Contract Law - Offer and Acceptance

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Explain offer and acceptance
In order to establish the existence of an agreement, the court usually examines all the circumstances to see if one party has made a firm offer and the other party has clearly accepted that offer; offer plus acceptance equals agreement.
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Explain an objective test
Involves looking at the words, conduct of the parties from the perspective of a reasonable man. The actual mental intention of the parties is irrelevant.
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Definition of an objective test by Lord Denning MR in Storer v Manchester City Council
"In contracts, you do not look into the actual intent in a man’s mind. You look at what he said and did.”
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Define an offer
An offer may be defined as a “statement of an intention to be bound, on terms which are certain, made by one party to another, which upon acceptance by that other party, forms a binding contract.”
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To whom may the offer be made?
The claimant must establish the existence of a firm offer made either to a particular person; to a group of persons; or to the world at large.
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Ingredients of an offer
1) A clear display of contractual intent; 2) On terms that are fixed; 3) On terms that are certain; 4) On terms that once accepted automatically bind both parties to their agreement.
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How do the courts assess contractual intent when identifying an offer?
Rather than being concerned with actual intent of the offeror (subjective approach), the courts adopt a more impartial stance and apply an objective standard to determine the issue of contractual intent.
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Distinguishing an offer from an invitation to treat
Only an O is capable of being accepted, giving rise to contractual obligations between the parties. I to T = merely an indication that the party is open to negotiation. Demonstrating willingness to open the negotiation process or invites offers.
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Facts of Gibson v Manchester City Council
Claimant enquired whether he could purchase his council house. Council responded with letter stating "may be prepared to sell the house to you" at a fixed price. Shortly after, Labour took over the council and withdrew the house from the market.
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Held: Gibson v Manchester City Council
Claimant argued the letter constituted an offer and that he accepted the offer before control of the council changed. However, House of Lords held that the letter was merely an I to T.
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Reasoning in Gibson v Manchester City Council
The words "may be displayed to sell" displayed no contractual intent and were intended only to invite Mr Gibson to make an offer for the property.
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Facts of Storer v Manchester City Council
Claimant received a letter from the council labelled "Agreement for sale". The claimant signed and returned the document before political control of the council changed. The council then revised its policy on sellling council houses&refused to sell.
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Held: Storer v Manchester City Council
Court of Appeal held that the letter was in fact an offer that the claimant had accepted before the property was withdrawn from sale.
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The use of "presumptions"
Depending on the particular situation, the court will start with a general presumption regarding the offer/invitation to treat distinction. Such a presumption will be based on by reference to precedent and legal reasoning on those cases.
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The use of "presumptions" further explained
A presumption is NOT an absolute rule. Whether the presumption will APPLY depends on the particular facts.
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Pharmaceutical Society of Great Britain v Boots Cash Chemists: facts
In deciding whether there had been an infringement of s.18(1)(a)(iii) of the Pharmacy and Poisions Act 1933, the Court of Appeal had to decide how the requirements of offer and acceptance applied to the system of a self-service shop.
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Pharmaceutical Society of Great Britain v Boots Cash Chemists: legal arguments of the claimant
PS argued that the display of goods in a self service shop constituted an offer for sale which the customer accepted by picking an item they wished to purchase off the shelf and placing it into their basket
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Pharmaceutical Society of Great Britain v Boots Cash Chemists: held
No infringement of Act. The C of A held that display of goods was an I to T. The customer makes the offer by presenting the item at the cash desk which is then accepted by the cashier. At this point the transaction was supervised by the pharmacist.
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Why is the display of goods generally an invitation to treat? Perspective of customer.
Impractical&absurd if offer - customer would accept offer by removing item from shelf. If they change their mind, no room for negotiation - won't be able to return item to shelf. Obliged to pay price marked&purchase item. Breach of contract if not.
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Why is the display of goods generally an invitation to treat? Perspective of shopkeeper.
Obliged to sell to anybody who enters his shop&removes an item from the shelf. He will not be able to refuse sale - breach of contract if done so. Limits freedom to browse goods and change mind. Freedom of shopkeeper to pick&choose customers reduced.
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Fisher v Bell: facts
Defendant displayed a flick knife in his shop window with a price tag attached. He was charged with "offering for sale" the flick knife in contravention of the Restriction of Offensive Weapons Act 1959.
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Fisher v Bell: held
Court held that the display of a flick knife in a shop window was an invitation to treat. As he had not made an offer he was not guilty of the offence of "offering for sale" the knife.
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Fisher v Bell: legal reasoning
A shop is a place for bargaining. A shopkeeper has the right to pick and choose his customers. Customer has the right to change their mind - can put item back and substitute. Quantity argument - shopkeeper has limited stock.
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Partridge v Crittenden: facts
D placed an advertisement in the periodical Cage and Aviary Birds, under the general heading "Classified Advertisements". The advertisement stated: "Bramblefinch *****, bramblefinch hens, 25s each". Mr Thompson saw and wrote to Mr P requesting a bird
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Partridge v Crittenden: facts continued
A bird was subsequently delivered to Mr T. Mr P was then charged with offering for sale a wild bird contrary to s.6 of the Protection of Birds Act 1954. Issue: whether Mr P had offered the bird for sale and was therefore guilty under the legislation.
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Partridge v Crittenden: held
At first instance, magistrates found the advertisement constituted an offer for sale and fined Mr P £5. On appeal, the High Court held that the advertisement was an I to T. Thus, the offence had not been made out, as the advertisement = not an offer.
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Advertisements and issue of "multi-acceptance" in case of Partridge v Crittenden
Mr P would have been obliged to sell to anybody who saw the advertisement and purported to accept by placing their money in the post. Mr P did not have an unlimited supply of birds - would have been in breach of contract with every person(unable to)
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Grainger v Gough
A wine merchant's price-list was held to be an invitation to treat. Otherwise the merchant would have been bound on acceptance to supply an unlimited amount of wine at the price indicated.
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Carlill v Carbolic Smoke Ball Co Ltd: facts
Defendants placed an advertisement in the newspaper advertising their Carbolic Smoke Ball, a device that they claimed could cure many common aliments. This involved £100 to anyone who caught influenza following correct use of the product.
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Carlill v Carbolic Smoke Ball Co Ltd: facts continued
Mrs C bought a smoke ball and used it as prescribed for serval months then caught influenza. When she tried to claim her "reward", the Smoke Ball Company refused to honour its promise.
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Carlill v Carbolic Smoke Ball Co Ltd: held
The Court of Appeal unanimously rejected the company's arguments and held that there was a fully binding contract for £100 with Mrs. Carlill.
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Carlill v Carbolic Smoke Ball Co Ltd: company's defences
Cannot make an offer to the whole world; Advertisment was a "PUFF" so there was no intention to create legal relations; Mrs C did not communicate her acceptance; nor provide any consideration directly to the company.
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Carlill v Carbolic Smoke Ball Co Ltd: claimant's responses
possible to make an offer to the world at large, that can ripen into a contract should the necessary act be met; objective test; no need to communicate acceptance - by performance of required acts, since it was unilateral; use of ball =consideration.
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Lefkowitz v Great Minneapolis Surplus Stores Inc: facts
D placed the following advertisement in a newspaper: "Saturday 9.A.M. Sharp 3 Brand New Fur Coats Worth to $100.00. First Come First Served. $1 Each". C saw this and was the first person to enter the store on the Sat morning.
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Lefkowitz v Great Minneapolis Surplus Stores Inc: facts continued
Store refused to sell him a fur coat, relying on the argument that it only intended to sell the coats to women.
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Lefkowitz v Great Minneapolis Surplus Stores Inc: held
Supreme Court held that an advertisement was in fact an offer, stating that the advertisement was "clear, definite and explicit, and left nothing open for negotiation".
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Explain a "without reserve" auction
The auctioneer undertakes to sell the item to the highest bidder. The auctioneer acts as an agent. The offer is made by a person placing a bid. This offer is accepted when the auctioneer's hammer falls - a person may withdraw bid before.
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Why is there a collateral contract in a "without reserve" auction?
If the auctioneer refuses to accept the highest bid he will be in breach of this implied obligation and will be in breach of contract to that bidder.
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Payne v Cave
Established: call for bids = invitation to treat. Bid = offer. Fall of the hammer = acceptance. Thus, can withdraw offer before acceptance.
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Barry v Davies: facts
Owners of two machines instructed defendants to auction these machines "without reserve". Machines had market value of £14,000 each. At the auction the highest bid was £200 for each machine. The auctioneer withdrew the machines from sale.
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Barry v Davies: facts continued
The auctioneer then advertised the machines for sale and sold them for £700 each. The highest bidder brought an action against the auctioneer arguing that there had been a breach of contract when the auctioneer refused to accept his bid.
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Barry v Davies: HELD
Breach of a collateral contract between the auctioneer and highest bidder. Being auctioned "without reserve" created an obligation that the auctioneer would accept the highest bid. Thus, awarded damages.
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How did the Court calculate damages in Barry v Davies?
Expectation interest - court will look to the position the highest bidder would have been in had the contract not been breached. Awarded difference between price bid (£400) and market value (£28,000) = £27,600.
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Explain a "with reserve" auction
Owner of the goods states a minimum price to the auctioneer below which they are not prepared to sell. If not met, no obligation to sell item to highest bidder. If auctioneer accepts a bid below reserve price - auctioneer in breach of their contract.
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Which case resolves issues associated with advertisements of an auction?
Harris v Nickerson
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Harris v Nickerson: FACTS
Claimant travelled to an auction on the strength of an advertisement intending to bid for certain items of furniture. But, the items for which he intended to bid were withdrawn from sale and the claimant tried to claim for loss of time+travel expense
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Harris v Nickerson: HELD
Court held the advertisement was an invitation to treat and as such no action for breach contract could be brought. Otherwise, intolerable burden on auctioneer&other parties advertising occurrence of events.
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Define a tender
A person may seek specific goods or services and will put the job or service out to tender. By doing so the individual making the request will be seeking that people submit offers in response. Request = ItoT. Response = O.
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Harvela Investments v Royal Trust Co of Canada: FACTS
First defendants sought to sell their shares in a company by tender with the intention that they would accept the highest offer. The plantiff made an offer of $2,175,000. The second defendants made an offer of $2,100,000 or C$101,000 in excess of....
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Harvela Investments v Royal Trust Co of Canada: FACTS continued
any other offer....whicever is the higher". This type of offer = referential bid. The first D accepted the referential bid. House of Lords had to decide which party was entitled to shares. Thus, looked at intention of party making invitation.
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Harvela Investments v Royal Trust Co of Canada: HELD
Intention: participate in a fixed bidding sale. Thus, the referential bid of D was not the "highest offer" and the plantiff's bid of $2,175,000 should have been accepted.
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Blackpool and Fylde Aero Club Ltd v Blackpool BC: FACTS
Council made it clear they would consider all tenders submitted before the deadline. Aero Club posted its tender in Town Hall post box before deadline. But, post box not emptied that day resulting in the council refusing to consider the late bid.
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Blackpool and Fylde Aero Club Ltd v Blackpool BC: HELD
The request for tender was an ITT - no obligation to accept any of the tenders submitted. But, request also contained collateral offer to consider all bids receieved before deadline, which AC had accepted by placing tender in the Town Hall post box..
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Blackpool and Fylde Aero Club Ltd v Blackpool BC: HELD continued
before the deadine. This collateral contract was therefore breached when the council failed to consider the Aero Club's bid.
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Spencer v Harding: facts
The defendants sent a circular saying they had been instructed to sell the stock of a company. The claimants submitted a tender in response. Claimants argued circular amounted to an offer and they accepted offer by submitting tender.
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Spencer v Harding: HELD
Court held that the circular was an invitation to treat. D were reading to receive offers but there was no obligation to accept. But, wording is VITAL. What if circular said highest bidder?
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Harvey v Facey: FACTS
Claimants contracted the defendants and asked for the lowest price at which the defendants would sell "Bumper Hall Pen" (plot of land). Defendants replied: "Lowest cash price for BHP £900". Claimant said: "We agree to buy at £900".
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Harvey v Facey: HELD
The statement of minimum price was not an offer to sell (neither an acceptance in response to the claimant's communication). No contract for sale of land.
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ACCEPTANCE explained
If a legall recognisable offer has been made then in order for this to develop into an agreement there needs to be an unequivocal acceptance of that offer. Law requires that the offer and acceptance must match; that they should be mirror images.
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ACCEPTANCE explained further
Courts again use an objective test. Reasonable man takes words into account and party's conduct and documents.
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Define a counter-offer
If an offeree seeks to vary or introduce new terms then this will not constitute acceptance. A counter-offer has the effect of destroying the orignal offer.
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Hyde v Wrench: FACTS
The D offered his land for sale for £1,000. The P responded by offering £950, which was rejected by D. P then sought to accept D's offer of £1,000.
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Hyde v Wrench: HELD
By making an offer of £950, the P had rejected the original offer of £1,000 and replaced this with an offer of £950. As new offer was rejected by D, no contract. Not possible to revive D's original offer as been destroyed+new offer had been ...
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Hyde v Wrench: HELD continued
substituted by his counter-offer. Original offer was no longer capable of being accepted and the counter-offer was now the new offer which was capable of being accepted or rejected.
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Distinguish a counter-offer from a request for information
A request for information will not have the effect of destroying the original offer.
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Stevenson v McLean: FACTS
D offered to sell a quantity of steel to the plantiffs at 40s per ton. P responded by enquiring as to whether the D would accept 40s for delivery over two months, or if not, what was the longest time that they would give?
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Stevenson v McLean: HELD
This response by the P constituted a request for information. P not seeking to introduce new terms into the offer, but were seeking clarification of existing terms. Thus, offer of 40s still open to acceptance.
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Explain cross-offers
Occur when both parties make the same offer, each party in ignorance of the other's offer. It is arguable that both parties display contractual intent, but a meeting of the minds as to an agreement lacks. Obiter authority in Tinn v Hoffman.
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Battle of the forms
Business and the use of "standard form" contracts. Battle between the parties usually arises when one business makes an offer on its standard terms and the other business seeks to impose its own standard terms when accepting.
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British Road Services Ltd v Arthur Crutchley & Co: FACTS
Claimants delivered cargo of whiskey. Driver handed over delivery with the claimants standard terms of conditions. Receipt stamped by D as being under their terms and conditions. Receipt handed to delivery driver.
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British Road Services Ltd v Arthur Crutchley & Co: HELD
D argued delivery note = offer and receipt = counter-offer; C accepted offer by releasing the goods. Held: contract was under D's conditions as they had the "last shot" which prevailed.
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Butler Machine Tool Co v Ex-cell-o-Corp: FACTS
P offered to sell machinery to D for £75,535. P sought to impose their own standard terms, including a price variation clause. D sought to accept P's offer+impose their own STs (no clause). P completed+signed a tear-off slip stating acceptance.
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Butler Machine Tool Co v Ex-cell-o-Corp: HELD
Court of Appeal held that it was the D's terms that prevailed. P's initial offer was rejected by D and substituted by a counter-offer from the D. P accepted counter-offer when they signed and returned tear-off slip.
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What did Entores establish?
The general rule is that acceptance must be communicated to the offeror. Therefore, an acceptance will only become effective when it comes to the attention of the offeror.
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Explain prescribed methods of acceptance
If the offeror makes clear that a particular method of acceptance should be used and no other method will suffice, there may be no contract if another method is used.
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Eliason v Henshaw
Letter of acceptance was sent by post, as opposed to the request. D thought it would reach P more speedily, but held to be no contract as the specified method of acceptance had not been used.
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What did the case of Tinn v Hoffman establish regarding prescribed method of acceptance?
If there is no prescribed exclusive means of acceptance, an equally expeditious method will suffice.
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Explain the postal rule
Acceptance is effective when posted. The "post" only means Royal Mail, not private postal services.
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What issues did the postal rule resolve?
Obvious delay between acceptance being sent and acceptance arriving with the offeror; acceptance may get lost in the postal system and never arrive; out of the control of the offeree and little else they can do.
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Adams v Lindsell: FACTS
D wrote to the P offering wool for sale. But, letter sent by D was misaddressed and delivery to P was delayed. P posted on the same day they received the offer.Before P's acceptance arrived the D sold the wool to another party.
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Adams v Lindsell: HELD
P's acceptance was effective once posted. As acceptance was effective before the wool was offered to another party, the D were in breach of contract when they in fact sold the wool to another party.
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What did the Household Fire Insurance Co Ltd v Grant establish?
Contract will be formed once the acceptance has been posted - even if the letter is delayed through the fault of the Post Office, or even if the acceptance never reaches the offeror at all.
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What does the case of Henthorn v Fraser establish?
It must be reasonable to use post as a method of acceptance. The fact that the parties lived some way from one another justified postal acceptance of an oral offer.
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What did the Contimar case establish?
The letter must be properly posted. A misaddressed letter could not rely on a rule similar to the postal rule in contract. Court held that as the notice had not arrived within the 14-day period, notice of intention to appeal=ineffective.
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What did Professor Treitel suggest? (analysis of Contimar case)
There is no hard and fast rule. He indicates it is at the time least favourable to the party responsible for misdirection. This analysis was accepted (obiter) in Korbetis v Transgrain Shipping BV.
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What did the case of Re London & Northern Bank establish?
The letter of acceptance must be properly posted. In the case, post handed to somebody who was not properly authorised under Royal Mail.
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Holwell Securties v Hughes
D made an offer to the P for sale of land requiring "notice in writing" of their acceptance. The P posted a letter but it never arrived. Court of Appeal held that the postal rule did not apply.
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Holwell Securties v Hughes - what did it establish?
An offeror through the wording of his offer can explicitly displace the postal rule.
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What does the case of British & American Telegraph Co v Colson establish?
Lawton LJ in this case confirmed that if the application of the postal rule produces "manifest inconvenience and absurdity" the the courts may refuse to apply the rule in order to give effect to the intention of the parties.
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What did the case of Wenckheim v Arndt establish?
The court held that it was not possible to withdraw an acceptance once it had been posted. The purpose of the postal rule is to determine the point of acceptance. Thus, the contract cannot be unravelled by the actions of one of the parties.
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What did the case of Dunmore v Alexander establish?
The court suggested it may be possible to withdraw an acceptance by using a swifter method of communication. But, this should be treated with caution: the court were unsure whether the communication in question was actually an acceptance or offer.
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Entores v Miles Far East Corp
P were based in London and the D in Holland. The P communicated to the D using a telex machine and the issue for the court was to determine where the contract was formed. HELD: contract was made where the acceptance was received (in London).
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Explain the obiter of Entores by Denning LJ - state the three broad scenarios.
The offeree realises that his acceptance has not got through;the offeree reasonably believes that his acceptance has got through when it has not; the offeree reasonably believes that his acceptance has got through&its the fault of the offeror its not
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First of Denning LJ's scenarios
There is no contract - remains responsibility of the offeree to communicate his acceptance to the offeror
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Second of Denning LJ's scenarios
No contract - remains the responsibility of the offeree to resend his acceptance.
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Last of Denning LJ's scenarios
The fault will lie with the offeror and he will be prevented from arguing that he never received the acceptance. For example, failing to replace a toner cartridge in his fax machine.
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Tenax Steamship Co v Owners of the motor Vessel Brimnes (The Brimnes)
A revocation of an offer was sent via telex to the defendants during office hours. The message was not read by the Ds until the next day. The Court of Appeal held that the revocation was effective at the time it was received on the defendants machine
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How does the Brimnes case explain the assessment of fault?
It was the fault of the office staff that the message was not read until the next day. The fault therefore rested on the defendants.
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Mondial Shipping and Chartering BV v Astarte Shipping Ltd
Lord Wilberforce's commentary of "no universal rule" regarding acceptances sent outside office hours reinforced. As the the telex had not been sent within ordinary business hours,the recipients couldn't have expected to receieve telex instantaneously
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Felthouse v Bindley - silence and bilateral contracts
Uncle sent letter to nephew, offering specific amount to buy a horse with "If I hear no more, I consider the horse mine". Uncle pursued an action for beach of contract, but court held there was no contract as the newphew had failed to communicate A.
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Key exceptions to the rule in silence
Acceptance by post: Adams. Acceptance in unilateral contracts: Felthouse v Bindley.
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Acceptance in unilateral contracts
The offeror will have implicitly waived the need for acceptance to be communicated. Acceptance will be by performing the act required as a condition of acceptance. Link to Carlill - her conduct constituted A - no need to communicate A.
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Issues of acceptance in unilateral contracts
Difficult to identify precise point at which an acceptance is effective. This has a knock-on effect in the context of revocation. Response: courts have recognised acceptance in a UC can be a "continuing act"
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Errington v Errington
Father proposed that if children payed off remaining mortgage, they'd ultimately own the house. But, father died before succeeded. Court of Appeal held that the offer could not be withdrawn - continuing act of acceptance by performance.
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Daulia Ltd v Four Millbank Nonimees Ltd
Established offeror has an implied obligation not to revoke once the offeree has embarked on performance of the required act.
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What did Shuey v USA establish?
Offeree must take reasonable steps to revoke offer. Case suggests that if the offer was advertised in a particular way then it would be reasonable to revoke it by the same method.
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Gibbons v Proctor - acceptance in ignorance of an offer
police officer gave information for which a reward was offered, but unaware when giving info. Court held police officer was entitled to award.
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R v Clarke
Suggests that if an offeree has an awareness of an offer of reward, but happens to forget about it, then he will not be entitled to claim the reward.
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Williams v Carwardine
As the claimant was aware of the offer at the time of accepting (the offer was within her mind), then her motives for giving evidence did not present a valid excuse. Thus, enitled to reward.
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Routledge v Grant
Revocation is ineffective unless it has been communicated to the offeree and it is effective, if by post, when it arrives.
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Byrne & Co v Leon Van Tien Hoven
Court held that the offer was accepted when the telegram was sent and therefore the defendants could not revoke their offer without being in breach of contract.
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Dickinson v Dodds
Courts accepted that a reliable third party may be able to communicate the revocation of an offer. But, third party must be "objectively reliable".
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Card 2

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Involves looking at the words, conduct of the parties from the perspective of a reasonable man. The actual mental intention of the parties is irrelevant.

Back

Explain an objective test

Card 3

Front

"In contracts, you do not look into the actual intent in a man’s mind. You look at what he said and did.”

Back

Preview of the back of card 3

Card 4

Front

An offer may be defined as a “statement of an intention to be bound, on terms which are certain, made by one party to another, which upon acceptance by that other party, forms a binding contract.”

Back

Preview of the back of card 4

Card 5

Front

The claimant must establish the existence of a firm offer made either to a particular person; to a group of persons; or to the world at large.

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Preview of the back of card 5
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