Lecture 3

Rules Relating to Offers

 Re-cap
Offers and ITT
• An offer is a statement of terms by which the offeror is willing to be bound

• An offer may result in a unilateral (acceptance by performance) or bilateral

contract (2 parties promise to perform an act in exchange for the other
party's act)

• Carlill v Carbolic Smoke Ball Co – unilateral contract – the advert was an

offer which was accepted by performance

• Distinguish offers from:

• invitations to treat (invitation to negotiate a contract, e.g.
displays, adverts, tenders and auctions)
• Mere negotiations (Harvey v Facey and Stevenson v
McClean)

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 Learning Outcomes
By the end of this lecture you should be able to:

• Understand the rules relating to offer, namely:

• an offer must be made in certain terms
• an offer must be communicated to the offeree
• Recognise how an offer may be terminated:
• by revocation
• death
• where an offer is conditional and the condition
is not satisfied
• lapse of time
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 Offers
An offer must be:
• a clear display of contractual intent
• on terms that are fixed
• on terms that are certain
• on terms that, once accepted,
automatically bind the parties
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 An offer must show
contractual intent
• Clear that the parties intended the offer to have legal
consequences/ to bind

• If no intent – ITT
• Objective approach, looking at words and conduct:
“in contracts you do not look into the actual intent in a man’s
mind. You look at what he said and did…” (Lord Denning,
Storer v Manchester City Council [1974])

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 An offer must be made in
certain terms that are fixed
• If an offer is vague or cannot be determined then acceptance of
that offer may not constitute a valid contract (inchoate
(incomplete) agreements).

• Courts will refuse to enforce if a significant term/s of the contract

is too vague - parties must reach agreement on the fundamental
terms, rather than all elements of the contract

• The courts will not construct a contract for the parties, but that
where a vague clause (which is insignificant) can be struck out of
the contract that will be done.

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 Nicolene Ltd v Simmonds (1953)

• Where a clause can be deleted and you still have

a workable agreement

• “…we are in agreement that the usual conditions

of acceptance apply…”

• There were no “usual conditions” – meaningless

phrase which could be ignored
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 Scammell v Ouston (1941)

• Courts may not enforce an agreement where there is

uncertainty in terms of what was agreed

• Parties agreed to supply lorries on “…hire purchase

terms…”

• House of Lords – absence of any further details

regarding these hire purchase terms meant that the
contract was too vague to be enforceable

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Could be considered valid if...
 The vague clause can be ignored

 Mechanisms by which the uncertainty can be resolved:

 Foley v Classique Coaches [1934] – “at a price to be

agreement between the parties from time to time” - any
ambiguity should be referred to arbitration.

 Hillas v Arcos [1932] – “100,000 standards” – implying

terms based on the agreement.

 Previous dealings/ trade/ industry custom and practice

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 An offer must be
communicated to the offeree

Should you receive the benefit of a

reward you knew nothing about?

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 An offer must be communicated
to the offeree
• To accept an offer, a person must be aware of the existence of the
offer

• Therefore, if a person does an act that he later discovers someone

is prepared to reward, he cannot then claim that reward since he
did not know about it at the time of performing the act – Gibbons v
Proctor (1891) (approach with caution…) and Taylor v Allon
[1965]

• Communication may be verbal, written, implied by conduct or a

mixture of these methods.

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Termination of Offer
Rejection

TERMINATION
OF OFFER

Lapse Revocation

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 Termination of Offer
Rejection
• Express or implied

• Counter offer

• Hyde v Wrench [1840]

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 Termination of Offer
Rejection
 Counter offers:
• A: Offer 1-Would you like to buy my car for £1.000?

• B: No but I'll give you £950 for it. Offer 1 is destroyed and a new offer (2) is made

• A: No, that's not enough, Offer 2 is also destroyed

• B: In that case I'll give you £1000, (now offer 3)

• Offer 3 is a new offer so is free to be accepted or rejected – even though it is the

same as the first offer.

Hyde v Wrench (1840)

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 Termination of Offer
Revocation
Main principles of revocation:
1. Revoke any point before acceptance (Payne v Cave [1789])

2. Communication of revocation is essential (Byrne & Co v Leon

Van Tien Hoven (1879)

3. Revocation via a reliable 3 rd party - Dickison v Dodds [1876]

4. Unilateral contracts? Shuey v USA (1875)

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 Revocation before acceptance

 Payne v Cave [1789]

• During an auction the defendant made the highest bid for the claimant’s
goods

• The defendant withdrew before the auctioneer’s hammer fell

• Question whether the offer had been withdrawn before acceptance

• Held that offer had been withdrawn before acceptance (i.e. the fall of the
hammer)

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 Communication of Revocation
 Byrne & Co v Leon Van Tien Hoven (1879)

• Defendant offered to sell the claimant’s goods – the offer was made by letter.

• Later, the defendant wrote to the claimants to withdraw the offer

• Before the claimant’s had received the revocation they had accepted the offer by
telegram.

• The court held that a valid contract was made – the revocation was not effective because
it had not been received by the claimants before they accepted the offer – revocation had
not been sufficiently communicated.

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 3rd Party Revocation
Dickinson v Dodds (1876)
10th June Dodds offers in writing
house to Dickinson for £800 – open
until 9am on 12th June

11th June, Dodds sold house to Allan –

Allan informed Dickinson

12th June before 9am Dickinson

handed letter of acceptance to Dodds –
Dickinson had already accepted
Allan’s offer

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 Unilateral Contracts
Revocation
• Taking Carlill v Carbolic Smoke Ball Co – how would
the company revoke its offer if its advert was open to the
public or even the whole world!

• Problems:
• unaware if anyone has accepted via performance; and
• necessary to communicate with the world?

• Shuey v USA (1875)

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 Lapse
 Main principles of lapse:

 Acceptance becomes impossible due to lapse of time

1. Reasonable time limit if no time limit for the offer specified (Ramsgate
Hotel Co v Montefiore [1866])

2. Conditional offers – offer lapses if condition not satisfied (Financings

Ltd v Stimson (1962))

3. Death of the offeror – automatic termination of the offer

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 Lapse after reasonable time
Ramsgate Hotel Co v Montefiore

• Defendants offer to buy shares in the claimant’s company at a fixed price

• Six months later the claimant company accepted the offer

• During the six month period the value of the shares had fallen

• The offer had not been withdrawn but the defendant refused to honour the offer on the basis of the fallen share price

• Claimant company sought specific performance

• The court held that owing to the subject matter of the offer (reliance on share price) the offer had lapsed over a reasonable period of
time – therefore the offer had lapsed

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 Conditional offers
 Financings Ltd v Stimson (1962)
• The defendant attempted to buy a car from a car dealer on hire-purchase. However, the
hire purchase document stated that the contract would not be binding until it had been
accepted by the finance company who were financing the hire purchase.
• The defendant paid the first instalment, insured the car and took it away. However, the
defendant later tried to return the car to the dealers as he was unhappy with the car.
After the defendant had returned the car it was stolen from the car dealers.
• The finance company were unaware that the car had been stolen and in the meantime
accepted the written offer which had been sent to them.
• The defendant refused to pay the charges and the finance company sued him for breach
of the hire purchase agreement.

• The court held that the defendant’s offer was subject to an implied condition that the
car should continue in its undamaged state and that on the failure of that condition, the
offer lapsed.

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 Death
• Death of the offeror (person making the offer) will automatically terminate an
offer to enter into a contract for personal services, e.g. to perform at a
concert.

• If the contract is not for personal services, then it appears that the offer can be
accepted until the offeree is notified of the death of the offeror (obiter in
Bradbury v Morgan (1862)).

• Death of the offeree (person receiving the offer) probably terminates the offer
- obiter in Reynolds v Atherton (1921): if an offer “made to a living person
who ceases to be a living person before the offer is accepted…is no longer an offer
at all”.

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 Postal Rule
• Where the post has been used to communicate the offer it must be in the
contemplation of the parties that the post was to be used as a method of
communication.

• When the postal rules apply then it must be remembered that a letter of
acceptance of the offer becomes valid at the time of posting.

• However, a letter of revocation is only valid on receipt.

• Byrne v Van Tienhoven and Co. (1880)

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Scenario – Life of Brian
Brian is an offeree. John has offered
to sell Brian his ‘Game of Thrones’
boxset for just £5 and that Brian must
accept before next Monday.

Brian cannot quite contain his

excitement and intends to text John
back accepting the offer. Brian has a
drunken evening and forgets to text
John.

The next morning, Allen, a mate of

Brian and John informs Brian that
John has now sold the box set to
Andrew. Brian is livid (see picture
for lividness).

Does John have the right to sell the

box set to Andrew after having first
made the offer to Brian?

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 Summary
• Offer must be certain, the court will not rewrite a contract to make it
clear

• An offer must be communicated to the offeree before it can be accepted.

• An offer can be withdrawn by the offeror at any time before acceptance.

• An offer may expire by death, an unfulfilled condition or lapse of time.

• An offer can be rejected by the offeree.

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