Chapter 2: Agreement - offer and acceptance

• Elements of a contract - agreement


  • Offer (promise, undertaken or commitment with definite and certain terms communicated with offeree)
  • Acceptance before termination by revocation rejection or operation of law
• Elements of a contract - consideration


  • Bargained for exchange of something of legal value
  • Substitute for consideration such as promissory estoppel
• Elements of a contract - intent


  • Presumption of intent in commercial arrangements but not in domestic such social/domestic situations
• Promise, undertaking or commitment


  • For a communication to be an offer it must contain an expression of a promise undertaken or commitment to enter into a contract rather than a mere invitation to treat
  • There must be an intent to intend to a contract
• Communication to the offeree

  The offeree must have knowledge of the offer
• Other communications which do not amount to an offer


  • Responses to requests for information
  • Invitation to treat
• Advertisements


  Most advertisements are treated as invitation to treat rather than offers
• Shop sales


  • Goods displayed in a shop window are an invitation to treat
  • The offer to buy is made by the customer when the goods are taken to the tail point
  • The offer is accepted when the shopkeeper rings up the sale
• Price lists


  Invitations to treat
• Tenders


  • An invitation to tender is an invitation to the interested parties to submit bids setting out the terms on which they are prepared to carry out a piece of work
  • An invitation to tender is not an offer
  • Each party makes an offer and the requesting party will then consider those offers a pick one to accept
• Auctions


  • An auction catalogue is not an offer is merely an invitation to treat
  • Therefore it is open pseudo auctioneer to visual lots from a sale prior to the auction
  • An auctioneers request for bids is also an invitation to treat
  • A person takes part in the auction by making offers by placing beds
  • When the hammer falls the auctioneers accepted the highest offer/bid
• Price quotations


  Whether a prize condition constitutes an offer or Miller invitation today is a question of fact based on the intention of the parties
• Exception: unilateral contracts


  • In these cases an advertisement does constitute an offer
  • The contract arises when the person making the offer promises to do something if the person receiving the offer just something in return and the offeree actually does what the offeror
  • The other party can choose to accept by performance
• Termination by the offeror - revocation


  Revocation is a retraction of an offer by the offeror
• An offer cannot be accepted after it has been terminated
• An offer may be terminated by

  • An act of either party
  • Operation of law
• An offer may be revoked directly


  • By direct communications made at any time before acceptance
• An offer may revoked indirectly if the offeree receives


  • Correct information
  • From a reliable source
  • Of acts of the offeror which would indicate to a reasonable person that the offeror no longer wishes to make the offer
• Effective when revocation received


  For verification to be effective it must be received by the offeree. however the verification does not have to be made directly by the offeror - it can be done by a reliable third party
• Limitations on offeror's power to the revoke


  • Collateral contract
  • Beginning performance under an offer for a unilateral contract
• Collateral contract


  A collateral contract is distinct contract in which the offeree gives consideration for a promise by the offeror for example not to revoke an outstanding offer
• Beginning performance under an offer for a unilateral contract


  • An offer in a unilateral contract becomes an irrevocable once performance has begun so offeror cannot withdraw
  • Note that they still no contract until the offering has completed performance so if the offeree may withdraw at any time until then
• Difference between bilateral contract and unilateral contract

  • Bilateral contract: a bilateral contract arises from an offer that can be accepted by a promise or by performance
  • Unilateral contract: Can only be accepted by performance provided the offeror has not stipulated a method of acceptance. Once the offeree begins performance, the offer is irrevocable
• Termination by offeree


  • Rejection - either expressly or impliedly such as through a counter offer
• Express rejection


  • An express rejection is a statement by the offeree that they do not intend to accept the offer. such a rejection will terminate the offer; the offeree cannot accept the offer in the future if the offeree changes their mind
  • A rejection is effective when received by the offeror
• Counter offer


  • A counter offer is an offer made by the offeree to the offeror which relates to the same subject matter as their original offer but differs in its terms
  • A counter offer is both a rejection of the original offer and a new offer
  • It terminates the original offer and reverses the roles of the parties: the offeree making the counter offer becomes the offeror open you offer which the other party may accept or reject
• Mere Enquiry/request for further information


  • An enquiry will not terminate the offer when it is consistent with the idea that the offeree is still keeping the original proposal under consideration
  • The test is whether a reasonable person would believe that the original offer has been rejected
• Rejection of Collateral contract

  • An agreement to keep the original offer open is often a collateral contract
  • A rejection of or counteroffer to, the collateral contract does not terminate the original offer. The offeree is still free to accept the original offer
• Lapse of time


  An offer may be terminated by the offeree's failure to accept within the time specified in the offer or if no deadline was specified, within a reasonable period (a reasonable period will be determine by the courts) e.g. food will have a short date due to it being perishable or for an item that fluctuates in value e.g. shares
• Termination by operation of law


  • Death of offeror or offeree
  • Destruction of the proposed contract's subject matter
  • Supervening illegality
  • Failure of any condition contained it the offer
• Revocation by offeror


  • Effective and received
  • Express revocation or implied revocation
  • Limitations unpowered terminate - collateral contract beginning performance of unilateral contract
• Rejection by offeree


  • Effective when received
  • Express rejection, counter offer or lapse of reasonable time
  • Limitations on power to terminate - generally cannot reject if already accepted
• Termination by operation of law

  • Effective when the death or insanity of either party, their destruction of the subject matter or the supervening illegality occurs
  • Death or insanity of either party, destruction of subject matter or supervening illegality
• The acceptance


  • Only the person to whom an offer is addressed as the power of acceptance
  • A member of a class to which an offer has been directed it also had the power of a substance
  • Generally an offerees power of acceptance cannot be assigned. however the rules of agency may apply. this is whereby an agent may accept the terms of an offer on their principals behalf even though the resulting contract will be between the offeror and the principal
• Offeree must know of the offer


  • The offering must know of the offer in order to validly accept it
  • This is true for a bilateral contract or a unilateral contract
• Methods of acceptance


  • Unless the matter is stipulated by the offeror, an offer will be constructed as inviting acceptance in any reasonable manner and by any medium reasonable under the circumstances
  • If a particular method of acceptance is required then the offer he does not use that method yet there has been no valid acceptance
  • However an exception to this rule applies when the method of acceptance is different but no less advantageous to the offeror
• Silence as acceptance


  • Generally an offeree cannot be forced to speak or have silence treated as acceptance
  • The law requires positive steps to be taken by the offeree before they can be bound by a contract
  • Silence is not a positive step
• Acceptance of unilateral contract


  • Offeree has no obligation to complete performance – Acceptance is not done until performance is COMPLETE
  • The offeree is not obliged to complete performance merely because performance has begun
  • Only complete performance constitutes an acceptance of a unilateral offer
• Notice


  Generally, the offeree is not required to give the offeror notice that he has begun the requested performance but is required to notify the offeror within a reasonable time after performance has been completed
• Acceptance by conduct


  The offeror must be aware of the offeree's conduct so as to satisfy the requirement of communication