Contract law


Offer and acceptance

Agreement and promise- contracts are usually regarded as legally enforceable agreements. Existence of agreement is usually identified using offer and acceptance. There will be an agreement if one party (the offeror) has made an offer to contract on certain terms to another (offereee) and the offeree has accepted the offer in the same terms and has communicated his acceptance to the offeror. This is a lawyers analytical device, not a description of the way people behave when making contracts. 

Andrew Smith J in Maple Leaf Macro Volatility Master Fund v Rouvroy 2009- 'the court will, if appropriate assess a persons conduct over a period and decide whether its cumulative effect is that he has evinced an intention to make a contract.' 

Doctine is popular with judiciary as it answers 3 questions about contract formation- a) whether an agreement has been made b)when the agreement was made and c)where the agreement was made. The agreement is made when and where the acceptance is communicated. 

Clarke v Dunraven 1897 and Thornton v Shoe Lane Parking Ltd 1971.

1 of 12


Offer- 'an offer is an expression of williingness to contract on certain terms made with the intention (express or implied) that it shall become binding as soon as it is accepted by the person to whom it is addressed' - Treitel. Offers must have a certain degree of certainty- they cannot be too vague.

Intention to make an offer- Carlill v Carbolic Smoke Ball Co 1893, Upton RDC v Powell 1942, Bowerman v Association of British Travel Agents 1995, and OBrien v MGN 2002.

Offers in advertisements- Grainger and Son v Gough 1896, Partridge v Crittenden 1968, Bowerman v Association of British Travel Agents 1995. 

Displays in shops- Fisher v Bell 1961, Pharmaceutical Society of GB v Botos Cash Chemists 1953 and Lasky v Economic Grocery Stores 1946.

Auction sales- Sale of Goods Act 1979 s57(2), Warlow v Harrison 1859, Harris v Nickerson 1873, Barry v Heathcote Ball 2001 and British Car Auctions v Wright 1972.

2 of 12


Offers and request for information- Harvey v Facey 1893 and Stephenson, Jacques and Co v Mclean 1880. 

Conditional offers- Conditions precedent (suspensive conditions) eg I will sell you my umbrella if it rains tomorrow. Conditions subsequent (resolutive conditions) eg I will sell you my umbrella but not if it rains tomorrow. The legal effect of these depends on the construction of the condition  itself. Conditions precedent are someimtes precedent to the existence of the contract-there is no contract unless and until the condition is satisfied. But a condition precedent may be precedent to the duty to perform the contract, not necessarily to its existence. There is a difficult question as to whether a party may be under obligation to cause a condition to be satisfied. Winn v Bull 1877, Smith v Butler 1900, Mackay v **** 1881. 

3 of 12

Termination of offer

An offer wil cease to have effect if it is expressly revoked by the offeror, but must communicate this before there has been effective acceptance, or the offeree rejcts the offer, or makes counter offer, of the offeror makes a second offer in substiution for the first. 

An offer will lapse if not accepted in the given time, or if no time given a reasonable time. 

If offeror fixes a time that acceptance must be communicated he can still revoke his offer in the time, unless he has agreed for good consideration to keep it open. Where he has agreed to keep it open for consideration the agreement is sometimes called an option, 

The offerro may waive the need for communication of the acceptance within the time stipulated. 

It is uncertain if death of the offeror or offeree will cause the offer to lapse. Answer to this seems to depend on the nature of the offer and its exact terms. 

a) express revocation- Byrne v Van Tienhoven 1880 and Dickinson v Dodds 1876.

b) counter offer- Hyde v Wrench 1840 and Stevenson, Jacques and Co v McClean 1880 

4 of 12

Termination of offer

Substitute offer- Pickfords v Celestica Ltd 2003

Exffluxion of time- Ramsgate Victoria Hotel v Montefiore 1866

Death of offeror or offeree- Bradbury v Morgan 1862 and Reynolds v Atherton 1921.

5 of 12


A) Communication- general rule is that the acceptance must be communicated to the offeror. Some exceptions. Disputed whether offeror is bound by an acceptance that he would have recieved but for some fault of his own. It is also uncertain how far you can waive the need for acceptance altogether. 

No fixed rules about how acceptance may be communicated. The offeree can in principle use any reasonable method in the circumstances. Conduct can count. Offeror may prescribe a method of acceptance. The offeror may however waive the need to use the prescribed method. 

i) waiver of communication- can silence constitute an acceptance? Felthouse v Brindley 1862, Taylor v Allon 1966, The Leonidas 1985 and Re Selectmove 1995. 'I see no reason in principle why that should not be an exceptional circumstance such that the offer can be accepted by silence.'- Gibson re Selectmove. 

ii) acceptance by conduct- Brodgen v Metropolitan Railway 1877 and Robophone Facilities Ltd v Blank 1966.  Unsolicited Goods and Services Act 1971.

6 of 12


iii) Communication through an agent- Powell v Lee 1908.

B) the postal acceptance rule- if the offeree reasonably uses post to communicate the acceptance, english law uses the odd rule that the acceptance is effective when the letter of acceptance is posted (as long as properly address and stamped) and not when it is communicated to the offeror. Applied to telegrams. Means you can be bound by acceptance even if you dont know it. In Household  Fire this remains true even if the letter never reaches the offeror. Adams v Lindsell 1818, Henthorn v Fraser 1892, Household Fire and Carriage Accident Insurance Co v Grant 1879, Byrne v Van Tienhoven 1880 and Stevenson Jacques v McLean. 

It is disputed whether the postal acceptance rule should be applied by analogy to communication by email. Not been considered in any reported english case.

C) Prescribed mode of acceptance- Holwell Securities v Hughes 1974 and Financings v Stimson 1962, Manchester Diocesan Council v Commercial and General Investments 1970 and Tinn v Hoffman 1873.

D) Withdrawal of acceptance- Dunmore v Alexander 1830

7 of 12


Simultaneous communications- In the Entores case the CoA held that where parties were communicating by telex the postal acceptance rule was not applied by analogy and so the acceptance was effective when recieved on the offerors telex machine and not when it was transmitted. Decision affirmed by HoL in the Brinkibon case. It is generally assumed the same principle applies to other forms of simultaneous communication or near simultaneous, but the position of communication by email is disputed. There is no English case on this subject.

Entores v Miles Far East Corporation 1955, Brinkibon v Stahag Stahl 1983 and the Brimnes 1975

8 of 12

Unilateral contracts

A contract made in the form of a promise in return for some act or condition to be performed is sometimes referred to as a unilateral contract. Acceptanec of the offer to enter into such a contract and the consideration for it, is the performance of the act or condition specified by the offeror. Carlill case is classic example. Problems: it is disputed if the offeror can effectively revoke his offer once an offeree has begun to perform that act but as not yet completed it- walk to york problem. If the offeror can revoke his offer in these circumstances, does he have to give actual notice of revocation to the offeree or merely give a similar degree of publicity to the revocation as to the offer. Latter seems preferable but no english case. Can the offeree claim the benefit of the promise if at the time he performed the act he was unaware the offer had been made? Text books generally say he cannot- as you cant except an offer you dont know about- but cases are unclear. 

Theoretical basis- Carlill v Carbolic Smoke Ball Co and UDT (Commercial) v Eagle Aircraft Services 1968. 

Does the offeree have to know of the offer before he satisfies the condition laid down by the offeror?- Gibbons v Proctor 1891 and Fitch v Snedaker.

9 of 12

Unilateral contracts

Is the motive of the offeree performing the condition relevant? Williams v Cawardine 1833 and R v Clarke 1927

Can the offeror revoke the offer after an offeree has begun the act? Luxor v Cooper 1941, Offord v Davies 1862, Errington v Errington 1952 and  Daulia v Four Millbank Nominees 1978

If the offeror can revoke the offer does he have to give express notice of revocation to the offeree? Shuey v United States 1875

8) Battle of the forms- Butler Machine Tool Co v Ex-Cell-O Corporation 1979, OTM v Hydranautics 1981 and Tekdata Intercommunications v Ampenol 2009.

9) Tenders- one party (customer) invites potential contractors to tender (bid) for a certain contract. Ususally draws up a tender document on the basis of which tenderers are supposed to tender their best price. This is important for the customer so that all tenders are submitted on the same terms so that prices are directly comparable. Invitation to tender is merely an invitation to treat. Tenders are offers to contract at the price. The customer can then choose any or none. Has to communicate his acceptance by any reasonable method. Immediate binding contract on the terms of the tender.

10 of 12


However some are different. Not always used as a contract making device, but as an elemination round in which the customer identifies who he would like to make a contract with will be concluded at a later date. Often used in large scale international building contracts. 

Not always the case that a single contract comes from the sucessful completion. In requirements contracts (where they ask for supply over a period of time) the acceptance of a sucessful bid may result in a single contract which is performed over period of the contract, or a sucession of contracts made when the customer places orders with the tenderer during a contract period. Question of construction. Significance is that if single contract tenderer is bound by the price he tendered over the whole contract, but if sucession of contracts is formed he may revoke his originial tender price at any time provided he gives proper revocation as the tender is an offer accepted from time to time when he places orders. 

Spencer v Hardins 1870, GNR v Witham 1873, Percival v London County Council Asylum and Blackpool v Fylde Aero Club v Blackpool Borough Council 1990.

11 of 12

Analysis of agreement

Miller 1972, Felthouse v Brindley 1862, Daulia v Fourmill Bank Nominess 1978, Storer v Manchester City Council 1974, Gibson v Manchester CC 1979 and the Leonidas D 1985. 

11) Right to cancel a concluded contract- in principle where the contract has been made both parties are bound and neither can cancel unilaterally, although they can both agree to rescind the contract. There are statutory exceptions to this, normally in consumer protection legislation often of EU. Normally gives consumer a cooling off period when he can cancel the contract without liability, The Regulations governing this have recently changed into The Consumer Contracts (Information, Cancellation and Additional Charges) Regs 2013.

12 of 12


No comments have yet been made

Similar Law resources:

See all Law resources »See all Contract resources »