Fundamentals of Law (BL502)
Law of Contract
Offer – Withdrawing, Rejecting and
Accepting
Fundamentals of Law (BL502)
Fate of An Offer
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


Withdrawn by offeror
Accepted by offeree
Rejected by offeree
Lapse due to passing of time
Lapse due to death of offeror or offeree
Lapse due to failure of condition precedent
Fundamentals of Law (BL502)
Withdrawing an Offer
 Cannot be withdrawn after accepted
 The withdrawal of the offer must be
communicated to the offeree
 Special cases:
 Unilateral offers
 Options cannot be withdrawn
Fundamentals of Law (BL502)
Withdrawing an Offer after Acceptance
 A contract is made when the offer is accepted
 Once accepted the offer cannot be withdrawn
 Attempted withdrawal may be a breach of a
contract
Fundamentals of Law (BL502)
Withdrawing an Offer Before Acceptance
• Generally, an offeror may withdraw an offer at
any time before acceptance
• Routledge v Grant (S&OR p78)
• But, options cannot be withdrawn
– an option is a separate enforcable obligation
and cannot be withdrawn
– Exists where the offeree has given
consideration to keep an offer open
– Goldborough Mort v Quinn (S&OR p 80)
Fundamentals of Law (BL502)
Withdrawal Must be Communicated
 Offeror must let the offeree know that the offer is
withdrawn
 Byrne & Co v Tienhoven & Co S&OR p79)
 Offeror does not have to communicate
withdrawal personally
 Would a reasonable person in the position of the
offeree conclude that the offer had been
withdrawn?
Fundamentals of Law (BL502)
Withdrawing a Unilateral Offer
 Involves a unilateral promise e.g. Carllil v
Carbolic Smoke Ball Co (S&OR p74)
 If offeree has acted on the promise then offeror
cannot withdraw until offeree has had a
reasonable opportunity to complete
Fundamentals of Law (BL502)
Rejecting an Offer
 Once rejected, an offer cannot be accepted
 May be rejected expressly or by implication
 Implied
 Offeree’s actions are inconsistent with an
intention to accept
Fundamentals of Law (BL502)
Rejecting An Offer (Cont.)
 A counter offer is a rejection
 Hyde v Wrench (S&OR p81)
 Any material alteration is a counter offer
 Restating the offer when accepting is not a
counter offer
 Turner Kempson v Camm (S&OR p81)
Fundamentals of Law (BL502)
Rejecting An Offer (Cont.)
 A counter offer is a rejection (cont.)
 Asking for clarification is not a counter offer
 Reasonable person test
 examine all circumstances
Fundamentals of Law (BL502)
Accepting the Offer
 Only offeree may accept
 Acceptance must be final & unqualified
 Must be communicated to the offeree (some
exceptions)
Fundamentals of Law (BL502)
Accepting the Offer (Cont.)
 Acceptance must be final & unqualified
 “Subject to Formal Contract”
 There is a contract & one of terms is that
documentation be prepared
 There is a contract but nothing can happen
until contract prepared
Fundamentals of Law (BL502)
Accepting the Offer (Cont.)
 Acceptance must be final & unqualified (cont.)
 “Subject to Formal Contract” (cont.)
 There is no contract
 Masters v Cameron (S&OR p82)
 Plastyne Products v Gall Engineering
(S&OR p83)
 Communications after acceptance are
irrelevant
Fundamentals of Law (BL502)
Acceptance Must be Communicated
 Silence does not amount to acceptance
 Large companies
 Who must receive acceptance?
 Depends on intention of parties
 Acceptance occurs when the communication
is received in the ordinary course of business
or would have been received if ordinary
course of business were followed
Fundamentals of Law (BL502)
Acceptance Must be Communicated
 Internet
 Electronic Transactions Act
 Receipt occurs when it enters designated
information system
 Otherwise, when it comes to attention of
addressee
Fundamentals of Law (BL502)
Acceptance Must be Communicated
 Express Communication of Acceptance is not
necessary where
 Implied from past dealings between parties
 Industry custom
 Acceptance indicated by conduct
 Unilateral contracts
 Postal rule
Fundamentals of Law (BL502)
Acceptance Must be Communicated
 The Postal Rule
 Offeree has expressly or impliedly accepted
the post as the means of communication
between the parties
 Acceptance occurs at time of posting not
receipt
 Does not apply where communication is
instantaneous
 Often determines jurisdiction
 Berinkibon v Stahag Stahl (S&OR p 86)
Fundamentals of Law (BL502)
Acceptance Must be Communicated
 Mode & timing of acceptance must conform to
offeree’s requirements
 Nominating a mode of acceptance may not
set the only mode of service
 Spectra v Pindari
 Agent of the offeror may accept
 Powell v Lee (S&OR p87)
Fundamentals of Law (BL502)
Lapse of Offer
 Due to death of either party if
 Not an option
 Does not involve personal skill or service by
the deceased
 Due to failure of condition precedent
 Due to time
 Express time limit
 Otherwise, offer remains open for a
reasonable time
Fundamentals of Law (BL502)
Lapse of Offer (Cont.)
 Due to time (Cont.)
 What is reasonable time depends on:
 Method by which offer made
 Nature of the transaction
 Terms of Proposed Contract
 Actions of parties between offer &
purported acceptance
 Intimations as to time by offeror
Fundamentals of Law (BL502)
Agreement Must be Certain
 Must be sufficiently certain in all its essential
elements especially:
 Subject matter
 Price
 Must not contain unclear, ambiguous or
contradictory terms
 Courts will uphold contract where possible
 Whitlock v Brew (S&OR p 89)
Fundamentals of Law (BL502)
Agreement Must be Certain (cont.)
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Agreement to agree
Agreement to negotiate
Subject to contract
Subject to finance etc
Has an offer been
made?
Fundamentals of Law (BL502)
No
No Contract
Yes
Did the offeror
intend to revoke
the offer?
Yes
Did the offeror
communicate
revocation?
Yes
No
Has the offer
lapsed?
No
Yes
No
Has acceptance
been received by
the offeror?
Yes
No
Contract
Yes
Was acceptance
made under the
postal rule?
No
Fundamentals of Law (BL502)
Law of Contract
Intention & Consideration
Fundamentals of Law (BL502)
Intention to Contract
 Parties must intend their agreement to be legally
binding i.e. enforceable by a court
 An intention to be morally binding is not enough
 Objective test
 Distinction between
 Social/domestic agreements
 Commercial agreements
Fundamentals of Law (BL502)
Domestic Agreements
 Court presumes that parties did not intend to
contract
 Presumption may be rebutted
 Todd v Nicholls (S&OR p94)
 Roufos v Brewster (S&OR p94)
Fundamentals of Law (BL502)
Domestic Agreements (cont.)
 Court will look at
 Terms of agreement
 Circumstances surrounding the agreement
 Effect of the agreement on the parties
 Parties conduct subsequent to agreement
Fundamentals of Law (BL502)
Commercial Agreements
 Courts presume that the parties intended to
contract
 Clear words are needed to rebut the
presumption
 Onus is on party seeking to disprove the
contract
 Rose & Frank v J R Crompton (S&OR p95)
 Edwards v Skyways (S&OR p95)
Fundamentals of Law (BL502)
Commercial Agreements (Cont.)
 Contrast with Clauses excluding courts
jurisdiction which are are invalid
 Letters of Comfort
 Kleinworth Benson v Malaysia Mining
 Banque Brussels Lambert v Australian
National Industries
Fundamentals of Law (BL502)
Commercial Agreements (Cont.)
 Heads of Agreement/Letters of Intent
 Air Great Lakes v K S Easter (S&OR p98)
 Coal Cliff Collieries v Sijehama (S&OR p98)
 “Without prejudice” documents