Paper 2.2 – Corporate and Business Law
By Ahmed Alasalli
Chapter 4 – Offer and Acceptance
An offer is a definite and unequivocal statement of willingness to be bound by contract. The offer can be
expressed or implied.
Essential elements of an offer:
1.
2.
3.
4.
Must be definite and unequivocal
There must be a clear intention to be bound
Can be made to a particular person or the world at large
Must be communicated
Definite and unequivocal
This means that the offer cannot be vague or uncertain in its interpretation.
Clear intention to be bound
The offer must not merely be negotiating. All the offeree has to do is to accept the terms as laid down by
the offeror and the contract will be complete
Example: Gibson v Machnester City Council – the council said they’d be prepared to sell the house for a
certain sum of money, this was not an offer, it was merely a suggestion (called an invitation treat).
Persons to whom an offer may be made
It can be made to a particular person, to a class of persons or even to the whole world
Example: Carlill v Carbolic Smoke Ball Co – a company made an advert saying that whoever uses their
medicine properly, and still gets the flu, will be paid ₤100 as a reward.
Communication of the offer
The offer must actually reach the person to whom it was made to be capable of acceptance. In other words
the offeree must know of it
Example: R v Clarke – the Government offered a free pardon to the accomplices of certain murderers if
they gave evidence that would lead to their arrest and conviction. A free pardon was not given to Clarke
even though he did that because he didn’t know of the reward at that time.
Termination of an offer
The offer must be ‘open’ when the offeree accepts it. If it was terminated before it was accepted then it
couldn’t be accepted.
An offer is terminated by way of revocation. An offer can be revoked by the offeror or a person authorized
to at on his behalf at any time before it has been accepted by the offeree. The revocation may be expressed
or implied. But revocation will not take affect unless it has been received and clearly understood by the
offeree.
Example 1: Byrne v Leon Van Tienhoven – an offer was posted, received and accepted. But before the
offeree accepted the offer the defendant sent a letter of revocation. It was received, however, after the
postage of the acceptance. The defendant was therefore liable under the contract.
Example 2: Dickinson v Dodds - ???
Example 3: Errington v Errington – a man offered to transfer his house to his son and daughter-in-law if
they cleared the mortgage debt by paying all the installments when due. The couple began paying the
installments but when the man died his personal representatives attempted to withdraw the offer. It was
held that the couple were entitled to continue paying all the installments and claim the house when the
mortgage debt had been paid off. The offer could not be revoked once the couple commenced the act of
acceptance: they could not however, enforce the contract until they paid off all the debts.
Rejection of an offer
An offer can be terminated by a rejection.
A counter-offer is an offer made in response to an offer. The counter-offer, in the same way as a rejection,
terminates the original offer
Example: Hyde v Wrench
Wrench offered to sell a house, but Hyde made a counter-offer. Hyde, however, accepted the original offer,
but the offer was held to be void.
Lapse of an offer
An offer can also be terminated by lapse:
1.
2.
3.
4.
5.
6.
if the offer is stated only to be open for a specific time period it will expire after this time
if there is no specific period of time mentioned by the offeror the offer will lapse after a reasonable
length of time.
If there is a dispute about the time period the court will decide what is reasonable. It is a question of
fact to be decided in each case.
If the offer was made subject to a condition, it will lapse on failure of that condition.
If the offeror dies, the offer can no longer be accepted once the offeree knows of the death
If the offeree dies, his personal representatives cannot accept the offer.
Situations where there is no offer
Offers must be distinguished from:
1.
2.
3.
invitation to treat
statement of intention
statement of price


an invitation to treat is not an offer in itself but it is an invitation to others to make an offer.
As a general rule an offer is a statement which, if responded to by a simple ‘yes’ can be regarded as
constituting a contract.
Invitation to treat can arise in the following circumstances (recognized by law)
a) shop displays
b) advertisements
c) catalogues
d) prospectuses

Invitations to treat
Shop displays
Window and shelf displays in shops are invitations to the customer to offer to buy
Example: Pharmaceutical Society of Great Britain v Boots Cash Chemists – Statute requires that the sale of
certain pharmaceuticals must be carried out under the supervision of qualified pharmacists. Boots however
had their medicines on display, where the customer chooses which to buy. The claimant says that this is
against statute. It was held however, that the display was just an invitation to treat, the customer would
make an offer to buy, and it was up to the pharmacy to accept or reject the offer.
Example 2: Fisher v Bell – statute creates a criminal offence of ‘offering for sale’ certain offensive
weapons. A shopkeeper was prosecuted under this statute for displaying a flick knife in his shop window. It
was held that window display was not an offer of sale but only an invitation to treat. So the display did not
infringe the law.
Advertisements
Generally, an advertisement is an invitation to treat if further negotiations are intended or expected
Example: Patridge v Crittenden – an advertisement was made, whereby, it mentioned that certain items are
for sale at 25s each. This was an invitation to treat not an offer. The advertisement stated that the animals
were for sale, not that the seller would sell to all comers.
Catalogues and prospectuses
These are invitations to treat, not offers.
A mere statement of intention
An offer must be distinguished from a mere statement of intention.
A statement of price
The statement of a price in answer to an enquiry is not necessarily an offer to sell at that price
Acceptance




Acceptance is the unconditional asset to all the terms of the offer.
An offeror may stipulate a mode or method of acceptance, making it either mandatory or merely a
request.
An offeror may not stipulate that silence shall be acceptance
Acceptance is not effective until and unless it is communicated to the offeror.
Dispensation by the offeror ??
Cases when acceptance need not be communicated:
1.
2.
express dispensation
implied dispensation
acceptance must be communicated to the other party, i.e. brought to his actual notice except where the
offeror expressly or impliedly dispenses with the need for communication or where acceptance is made by
post.
The postal rule
The postal rule states that the communication of acceptance will be complete and effective when the letter
is posted or placed into the hands of the relevant postal authorities.
Basically, the offer and revocation are valid when received, but acceptance is valid when it is sent. The
dates apply to the date of postage.
The letters must be properly stamped, addressed and posted. Handing a letter to a postman who is
authorized to deliver is not equivalent in law to posting a letter.
Acceptance of unilateral contracts
Acceptance takes place when the offeree had begun to try and perform whatever act is necessary to
constitute acceptance. E.g. in a reward situation where a person has promised money for the offeree doing
some task, can the offer be revoked once the offeree has begun to do the requested task, Errington v
Errington.
For example, a unilateral contract would exist where an estate agent had made no promise to the owner to
find a purchaser for his property, but the owner has promised to pay a commission to the agent if he does
so. Under the rule, the owner would be unable to revoke his offer once the agent has taken a step towards
finding a purchaser. However, the owner may revoke his offer to pay a commission to the agent at any time
prior to the conclusion of a sale.