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Dreana Marshall

Offer & Acceptance
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INTRODUCTION

A contract may be defined as an agreement between two or more parties that is intended to be legally binding. The first requisite of any contract is an agreement (consisting of an offer and acceptance). At least two parties are required; one of them, the offeror, makes an offer which the other, the offeree, accepts.

OFFER

An offer is an expression of willingness to contract made with the intention that it shall become binding on the offeror as soon as it is accepted by the offeree.

A genuine offer is different from what is known as an "invitation to treat", ie where a party is merely inviting offers, which he is then free to accept or reject. The following are examples of invitations to treat:

1. AUCTIONS- In an auction, the auctioneer's call for bids is an invitation to treat, a request for offers. The bids made by persons at the auction are offers, which the auctioneer can accept or reject as he chooses. Similarly, the bidder may retract his bid before it is accepted.

2. DISPLAY OF GOODS- The display of goods with a price ticket attached in a shop window or on a supermarket shelf is not an offer to sell but an invitation for customers to make an offer to buy. See: Fisher v Bell [1960] 3 and P.S.G.B. v Boots Chemists

3. ADVERTISEMENTS - Advertisements of goods for sale are normally interpreted as invitations to treat. However, advertisements may be construed as offers if they are unilateral, ie, open to all the world to accept (eg, offers for rewards). See:Carlill v Carbolic Smoke Ball Co [1893]

4. MERE STATEMENTS OF PRICE- A statement of the minimum price at which a party may be willing to sell will not amount to an offer.

5. TENDERS - Where goods are advertised for sale by tender, the statement is not an offer, but an invitation to treat; that is, it is a request by the owner of the goods for offers to purchase them.

ACCEPTANCE

An acceptance is a final and unqualified acceptance of the terms of an offer. To make a binding contract the acceptance must exactly match the offer. The offeree must accept all the terms of the offer. However, in certain cases it is possible to have a binding contract without a matching offer and acceptance..

The following rules have been developed by the courts with regard to acceptance:

1. COUNTER OFFERS - If in his reply to an offer, the offeree introduces a new term or varies the terms of the offer, then that reply cannot amount to an acceptance. Instead, the reply is treated as a "counter offer", which the original offeror is free to accept or reject. A counter-offer also amounts to a rejection of the original offer which cannot then be subsequently accepted.

2. CONDITIONAL ACCEPTANCE - If the offeree puts a condition in the acceptance, then it will not be binding.

3. TENDERS - A tender is an offer, the acceptance of which leads to the formation of a contract.

4. COMMUNICATION OF ACCEPTANCE - The general rule is that an acceptance must be communicated to the offeror. Until and unless the acceptance is so communicated, no contract comes into existence: The acceptance must be communicated by the offeree or someone authorised by the offeree. If someone accepts on behalf of the offeree, without authorisation, this will not be a valid acceptance:

The offeror cannot impose a contract on the offeree against his wishes by deeming that his silence should amount to an acceptance:

Felthouse v Bindley (1862) 11 CBNS 869.

Where an instantaneous method of communication is used, eg telex, it will take effect when and where it is received. 

6. METHOD OF ACCEPTANCE - The offer may specify that acceptance must reach the offeror in which case actual communication will be required. If a method is prescribed without it being made clear that no other method will suffice then it seems that an equally advantageous method would suffice. 

7. KNOWLEDGE OF THE OFFER - An offeree may perform the act that constitutes acceptance of an offer, with knowledge of that offer, but for a motive other than accepting the offer. The question that then arises is whether his act amounts to a valid acceptance.

8. CROSS-OFFERS - A writes to B offering to sell certain property at a stated price. B writes to A offering to buy the same property at the same price. The letters cross in the post. Is there (a) an offer and acceptance, (b) a contract?

TERMINATION OF THE OFFER

1. ACCEPTANCE - Once an offer has been accepted, a binding contract is made and the offer ends.

2. REJECTION - If the offeree rejects the offer that is the end of it.

3. REVOCATION - The offer may be revoked by the offeror at any time until it is accepted. However, the revocation of the offer must be communicated to the offeree(s). Unless and until the revocation is so communicated, it is ineffective. The revocation need not be communicated by the offeror personally, it is sufficient if it is done through a reliable third party. Where an offer is made to the whole world, it appears that it may be revoked by taking reasonable steps. Once the offeree has commenced performance of a unilateral offer, the offeror may not revoke the offer.

4. COUNTER OFFER

5. LAPSE OF TIME - Where an offer is stated to be open for a specific length of time, then the offer automatically terminates when that time limit expires. Where there is no express time limit, an offer is normally open only for a reasonable time.

6. FAILURE OF A CONDITION - An offer may be made subject to conditions. Such a condition may be stated expressly by the offeror or implied by the courts from the circumstances. If the condition is not satisfied the offer is not capable of being accepted.

7. DEATH - The offeree cannot accept an offer after notice of the offeror's death. However, if the offeree does not know of the offeror's death, and there is no personal element involved, then he may accept the offer. 

Dreana Marshall