Offer and Acceptance
Bilateral contract
Both parties assume an obligation to each other
Offer + Acceptance = Agreement
Unilateral contract
One party makes an offer in terms which calls for an act to be performed
Only the person making the offer assumes an obligation. The other party accepts the offer by
performing the required act.
e.g., offering a reward for the return of a lost pet – obligation from person who put up poster,
but a/o can accept the offer by returning the pet
Formation of a Bilateral Contract:
- Is the communication (advert, notice, letter, statement) an offer or an invitation to
treat?
- Where there is further communication b/w the parties, is the statement from the other
party a counteroffer or a request for more info? – what is the effect of this on the
original offer?
- Is the acceptance in response to the offer?
- Is the acceptance a mirror image (unqualified) / Does it correspond exactly with the
terms of the offer? Where the acceptance doesn’t mirror the offer, it raises the
question of whether it’s a counteroffer or a request for further info
- Is the acceptance made using a valid mode?
- Is the acceptance communicated? This is determined by the mode of acceptance used
by the offeree i.e. by post – postal rule is relevant
- At the point of acceptance, is the offer still open?
Requirements of a Valid Offer
- Clear and certain
- Display an intention to be bound
Clear and certain
e.g., may be prepared to sell is not clear and certain
Intention to be bound
The wording ‘may be prepared to sell’ lacks intention to be legally bound.
'If you will sign the agreement and return it to me I will send you the agreement signed on
behalf of the corporation in exchange' = an intention to be bound.
Court takes an objective approach - What a reasonable man would say the parties intended
What was actually intended is not relevant.
Invitations to Treat
An invitation to treat is a first step in negotiations which may or may not lead to a firm offer
by one of the parties - cannot be accepted to form a binding contract.
,An offer is an undertaking to be contractually bound by the terms of that offer in the event of
an unconditional acceptance being made by the offeree.
Advertisements are invitations to treat
This has been held the case in relation to adverts in periodicals, advertisements by an
auctioneer that certain goods would be sold at a specified location on a specific date, and
adverts listing specific goods at a specific price.
The general rule concerning advertisements does not apply where the advertisement amounts
to a unilateral offer
Carlill v Carbolic Smoke Ball Co (1893)
The advertisement was held to be a unilateral offer because there was a clear prescribed act
(using the smoke balls in a specified manner for a specified period but nevertheless
contracting influenza) performance of which constituted acceptance. Further, the defendant’s
intention to be bound was clearly demonstrated by their deposit of the £1,000 and the
certainty of the language used in the advertisement.
Similar reasoning would be applicable to an advertisement offering a reward for the return of
lost property where there is clearly a conditional promise which will be turned into a binding
contract when the property is returned to the rightful owner.
➔ Two requirements of a unilateral - a prescribed act and a clear intention to be bound
Goods displayed in a shop window are not an offer for sale but an invitation to treat
This is regardless of whether the shop expressly designates that the goods are an offer or on a
website.
Invitations to tender
A request for tenders is used where a party wishes to purchase s/t. The requestor invites
tenders (i.e. offers) from those interested in supplying the goods or the services.
This is an invitation to treat. The requestor can accept or reject any tender, even if it is the
most competitive
A displacement of the general rule has been recognised where the invitation to tender
expressly contains an undertaking to accept the highest or the lowest bid
This is an offer to enter into a contract with the party submitting the highest / lowest bid. This
is a form of unilateral contract: the required act is making the highest / lowest bid, and when
this is carried out, the other party is bound.
An invitation to tender could give rise to a binding contractual obligation to consider tenders
in circumstances where:
(1) the tenders had been solicited from specified parties who were known to the requesting
party;
(2) there was an absolute deadline for submission;
(3) the party requesting tenders had laid down absolute and non-negotiable conditions for
submission.
There was a contractual duty to consider those tenders which had complied with the
conditions.
In an auction the auctioneer’s request for bids is an invitation to treat
The bidder makes an offer which the auctioneer is then free to accept or reject.
Acceptance of the bidder’s offer from the fall of the auctioneer’s hammer.
,Can remove offer before fall of the hammer
Many auction sales have a 'reserve' price
If no bid above this price is received, the seller keeps the goods.
In an auction without reserve the seller promises to sell to the highest bidder whatever that
bid turns out to be.
Termination of an Offer
Rejection
An offer is terminated by rejection. Once an offer is rejected, it cannot then be accepted
(unless the offeror makes the same offer again). A rejection does not take effect until it is
actually communicated to the offeror as only then will the offeror know that they are free
from the offer.
Rejection and counter-offers
An attempt to accept an offer on new terms is a rejection of the offer accompanied by a
counter-offer.
Where an offeree makes a counter-offer, the original offer is deemed to have been rejected
and cannot be subsequently accepted
Difficulties can occur when an offer is made on the standard terms of the offeror and the
purported acceptance is made on the standard terms of the offeree. If the terms are different
in any way, the offeree has in fact made a counter-offer.
Rejection – distinguishing a counter-offer from a request for information
if an offeree responds seeking clarification of the extent and terms of the offer, or to ascertain
if the offeror would consent to changing certain ancillary aspects of the offer, this is a request
for further information.
No counter-offer, the original offer remains open for acceptance.
E.g., defendant offered to sell to the claimant 3,800 tons of iron 'at 40s net cash per ton, open
till Monday'. The claimant responded 'Please wire whether you would accept 40 for delivery
over two months, or, if not, the longest limit you would give'. Having received no reply, at
1:34pm, the claimant despatched a telegram accepting the original offer.
The court held that the claimant's response was not a counter-offer but rather an enquiry
which did not serve to reject the offer.
Lapse of an offer
An offer will lapse through passage of time:
a) where acceptance is not made within the period prescribed by the offeror;
b) where no period is prescribed and acceptance is not made within a reasonable time. What
is reasonable will depend on the circumstances of the case.
Death of the offeror
If the offeree knows that the offeror has died, the offer will lapse
If the offeree is unaware of the offeror’s death, it probably will not.
, Death of the offeree will cause the offer to lapse - the offer cannot be accepted after the
offeree’s death by the offeree’s representatives.
Revocation
The offeror may withdraw (i.e. revoke) their offer at any time before acceptance
However, once a valid acceptance has been made, the offeror is bound by the terms of their
offer. An offer cannot be revoked after acceptance.
Revocation of an offer is effective only upon actual notice of it reaching the offeree.
Where revocation is communicated by post it takes effect from the moment it is received by
the offeree, not from the time of posting
Indirect communication of revocation
Provided the offeror has shown, by words or conduct, a clear intention to revoke their offer
and notice has reached the offeree, the revocation is effective.
The means of communication do not matter - revocation will be effective even if
communicated by a third party
Revocation of a unilateral offer
Possible to revoke the offer at any time prior to the completion of the required act
An exception to this rule may apply where the offeree has partly performed the obligation
and is willing and able to complete - the offeror may be under an implied obligation not to
revoke the offer once performance has commenced.
The offeree’s acceptance and consideration for this implied promise is starting to perform the
required act.
Communication of revocation in unilateral contracts made to the whole world
Revocation will be effective if the offeror takes reasonable steps to bring the revocation to the
attention of all those who may have read the offer
Acceptance
1. Acceptance must be in response to an offer
Only the person / people to whom an offer is made can accept the offer.
e.g., not be possible to accept an offer you overheard that was not addressed to you.
Where an offer is made to the world at large then everyone with notice of the offer is an
'offeree'
2. Acceptance must be unqualified
Must correspond exactly with the terms of the offer
If the offeree’s response to the offer is qualified, decide whether it constitutes a counter-offer
or a request for information.
3. Prescribed mode of acceptance
Bilateral contract
Both parties assume an obligation to each other
Offer + Acceptance = Agreement
Unilateral contract
One party makes an offer in terms which calls for an act to be performed
Only the person making the offer assumes an obligation. The other party accepts the offer by
performing the required act.
e.g., offering a reward for the return of a lost pet – obligation from person who put up poster,
but a/o can accept the offer by returning the pet
Formation of a Bilateral Contract:
- Is the communication (advert, notice, letter, statement) an offer or an invitation to
treat?
- Where there is further communication b/w the parties, is the statement from the other
party a counteroffer or a request for more info? – what is the effect of this on the
original offer?
- Is the acceptance in response to the offer?
- Is the acceptance a mirror image (unqualified) / Does it correspond exactly with the
terms of the offer? Where the acceptance doesn’t mirror the offer, it raises the
question of whether it’s a counteroffer or a request for further info
- Is the acceptance made using a valid mode?
- Is the acceptance communicated? This is determined by the mode of acceptance used
by the offeree i.e. by post – postal rule is relevant
- At the point of acceptance, is the offer still open?
Requirements of a Valid Offer
- Clear and certain
- Display an intention to be bound
Clear and certain
e.g., may be prepared to sell is not clear and certain
Intention to be bound
The wording ‘may be prepared to sell’ lacks intention to be legally bound.
'If you will sign the agreement and return it to me I will send you the agreement signed on
behalf of the corporation in exchange' = an intention to be bound.
Court takes an objective approach - What a reasonable man would say the parties intended
What was actually intended is not relevant.
Invitations to Treat
An invitation to treat is a first step in negotiations which may or may not lead to a firm offer
by one of the parties - cannot be accepted to form a binding contract.
,An offer is an undertaking to be contractually bound by the terms of that offer in the event of
an unconditional acceptance being made by the offeree.
Advertisements are invitations to treat
This has been held the case in relation to adverts in periodicals, advertisements by an
auctioneer that certain goods would be sold at a specified location on a specific date, and
adverts listing specific goods at a specific price.
The general rule concerning advertisements does not apply where the advertisement amounts
to a unilateral offer
Carlill v Carbolic Smoke Ball Co (1893)
The advertisement was held to be a unilateral offer because there was a clear prescribed act
(using the smoke balls in a specified manner for a specified period but nevertheless
contracting influenza) performance of which constituted acceptance. Further, the defendant’s
intention to be bound was clearly demonstrated by their deposit of the £1,000 and the
certainty of the language used in the advertisement.
Similar reasoning would be applicable to an advertisement offering a reward for the return of
lost property where there is clearly a conditional promise which will be turned into a binding
contract when the property is returned to the rightful owner.
➔ Two requirements of a unilateral - a prescribed act and a clear intention to be bound
Goods displayed in a shop window are not an offer for sale but an invitation to treat
This is regardless of whether the shop expressly designates that the goods are an offer or on a
website.
Invitations to tender
A request for tenders is used where a party wishes to purchase s/t. The requestor invites
tenders (i.e. offers) from those interested in supplying the goods or the services.
This is an invitation to treat. The requestor can accept or reject any tender, even if it is the
most competitive
A displacement of the general rule has been recognised where the invitation to tender
expressly contains an undertaking to accept the highest or the lowest bid
This is an offer to enter into a contract with the party submitting the highest / lowest bid. This
is a form of unilateral contract: the required act is making the highest / lowest bid, and when
this is carried out, the other party is bound.
An invitation to tender could give rise to a binding contractual obligation to consider tenders
in circumstances where:
(1) the tenders had been solicited from specified parties who were known to the requesting
party;
(2) there was an absolute deadline for submission;
(3) the party requesting tenders had laid down absolute and non-negotiable conditions for
submission.
There was a contractual duty to consider those tenders which had complied with the
conditions.
In an auction the auctioneer’s request for bids is an invitation to treat
The bidder makes an offer which the auctioneer is then free to accept or reject.
Acceptance of the bidder’s offer from the fall of the auctioneer’s hammer.
,Can remove offer before fall of the hammer
Many auction sales have a 'reserve' price
If no bid above this price is received, the seller keeps the goods.
In an auction without reserve the seller promises to sell to the highest bidder whatever that
bid turns out to be.
Termination of an Offer
Rejection
An offer is terminated by rejection. Once an offer is rejected, it cannot then be accepted
(unless the offeror makes the same offer again). A rejection does not take effect until it is
actually communicated to the offeror as only then will the offeror know that they are free
from the offer.
Rejection and counter-offers
An attempt to accept an offer on new terms is a rejection of the offer accompanied by a
counter-offer.
Where an offeree makes a counter-offer, the original offer is deemed to have been rejected
and cannot be subsequently accepted
Difficulties can occur when an offer is made on the standard terms of the offeror and the
purported acceptance is made on the standard terms of the offeree. If the terms are different
in any way, the offeree has in fact made a counter-offer.
Rejection – distinguishing a counter-offer from a request for information
if an offeree responds seeking clarification of the extent and terms of the offer, or to ascertain
if the offeror would consent to changing certain ancillary aspects of the offer, this is a request
for further information.
No counter-offer, the original offer remains open for acceptance.
E.g., defendant offered to sell to the claimant 3,800 tons of iron 'at 40s net cash per ton, open
till Monday'. The claimant responded 'Please wire whether you would accept 40 for delivery
over two months, or, if not, the longest limit you would give'. Having received no reply, at
1:34pm, the claimant despatched a telegram accepting the original offer.
The court held that the claimant's response was not a counter-offer but rather an enquiry
which did not serve to reject the offer.
Lapse of an offer
An offer will lapse through passage of time:
a) where acceptance is not made within the period prescribed by the offeror;
b) where no period is prescribed and acceptance is not made within a reasonable time. What
is reasonable will depend on the circumstances of the case.
Death of the offeror
If the offeree knows that the offeror has died, the offer will lapse
If the offeree is unaware of the offeror’s death, it probably will not.
, Death of the offeree will cause the offer to lapse - the offer cannot be accepted after the
offeree’s death by the offeree’s representatives.
Revocation
The offeror may withdraw (i.e. revoke) their offer at any time before acceptance
However, once a valid acceptance has been made, the offeror is bound by the terms of their
offer. An offer cannot be revoked after acceptance.
Revocation of an offer is effective only upon actual notice of it reaching the offeree.
Where revocation is communicated by post it takes effect from the moment it is received by
the offeree, not from the time of posting
Indirect communication of revocation
Provided the offeror has shown, by words or conduct, a clear intention to revoke their offer
and notice has reached the offeree, the revocation is effective.
The means of communication do not matter - revocation will be effective even if
communicated by a third party
Revocation of a unilateral offer
Possible to revoke the offer at any time prior to the completion of the required act
An exception to this rule may apply where the offeree has partly performed the obligation
and is willing and able to complete - the offeror may be under an implied obligation not to
revoke the offer once performance has commenced.
The offeree’s acceptance and consideration for this implied promise is starting to perform the
required act.
Communication of revocation in unilateral contracts made to the whole world
Revocation will be effective if the offeror takes reasonable steps to bring the revocation to the
attention of all those who may have read the offer
Acceptance
1. Acceptance must be in response to an offer
Only the person / people to whom an offer is made can accept the offer.
e.g., not be possible to accept an offer you overheard that was not addressed to you.
Where an offer is made to the world at large then everyone with notice of the offer is an
'offeree'
2. Acceptance must be unqualified
Must correspond exactly with the terms of the offer
If the offeree’s response to the offer is qualified, decide whether it constitutes a counter-offer
or a request for information.
3. Prescribed mode of acceptance
