Week 2-Offer and Acceptance

A contract comes into existence when acceptance of an offer is communicated to the offeror.
While early ideas of contracting provided that up until the moment of contract both parties are
under no obligations towards one another, developments in the law of estoppel, misleading
conduct, negligent misrepresentation and unjust enrichment have led to the apparent obligations
parties really owe one another before an agreement is reached.
Offer
The nature of an offer
expression of willingness to enter into a contract on certain terms. A proposal only amounts to an
offer if there is an indication that an acceptance is invited and will conclude the agreement between
the parties.
Brambles Holding Ltd v Bathurst City Council
suggested in obiter that an offer must take the form of a proposal for
consideration which gives the offeree an opportunity to choose between acceptance
and rejection.
language of command and peremptorily requests towards the other party
cannot be regarded as an offer
Ones conduct is important in determining whether an offer has been made.
In determining whether offer been made, critical issue;
- whether it would appear for RP in the position of the offeree that an offer was intended
- And that a binding agreement would be made upon acceptance
does not matter whether offeror intended to make an offer; court determines the intention
objectively according to outwards manifestations
Carlill v Carbolic Smoke Ball Co provides insight of these principles;
Facts:
- D manufactured and sold device CSB, which claimed to prevent influenza
- Advertisement said 100 reward for anyone who contracted cold having used the device for
3 times daily for 2 weeks in accordance with directions
- Ad stated 1000 deposited with bank, expressing their sincerity in the matter (intention).
- After reading ad, P purchased product, used it for several weeks and contracted flu
- D refused to pay reward to P.
Arguments:
- D provided 5 arguments that there was no contract formed;
1. No promise was intended and ad meant nothing
2. No offer had been made to any particular person
3. P had not notified her acceptance of any offer
4. The agreement was uncertain because it failed to specify a period within which the
disease must be contracted
5. P had supplied no consideration for Ds promise
Decision:
- First argument: court held that the statement relating to the bank deposit made it clear that
a promise was intended
interpreted ad objectively, according to what an ordinary person reading the
document would think was intended, rather than by reference to what D actually
intended
- Second argument: offer was made to the whole world, could be accepted by any person who
performed the conditions on faith of the ad
- Third argument: although acceptance of an offer must normally be notified to the offeror,
offeror may dispense with that notification. An offer that calls for the performance of certain
conditions may be accepted by the performance of such conditions.
- Fourth argument: while the ad could be interpreted in different ways in regards to the
period in which the disease was contracted, all possible restrictions were satisfied
nonetheless.
- Fifth argument: use of CSB by P constituted both a benefit to D and a detriment to P, either
of which would have been enough to constitute good consideration for the promise. Effort
and consideration she used when using the Smoke Ball was quite high- gave two weeks of
hard labour in return for the $100

Gibson v Manchester City Council
Facts - P was a council tenant and recived a letter from D inviting an application to buy
the council house
- D's letter stated: .. The Corporation may be prepared to sell the house to you at
the purchase price of 2,725... If you would like to make formal application to
buy your Council house, please complete the enclosed application form...
- P completed the application
- D was a newly elected council and refused to accept P's application
- P sued for breach of contract

Legal
Issues
- Was there finality of offer or only an invitation to treat
Rules - held that D's letter was not a contractual offer, which P could accept
- formal application by P was an offer, that D did not accept
- The statement of a price from one party does not necessarily provide indication
of an offer.
Quotes Lord Diplock: 'The words 'may be prepared to sell' are fatal... [D's letter is] setting out
the financial terms on which it may be the council will be prepared to consider a sale
and purchase in due course...'


Unilateral contracts
A contract which the offeree accepts the offer by performing his or her side of the bargain (e.g
Carbolic Smoke Ball)
HC has explained the consideration on the part of the offeree is completely executed by the doing
of the very thing which constitutes acceptance of the offer (Carbolic Smoke Ball)
The expression unilateral contract is a inaccuracy because there must be two parties to a contract
(Australian Woollen Mills Pty Ltd v Commonwealth)
only unilateral in the sense one party has performed his obligations by the time of
formation of the contract (offeree) and the other is still under obligations (offerer)
BILATERAL CONTRACT = at the time of formation, the obligations of both parties remain to be
performed. They are executory at the time of formation.
Australian Woollen Mills Pty Ltd v Commonwealth, P claimed that a unilateral contract had arisen
out of the Commonwealth Govs wool subsidy scheme;
Facts:
- D subsidised purchases of wool by manufacturers of woollen products to enable low prices
- D announced in a series of letters to manufacturers that it would pay subsidy on all wool
purchased for domestic use by Australian manufacturers
- AWM purchased large quantities of wool over next 2 years
- On three occasions subsidies were not payed over these 2 years, and in 1948 D discontinued
the scheme, but would ensure that each manufacturer would have a certain amount of
subsidised wool in stock on 30 June 1948
- AWMs stockpile exceeded this amount and so was required to repay the subsidy paid on
that excess.
- AWM paid, however later sued to recover it, along with the previous unpaid subsidies.
Arguments:
- AWM claimed that each of the announcements by D constituted a contractual offer to pay
the subsidy in return for AWM purchasing wool for domestic consumption.
- Each purchase of wool said to have risen a unilateral contract: purchase = acceptance of Ds
offer + consideration for the promise to pay the subsidy
Held:
High Court of Australia found that no offer had been made in order to induce
AWM to buy the wool nor had they asked
The government was actually just saying, if you buy wool, well pay you the
subsidy, so no necessary element of quid pro quo.
They also drew a difference between unilateral contracts and conditional gifts.
Contrast Conditional Gifts
1. A in Sydney says: I will pay you $1000 on your arrival in Sydney
o without more contract
A in Sydney promises B in Melbourne $1000 in return for Bs coming to Sydney = unilateral
contract
Need to show act done in response to request
Offers and invitations to treat
An offer can be distinguished from an invitation to treat an invitation to others to make offers or
enter into negotiations. For example;
Indication of an owner of a property that they he might be selling at a certain price
Food stores circulation of a price list, as if it were a contract, the store might find
themselves obliged to supply unlimited quantities of food at the listed price
Whether particular conduct amounts to an offer is a question to be decided on the facts of each case
and there are no specific rules regarding types of conduct that amount to an offer
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern)
Facts - Boots Cash Chemists had just instituted a new method for its customers to buy
certain medicines.
- The company would let shoppers pick drugs off the shelves in the chemist and
then pay for them at the till. Before then, all medicines were stored behind a
counter and an assistant had to get what was requested.
- The Pharmaceutical Society of Great Britain objected and argued that under the
Pharmacy and Poisons Act 1933, that was an unlawful practice. Under s 18(1), a
pharmacist needed to supervise at the point where "the sale is effected" when
the product was one listed on the 1933 Act's schedule of poisons.
- The Society argued that displays of goods were an "offer" and when a shopper
selected and put the drugs into their shopping basket, that was an "acceptance".
- Therefore because no pharmacist had supervised the transaction at this point,
Boots was in breach of the Act. Boots argued that the sale was effected only at
the till.
Issues 1. At what stage of a purchase in a self-serve store is there an acceptance of offer?
2. Is the customer bound to a purchase once they place an item in their basket?
3. Are Boots liable for selling poisons without a pharmacist's supervision?
Held The usual view has been that customers (say in a bookshop) select the item they wish to
purchase, and then take it to the assistant, who accepts it and completes the contract. I
cannot see that this situation is any different. The plaintiff contends that the defendant
has offered to sell the goods by displaying them on the shelves, and that the plaintiff
accepts the offer by taking them from the shelf. If this is correct, then a person who takes
something from the shelves cannot then replace the item if they see something which
they would prefer more. It seems clear that the sale takes place at the cash register,
under the supervision of the pharmacist, in conformity with the Act.
Rule - Goods on a display are invitation not an offer; the customer makes an offer when
they take the goods to the register.
- The cashier is under the shopkeeper's authority to make acceptance, hence a
contract has not been made until the cashier accepts the purchase.


Shop sales
The display of goods for sale is ordinarily treated as an invitation to year and not an offer. In Fisher v
Bell it was held that the owner of a shop who displayed a flick-knife in a shop window had not
committed the statutory offence of offering the knife for sale.
As in Boots Cash Chemists Ltd, customers must be entitled to return and substitute products they
have chosen from the shelves. Therefore customers are only regarded as making an offer when they
present the items to the cashier and are not bound until the cashier has accepted that offer.

Auctions
Auctions are also held to be invitations to treat. Each bid is considered an offer, and acceptance is
communicated by the fall of the hammer. This entails that:
- The auction can be cancelled
- A bidder is entitled to withdraw his bid before it is accepted
- No obligation to sell to the highest bidder
The laws regarding auctions are specifically mapped out in the Sales of Goods Acts, which state that
an auction is only complete when the auctioneer declares it is complete, and until then, bids may be
withdrawn.
Auctions without reserve
A legal debate ensues when an auction is declared to be without reserve does the auctioneer
assume a legal obligation to sell to the highest bidder?
In Australia, an auction without reserve still does not alter the general rule. This was held in AGC
(advances) Ltd v McWhirter. Regardless of the announcement that the auction is without reserve,
the auction is not an offer, and there is no obligation to sell to the highest bidder.
In England, an auction without reserve does constitute an offer to sell to the highest bidder. By
announcing the special conditions of the auction, the auctioneer offers to conduct the auction in a
certain way, and the bidder accepts that way by bidding.
If the high bidder is not accepted by the auctioneer, the bidder may have legal cause to sue the
auctioneer since.

Tenders
A tender process involves each bidder submitting a single bid, without knowing what the other
parties bid. A call for tenders is regarded as an invitation to treat, and the bids are regarded as
offers.
However, similarly to auctions, the person calling for tenders may specify the terms of the process.
Thus, if the person calling for tenders promises to accept the highest bid, the call for tenders will be
regarded as an offer. This was discussed in Harvela Investments Ltd v Royal Trust of Canada (CI) Ltd.
Ticket Cases
Ticket cases are examples of the need to ascertain when and where the contact has been formed,
for purposes of jurisdiction or whether written conditions are a part of the contract.
The problem with usual transport tickets is that the written conditions are viewed by the other party
only after he has bought the ticket. This defies the usual offer and acceptance rules: since the
immediate assumption is that the contract is made when the ticket is bought, doesnt this entail that
the conditions are not a part of the contract?
The view held after MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) is
that the ticket only represents an offer made to the passenger, which he accepts by presenting
himself for travel. No contract is formed by the purchase of the ticket alone.
Electronic
Doesnt change, rules of offer and acceptance can be applied to electronic
Termination of an offer
There are 4 ways in which a contract could be terminated
1.Withdrawal
General Rule
An offer can be withdrawn or revoked by the Offeror at any time before it is accepted by the
Offeree. Even if the Offeror promises to hold the offer open for a certain amount of time, he
can withdraw or revoke it at any time as long as it hasnt been accepted.
Withdrawal of the offer is effective only once it has been communicated to the Offeree. The
usual conditions of the postal rule do not apply here.
If the Offeree wants to ensure the offer is not withdrawn for a period of time, he will have to
supply consideration (ie, give something of value). This practice is called an option.
Options
If consideration has been given in return for a promise to hold an offer open, that promise
will be binding (essentially, a unilateral contract is formed).
o Parties are split into Grantor (Promisor) and Option Holder (Promisee)
o The offer made by the Grantor cannot be revoked for the amount of time specified,
and the Option Holder is entitled to accept it or not.
2.Lapse

An offer can be terminated through a lapse of time. If a certain time period for which the offer will
be open is expressly specified by the Offeror, the offer will be terminated after that time has lapsed.
If no time is specified, the offer can also lapse after a reasonable amount of time has passed.
What constitutes reasonable time is subjective to circumstances and subject matter of the offer.
Usually, verbal offers would lapse more quickly than formal or written offers.

Death of a party
The death of one of the party often causes the termination of the offer. The court seeks to
avoid making a generalised rule, but it is held that the Offeree cannot accept an offer after
he learnt that the Offeror has died. This was decided in Fong v Cilli
This means that an Offeree might be able to accept an offer even if the Offeror had died, if
his acceptance was communicated before he had found out of the death.
In the case of an option, the death of the Option Holder does not terminate the offer, and
the option may be exercised by the representatives of his estate. However, the offer will be
terminated if the offer was personal to the Option Holder.
This rule does not apply in the case of the Grantors death in that case, the offer will be
terminated. In Laybutt v Amoco Australia Pty Ltd, Gibbs J has said that since an option is a
conditional contract, the option could be enforced against the estate of the grantor.

3.Failure of condition
Offers can be made subject to a particular condition. This may entail that the offer may only be
accepted after the condition has been fulfilled, or that the offer will lapse once the condition has
been fulfilled.
This has been discussed in Financings Ltd v Stimson, in which the courts held that there are often
implied conditions when an agreement is formed.
A common example of a condition in a written agreement is that all parties must sign the agreement
in order for it to be binding. In Neill v Hewens, it was held that in the case of co-vendors, the
signature of one co-vendor is not binding without the signature of the other co-vendor.
There is an implied presumption that one of the co-party only wishes to bind itself if the other
parties does as well
This is an example of a condition which needs to be fulfilled.

Rejection and counter-offer
If an offer is rejected, it is terminated and cannot be accepted again. A counter-offer also terminates
the previous offer.
Because of this counter-offer rule, a distinction needs to be made between a counter-offer to an
inquiry with regards to possible alternation of the terms. An inquiry is when the buyer has not
manifested an intention to reject the offer, merely to see whether there is room for negotiation.
Therefore, the offer is still open.
Butler v Ex Cell
Something was sold, delayed- therefore price has gobe up because of 10 month delay
Use of standard form contracts. Valid acceptance is achieved only when unconditionally. If you had
your own conditions in your acceptance, than the previous offer is terminated. If youve sent your
own conditions youre actually rejecting the previous offer.



Unilateral contracts and revocation
A difficulty arises sometimes when an offer to enter into a unilateral contract is withdrawn,
especially when the Offeree has begun to perform the performance but has not finished (so it does
not constitute acceptance).
For example, A promises to pay B $100 to not eat for a whole day.
B doesnt eat for 18 hours, at which point A withdraws his offer
This seems unfair, as B already supplied partial consideration. The general rule is that an offer
cannot be revoked if the act made in exchange for it has been partly performed.
There is an implied condition in the agreement that the offer will not be withdrawn once the Offeree
begins to perform.
However, this general rule was not followed in Mobil Oil Australia Ltd v Wellcome International Pty
Ltd, in which it was established that an An offer made in return for performance of an act is, like
any other offer, revocable at any time.
Such an offer can only be secured against revocation when there is an implied contract not to
revoke, or an estoppel.
Goldsborough Mort and Co v Quinn
Facts:
- Letter stating that for the sum of five shillings, the P would be able to purchase the land and
the conditional lease and purchases-within 1 week- if pay 1 pound 10 shillings per acre- will
transfer lands to P
- Tried to repudiate the offer- saying that it bad been made under a mistake
- The offer was accepted within the week
- D said contract was not complete- rather was a notification to make a contract thus
damages only were payable
Issue- once payed, could not revoke offer









Acceptance
Introduction
Acceptance is an unqualified assent to an offer.
There is a debate whether acceptance is dependent upon actual consensus between the parties (a
meeting of the minds or ad idem). In other words, if the Offeree accepted the offer, but did not
understand the terms of the offer, has he really accepted the offer and entered the agreement?
- The Objective approach considers only the outward manifestations rather than actual
consensus.
- The Subjective approach considers whether there was a real understanding between the
parties
Objective vs Subjective approaches
Futility of Subjective approach because of Estoppel
In practice, the Subjective approach will always lead to the same result. This is because of
the principle of Estoppel.
An Estoppel will arise when a person conducts himself in a way which would induce the
other party to reasonably believe he accepted the contract. The effect of the Estoppel is to
prevent the Offeree from denying that he has accepted the contract. Thus, the principle of
Estoppel entails that the outward manifestations of acceptance will still constitute
acceptance in the absence of a real meeting of the minds. This was decided in Smith v
Hughes:
if, whatever a mans real intention may be, he so conducts himself that a reasonable man
would believe that he was assenting to the terms proposed by the other party, and that
other party upon that belief enters into the contract with him, the man thus conducting
himself would be equally bound as if he had intended to agree to the others terms.
Prevalence of the Objective approach
Besides the futility of the Subjective approach once coupled with Estoppel, the courts in
Australia have since ruled that the Objective approach will determine acceptance. This was
held in the following cases:
Taylor v Johnson: The clear trend in the decided cases and academic writings has been to
leave the objective theory in command of the field
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd: It is not the subjective belief or understandings
of the parties about their rights and liabilities that govern their contractual relations. What
matters is what each party by words and conduct would have led a reasonable person in the
position of the other party to believe.
Thus, acceptance is constituted if the Offeree behaves in such a way that a reasonable
person would believe he is agreeing to the offer, even if there is no real consensus between
the parties.
Exception Unilateral contracts (Consciousness of the offer)
With unilateral contracts, it is possible that a person would perform the act necessary to
accept the contract without actually being aware of an offer or contract.
For example, a person returning a lost dog without knowing there is a reward for it.
The courts have decided in Crown v Clarke that the performance of a requested act will not
form a unilateral contract when it is clear that the Offeree was not performing the act on the
faith of the offer.
The court held that the Subjective approach should govern unilateral contracts in which the
communication of acceptance is dispensed with.
In these cases, the evidence of subjective intention should be taken into account.

Communication of acceptance
The general rule
Acceptance has effect when it is received by the Offeror. This was established in Latec Finance Pty
Ltd v Knight:
- A contract is not made until acceptance is received by the Offeror.
- However, the Offeror may expressly or impliedly dispense with the need for actual
communication of acceptance.
- This can be done in two ways: Offeror agreeing to treat the doing of a particular act as
effective acceptance. This is usually the case in unilateral contracts.
- Offeror treats the despatch of a particular method as effective regardless of whether it
reached him.
The postal rule
Where the acceptance is expected to be sent by post, the acceptance is effective as soon as it is
posted. This was decided in Adams v Lindsell and Henthorn v Fraser, and is an exception to the
general rule.
However, there have been judgments indicating that the postal rule only applies when the Offeror
intended that the offer could effectively be accepted by the act of posting a letter of acceptance
(Tallerman & Co Ltd v Nathans Merchandise (Vic) Pty Ltd)
Scope of the postal rule

The postal rule does not extend to telecommunications. This means that the contract is
formed when and where the acceptance is received by the Offeror.
o England, decided in Entores v Miles Far Eastern Corp, reaffirmed explicitly in
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH .
o Australia: Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd:
In Brinkibon, the court admitted that exceptions may be made when:
o The message is sent or received through a third party
o The message is sent out of office hours
o The message is not intended to be read immediately
It should be noted that the courts havent yet addressed the question of communication
over the internet (interactive websites/email). However, it follows from other instant
communications that the postal rule will not apply, and formation will take place when and
where it is received by the Offeror.
Regardless, in Australia, the Electronic Transactions Acts have been enacted to govern such
cases. The acts distinguish between:
Information systems expressly designated to receiving acceptance In this case, acceptance is
effectively communicated once it enters the information system
Note: a general email inbox on a letterhead does not constitute an expressly designated
information system.
Information systems which are not expressly designated for such purposes. In this case,
acceptance is effectively communicated once it comes to the attention of the Offeror.

Methods of acceptance
The Offeror is allowed to prescribe exclusive methods of communication of acceptance. If he does
so, acceptance can only be communicated via those methods. Similarly, the Offeror may dispense
with the communication, as is impliedly done in unilateral contracts.
Silence as acceptance
An Offeror cannot stipulate silence as a method of communication of acceptance. Similarly,
silence cannot constitute acceptance. This was decided in Felthouse v Bindley.
Sued actioneer for selling horse. No, never communicated
Acceptance inferred from conduct exception to silence rule
Silence can constitute acceptance when the Offerees conduct indicates that he has
accepted the offer. This was decided in Empirenall Holdings Pty Ltd v Machon Paull
Partners Pty Ltd.
- Sent letters to eachother, told mr jury doesnt sign contracts. Mr Jury instead continued
work and kept on paying them. Conduct there from an objective person which indicates a
contract accepted.
- Since acceptance is measured objectively, it all comes down to whether the Offerees
conduct, which may include silence, signals that he accepted the offer.
When the Offeree takes the benefit of services which he knows are in accordance to the
offer, and had a reasonable time to reject the offer, it signals acceptance.

Correspondence between offer and acceptance
Acceptance corresponds precisely with the offer. This means that the offer can only be accepted or
rejected by the Offeree. Negotiation will be viewed as a counter offer, which means that the old
offer was rejected, and a new offer exists.
A problem arises during complex negotiations where two parties exchange inconsistent standard
forms, and reach agreement on the principal terms without deciding whose standard form should
prevail. This is called the battle of the forms, and was discussed in Butler Machine Tool Co Ltd v
Ex-Cell-O-Corp (England) Ltd, where two approaches were identified:
1. Conflict approach: Requires the courts to determine which set of terms has
prevailed.
Either by who had the last shot (the last say), or the party who is most
persistent in insisting that their own set of terms should prevail.
2. Synthesized approach: Make up a contract from consistent terms, along with terms
from one set that appeared to be accepted by the other party.
Any gaps in the synthesized contract could be filled with terms implied by
the court.
2. Intended to be a promise
3. To find out if offer, look into sensecity