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Offer and Acceptance The test whether there has been correspondence between offer and acceptance is not

subjective but objective. This raises 3 issues; 1.)Why is it an objective approach? If the contract is about the enforcement of promises voluntarily made why does the law not concentrate on the subjective intentions of the party? 2.)There are issues in the broadness in defining this objective theory of contract. 3.)Third issue relates to the role of the subjective intentions of the parties to the contract, are they irrelevant or do they have some enduring significance? When deciding whether or not a contract has been concluded the courts generally look for an offer made by one party that has been accepted by the other. Not every contract can be analysed in terms of offer and acceptance and indeed this model has been criticized for its rigidity and the fact that it is out of step with commercial practice. An offer is a statement by one party of a willingness to enter into a contract on the terms that he has put forward. An offer is generally contrasted with an invitation to negotiate (or an invitation to treat) which is no more that an invitation to the other party to enter into negotiations on the terms proposed. The distinction between an offer and an invitation to negotiate has proved to be a difficult one to draw in certain circumstances such as advertisements, the display of goods for sale in shops and auctions. An offer can be terminated by revocation, rejection by the person to whom the offer has been made, lapse of time, the occurrence of a stipulated event and, possibly, the death of one or other party to the contract. An acceptance is a final and unqualified expression of assent to the terms of an offer. The question whether an offer has been accepted has generated a considerable amount of case law and the outcome of which can be expressed in the form of a number of different rules, some of which have given rise to considerable difficulty in practice, particularly in connection with the battle of the forms. The offer and acceptance rules are applicable to all contracts and not just a selection. Contracts can be bilateral (2 parties to the contract promise each other that they will carry out their respective obligations) or unilateral (only one party makes a promise to another, e.g. classic example if offering reward for lost property). Advertisements The general rule applicable to advertisements is that (at least in bilateral contracts) an advertisement constitutes an invitation to negotiate and not an offer. The reason for this is said to be the need to protect the party placing the advertisement from incurring a liability in contract to every person who is willing to purchase the goods at the stipulated price. Could have been approached differently, could have been done by treating the advertisement as an offer but then implying into that offer that it can only be accepted while stocks last.

Unilateral contract Carlill vs. Carbolic Smoke Ball Company (1893) The defendants advertised that they would give 100 to anyone who still contracted influenza after using their special smoke ball as directed on the printed instructions. The plaintiff purchased and used the product as directed and still contracted influenza. She succeeded, the defendants appealed and were rejected, it was constituted that the terms of the advertisement constituted an offer, the terms of which were accepted by the plaintiff. A number of issues of law were raised by the facts in Carlill, these issues are (i) Did the defendants intend to be bound by the terms stated in the advertisement? (ii) Did Mrs Carlill validly accept the offer contained in the advertisement? (iii) Did Mrs Carlill provide any consideration for the promise contained in the offer? In terms of offer and acceptance, how and when did Mrs Carlill accept the offer contained in the adwas it when she purchased the smoke ball, when she used it for the first time or only when she completed the course? The second problem concerned the communication of acceptancethis rule was held not to be applicable to Mrs Carlill because the terms of the offer demonstrated that the need for communication has been waived by the defendants. Finally the defendants argued that there was no consideration for their promise, basically both parties must have contributed something towards the agreement. The Court of Appeal held that there was consideration on 2 grounds, the first was the benefit that the defendants gained as a result of the use of the smoke ball (sales) and the second was that the use of the smoke ball for an extended period of time constituted a detriment so that she provided consideration for the defendants promise. Tenders The practice of inviting parties to tender (bid) for particular objects is not an uncommon one. It is, perhaps, most frequently encountered in construction projects. The general rule is that the invitation to tender is not an offer but an invitation to negotiate although cases can be found in which the courts have concluded that the invitation to tender did in fact contain within it an offer. E.g. Blackpool and Fylde Aero Club Ltd v. Blackpool Borough Council The (appellant) council invited tenders for a concession to operate pleasure flights from the local airport; among the recipients of this invitation was the (respondent) club which has held the concession since 1975. The date/time stipulated was 17 March 1983 at noon. The club submitted its tender on the 17th as requested but the box was not checked until the following day, the 18th. The council refused to consider the clubs tender on the ground that it has been received late. The club then brought an action for damages against the council. The judge resolved the contractual issue in favour of the club. The counsel for the appellant raised four main submissions, 1.) An invitation to tender in this form was well established to be no more than a proclamation of willingness to receive offers; the council would not have been bound to accept the highest tender or any tender. 2.) On a reasonable reading of this invitation to tender the council could not be understood to be undertaking to consider all timely tenders submitted. 3.) The court should be no less rigorous when asked to imply a contract than when asked to imply a term in an existing contract.

4.) The warranty contended for by the club was simply a proposition tailor made to produce the desired result. A factor which may also have been of some significance in Blackpool Aero is the fact that the defendant was a public authority. Auction sales The auctioneer makes an invitation to negotiate (treat). The offer is then made by the member of the public who makes a bid for the lot; this bid is not usually accepted immediately. Acceptance is the fall of the hammer. Problem comes when there is an auction without reserve, e.g. Barry v Davies [2000] 1 W.L.R. 1962, goods didnt get any where near what they were worthbid 200 and won and the value was actually like 14,521. The claimant was successful. The bidders sued for a breach of contract, 2 contracts. First contract is that the auctioneer must accept the bid from the highest bidder. Second contract is between the owner of the goods and the highest bidder. The contract found to exist on the facts of Barry was one between the potential buyer and the auctioneers; the effect of the auctioneers actions was to prevent a contract being formed between the seller and the buyer. What constitutes an acceptance? An acceptance has been defined as a final and unqualified expression of assent to the terms of an offer. The question whether an offer has been accepted has generated a considerable amount of case-law. Must the acceptance coincide exactly with the terms of the offer? The general answer is that an acceptance must be an unqualified expression of assent to the terms proposed by the offeror. Butler Machine Tool Co Ltd v. Ex-Cell-O Corporation (England) Ltd (1979) The Plaintiffs (Butler) quoted a price for a machine tool of 75,535 to be delivered within 10 months. There were terms and conditions which stated that there would be an increase in price if there was in increase in costs and so forth. It was delivered in 16 months and by that time the price had gone up by 2,892. The judge held that the price variation in the sellers was consistent throughout the dealings between the two companies. Must the acceptance be communicated to the offeror? The general rule is that an acceptance, to be considered valid, must be communicated to the offeror. There are some exceptions like the Carbolic Smoke Ball case. E.g. Entores Ltd v. Miles Far East Corporation, the plaintiffs (based in London) made an offer by telex (like fax) to the defendants, a company based in Amsterdam who acted as agents for an American corporation. The defendants sent their acceptance of the offer by telex. The plaintiffs applied for leave to serve a writ on the American corporation in New York. Where was the contract made? When the defendant sent their acceptance by telex (in Amsterdam) or was it made when the telex was received on the plaintiffs machine (in London). It was held that the contract was formed when the

communication of the acceptance was received by the plaintiffs in London so that the English courts has jurisdiction. Prescribed method of acceptance It is open to an offeror to state in the terms of his offer that an acceptance must assume a particular form or be sent to a particular place. Can silence amount to acceptance The general rule is that silence does not amount to an acceptance and the rule is a good one. The issue that must be considered is the following, X sends Y an offer and states that he, X, will regard the offer as having been accepted unless Y informs him to the contrary within 7 days. Y decides to accept the offer but does not communicate his acceptance to X because he believes that he does not need to. X subsequently informs Y that no contract has been made as a result of Ys lack of communication of his acceptance. Felthouse v Bindley (1862) 11 C.B.(N.S.) 869, Felthouse offered to buy his nephews horse, he said if I hear no more about the horse then the horse is mine. The nephew didnt answer however the nephew told Bindley (an auctioneer) that the horse had already been sold yet Bindley mistakenly sold the horse to another party. Felthouse sued for conversion (an action when someone infringes your ownership). Felthouse was not successful. Silence is ambiguous, needs to be communicated to offeror. The postal rule English law has adopted that acceptance takes place upon the posting of the letter of acceptance. The offeror is bound before he even knows it (while its in the post), he is bound even if he doesnt receive the letter and he cannot revoke the offer after the contract has been formed and posted.
The postal acceptance rule is rather controversial and is subject to qualifications: Henthorn v Frazer [1892] 2 ch. 27 must be reasonable for person sending the acceptance to reply on postal rule Household Fire and Carriage Accident Insurance Co Ltd. v Grant (1878-79) L.R. 4 Ex. D. 21 specification that letter must arrive Holwell Securities v Hughes [1974] 1 W.L.R. 155; [1974] 1 All E.R. 161 - acceptance by notice in writing prevented operation of the rule. LJ Korbetis v Transgrain Shipping BV [2005] EWHC 1345 where offeree incorrectly addresses the letter postal acceptance rule likely to be displaced (obiter dicta).

Acceptance of Unilateral Contracts The rules relating to acceptance must be modified in their application to unilateral contracts. One modification is that the courts may readily imply, as they did in Carbolic smoke ball case, that the offeror has waived the requirement that the acceptance be communicated to him. Further difficulties include, The first relates to the identification of the act that constitutes the acceptance. The second issue relates to the time at which the offeror can withdraw his offer.

Acceptance in ignorance of an offer The general rule is that performance of the requested act does not amount to an acceptance unless the party performing the act did so with knowledge of the existence of the offer. The difficulty in this area is unilateral cases. Conclusion In essence the approach of the courts is first to seek out an offer and, having found it, see whether or not there has been a matching acceptance. In practice of course the process is much more complex. Lord Denning stated that the offer and acceptance approach was out of date but he failed to persuade his colleagues of the merits of his view. Rather than abandoning this approach the courts have decided to apply it with a degree of flexibility to the facts of individual cases.