lOMoARcPSD|5610840

L1 Offer and Acceptance

The Law of Contract I & II (The University of Hong Kong)

StuDocu is not sponsored or endorsed by any college or university

Downloaded by teresa chang (techang1@gmail.com)
 lOMoARcPSD|5610840

Contract Law: Offer and Acceptance

Offer

Clarity and certainty of an offer

1. Offer: unequivocal statement of willingness to contract on certain specified

terms1 (SEE treitel 2-002)
a. a question of intention
b. no particular words needed (word “offer” not necessary; word “offer” may
not mean offer: all depends on the intention)
c. subjective willingness not required (reasonable person’s interpretation to
be an offer, instead of the offeror’s subjective intention) (objective
principle)

2. Previous dealings or trade customs can be used to interpret the incomplete

details2

Nature of an offer

1. Offer v Invitation to treat

a. Invitation to treat = asking other party if it’d give offer (invitation to
negotiate); no bounding power3
b. Goods displayed/advertised = invitation to treat; offer is made by the
customer4 5
c. The action of selling a good can be treated as an offer itself sometimes6

1
Gurthing v Lynn (1831) 2 B Ad: “if the horse is lucky” is too vague
2
Hillas v Arcas (1932) 43 LI Rep 359: wood quality information could be obtained from previous
dealings
3
Gibson v Manchester City Council (1979) 1 WLR 294 (HL): asking for filling in a formal application
form cannot be treated as an offer
4
Fisher v Bell (1961) 1 QB 394: flick knife on display doesn't commit any offer
5
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401:
display of goods (medicines) doesn’t commit any offer
6
Barry V Davies (2000) 1 WLR 1962: auction is an offer itself; items without reserve price must be sold
at highest price

Downloaded by teresa chang (techang1@gmail.com)

 lOMoARcPSD|5610840

d. Advertisement of bilateral contacts are invitations to treat7

e. An automatic machine ready to take coins (e.g. vending machine) IS
making an offer

2. Offer v statements giving information

a. Statement showing intention in the future =/= offer8

3. Unilateral contracts v mere puff/boast

a. Can the offer be completed?9

4. An offer must be communicated

a. Cannot accept an offer he/she doesn't know about10

Termination of an offer

1. Termination by revocation before acceptance

a. At any time, even if promised to open for a while11
b. Exception: when the promise to keep the offer open is due to something in
return given by the offeree (consideration, so the promise is a contract
itself)
c. Not effective until received12
d. can be communicated by reliable third party13
e. not applicable to unilateral contract if offeree has entered into action 14

2. Termination by lapse of time

7
Prtridge v Crittenden: “Quality British … bramblefinch cocks, bramblefinch hens … 25s each”:
transmission of a price list X offer, otherwise, involved in any number of contractual obligations
8
Harvey v Facey (1893) AC 552 (PC): lowest price for Bumper Hall Pen, 900 pounds” is only giving
information
9
Carlill v Carbolic Smoke Ball Co. [1983] 1 QB 256: deposits of 1000l shows the sincerity that it is not
a mere puff interpreted by a reasonable person “clear intention to be bound by law”
10
Bloom v American Swiss Watch Co. (1915) App D 100 SA: gave information of a jewelry thief for free
as he didn't know there was a reward; cannot claim the reward
11
Routledge v Grant (1828) 4 Bing 653: gave 6 weeks to accept the offer of selling a house; able to
withdraw offer before the 6 weeks is up
12
Byrne v Van Tienhoven (1879-80) LR 5 CPD344, CPD: revocation of the offer to sell tinplates is not
effective as it is received after acceptance
13
Dickson v Dodds
14
Errington v Errington and Woods (1952) 1 KB 290 (CA): promised to give the house when they had
paid off mortage; cannot be revoked once they started paying the mortage

Downloaded by teresa chang (techang1@gmail.com)

 lOMoARcPSD|5610840

a. If no time limit, offer will expire at the end of “reasonable” time15

3. Termination by death
a. Offeree dies = unable to accept = terminate
b. Offeror dies = terminates if offeree knows his death

4. Termination by rejection/ counter offer

a. offer rejected = cannot be accepted afterwards16
b. Making a counter offer = rejecting original offer

Acceptance

Acceptance must be unqualified and final

1. Negotiation by standard forms = “battle of forms”17, ”last shot”

2. Introduction of new terms = counter offer

Communication of acceptance

1. Contracts are completed in the place acceptance is received18

2. If acceptance sent out of office hour -> completed at the beginning of next office
hour19

Methods of Acceptance

15
Ramsgate Victoria Hotel v Montefiore (1865-66) LR 1 Ex 109 (Ex Ct): offered to buy shares in June,
heard no reply until November, the acceptance was invalid due to unreasonable delay
16
Hyde v Wrench (1840) 3Beav 334 (Ct Ch): Offered to sell farm at 1000, replied 950, rejected,
attempted to buy at 1000, failed
17
Butler Machine Tool Ltd v Ex-Cell-0-Corp (England) Ltd [1979] 1 WLR 801: final form is the only
effective contract, accepted by both conduct (providing machine) and by the signature to the reply
slip, on terms of no further charges
18
Entores v Miles Far East Corporation [1955] 2 QB 327: Acceptance sent from London and received
in Amsterdam. Acceptance was in Amsterdam when the message was received
19
Mondial Shipping and Chartering BV v Astarte Shipping Ltd (1995) CIC 1011: sent at 23.41 hours on 2
Dec (Offer said it could be made until 24.00 hours), but it’s out of office hour, so it’s completed on 5
Dec 9 a.m. (NOTE inconsistency with Electronic Transaction Ordinance in HK)

Downloaded by teresa chang (techang1@gmail.com)

 lOMoARcPSD|5610840

1. If offer states only to be accepted through particular method, it can be accepted

by that method or by a less beneficial method to the offeree20 21

2. Can be by conduct22

3. Offeror cannot stipulate that no reply = acceptance23

Exceptions to the Rule “Acceptance must be communicated”

1. Unilateral contract: acceptance is shown by certain actions (e.g. Carlill v Carbolic

Smoke Ball Company: using smoke ball)

2. Postal rules: acceptance is effective, even if it never arrives24, if it is

a. Correctly addressed
b. Adequately stamped
c. Put in the post box/postal system (NOT handled to a messenger to post)

3. Postal rules will not apply if

a. they are excluded in contract
b. wording of contract is inconsistent with the rules25

Instantaneous and electronic communication of acceptance

 Telexes: Entores [1955] and Brinkibon [1983]
 Emails: David Thomas and Anor v BPE Solicitors [2010]
 ETO, s.19(2): unless otherwise agreed:
 If designated an information system (in email: email address): receipt
20
Manchester Diocesan Council for Education v Commercial and General Investments [1970]
21
Yates building Co Ltd v Pulleyn & Sons (York) Ltd (1975) 237 EG 183 (CA): stated acceptance to be
made through registered or recorded delivery post (to ensure it’s received), offeree sent ordinary post,
acceptance is valid
22
Brogden v Metropolitan Rly Co
23
Felthouse v Bindley (1862) 11 CB NS 869 CCP: wrote “if hear no reply = horse sold at £30 15s’”,
which is invalid
24
Adams v Lindsell; Household Fire and Carriage Accident Insurance Company Ltd v Grant (1878-79)
LR 4 Ex D 216(CA): after application of claimant, company sent letter of allotment but letter never
arrived. Acceptance is valid.
25
Holwell Securities v Hughes (1974) 1 WLR 155 (CA): the word “notice in writing” is inconsistent with
postal rules as it required communication itself

Downloaded by teresa chang (techang1@gmail.com)

 lOMoARcPSD|5610840

occurs when it is accepted by the designated information system

 If not designated an information system: receipt occurs when it comes to
knowledge of the adressee

Downloaded by teresa chang (techang1@gmail.com)

 lOMoARcPSD|5610840

Battle of forms
 Butler Machine Tool Ltd v Ex-Cell-0-Corp (England) Ltd [1979] 1 WLR 801: final
form is the only effective contract, accepted by both conduct (providing
machine) and by the signature to the reply slip, on terms of no further charges
1. B makes offer
2. E makes counter offer
3. B accepts E’s counter-offer, despite accompanying letter
4. Bridge LJ: “… the language is equivocal and wholly ineffective to override the
plain and unequivocal terms of the printed acknowledgement of order”
5. Lord Denning: not traditional o & a, but all communications by the parties ->
reach agreement on material terms? (minority approach which is not accepted)
a. What is “material”? price escalation term is not material term?
b. Traditional approach: Strong encourage to reach agreement (if don't -> no
contract -> unpredictable consequences)

Communication of acceptance:
 Communication means, at least received by:
 Protects offeror without being bound if there is no acknowledgement ->
avoid breaching the contract
 Entores v Miles Far East Corporation (1955) 2 QB 327
 offer made in Holland, acceptance made in England, so contract was made
in England
 formed when the message is received in London
 Lord Denning
 “shout to a man an offer … acceptance drowned by aircraft noice … no
contract”
 “by telephone … line goes dead such that don't hear the words of
acceptance … no contract”
 “In all circumstances … the man who sends the message of
acceptance known that it has not been received or he has no reason
to know. So he must repeat it.”
 If offeror is in fault … offeree believes reasonably that it is received …
there is contract// if it is not offeror’s fault -> even it’s the third party’s
fault -> no contract

Downloaded by teresa chang (techang1@gmail.com)

 lOMoARcPSD|5610840

Exception to “acceptance must be communicated”

 Unilateral contracts: Carlill v Carbolic Smoke Ball Co
 Errington v Errington and Woods (1952) 1 KB 290 (CA): promised to give
the house when they had paid off mortage (offer of unilateral contract) - >
started to make payment but father died before the paid off, leaving house
to his widow: Lord Denning: “cannot be revoked once they entered the
performance of the act” (Note that acceptance doesn't mean completion
of contract)
 Soulsbury v Soulsbury (2007): 10000 pounds if he didn't take legal actions,
on his dead: endorsed Denning’s approach
 Postal rule
 Adams v Lindsell (1811) 1B & Ald 681
 Household Fire and Carriage Accident Insurance Company Ltd v Grant
(1878-79) LR 4 Ex D 216(CA): after application of claimant, company sent
letter of allotment but letter never arrived. Acceptance is valid.
 Can be excluded by terms of the offer: Holwell Securities v Hughes (1974) 1
WLR 155 (CA): the word “by notice in writing” is inconsistent with postal
rules as it required communication itself. Lord Denning
 Where the parties don't think about the use of postal service (e.g.
offering sale of car by oral, don't contemplate the use of post)
 Manifests in facts and observity : obviously unreasonable to accept by
post (can be excluded by the nature of transaction implicitly)
 Arguments for postal rule:
 Post office as each party’s agent: just as if is handling letter to offeror
himself, but there are CA:
 only authority to transmit/ deliver, but not to read one’s letter
 applies even if offeror have no deals with the post office
 Persons who offers by post creates the risk that the acceptance can be
lost (also they could have excluded the rule), CA:
 Applies even if offeror didn't started the offer by post: not
creating the risk
 Why not choose to include the rule?

Downloaded by teresa chang (techang1@gmail.com)

 lOMoARcPSD|5610840

 Prevents hardship to the offeree: believe that contract is formed and

may enter into action, there may be harm to the offeree, CA:
 Also creates hardships to the offeror: may believe they are not
bounded by contract, may suffer loss and ent4er in other
transactions
 Adams v Lindsell: “no contract could … go on ad infinitum”: if
notification is needed by the offeror, then why not notification is
needed by the offeree that notification has been received?, CA:
 Law can draw the line to stop the notification
 Instantaneous and electronic communication: General rule but not postal rule
will apply (including emails): Entores, Brinkibon// reasons for emails being
received in General Rule
 Telex and emails should be treated the same: no/short delays
 Person who sends the telex could generally tell that his telex has not been
received, also to emails
 See s.19(2), Electronic Transactions Ordinance:
 Unless otherwise agreed between the originator and the addressee of
an electronic record, the time of receipt of an electronic record is
determined as follows—
 (a)if the addressee has designated an information system for the
purpose of receiving electronic records, receipt occurs—
 (i)at the time when the electronic record is accepted by the
designated information system; or
 (ii)if the electronic record is sent to an information system of
the addressee that is not the designated information
system, at the time when the electronic record comes to the
knowledge of the addressee;
 (b)if the addressee has not designated an information system,
receipt occurs when the electronic record comes to the
knowledge (reasonable knowledge but not subjective
knowledge) of the addressee.

 Prescribed Method of acceptance:

Downloaded by teresa chang (techang1@gmail.com)

 lOMoARcPSD|5610840

 Manchester Diocesan Council for Education v Commercial and General

Investments [1970] 1 WLR 241:
 “shall be informed … by letter sent to him by post addressed to the
address given by him in the tender”/
 No less advantageous to the offeror: Yates building Co Ltd v Pulleyn &
Sons (York) Ltd (1975) 237 EG 183 (CA): stated acceptance to be made
through registered or recorded delivery post (to ensure it’s received),
offeree sent ordinary post, acceptance is valid

 Acceptance by silence?
 Felthouse v Bindley (1862) 11 CB 869:
 “If I hear no more about him, I shall consider the horse mine”
 “The uncle had no right to impose upon the nephew the sale of his
horse”
 unfair to offeree as he has to check has explicitly reply to all offers
 Exception:
 if by previous conduct both party is informed and accepted to be
bounded by those situations
 if the offeree wants to enter into the contract (by silence)

 one cannot accept an offer while being ignorant of its existence

 R v Clarke (1927) 40 CLR 227
 Award for information leading to the conviction of murder
 Give evidence in order to clarify himself
 When giving info., he knew the award, but the objective to give info. Is
not to collect award
 High Court denied this claim as claimant has to motivate in ways
towards the acceptance

Termination of an offer
 Revocation
 At any point before acceptance, even promised that offer will be open for a
particular period of time
 Must be communicated to the offeree

Downloaded by teresa chang (techang1@gmail.com)

 lOMoARcPSD|5610840

 Byrne v Van Tienhoven (1879-80) LR 5 CPD 344: revocation of the offer

to sell tinplates is not effective as it is received after acceptance
 Communication need not be given by the offeror himself: Dickinson v
Dodds (1876) 2 Ch D 463:
 before acceptance, Dodds negotiates with 3rd party and sold the land
 once he knew the negotiation, the revocation is valid by conduct


Downloaded by teresa chang (techang1@gmail.com)