OFFER AND ACCEPTANCE

Definition of offer
Section 2(a) Contracts Act 1950

• An offer is a promise or proposal by a person (offeror) to another person (offeree)

with intention to create legally binding relationship.

• Offer can be by words, conduct, an act or abstinence.

Condition of offer
• Must be clear, complete, final to avoid any doubt or discrepancies if terms unclear.

GUNTHING v LYNN

Lynn offered to buy a horse from Guthing on condition that if the horse
brings luck to him he will pay another 5pound extra. A dispute arose
and the issue is whether there is valid offer or not.

Held: The offer is not valid because it’s not final and complete.

• Offer can be made either expressly or impliedly (Section 9 Contracts Act 1950).
Expressly – in writing or verbally Impliedly – conduct of the parties.

Type of offer
o Individual (specific person) (Section 2(b))

BOULTON v JONES

o General public

1. Address public at large and would satisfy all terms and conditions
stipulated by offeror.

2. Anyone who fulfill the condition may accept the offer.

CARLILL v CARBOLIC SMOKE BALL CO.

 The Defendants had made an advertisement about a medicine Smoke
Ball that was used to cure influenza. They also mentioned that they
would pay 100pound to anyone who still suffering influenza after
taking medicine according to its prescription. To show their sincerity,
the defendant had deposited some amount of money into the bank. The
Plaintiff duly used the product advertised but nevertheless became ill.
The Plaintiff claim for the amount promised but the Defendant refused.

Held: The advertisement was made to the whole world at large and
anyone who consumed the medicine as prescribed was said to accept
the offer. Plaintiff accepted the offer and entitled the money.

Communication of offer
o Section 2 (a) – ‘signifies to other’

o Section 4 (1) - complete when it comes to the knowledge of person to whom

it made.

TAYLOR v LAIRD

Plaintiff (Taylor) resigned from being the captain of a ship owned by

the Defendant during a voyage. Plaintiff then assisted to sail the ship
back and claimed remuneration from Defendant (Laird) from work
done.

Held: Plaintiff did not communicate his offer to give his service to sail
the ship back. Therefore Defendant did not liable to pay remuneration
to Plaintiff.

o If the offer has not been communicated to the offeree, no acceptance could be
made to form binding contract.

o A party accept the offer must aware the existence. If not, it does not form any
binding contract.

R v CLARKE

The Australian Government offered a reward for any information

leading to the arrest and conviction of persons responsible for the
murder of 2 police officers. Mr. X and Clarke were arrested for the
crime. Clarke then gave information which lead to the arrest of another
person, Mr. Y.
 X and Y were convicted but Clark was release. Later, he knew about
the reward and claimed for it.

Held: His claim failed on the grounds that the information was given
only to release himself and not in reliance on the offer of reward.

OFFER VS INVITATION TO TREAT

o An offer must be differentiate from invitation to treat (ITT). ITT is not an

offer but sort of preliminary communication on stage of negotiation which
might lead to an offer. Invitation from one party to make an offer.

o Examples : advertisement, display of goods with price tags, tender, price list,
auctioneer.

o Advertisement :-

1. Only an invitation to attract people’s interest to make an offer.

2. The person who read the advertisement and make offer to buy.

HARRIS v NICKERSON

Defendant advertised a sale of certain goods including certain office

accessories on a certain date at particular place. Plaintiff attended the
sale with attention to buy some office accessories. However, the
Defendant had actually withdrawn the sale of office accessories.
Plaintiff sought for damages and claimed that the defendant had
breached the contract since the advertisement was an offer and his
presence was an acceptance to the offer.

Held: The advertisement was only invitation to treat and no contract.

COELHO v PUBLIC SERVICE COMMISSION

 The Plaintiff applied for the post of Assistant Passport Officer as
advertised in Malay Mail newspaper. He was later informed that his
application has been accepted. Subsequently, the Defendant tried to
terminate Plaintiff’s employment on the basis that he was appointed on
probation.

Held: The job advertisement was an invitation to any qualified persons

to apply. The application from the applicant was offers and such offers
could either be accepted with or without conditions. In this case, the
appointment letter was an unconditional acceptance. Therefore, there
was a valid contract between Plaintiff and Defendant. The termination
was invalid.

o Display of goods with price tags

1. The offer is made when customers select the desired goods and bring
them to the counter for payment. Cashier will make acceptance.

PHARMACEUTICAL SOCIETY OF GREAT BRITAIN v BOOTS

CASH CHEMIST LTD

The defendants were charged under the Pharmacy and Poisons Act
1933, which made it unlawful to sell certain poisons unless a registered
pharmacist supervised the sale. They had stationed a registered one at
the cashier’s desk. However it was alleged that there was a contract
when the customers selected those poisons and put it into the shopping
baskets.

Held: The display of goods on shelf was only invitation to treat. The
agreement or contract was formed once cashier accepted the payment
from the buyer.

FISHER v BELL
 Display of several kinds of pen-knives in a glass window is only
invitation to treat. The acceptance of that offer depends on the
discretion of shop owner.

o Tender

1. Notice inviting tender are also invitation to treat. The party submitted
the tender may or may not accept such tender

SPENCER v HARDING

The Defendant made an announcement inviting tenders for the sale of

certain goods. The offer for tender made by the Plaintiff was the
highest but the Defendant did not accept it.

Held: The Defendant has the right to reject such offer as there was no
valid contract.

o Price List or Quotation

1. To give opportunity to buyer to choose the best price. Both buyers and
sellers have rights to accept or reject such offer or new price given.

HARVEY v FACEY

A had telegraphed to B “will you sell us Bumper Hall Pen?’ (a plot of

land). B replied by telegraph “the lowest price for BHP is 900pound. A
agreed to buy it on price.

Held: No contract had been made because B just supplying the

information.
 PRESTON CORPORATION SDN BHD v EDWARD LEONG &
ORS.

The publisher (Preston) asked for quotation from Respondent (printer)

Held: The quotation was only supply of information and only

invitation to treat.

o Auctioneer inviting bids

1. “A sale by public auction shall be complete when the auctioneer

announces its completion by the fall of hammer” (Section 10 Auction
Sales Act).

2. It is only invitation to treat.

REVOCATION OF OFFER

• When it can revoke?

o An offer remains open until it lapses or withdrawn.

o Section 5 (1) – an offeror may revoke it at any time before acceptance.

o Once accepted, offeror is no longer entitled to revoke his offer.

PAYNE v CAVE

An offer can be effectively revoked before fall of hammer in an auction sale.

ROUTLEDGE v GRANT

Defendant offered to sell house to Plaintiff and acceptance need to be made

within 6 weeks. The issue was, can Defendant revoke his offer before 6 weeks
lapsed?

Held: Defendant may revoke his offer at any time within 6 weeks on condition
that no acceptance had been made by Plaintiff.
• Modes of revocation (Section 6)

o Section 6 (a) - Communication of revocation notice by offeror to another party

1. Revocation only effective when it put into the transmission on the

person and after the notice had come to actual knowledge of another
party/oferee. (Section 4 (3) (a) & (b) ) (Illustration Section 4)

2. Revocation through post – (Illustration Section 5)

3. It can be made offeror or their representative. Third party is not

sufficient.

BRYNE v VAN TIENHOVEN

D offered to sell 1000 boxes of tinplates to the P. The following

communications took place between them:

1st October: D posted letter of offer in Cardiff to P in New York

8th October: D posted a letter revoking the offer

11th October: P received the letter of offer and sent acceptance by

telegram on the same day

15th October: P sent a letter of acceptance, verifying the acceptance by

telegram on the 11th October

20th October: P received the D’s letter of revocation which was posted
on the 8th October

Held: There was a contract between the parties. The revocation of the
offer posted on 8 Oct was not effective until 20th Oct when it was
received by the P. Meantime; the P had already accepted the offer on
11 October when the telegram was sent.

HENTHORN v FRASER
 D represented an association of developers offered in writing to sell
several houses to the P. The following events took place on the
following day:

12pm : D posted a letter of revocation to the P.

3.50pm: P posted a letter of acceptance to the D.

5pm: P received the letter of revocation of offer from the D.

Held: contract occurred at 3.50pm when P posted his letter of

acceptance to the D.

• Revocation by lapse of time (Section 6 (b))

o Two situation occurred:-

1. When the acceptance has not been made within the time prescribed by
the offeror.

2. If no time is prescribed the acceptance has not been made within a

reasonable time.

o What is defined as ‘reasonable time’?

FRASER v EVERETT

The contract was for shares. The P were expected to mail the scrips of
shares about the end of March, and which if done so, the scripts
would have arrived on or before 23rd April. However the scripts were
mailed early in April and received by the D on 15th May.

Held: The acceptance of the P was not made within a reasonable time.
The scripts should have been delivered much earlier, taking into
consideration that the shares in question were mining shares of a very
fluctuating character.

RAMSGATE v MONTEFIORE

MACON WORKS v PHANG HON CHIN

 • Revocation by failure of the offeree to fulfil condition precedent to the acceptance.
(Section 6 (c) )

o If offeror put a condition to be fulfilled by offeree before making acceptance

the offeree must fulfil it and if not the offer is revoked.

• Revocation by the death or mental disorder of offeror. (Section 6 (d))

ACCEPTANCE
Section 2 (b)

• Acceptance is where the person to whom offer was made agrees to the offer or the
proposal made or adopts the conditions of offer.

• Once there is an acceptance an agreement between the parties is created. A contract is

binding when the offer is accepted.

CONDITION OF ACCEPTANCE

• Acceptance must be absolute and unqualified

o Acceptance must be made exactly on the same terms as the offer without any
modifications. (Section 7 (a))

o Any modification constitute counter-offer not acceptance

o Counter-offer – rejection of original offer and did not amount to create binding
contract.

HYDE v WRENCH

On June 6 the Defendant offered to sell his estate to the Plaintiff for 1000pound. On
June 8, in reply the Plaintiff made a counter offer to purchase the land at 950pound.
The Defendants refused to accept the counter offer. Subsequently, on June 27 the
 Plaintiff accepted the original offer. The issue was whether there was a valid
acceptance and the Defendant was bound to sell the land to Plaintiff.

Held: There was no acceptance because the counter offer contained in the Plaintiff’s
letter of June 8 had rejected the original offer which could not be revived.

STEVENSON JAQUES & CO v Mc LEAN

The defendant offered to sell iron at 40s per ton. The Plaintiff sent a telegraph to the
Defendant saying “Please answer whether you would accept payment for delivery
over 2 months or if not longest limit that you would give.”

There was no response from the Defendant and the Defendant then sold the iron to
another purchaser thinking that the Plaintiff had rejected the offer.

Held: The Plaintiff did not make a counter offer. The telegram was only an inquiry
which should have been answered by the Defendant and could not be treated as a
rejection to the offer.

• Communication of acceptance must be in some usual and reasonable manner

o Two method of communication with regard to the mode of acceptance and

time of acceptance.

o The general rule is an acceptance must be communicated to the offeror. The

mode of acceptance for example that the acceptance must be made by writing,
must be followed by the offeror.

o If the offer does not follow the prescribed mode, the acceptance must be in
usual and reasonable manner depending on the circumstances and practice
norms available.

ELIASON v HENSHAW

The appellant offered to buy flour from the Respondent requesting that the
acceptance to the offer should be sent to the Appellant at Harper’s ferry by the
wagon which brought the offer letter. The respondent sent the letter by mail
thinking that it can arrive more quickly. Unfortunately, the prescribed letter
 arrived after prescribed date. The issue was whether there was a valid
acceptance to constitute valid contract.

Held: The Appellant was entitled to reject the acceptance as the Respondent
did not adhere to the prescribed mode of acceptance.

o Therefore, the mode of acceptance must be made clearly by offeror. Keeping

silence without actually making the effort of conveying the acceptance to the
offeree does not amount to an acceptance.

FRASER v EVERETT

It was held that there is no rule of law saying that “silence give consent” which
is applicable to mercantile contracts.

Exceptions to general rule of communication of acceptance:

o Although acceptance must generally be communicated to the offeror, in

certain circumstances, actual communication is not required. Hence, even
though the acceptance was not physically made, a contract can still be created.

o The following are the exceptional circumstances where communication of

acceptance is not necessary:

• When the offeror dispensed with the need of communication of

acceptance.

 If the offeror waives the requirement of communication of acceptance

or release the offeree from obligation to communicate the acceptance,
the offeree needs not to communicate his/her acceptance to the offeree.

 However there must be some express or implied requirement from the

offeror that a particular mode of acceptance will be sufficient or there
must be some conduct on part of offeree which shoes that offeree
intends to accept and which confirms to the mode of acceptance
indicated by the offeror

 In Carlill v Carbolic Smoke Ball, a valid acceptance had been made

even though there was no communication of acceptance, once the
plaintiff fulfils the certain conditions.
 ERRINGTON v ERRINGTON

A father promised his son & daughter in-law that the house in which
they were living would belong to them as soon as they had paid off the
instalments of a mortgage on the house. The son then paid the
instalment but subsequently, the father refused to transfer the house.
The issue was whether there was a valid contract between them

Held: There was a valid contract between father and son. The father’s
promise was a unilateral contract. The acceptance became valid once
the son started to pay the instalment even though the son did not
verbally communicate his acceptance.

• Where the offeror allows the offeree to fulfil the condition of offer.

 When the offer contains certain stipulations or conditions in order to

form a valid acceptance. Actual communication is not necessary and
only the act of performing the conditions considered sufficient.

• Reciprocal promises

 Section 2(f): promises which form the consideration or part of

consideration for each other are called reciprocal promises

 Section 8: performance of the conditions of a proposal, or the

acceptance of any consideration for a reciprocal promise which may be
offered with a proposal, is an acceptance of proposal.

 The proposer allows the acceptance of any consideration for a

reciprocal promise which may be offered with a proposal.

Acceptance through post (postal rule)

 The general rule is that the acceptance is complete only when it is communicate to the
offeror. It is communicated when it comes to the actual knowledge of the offeror.

 However, acceptance through post is complete even though it has not come to the
actual knowledge of the offeror.

 When a letter of acceptance is posted, it binds the offeror from the time that it is
posted and not when it received. This is an exception to the general rule that the
acceptance must be communicate and called as ‘postal rule’
 Under this exception, the offeror is bound by the offeree’s acceptance even though he
has no knowledge the acceptance being made. Hence, a valid contract is created when
the acceptance is posted.

 Section 4 (2) provides communication of acceptance is complete

a. as against the proposer, when it is put in a course of transmission to him, so as

to be out of power of the acceptor; and

b. as against the acceptor, when it comes to the knowledge of the proposer.

 Illustration (b) to Section 4:

B accepts A’s proposal by letter sent by post. The communication of the acceptance is
complete –

As against A, when the letter is posted

As against B, when the letter received by A

 Therefore, although the letter of acceptance has not reached the offeror, the offeror is
still bound by the acceptance. This situation is also applied where the letter of
acceptance gets lost upon posting or its delay.

ENTORES v MILES FAR EAST CORPORATION

It was held that when a contract is made by post, the acceptance is complete as soon
as the letter is put into post box; that is where the contract is made.

IGNITIUS v BELL

The Defendant offered to sell his land to the Plaintiff on condition that if the plaintiff
would like to accept the offer, the acceptance must be made on or before 20th August
1912. The Plaintiff sent an acceptance by registered post on the 16th August but the
letter only reached on the Defendant on 25th August. The dispute is whether there is a
contract created as there was a delay.

Held: The acceptance was exercised by the plaintiff when the letter was posted on 16th
August. A contract is created once the letter of acceptance is posted and hence, the
defendant was bound by the contract.

HOUSEHOLD FIRE & CARRIAGE ACCIDENT INSURANCE v GRANT

 The Defendant offered to buy shares in the plaintiff’s company. The plaintiff’s
company accepted the offer and the letter of allotment (i.e. letter of acceptance) was
posted to the defendant. However, the acceptance never reached the destination.
When the plaintiff’s company asked for payment of he shares, the defendant refused
to pay as there was no valid acceptance from plaintiff’s company.

Held: There was valid acceptance once the plaintiff’s company posted the acceptance.
Therefore valid contract existed.

 Based on Section 4 (2), the offeree remains free from contract until the actual
receipt of the acceptance by the offeror.

 As precaution, the offeror should provide adequate protection including terms in

the offer when the actual contract begins and both parties are bound by the terms.

Revocation of acceptance

 Section 5 (2): An acceptance may be revoked at any time before the communication
of the acceptance is complete against the acceptor, but not afterwards.

 The offeree could revoke his acceptance at any time before or at the moment the letter
of acceptance reaches the offeror.

DUNMORE v ALEXANDER

The letter of acceptance and the letter of revoking the acceptance were received by the
offeror simultaneously. It was held that the acceptance had been effectively revoked
by the offeree. Therefore there was no contract.

 When the communication of revocation of acceptance affective?

a. Section 4 (3) (a) & (b)

b. Illustration (d) Section 4 : B revokes his acceptance by telegraph. B’s

revocation is complete as against B when the telegram is dispatched,
and as against A when it reaches him

 In conclusion, it appears that the offeree has the advantages in 2 situations:

a. He could post the letter of acceptance and thus stop the offeror from
withdrawing or revoking the offer.
b. In the meantime, he could revoke the acceptance by using a speedier
means of communication before the letter of acceptance reaches the
offeror