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OFFER AND ACCEPTANCE

LAW OF CONTRACT

WHAT IS A CONTRACT?
It refers to an agreement between two or more parties that is legally binding between them. Section 2(h) of the CA 1950 defined contract as an agreement enforceable by law.

ELEMENTS OF CONTRACT
1.

2.
3. 4. 5. 6. 7. 8.

Proposal & Acceptance Consideration Intention to create legal relations Certainty Legal Capacity Free consent Legality of the objects Required formalities

PROPOSAL & ACCEPTANCE


GEN. RULE: PROPOSAL AGREEMENT. + ACCEPTANCE=

1. Proposal Section 2 (a) of the CA 1950 Defined what is proposal. Proposal can be a promise, an act or abstinence. The person who made the proposal is called the promisor.

To whom can a proposal be made?


a)

Individual Only that particular person may accept the proposal.

Boulton v Jones (1857) 2H & N 564 F: Defendant had business dealing with a shopkeeper named Brocklehurst. The defendant had ordered some stocks from B but on the day of the order B had sold his business to the Plaintiff. The Plaintiff delivered the goods without informing the Defendant of the change of ownership.; The Defendant then refused to make any payments. H: It was held that the plaintiff had no rights to accept an offer not made to him.

b) General public Anyone who meets all the terms of the proposal may accept Carlill v Carbolic Smoke Ball Co. LTD [1893] F- CSB advertised that they will offer 1,000 pound to anyone who still succumbed to influenza after using a certain remedy for a fixed period. The Pf duly used it but, nevertheless, contracted influenza. The Pf then sued for the money. H- The Pf was entitled to the 1,000 pound as she had accepted the offer made to the world at large.

Proposal must be communicated


[Section 4 (1) CA 1950] it is complete when it comes to the knowledge of the person to whom it is made. Ignorance of proposal disable a person from making acceptance. R v Clarke (1927) F-A reward was offered to anyone who gave information leading to the arrest and convictions of persons responsible for the murder of the police officers. X and Clarke were arrested and Clarke gave information leading to the arrest of Y. X and Y were convicted but not Clarke. Later, he knew about the reward and claimed for it. H- Clarke was not aware of the reward at the time he gave the information. He was merely acting to clear himself. Therefore, Clarkes claim failed.

PROPOSAL MUST BE DISTINGUISHED FROM ALL THE FOLLOWINGS;


1.

Invitation to treat (ITT) - it is a sort of preliminary communication at the stage of negotation, which passes between the parties at the stage of negotation. -Examples: Price tags, advertisement, display of goods, and auction.

PHARMACEUTICAL SOCIETY OF GB V BOOTS CASH CHEMISTS(1953)


Issue: Was there a sale when a customer picked up an item from the shelf and place it into the shopping basket or cart? F- The Df are prohibited by law to sell certain poisons unless a registered pharmacist supervised such sale. So, they had stationed a registered pharmacist at the cashiers desk where payment was to be made. However, the company is being sued because it was alleged that there was a contract when the customers selected those poison and put it into their shopping basket. H- The display of goods on shelf was only an ITT. Proposal was made by the buyer when they place the item into the shopping basket. Thus, agreement was formed once the cashier accepted payment from the buyer.

2. Counter Offer
When

A make a proposal to B, B has a choice whether to accept or reject it. But if B makes a new proposal by changing a vital terms of the contract. ( Example: price of the goods), B is said to have made a counter offer. Effect: As original proposal is destroyed and it can no longer be accepted. A then become the acceptor and B become the proposer.

HYDE V WRENCH (1840)

F: Df offered to sell a piece of land to Pf for 1000 pound on 6th June. P then make a counter offer to purchase the land at 950 pound on 8th June. However, the Df refused to accept the new price. P then immediately wrote to the Df accepting the original offer on the 27th June. H: There was no acceptance because the Pf letter on 8th June had rejected the original offer and the original offer are not to be revived. Therefore no valid contract.

I.

2. Acceptance Section 2(b) of the CA 1950 defined acceptance as when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted become a promise The person who accept the proposal is called the promisee. Characteristic of acceptance Section 7 (a) of the CA 1950- acceptance must be absolute and unqualified. (i.e It must be accepted according to the terms of the contract so that there is complete agreement and it will not amount to counter

CONTINUE

Lau Brothers & Co v China Pacific Navigation Co. Ltd F: Negotiation for the delivery of logs were conducted through a series of telegrams and letters. The Df withdrew and the issue was whether there was a binding contract at that stage. H: The parties were still in a state of negotiation and the Df could rightly withdraw from it.

II. Acceptance must be made within reasonable time Section 6 (b) of the CA 1950 -If there is a fixed date given, it must be accepted before the date lapses. - if there is no fixed date given, it must be accepted within a reasonable time.

RAMSGATE VICTORIA HOTEL CO LTD V MONTEFIORE (1866)


F: In June M offered to buy R companys share. In November, the company allotted the share to M who had by then refused to accept on the grounds that the proposal should have been accepted within reasonable time. the defendants refusal was justified because such proposal should have been accepted within a reasonable time and the period between June and November was clearly not reasonable.

H:

III. Silence does not constitute acceptance. (requires positive act of acceptance) Felthouse v Bindley (1862) F: Pf, the uncle, write to his nephew offering to buy his horse saying if I hear no more about him, I consider him mine. The nephew did not reply but told the auctioneer, the df, not to sell the horse. The df sold by mistake and the pf sued the df for conversion. H: there could be no conversion because there was no contract between the pf and his nephew since the nephew did not communicated his acceptance to the pf offer. Silence is not acceptance.

IV. It must be communicated using usual mode or method (s 7(b) CA 1950)

V. Acceptance can be made by performance


-

For example a taxi driver who drives his customer to a specific destination is accepting the proposal made by the customer in form of performance.

Special issue as to communication of acceptance. (acceptance need not be communicate to the proposer.) A. The Postal Rule

a)

b)

It is the rule governing acceptance through post. Provided under section 4(2) of CA 1950 Communication of an acceptance is complete as against : The proposer once it is posted (s.4(2)(a)) Acceptor, when it comes to the knowledge of the proposer (s.4(2)(b))

Ignatius v Bell (1913)


F:The plaintiff was given an option agreement to purchase the DFs right over a piece land. The option must be exercised on or before 20th of August 1912. Both parties had agreed to use post as a means of communication. The Pf then sent a notice of acceptance by registered post in Klang on 6th of August but it was not delivered until the evening of 25th of August because the DF was away. H: Section 4 applies. The plaintiff has duly exercised the option when he posted the letter on 6th of August 1912.

Entores Ltd v Miles Far East Corporation (1955) Lord Denning stated that:Acceptance is complete when it is put into the post box because it is the place where contract is made. Limitation of the Rule: - It only applies to acceptance and not other types of communication such as proposal, counter offer and revocation - The rule can always be excluded by the offeror - For example the offeror stated that the acceptance must be by notice in writing. Therefore mere posting of the letter of acceptance is not sufficient. (he must have received the notice of acceptance before there can be acceptance)

B. Instantaneous Communication - this type of communication refers to telex, telephone, and other form of communication (usually electronics) that reaches the other person instantly. - the issue to be determine is when and where the communication of acceptance should be effective Case : The Brimnes (1974) Held : the communication was effective when it was received on the charterers telex machine during office hours although it was not actually read until the following morning.

REVOCATION

Requirement of a valid revocation:


a)

It must be communicated
i.

ii.

Person who makes the revocation [ S.4(3)(a), CA 1950]- it is complete when it is communicated to the other person Person who receives the revocation [S.4(3)(B), CA 1950]- it is complete when it comes to his knowledge Proposal [s.5(1),CA 1950]- At any time before communication of its acceptance is complete against the proposer, no afterwards. Acceptance [s.5(2), CA 1950]- At any time before communication of its acceptance is complete against the acceptor, no afterwards. the as the as

b)

Time of revocation
i.

ii.

ILLUSTRATION
A proposes by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time / at the moment B post his letter of acceptance but not afterwards. B may revoke his acceptance at any time/ at the moment when the letter communicating it reaches A, but not afterwards.

REVOCATION OF ACCEPTANCE
S. 5(2) The acceptance is effective as against the acceptor only when it comes to the knowledge of the proposer. Therefore, it means that the acceptor(promisee) can revoke his acceptance before it comes to the knowledge of the proposer.

REVOCATION OF PROPOSAL
1.

Communication of notice of revocation by the proposer to the other party. [s.6(a), CA 1950].
- includes agent acting on behalf of the proposer, but not a strange third party - revocation for postal rule: revocation can be made before such posting at the appropriate telegraph office.(Byrne v Tienhoven [1880])

BYRNE V TIENHOVEN [1880]

F: The Df offered to sell 1000 boxes of tinplates to the Pf. 1st Oct- D posted a letter of offer in Cardiff to P in New York. 8th Oct- D posted a letter revoking the offer of 1st of Oct. 11th Oct-P received Ds letter of 1st Oct and sent by telegram his acceptance the same day (11/10). It also followed up the letter of acceptance on 15th of Oct. 20th Oct- Ds letter of revocation received by P.

Held: There was a contract between the parties because the revocation of the Offer posted on 8th of October was not effective until 20th of Oct when the Pf received it. Furthermore, the Pf had already accepted the offer on 11th of Oct when the telegram was sent. Implication- In order to revoke the proposal or an acceptance, the letter of revocation should be sent through a faster medium, such as telephone.

2. by lapse of time prescribed in the proposal for its acceptance, or by the lapse of reasonable time, without the communication of its acceptance. (s.6 (b), CA 1950) Case : Ramsgate Victoria Hotel Co. v Montefiore 3. when acceptor fails to fulfill a condition precedent to acceptance (s.6 (c)) - For example : A offers to pay B Rm100 if B washes As car. There is no contract unless and until B washes As car

4. Death or mental disorder of the proposer (s. 6 (d)) - however acceptance without prior knowledge of this is consider as a good acceptance.