Seminar 3: DURATION OF OFFERS

REVOCATION Revocation can occur at any time prior to acceptance if it is communication to the offeree. This is even if it is expressly stated to be open for a certain period.

METHOD OF COMMUNICATION Law doesnt state specifically what type of means by which revo needs to be communicated. Only requirement = any means of communication will suffice so long as the fact that a contract has been revocked actually comes to the offerees notice. Doesnt need to be by words. Can revoke by doing something that is inconsistent with the continuation of the offer. This inconsistent act has to come to the attention of offeree.

Dickinson v Dodds (1876) 2 Ch D 463 RULE No one can accept an offer which he/she knows to have been withdrawn. F: On Wednesday, Dodds offered to sell Dickinson some houses for 800 pounds. His letter stated that the offer was to be left over until Friday, 9am. Despite this, Dodds sold the houses to a third party on Thursday. Dickinson heard of this sale from a fourth person on Thursday evening, and before 9am on Friday morning, attempted to accept Dodds offer by handling him a formal acceptance. Held: The acceptance = invalid. The offeror need not give notice of revocation personally for it to be effectively. If the offeree becomes aware of it from a reliable source, that will suffice. Here, the offer had been validly revoked before acceptance bcos Dickinson had received notice of it, albeit from someone other than the offeror. Offerors entitlement to revoke is absolute. Even if they have a promise to keep the offer open for a particular time, they are normally not held to it. EXCEPTION = Option whereby o Considerdation has been provided [promisee pays to keep offer open] o a deed is keeping it open. If offeror revokes the original offer despite granting the option, the offeree can take action on the basis of the option.

TERMINATION OPTIONS Goldsbrough Mort & Co Ltd Quinn (1910) 10 CLR 674 RULE If an option where consideration has taken place, then you cant revoke it. Its a conditional contract. Option must be kept open for the agreed time because consideration has been paid.

F: D granted the company an option right to purchase the whole of Ds freehold lands within one week from this date at the price of 1 pound, 10 shillings per acre. P gave D 5 shillings as consideration to keep the offer open. Before the one week ended or P had accepted, D revoked it saying it was a mistake. During this time, D formally accepted the offer within the time and sued for specific performance. Held: This was a promise backed up with consideration [the 5 shillings]. It was an agreement subject to a condition subsequent acceptance by the other in the time provided for. Withdrawal = breach. Remedy = damages or specific performance. Griffith CJ (at 678): An offer may be withdrawn at any time before acceptance. A mere promise to leave it open for a specified time makes no difference, because there is, as yet, no agreement, and the promise, if made w/o some distinct consideration is nudum pactum [a naked promise an agreement made w/o consideration. Ie unenforceable] and not binding. But if there is (as in the present case) a consideration for the promise it is binding. This is often expressed by saying that n option given for value is not revocable. UNILATERAL CONTRACTS - Strict application of revocation rule would say that so long as performance hasnt occurred [the finishing of performance] it can be revoked. - h/w, this is unfair. Especially if youre close to completing the performance. - In unilateral contracts there are usually two offers: o The express offer concerning the main subject matter of the proposed transaction and, o an implied promise not to revoke the express offer once the offeree had started performance, at least until there had been a reasonable opportunity to complete it. - Commencement of the required performance would constitute both the offerees acceptance of the implied promise and the consideration for that promise. - Thus, if the offeror revoked the express offer before acceptance was complete, the offeree could sue for breach of secondary contract. - In a unilateral agreement, the act of acceptance = consideration AND performance.

Mobil Oil Australia Ltd v Lyndel Nominees (1998) 81 FCR 475 RULE: Offeror is at liberty to revoke the offer at any time, even if they have implied that they would not revoke it. F: Mobil allegedly promised its franchisees an additional nine years tenure of their service station sites w/o any additional fees if they achieved 90 per cent or more in its annual Circle of Excellence judging every year btw 1992-1997. Mobil argued that, if these promises were really offers, they had been validly revoked in 1995 (that is, before any of the franchisees argued that Mobils promise had also created an implied ancillary unilateral contract to the effect that once a dealer had started the required performance, Mobil would not revoke its offer until that dealer had a reasonable opportunity to complete the acceptance that is that Mobil would not revoke the offer until AFTER the final round of judging in 1997.

Held: Although the promise = offer, it could be revoked at any time before acceptance even if the franchisees had commenced the performance which, when complete, would be valid acceptance. The revocation occurred by no later than 1995. Therefore, there was no contract and Mobil was not liable. REJECTION, LAPSE, NON-OCCURRENCE OF CONDITION AND DEATH Stevenson, Jacques & Co v McLean (1880) 5 QBD 346 RULE Request for info was not a counter offer and that the acceptance was in regards to the original offer. F: D telegraphed P offered to sell iron for 40 s. Offer opened until Monday. Monday morning, P telegrammed D - please wire whether you will accept 40 for delivery over two months, or if not, longest limit you would give. M didnt respond and P telegrammed again to accept the original offer. By then, D sold it to a third party and sent a telegrammed which crossed w/ Ps 2nd telegram. P sued. NOTE under the postal rule, acceptance = complete immediately after acceptance is posted/telegrammed. But this doesnt apply to revocations of an offer. P could recover if Ds offer was still open when he sent his telegram of acceptance. Ds argument was that Ps 1st telegram was a counter offer and that it had destroyed the original offer on Monday morning. Held: Ps 1st telegram was not a counter-offer. It was a MERE INQUIRY. Ds offer was still open at the time of the 1st telegram from P, it had been validly accepted, a contract had arisen and D was in breach of contract. UNCERTAINITY AND INCOMPLETENESS Generally the rights + obligations of the parties must be sufficiently certain to be enforceable. Also, there may be no contract if some contractual obligation has yet to be agreed on. But the courts strive to give effect to contracts if possible. Council of the Upper Hunter County District v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 F: P bulk purchased electricity from a generating authority and agreed to supply electricity to D w/ provision for a price variation in accordance w/ a formula which depended on changes in wages and cost of coal to the generating authority. P sought to increase its charges, but D alleged the clause was void for uncertainty, placing reliance on the term supplier costs. Held: contract is not automatically void for uncertainty just because it may be construed in more than one way. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it.' He observed that a narrow or pedantic approach to interpretation should not be taken - it is clear that Australian courts will be slow to find an agreement void for uncertainty. In this case there was no uncertainty even though there may be scope for disagreement about what constituted suppliers costs in individual cases.

COURT WILL UPHOLAD CONTRACTS IF AT ALL POSSIBLE Courts typically dont like overturning contracts, and if it is at all possible, they will try to enforce them. Uncertainty + vagueness will only invalidate an agreement where the counts cant REASONABLY ASCERTAIN what the parties intended. If intentions are clear of if they are capable of being ascertained w/ reasonable certainty - the court will give effect to them. Terms of contract are in express terms and implied terms. o EXPRESS TERMS Statements which are expressly stated to be a term of a contract Can be oral or written Can include incorporation by reference (summary docs) Tickets, notice boards o IMPLIED TERMS Implied or incorporated from other docs by reference Terms can be implied for the following reasons : past dealings, custom/trade usage, business efficacy, implied by law, past dealing Hillas & Co v Arcos Ltd (1932) LT 503 RULE: Court moved away from strict, literal interpretation of contract terms. Interpreted it with a view of preserving the bargain. Court ruled that judges may imply terms into a contract based on the past dealings of the parties rather than void the agreement. F: Arcos agreed to supply Hillas with lumber in a contract stating the sale of "22,000 standards of softwood of fair specification". In the contract there was an option to purchase additional "100,000 standards" of lumber. The only terms of the option stated, "whatever the conditions are, buyers shall obtain the goods on conditions and at prices which show to them a reduction of 5 per cent on the f.o.b. value of the official price list at any time ruling during 1931." Hillas tried to exercise the option but Arcos claimed the contract was cancelled. Held: The price could be implied as it would be similar to that specified in their past dealings. At trial the jury found that the contract had not been cancelled but Arcos put forward the claim that the option "was an agreement to make an agreement, the terms of which were not defined, and so was unenforceable." Though they expressed regret for doing so, MacKinnon J of the Court of Appeal followed the rule set out in the case of May v Butcher which stated that if there are any essential terms of a contract of sale that are to be set by a future agreement then the contract is void. SEVERANCE OF UNENFORCEABLE CLAUSE Whitlock v Brew (1968) 118 CLR 445

RULE: The law will not make an agreement for parties out of terms that are indefinite. That is, there will be no contract unless the EXACT OBLIGATION UNDERTAKEN CAN BE DETERMINED OBJECTIVELY AND W/ A REASONABLE DEGREE OF CERTAINITY. F: W agreed to sell B a plot of land and B paid a deposit. Clause 5 of their agreement provided that, on taking possession, B would lease part of the land to S Upon such reasonable terms as commonly govern such a lease. Brew subsequently changed his mind, refused to go through with the contract and sued for return of his deposit on the grounds that the agreement was too uncertain and therefore not enforceable. The contract required him to lease part of the property upon such reasonable terms as commonly govern such a lease but, he said, there was no such common terms. Such leases differed greatly in duration, rent and all other aspects, and for the court to enforce the contract, it would have to write the lease the parties had not done so. Held: The contract = void for uncertainty and B could recover his deposit. AGREEMENTS TO NEGOTIATE Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 RULE: in appropriate circumstances, an agreement to negotiate in good faith in order to try to reach a final and binding agreement may be enforceable. F: A statement in a "heads of agreement" for a proposed complex joint venture for a coal mine said that the parties "would proceed in good faith to consult together upon the formation of a more comprehensive and detailed Agreement". Held: contract was too vague and uncertain to be enforceable. But said that a promise to negotiate in good faith can be enforceable. It will depend on the construction of each particular contract. CONDITIONAL PROMISES - Acceptance w/ strings attached. The offeree accepts subject to some reservations. - Thus, theres no final and unqualified assent to the terms of the offer and so there is no contract. - A conditional acceptance is NOT a true acceptance. - It will become true when the condition is removed. This would also depend on whether the offer is still open when that happens? - Have the parties finally agreed on the terms that will bind them or can the condition result either in the contract not proceeding at all or in the initially agreed terms being altered? - If acceptance is not really conditional at all and the agreement will be enforced. If the condition can result in the contract either not proceeding at all or proceeding on different terms the acceptance is conditional, no final agreement has been reached Masters v Cameron (1954) 91 CLR 353 Held: Courts will only exercise finalised contracts.

F: Parties signed memorandum whereby D agreed to sell his fam. P paid deposit. Memorandum contained ths clause This agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to me [Ds] solicitors on the above terms and conditions. Who was entitled to the deposit? If contract = enforceable, then D. If not, then P. Held: Contract was not enforceable and P got his deposit back. Reason = agreement was NOT in its final form. It had to be acceptable to Ds solicitors. Presumably they could have altered it, but whether they did is immaterial. Agreement gave them the power and, hence was not final. Meehan v Jones (1982) 149 CLR 571 RULE: Illusory promises, discretion to a fulfilment of a condition. DEF OF ILLUSORY PROMISES = when one of the parties is given discretion as to whether to perform the contract, but not where one of the parties has a discretion in relation to the fulfilment of a condition on which the contract depends. F: This case involved a contract for the purchase of property which was "subject to suitable finance being available". The purchaser told the vendor that they had found satisfactory finance, but the vendor refused to complete. The purchaser sought specific performance, but the defendant argued that there was no contract on the following grounds: 1 - that the condition left vital matters yet to be agreed - so what appeared to be a "contract" was really no more than an agreement to agree. 2 - that the language was so imprecise that one could not say what actions would satisfy it. 3 - that if P retains discretion as to whether they will perform obligations, then what appears to be a contract is really illusory. Held: the subject to finance clause was held to be a condition precedent to performance and it involved obligations on the purchaser's part to make reasonable efforts to find finance and then an honest appraisal of the finance which was on offer.