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CHAPTER 3 Offer and Acceptance

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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Object of lecture
Introduce you to the rules of offer and acceptance

By the end of this lecture you will be able to:


identify when an offer has been made and be able to distinguish it
from other proposals
explain the rules relating to offer
recognise those situations that would cause an offer to be revoked
or lapse
explain when acceptance of an offer has occurred and describe the
rules relating to acceptance
explain the effect of joint promises on the rules of offer and
acceptance
2015 Thomson Legal & Regulatory Ltd. All Rights Reserved.
PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Introduction

Three necessary elements for a contract:


A (O + A) + IN + C = K
Agreement enforceable at law entered for a consideration

This set of power points looks at O and A only


valid O + valid A = prima facie K

2015 Thomson Legal & Regulatory Ltd. All Rights Reserved.


PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Terminology

What is an offer?
invitation to a person(s) to enter an agreement on certain terms

What is an acceptance?
agreement to contract on the terms specified in the offer

Invitation to treat:
statement inviting offers

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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Terminology cont

Counter-offer:
an offer made in response to an offer
a counter-offer kills the offer

Offeror:
person who makes an offer

Offeree:
person to whom an offer is made

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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Policy Underlying Rules

The policy behind the Offer and Acceptance analysis is that there must
have been consensus ad idem a meeting of minds between the
parties before they will be held bound to an agreement, ie:
the offeree knew what the offeror proposed before accepting the
offer; and
the offeror was aware that the offeree had accepted the offer

The courts adopt a flexible approach to their interpretation of the rules


as to offer and acceptance

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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Rules as to Offer General

An offer is an invitation to a person to enter a contract on certain


specified terms and can be:
to a single person, a group of people or to the world at large:
Carlill v Carbolic Smoke Ball Co (advertisement in newspaper
considered offer to the world at large)
by communication by the offeror of the offer to an offeree:
by words, writing or conduct

Note that all terms of the offer must be brought to the offerees notice

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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Rules as to Offer Invitations to Treat

An offer is a definite undertaking with an intention to be


bound if it is accepted

An invitation to treat represents the negotiation stages before


an offer is made

An invitation to treat generally invites others to make an offer


unless clear intention to contrary can be shown, eg in an
advertisement the words raincheck appear

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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Rules as to Offer
Invitations to Treat Examples

Shop displays, catalogues, advertisements:


Pharmaceutical Society of Great Britain v Boots Cash Chemists
[1952]: goods on display on shelves where customers selected
their needs and took them to the check-out counter
Incorrect advertising of prices on shop displays, or in catalogues
and advertisements may amount to breaches of consumer
protection legislation such as the Competition and Consumer Act
(Cth), eg:
s 18 (misleading or deceptive conduct);
Pt 3.1 ss 29-38 (false representations); or
s 35 (bait advertising)

2015 Thomson Legal & Regulatory Ltd. All Rights Reserved.


PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Rules as to Offer
Invitations to Treat Examples

Auction sales:
calling for bids:
invitation to treat
bids:
offers
bringing down the hammer:
acceptance
Tenders:
advertisement calling for tenders
invitation to treat
tenders received
offers
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Rules as to Offer Withdrawal
An offer can be withdrawn:
at any time prior to acceptance by communication to the offeree
note dates in Byrne & Co v Leon Van Tienhoven (1880):
offer by letter sent 1 October
offer withdrawn on 8 October
offer received and accepted by telegram on 11 October
offer accepted by letter on 15 October
withdrawal of offer received on 20 October

unless the offeror has contracted (ie consideration) to keep the offer open:
Goldsbrough, Mort & Co Ltd v Quinn (1910): G paid Q 5/- for right to purchase
property within a week but before the week was up Q tried to withdraw the offer

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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Rules as to Offer Expiration

An offer expires:

if not accepted within the time stipulated in the offer (or within a
reasonable time)

on the making of a counter-offer

on the death of the offeror if the offer is for personal services

on loss of contractual capacity by the offeror, eg insanity


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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Rules as to Acceptance General

Acceptance is agreement to contract on terms specified in the


offer and:
can only be by a person to whom the offer was made
must be strictly in accordance with the terms of the offer:

Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957): a lease
contained an option to renew on the basis that rent was paid
on time it hadnt been although the landlord hadnt
complained

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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Rules as to Acceptance General cont

Acceptance:
must be in reliance on the offer:
R v Clarke (1927): C, arrested and charged with a murder for which
a reward had been offered, gave information voluntarily leading to
the arrest and conviction of the real murderer and claimed the
reward
Gave information during police investigation and to secure his own release

must be within the time set (or a reasonable time if none is stated):
Ramsgate Victoria Hotel Co v Montefiore (1866): M wrote to a RVH
offering to buy shares but the company took 5 months to reply
accepting Ms offer

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Rules as to Acceptance Communication

Acceptance must be communicated unless:


the offeror has said nothing, then what is reasonable in the circumstances:
the offeror has dispensed with notification;
acceptance takes the form of performance of an act:
where the postal rule applies (acceptance effective on posting)

Silence on its own cannot constitute acceptance:


Felthouse v Bindley (1862): A wrote to B offering a horse for sale saying that
if he did not hear from B he would assume B had accepted the offer

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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Completion of Acceptance

Acceptance is completed at the time and place of communication


of the acceptance to the offeror:
Mendelson-Zeller Co Inc v T & C Providores Pty Ltd [1981]: offer
accepted by telex in California, so acceptance in USA

unless:
acceptance is by conduct:
Carlill v Carbolic Smoke Ball Co: use of smoke ball

the postal acceptance rule (PAR) applies:


Elizabeth City Centre Pty v Corralyn Pty Ltd (1995): in taking
up an option on a sub-lease which contained a clause that
notice had to be sent certified or registered mail, C posted its
renewal by ordinary post One condition that offer is treated as accepted on the
third day of posting, It was held that the use of condition impliedly excluded PAR
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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Acceptance and the Postal Acceptance Rule

The PAR rule is an exception to the general rule that acceptance


is not effective until communicated to the offeror
Under the postal rule, unless otherwise stated by the offeror:
the offer is effective on receipt by the offeree;
revocation is effective on receipt by the offeree;
but
acceptance is effective on posting by the offeree

The PAR rule applies to telegrams as well as letters but NOT to


instantaneous methods of communication such as telephone or
fax
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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Joint Promises

While a contract requires two parties a promisor who makes the


offer and a promisee who accepts either or both parties may
consist of more than one person (joint promisors or joint promisees)

Joint promisees may be liable on the contract jointly (ie together)


or jointly and severally (ie together or individually), which may
affect who is liable

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PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Example Question

Question 3.8 from the text:

Satellite Pty Ltd, a marketing firm, has decided to introduce a new business
method for marketing CDs to consumers containing a contract stating that
the CDs cost $27 each, that payment should be remitted to Satellites Post
Office Box address if the consumer wishes to keep the CD, otherwise the
CD must be returned. The contract also states, in small print, that should a
consumer fail to either return the CDs, or remit payment within 30 days, the
company would commence legal proceedings to recover the $27.
Advise Satellite as to its right to recover the price of each CD from
consumers who fail to return the product.

2015 Thomson Legal & Regulatory Ltd. All Rights Reserved.


PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015
Example Question

Questions to consider when answering Question 3.8:

Has a valid offer been made?

Has that offer been accepted? How was acceptance to take place?

Is there agreement?

2015 Thomson Legal & Regulatory Ltd. All Rights Reserved.


PowerPoint slides to accompany Davenport & Parker Business and Law in Australia 2nd ed 2015