The Fact of Agreement - The Offer
- In cases where the existence of an agreement is in question, the
traditional method for resolving it has been to apply the rules of
offer and acceptance.
Offeror: Person who makes offer
Offeree: Person to whom offer is made
The rules of offer and acceptance tell us a number of important things about any contract that results:
(a) when the contract has been entered into – this can be a very
important matter because, in cases where stamp duty is payable on the
contract, it has to be paid within a certain time from the date the
contract was entered into.
(b) where the contract was entered into – this is important in cases
where a contract is entered into between parties in different legal
jurisdictions and it has to be established which jurisdiction’s courts
will resolve the dispute.
The Offer
Definition of Offer
‘A clear statement of the terms by which the person making the offer is prepared to be bound’
OR
‘The indication by one person to another of his [or her] willingness to
enter into a contract with him [or her] on certain terms’
For a valid offer to exist it must be communicated to the offeree, by
the offeror or his/her agent. If the offeree learns of the offer from
an unauthorised person there is no offer for that offeree to accept.
Banks v Williams (1912)
The Existence of an Offer
- An ‘invitation to treat’ is a request to others to make offers or to engage in negotiations with a sale in mind.
- If a seller has only issued an invitation to treat, a reply to the
invitation will at most be an offer which the seller has the option to
accept or reject.
Gibson v Manchester City Council [1979]
Facts: In November 1970, Manchester City Council (MCC) sent out
brochures outlining their scheme to sell council houses. If recipients
of the brochures wanted further information they were to return a form
attached to the brochure. Mr Gibson did precisely this. The letter
asked Mr Gibson to make a formal application on the form provided -
which he did. In May 1971, the council changed hands and Labour came to
power. Mr Gibson was told that as his transaction had not reached the
stage of exchanging contracts, the council was no longer prepared to
sell him a council house.
Held: No binding contract had come into existence. The most that could
be said about the council's letter of Feb 16th was that it represented
part of the negotiations where the parties were feeling their way
towards an agreement. It lacked the unequivocal nature of a true offer.
The existence or otherwise of an offer is further explored in the
following five contexts: (i) circulars and catalogues; (ii) displays of
goods; (iii) auctions; (iv) tenders; and (v) standing offers.
Circulars, catalogues and advertisements
The general rule is that circulars, catalogues and advertisements
setting out price lists or promoting the sale of products are seen as
invitations to treat.
The rationale is that if the seller was seen as making the offer, the
number of acceptances by means or orders for the good might well exceed
the total stock held by the seller. Grainger & Son v Gough [1896]
The general rule will not apply if it is clear from the circular that
the seller is limiting his/her liability to the amount of stock in hand.
Lefkowitz v Great Minneapolis Surplus Store (1957)
Facts: A store placed a newspaper advertisements which read: ‘1 Black
Lapin Stole … Beautiful, worth $ 139-50 … $ 1-00 FIRST COME FIRST
SERVED’. Lefkowitz was the first to present himself in response to the
advertisement, but the store refused to sell the fur, on the basis of a
house-rule in the store that the offer was intended for women only.
Held: The court found in favour of Lefkowitz, saying the advertisement
was an offer which Lefkowitz had accepted and that the store could not
impose new conditions, in the form of the house rule, on the offer
after it had been accepted.
Carlill v Carbolic Smoke Ball Co
Facts: The defendants advertised ‘100 pounds reward will be paid by the
Carbolic Smoke Ball Company to any person who contracts the increasing
epidemic influenza, colds, or nay disease caused by taking cold, after
having used the ball three times daily for two weeks according to the
printed directions supplied with each ball. 1000 pounds is deposited
with the Alliance Bank, Regent Street, showing our sincerity in the
matter’.
Issue: Whether the advertisement amount to an offer or a mere puff?
Held: Appeal dismissed. Lindley: “We must firs consider whether this
was intended to be a promise at all, or whether it was a mere puff
which meant nothings. Was it a mere puff? My answer to that is No, and
I base my answer upon (the 1000 pounds deposited). The deposit is
called in aid by the advertiser as proof of his sincerity in the matter
– that is, the sincerity of his promise to pay this 100 pounds in the
event which he has specified
Displays of goods
As a general rule, a display of priced goods in a shop, or in a shop window, is an invitation to treat and not an offer.
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953]
Facts: The Pharmacy and Poisons Act prohibited the selling of certain
medicines unless ‘the sale is affected by, or under the supervision of,
a registered pharmacist’. Boots’ shop had a self-service system, with a
pharmacist supervising the operation at the cash desk.
Issue: Whether the display of the drugs in the pharmacy amounted to an offer?
Held: Appeal dismissed. Somervell: “The point taken by the plaintiffs
is this: it is said that the purchase is complete if and when a
customer going round the shelves takes an article and puts it in the
receptacle which he or she is carrying, and that therefore, if that is
right, when the customer comes to pay desk, having completed the tour
of the premises, the registered pharmacist, if so minded, has no power
to say ‘this drug ought not to be sold to this customer’.
- A more common sense approach would regard the acceptance as taking
place when the customer presented at the check-out ready to pay for the
goods. R v Dawood [1976].
Auctions
- The holding of an auction is regarded as an invitation to treat. The
consequence of this is that offers are made by bidder which in turn can
be accepted or rejected buy the auctioneer.
- Acceptance of an offer by a bidder is by the fall of a hammer. This
means an offer can be withdrawn anytime before the hammer hits.
- Also means the auctioneer does not have to accept the highest bid.
AGC (Advances) v McWhirter
Facts: AGC exercised its power of sale under a mortgage over land owned
by Mr and Mrs Mc Whirter’s company and advertised an auction with a
condition that ‘the highest bidder shall be the purchaser’. Mr
McWhirter made the highest bid after a reserve price was withdrawn.
Issue: Whether the auction amounted to an offer or an invitation to treat?
Held: Order that the caveat be removed. Holland: “It is clear that the
ration decidenci of Payne v Cave, was that the bidder is not a
conditional purchaser but is no more than an offeror and that
consequently no contract can come into existence unless and until his
bid is accepted, usually, by the fall of the hammer.
- If an auction is advertised as being one without a reserve price, the
above principles still apply; however, in Barry v Davies saw that if
there was no acceptance of the highest bid by the auctioneer, the
auctioneer was in breach of contract with the highest bidder.
Tenders
Tenders have similarities to auctions, but a key difference is that in
a tendering process each bidder makes only one bid and without
knowledge of the details of any other person’s bid. In the tendering
process it is the tenderer who makes the offer, and not the person
calling for tenders (the invitor).
If the party calling for tendors states that they will accept the best
tender, then they must do so and a contract arises with the best
tenderer. Harvela Investments Ltd v Royal Trust Co of Canada
Blackpool & Fylde Aero Club v Blackpool Borough Council
Facts: The Aero Club had a concession to operate pleasure flights from
the Blackpool Airport. In 1983 the grant of the concession came up for
renewal, and the Council invited the Club and six other parties to
tender. The Club’s tender was submitted in time, but the Town Clerk's
staff failed to empty the letterbox. The Council accepted a tender
lower than the Club’s tender.
Held: The Judge held that the request for tenders gave rise to an
implied obligation on the part of the Council to consider timely and
conforming tenders. The Council appealed against this decision
Standing Offers
These are offers to provide additional items of goods and services if
and when required. Standing offers are accepted each time an order is
placed for the additional goods and can be revoked at any time prior to
acceptance.
Colonial Ammunition Co v Reid (1900)
Facts: There was standing offer between parties to supply large
quantities of ammunition. After some time, the government ordered
different types of ammunition from another company. Plaintiff sued fro
breach of contract
Held: There was no contract until an order had been made. The agreement
is only a tender to supply the government with ammunition at prices
therein named.
The Range of Offerees
An offer can be made:
(i) to a specified person or persons, or
(ii) to a class of persons; or
(iii) to the world at large
Termination of Offers
An offer can come to an end in a variety of ways.
Lapse of time
- An offer stated to be open for a set time, lapses if not accepted within that time.
- If there is no set time for acceptance in the offer, it lapses after
the expiration of a reasonable time. What is reasonable is determined
by the facts and circumstances of each individual case Empirnall
Holdings v Machon Paul Partners (1988)
Rejection
- An offer once rejected is terminated. It cannot be subsequently accepted.
- A counter-offer is an implied rejected of an offer. This is confirmed by the case of
Hyde v Wrench (1840)
Facts: Where one party offered to sell land to another for £1,000. The
second party responded by offering to buy the property for £950. The
first party refused to accept the counter-offer, whereupon the second
party purported to accept the first party’s original offer to sell for
£1,000.
Held: The court held that no contract arose because the original offer
came to an end once the counter-offer had been made. There was thus, no
offer for the second party to accept.
The response may not be a counter-offer. It may be merely a request for
further information or clarification of the offer. If so, such a
response does not terminate the offer and the offer remains open.
Stevenson Jacques & Co v McLean (1880)
Facts: McLean telegraphed to Stevenson an offer to sell iron at 40s per
ton. Stevenson telegraphed ‘Please wire whether you would accept forty
for delivery over two months, or if not, longest limit you would give’,
but this was not answered. McLean later telegrapher revoking his offer,
but before it was received Stevenson had sent a telegram of acceptance.
McLean refused to deliver, and was sued for damages.
Issue: Whether the telegram was a rejection of the offer (counter-offer) or was a mere inquiry?
Held: Judgment for the plaintiffs. Lush: “Looking at the form of the
telegram, the time when it was sent, and the state of the iron market,
I cannot think this is its fair meaning. The plaintiff Stevenson said
he meant it only as an inquiry, expecting an answer for his guidance,
and this, I think, is the sense in which the defendant ought to have
regarded it.
Revocation
- The rule here is that, except in cases where an option has been
entered into an offer can be withdrawn by the offeror at any time
before the offer is accepted.
- This is because the statement or promise to keep the offer open is
unenforceable because the offeree has not given consideration for it.
Dickinson v Dodds
- For revocation to be effective, it must be communicated to the
offeree or someone else authorised to receive such communications.
- There is no postal rule for the revocation of an offer. If a letter
or telegram is used to revoke an offer, the offeree must receive it
before the revocation is effective.
Dickinson v Dodds
Facts: Dodds wrote: ‘I hereby agree to sell to Mr George Dickinson the
whole of the dwelling houses, garden ground, stabling, and outbuildings
thereto belonging, situate at Croft, belonging to me, for the sum of
800pounds. PS this offer is to be left over until Friday, 9 am 12 June
1987.’ Before the time expired, Dodds agree to sell the property to
Allan.
Issue: Whether the revocation of the offer was a valid one as it was not communicated?
Held: Appeal allowed. James: “The document, though beginning ‘I hereby
agree to sell’, was nothing but an offer, and was only intended to be
an offer, for the plaintiff himself tells us that the required time to
consider whether he would enter into an agreement or not.
Failure of a condition
- An offer may be made subject to an express or implied condition that
a certain state of affairs remains unchanged until acceptance.
- e.g. an offer to buy a property or goods would usually be conditional
upon the property or goods remaining in the same condition upon
acceptance: Financings Ltd v Stimson
Death of Offeror or Offeree
- It is assumed that generally, if the offeror dies and the offeree
knows of the death, the offeree cannot accept the offer: Dickinson v
Dodds
- If the offeree does not know of the offeror’s death the situation is more complex.
- If the offer was one, which related to personal services being
performed by the offeror, once a contract arose, presumably the death
of the offeror would terminate the offer, e.g. could be an offer to
sell land.
- The death of an offeree will generally terminate the offer Reynolds v Atherton
- However, intention and circumstances could change that situation.
Thus, an offer to sell property could perhaps be accepted by the
deceased offeree’s estate.