and so the claimant sued the
auctioneer in conversion. The auctioneer argued that the claimant had no title to sue because
he was not the owner of the horse as his offer to buy horse had not been accepted by his
nephew. This argument was upheld by the court on the ground that the nephew’s silence did
not amount to acceptance of the offer. The application of the general rule to the facts of
Felthouse has been subjected of criticism on the ground that the uncle waived the need for the
communication of the acceptance, and the nephew had manifested his acceptance by
informing the auctioneer that the horse had been sold. The fact has unequivocally illustrated
that there was a meeting of minds – which is regard as a key factor of concluding a contract
between the claimant and his nephew.
Instead, our law does in exceptional case accept that silence can amount to acceptance (Vitol
SA v Norelf Ltd). Lord Steyn citing the case of Rust v Abbey Life Assurance Co. for example,
a course of dealing between both parties may give arise to the interference that silence
amount to acceptance. Although there had been existing vast arguments on regard of whether
the general should apply in such cases alike, a good reason for abiding the general is,
however, where the offeree only mentally assent to the offer, but does not act on reliance
upon it, it is suggested that the general rule should apply because otherwise the offeree would
be able to speculate against the offeror, by stating that he had accepted the offer when the
offer is a good offer for himself and by stating that he had not accepted it when the contract
turned out to be a bad one. Therefore, a positive action is required on the part of the offeree to
provide evidence that he has in fact accepted the offer.
Exception to the rule requiring the communication of acceptance (unilateral offer and postal
rule)
The most major exceptions relate to acceptance sent through the post. The general rule of
postal rule can be seen in the case of Adams v Lindsell, which stand for the proposition that
acceptance take place when the letter of acceptance is posted by the offeree. The justification
put forward in support of this rule is, the first, post office is the agent of the offeror. This
justification is open for criticism that it cannot be said in any meaningful sense that the post
office is the agent because post office has no power to contract on behalf of offeror. The
second justification is the offeror has chosen to start the negotiations through the post, and the
risk or delay in the post should be imposed upon him. However, it is not necessarily that the
negotiations must started through post. It could be the case where the offeree initiated the
negotiations through the post by asking the offeror for the terms on which he was prepared to
do business. Nevertheless, it should be noted that postal rule only applies where it is
reasonable to use the post (Henthorn v Fraser). It is reasonable to use postal rule where the
parties live at the distance from each other’ it is not necessarily to use the postal rule to start a
negotiation. Hence, not entirely true to say that the offeror accepted all the risk while using
post. The following justification is that the offeree should not be prejudiced once he has
dispatched his acceptance and he should be able to rely on the efficacy of his acceptance.
This is a strong argument, but it could be met by providing that, once the acceptance has been
posted, the offeror can no longer revoke his offer (Byrne v Van Tienhoven).
It can seem that the justification of the general rules are weak, the operation of postal rule can
lead to injustice as well. For an example, when Y makes an offer to X and stated that the
offer will be open for acceptance until 2 pm on Wednesday. Applying the general rule, X
could validly ‘accept’ that offer by posting the acceptance at 1: 58 pm on Wednesday, even
though he knew it will not reach Y until Thursday. It is true that Y can avoid such hardship
by stating in his offer that the acceptance must reach him before 2 pm on Wednesday.
In addition to creating injustice, the general rule gives rise to practical difficulties. The first
arise where the letter is lost in a post. The general rule leads to the result that the contract had
been concluded or acceptance has been taken effect once the letter was posted in the post and
not when it reaches the offeror. This was held in the case of Household Fire Insurance v
Grant (1879). However, in Scotland, the view was rejected by Lord Shand in Mason v
Benhar Coal Co 1882. He states that, in his very own opinion, no contract exists when the
acceptance was posted but never reached to the offeror. It is suggested that latter rule is
preferable one because it is the offeree who has sent the acceptance, and hence he is in the
best position to know when his acceptance is likely to reach the offeror, and takes steps to
check it does so reach the offeror. Nevertheless, the English Court presently committed to the
view that a contract is concluded on the posting of the letter of acceptance even where it gets
lost in a post. However, when the reason of the lost of the letter is that it has been mistakenly
addressed by the offeree, acceptance does not take place on the posting because while the
offeror may take the risk of delaying of the letter, he does not take a further risk of
misconduct by the offeree (Korbetis v Transgrain Shipping BV 2005).
The second practical difficulty arise where the offeree posts his acceptance and then send a
rejection/revocation by a quicker method so that the rejection reaches the offeror before the
acceptance. Once again, the general rule illustrates that the contract was validly concluded
whilst the letter of acceptance was posted, and so the subsequent communication is not a
revocation of an offer, but rather than a breach of contract, which may be rejected, or
accepted by the offeror. On the other hand, it can be argued the contract was not concluded
when the letter of acceptance was posted allows the offeree to speculate at the offeror’s
expense by sending a quicker means of revocation where the contract turns out to be bad for
himself (A to Z Bazaars) contrary views (Countess of Dunmore v Alexander).