Week 2
Offer & Acceptance
LGST101 Business Law
Dominic Liew
Recap
• Civil law systems versus common law systems
• Separation of powers
• Common law versus statutory law
• Obiter versus ratio
Overview of Business Law
Contract Law
• Formation
• Terms
• Discharge
• Remedies for breach
• Vitiating factors
• Privity
Tort Law
• Negligence
Overview of Contract Law
• Contract formation
• Identifiable agreement that is complete and certain (Week 2 topic)
• Consideration
• Intention to create legal relations
• Contract formation-related
• Promissory Estoppel
• Capacity Terms of a contract
• Discharge of a contract
• Remedies for breach of a contract
• Vitiating factors
• Privity
Important questions
• Are contracts the same as agreements?
• No. Contracts are legally binding agreements (ie, contracts are a subset of
agreements)
• Why have contracts?
• Promotes economic exchange
• Why are there requirements for a contract to be formed?
• It may not be fair to hold parties to every single thing they say, including offhand remarks
Very important question
• In law, what’s the difference between a subjective intention and an
objective intention?
• Subjective = what the party “actually thought”
• Objective = what would be a reasonable inference as to what the parties
thought, based on the conduct of the parties as a whole
• Did anyone read Smith v Hughes (1871) LR 6 QB 59?
Requirements for a valid contract
1.
2.
3.
Identifiable agreement that is complete and certain
Intention to create legal relations
Consideration
- Gay Choon Ing v Loh Sze Ti Terrence [2009] 2 SLR(R) 332 at [46]
• Capacity
• Absence of vitiating factors
Identifiable agreement
• Consensus ad idem/meeting of the minds
• “it is also trite law that the test of agreement or of inferring consensus
ad idem is objective.”
- Gay Choon Ing v Loh Sze Ti Terrence [2009] 2 SLR(R) 332 at [56]
• Thinking subjectively in your mind that you are forming a contract is
irrelevant!
• Why?
Identifiable agreement
• “… this means that negotiations between the parties must have
crystallised into a contractually-binding agreement in which there is
no uncertainty as to the terms of the contract concerned. The
traditional tools of analysis centre around the concepts of offer and
acceptance …”
- Gay Choon Ing v Loh Sze Ti Terrence [2009] 2 SLR(R) 332 at [46]
• Offer & acceptance = identifiable agreement
Identifiable agreement – Offers
For your information
• Offeror = the person making the offer
• You can make an offer to BUY or an offer to SELL or an offer to TRADE etc.
• Offeree = the person the offer is being made to
• Unilateral contract = Promise to do something if you do an act
• Acceptance of the offer is by doing the act
• Bilateral contract = Promise for a promise
• Acceptance of the offer is done by communicating the acceptance to the
offeror
Identifiable agreement – Offers
Key Questions
• Was there a valid offer?
• Was the offer terminated?
Offers
Was there a valid offer?
Was there a valid offer?
What is an offer?
• “an expression of willingness to contract on specified terms, made
with the intention that is to become binding as soon as it is accepted
by the person to whom it is addressed”
- Your Business Law textbook at [7.8], citing another textbook
• “An offer, capable of being converted into an agreement by
acceptance, must consist of a definite promise to be bound, provided
that certain specified terms are accepted”
- Gay Choon Ing at [47], citing a Contract Law textbook
Was there a valid offer?
What is an invitation to treat?
• “An ‘invitation to treat’ … is simply an attempt to initiate negotiations,
to induce offers; hence, a response to an ‘invitation to treat’ can never
result in a concluded contract.”
- Gay Choon Ing at [48]
Was there a valid offer?
How do you distinguish an invitation to treat from an offer?
• “The distinction … is, at bottom, a question of the intention of the
party concerned”
- Gay Choon Ing at [48]
• Objectively, did the party intend to make an offer or an invitation to
treat?
Was there a valid offer?
How do you distinguish an invitation to treat from an offer?
• Does it matter if a person uses the words “I am here to offer to buy
X”? Must the word “offer” be used?
• Spencer v Harding (1870) LR 5 CP 561
• “We are instructed to offer purchase of stock”
• “Please send in your tenders”
• The court found that there wasn’t an offer
• Must an offer be made through words?
Was there a valid offer? (Display of goods)
Pharmaceutical Society of GB v Boots Cash Chemists [1953] 1 QB 401
• Facts: Under UK statutory law, sale of certain drugs must be
supervised by a pharmacist. The pharmacist was stationed at the cash
desk, and not at the shelves where the drugs were sold.
• Issue: Whether the display of goods for sale on shelves amounted to
offer, which a buyer can accept by putting the goods in the basket?
• Holding: Display of goods for sale is an invitation to treat
• Customer makes an offer to buy when he presents the goods for payment
• Seller may then reject or accept the offer at the cash desk
Was there a valid offer? (Advertisements)
Partridge v Crittenden [1968] 1 WLR 1204
• Facts: Advertisement in a magazine, “Bramblefinch cocks and hens,
25s each”
• Issue: Invitation to treat or offer?
• Holding: “When one is dealing with advertisements and circulars …
there is business sense in their being construed as invitations to treat
and not as offers for sale”
• People who read the advertisements may want to negotiate further
• Seller may have wanted to limit number of items to sell. An offer would mean
Was there a valid offer? (Advertisements)
Carlill v Carbolic Smoke Ball [1893] 1 QB 256
• Facts: Advertisement stated that the company would pay 100 pounds
to anyone who fell sick after using the company’s smoke ball 3 times a
day for 2 weeks according to specific instructions
• “100 reward will be paid by the Carbolic Smoke Ball Company to any
person who contracts the increasing epidemic influenza, colds or any
disease caused by taking cold, after having used the ball three times
daily for two weeks according to the printed directions supplied with
each ball. $1000 is deposited with the Alliance Bank, Regent Street, to
show our sincerity in the matter”
Was there a valid offer? (Advertisements)
Carlill v Carbolic Smoke Ball [1893] 1 QB 256
• Issue: Invitation to treat or offer?
• Holding: Offer, and NOT an invitation to treat
• Why? What was the material fact(s) that made the judges hold it was an offer
and not an invitation to treat?
• Remember to the underlying rule stated in Gay Choon Ing at [48]: “The
distinction [between an offer and an invitation to treat] … is, at bottom, a
question of the intention of the party concerned”
Was there a valid offer? (Tenders)
Spencer v Harding (1870) LR 5 CP 561
• In general, a tender is not an offer, but is an invitation to treat
Harvela Investments Ltd v Royal Trust Co Ltd of Canada [1986] 1 AC
207
• Facts: Defendant invited two parties to submit tenders for some shares,
stating that they would accept the highest offer
• Holding: A valid offer was still made (conduct evinced an intention to
be bound)
Was there a valid offer? (Auctions)
Section 57(2) Sale of Goods Act
• Calls for bids – Invitation to treat
• Bids made – Offer
• Acceptance – When the hammer falls
See your Business Law textbook discussing Harris v Nickerson [1873]
LR 8 QB 286 and Warlow v Harrison (1859) 1 E & B 309
Was there a valid offer? (Internet
Transactions)
Chwee Kin Keong v Digilandmall.com Pte Ltd [2004] 2 SLR(R) 594
• Facts: Laser printers were listed for sale on the Defendant’s website,
but the prices were incorrectly listed as $66 per laser printer instead
of S$3,854. The Plaintiffs ordered 1,606 of these printers on the
Defendant’s website. The orders were processed by the Defendant
automated order system and confirmation emails with the subject
“Successful Purchase Confirmation from HP online” were
automatically sent to the Plaintiffs.
• Issue: Was there a valid contract?
• Holding (Ratio): A contract had been form (ie, there was an offer to
Was there a valid offer? (Internet
Transactions)
Electronic Transactions Act, Section 14
• “A proposal to conclude a contract made through one or more
electronic communications which is not addressed to one or
more specific parties, but is generally accessible to parties
making use of information systems, including a proposal that
makes use of interactive applications for the placement of orders
through such information systems, is to be considered as an
invitation to make offers, unless it clearly indicates the
intention of the party making the proposal to be bound in
case of acceptance.”
Was there a valid offer?
Other things about offers
• Can offers be conditional?
• Eg, I will sell you this laptop subject to me winning a new laptop in a lucky
draw next week
• Can an offer be made without words?
• Must an offer be made known to the offeree (for there to be valid
acceptance)?
• Can you make an offer to the world at large?
Offers
Was the offer terminated?
Was the offer terminated?
There are four situations where an offer will be terminated before it is
accepted (and therefore no valid contract can be formed)
• Revoking the offer (Revocation)
• Rejection of offer & counteroffer
• Lapsing of time
• Failure of condition upon which offer was based
Was the offer terminated? (Revocation)
• An offer can be revoked, but the revocation must be communicated to
the offeree to be effective: Byrne v Van Tienhoven [1880] 5 CPD 344
• Revocation can be communicated by someone other than the offeror:
Dickinson v Dodds (1876) 2 Ch D 463
• Offer can be revoked at any time before acceptance, even if deadline
for acceptance is not yet over: Routledge v Grant (1828) 4 Bing 653
Was the offer terminated? (Rejection &
Counteroffer)
• A counteroffer (1) rejects the original offer; and (2) stands as a new
offer made to the original offeror: Hyde v Wrench [1840] EWHC Ch
J90
• However, simply asking for more information regarding the offer (as
opposed to making a counteroffer) does NOT terminate the offer:
Stevenson, Jacques & Co v McLean (1880) 5 QBD 346
• Is bargaining for a lower price considered asking for information, or making a
counteroffer? The answer is that it’s a matter of interpretation, argument, and
depends on the facts of the case (what’s new!)
Was the offer terminated? (Lapse of time)
• A clearly stated limit will determine when the offer lapses: Panwell
Pte Ltd v Indian Bank (No. 2) [2002] 4 SLR 963
• Unless it is clear from the offeror’s conduct and other evidence that the offer is
still capable of acceptance (again, it depends on the objectively ascertained
intentions of the parties)
• An offer which contains no express provision limiting its duration
terminates after lapse of a reasonable time; what is a reasonable time
depends on the circumstances of the case: Ramsgate Victoria Hotel v
Montefiore (1866) LR 1 Ex 109
• Eg, share prices are volatile, and a 5-month period is considered unreasonable
as a duration for the offer to remain open
Was the offer terminated? (Failure of
condition)
Financings Ltd v Stimson [1962] 3 All ER 386
• Facts: A purchaser viewed and offered to buy a functional car. The car
was then badly damaged. The seller then purported to accept the offer
to buy the car.
• Holding: The offer was no longer valid. There was an implied
condition that the car would remain in the same state in order for the
offer to be valid
Acceptance
Was there a valid acceptance?
Gay Choon Ing v Loh Sze Ti Terence Peter [2009] 2 SLR(R) 332 at [47]
• An acceptance is a final and unqualified expression of assent to the
terms of an offer
Was there a valid acceptance?
Gay Choon Ing v Loh Sze Ti Terence Peter [2009] 2 SLR(R) 332 at [63]
• “Whilst it is true that the court concerned must examine the whole
course of negotiations between the parties, this should be effected in
accordance with the concepts of offer and acceptance. What is
required, however, is a less mechanistic or dogmatic application of
these concepts and this can be achieved by having regard to the
context in which the agreement was concluded”
Was there a valid acceptance? (Offerorspecified)
• The offeror may specify the way to accept the contract
• Eg, “This offer may only accepted by registered mail sent to X address”
Manchester Diocesan Council for Education v Commercial and General
Investment Ltd [1970] 1 WLR 242
• “Where … the offeror has prescribed a particular method of
acceptance, but does not insist that only acceptance in that mode
shall be binding, acceptance communicated to the offeror by any other
mode which is just as good will conclude the contract”
Was there a valid acceptance? (By conduct)
Harvey v Johnston (1848) 6 CB 295
• Holding: An offer to buy goods was accepted by supplying the goods
Brogden v Metropolitan Railway Co (1877) 2 App Cas 666
• Facts: A railway company submitted to a merchant a draft agreement
for coal supply. The agreement was returned with several amendments
which the railway company did not expressly consent to. The
company accepted deliveries of coal for the next two years.
• Holding: An agreement was found starting from the point when such
deliveries began based on the amended agreement
Was there a valid acceptance? (By silence)
Felthouse v Bindley (1862) 11 CB (NS) 869
• Facts: An uncle offered to buy his nephew’s horse. The letter of offer
says: “If I hear no more about him, I shall consider the horse mine”.
An auctioneer who had been instructed by the nephew to sell his farm,
while told that the horse was reserved for the uncle, mistakenly sold
the horse. The uncle alleged that the horse had been sold to him, and
sued the auctioneer for conversion.
• Holding: The nephew intended his uncle to have the horse. But he did
not communicate such intention to his uncle, or done anything to
bind himself. Nothing, was done to vest the property in the horse in
[the uncle] …
Was there a valid acceptance? (By silence)
• Acceptance by silence generally not permitted
• Why? Think about commercial reality
• Is there an exception? Yes! See Re Selectmove Ltd [1995] 1 WLR 474
• Offeree: “If you do not hear from me, take it there is an agreement between us”
Receipt rule vs postal rule
Receipt rule
• General rule that applies to contracts with regard to offer and
acceptance
• For instantaneous forms of communication, that acceptance is effective
when the acceptance is RECEIVED (ie, communicated to and brought
to the notice of the offereror): Brinkibon v Stahag [1983] 2 AC 34
• Eg, face-to-face, telephone, telex and fax
Receipt rule vs postal rule
Postal rule
• Exception to the receipt rule that applies to acceptance sent by post
• Acceptance takes place at the time when the letter of acceptance is
posted, regardless of whether the letter reaches the offeror: Adams v
Lindsell (1818) 1 B & Ald 681
• It must have been within the contemplation of parties that postal delivery was
to be used (eg, the offeror made the offer by post): Lee Seng Heng v The
Guardian Assurance [1932] SSLR 110
• “The reason for this exception is historical; it was established in an era
Email communications
• Key question – should the postal or receipt rule apply to email
communications?
• This is important because many contracts are nowadays concluded via email
• Strictly speaking, no court in Singapore has conclusively or
authoritatively pronounced on this
• Recall the reasons for the postal rule and the receipt rule being created
the way they are (ie, think about the purposes of each rule – do these
purposes apply to email communications?)
Email communications
Chwee Kin Keong v Digilandmall.com Pte Ltd [2004] 2 SLR(R) 594
• Points in favour of postal rule
• Emails are processed through servers, routers and Internet service providers.
They are not instantaneous. Messages may arrive in a form that is not
understood. Certain Internet service providers provide the technology to
inform a sender that a message has not been properly routed, while others do
not
• The sender loses control over the route and delivery time of the message
Email communications
Chwee Kin Keong v Digilandmall.com Pte Ltd [2004] 2 SLR(R) 594
• Points in favour of receipt rule
• Most civil law jurisdictions prefer the receipt rule
• Emails are received in a relatively short time frame; more similar to
instantaneous or near instantaneous communication (even with the occasional
failure, most emails arrive sooner or later)
• Transactions over websites appear instantaneous or interactive
• The Electronic Transactions Act (although not substantively addressing the
issue) appears to be inclined towards the receipt rule
• The Vienna Sales Convention applies the receipt rule for international sales
contracts unless there is some other intention (should domestic sales contracts
Email communications
• In England, email communications appear to be governed by receipt
rule
• “In my view, the receipt rule should apply to communication by email,
at least where the parties are conducting the matter by email”: David
Baxter Edward Thomas v BPE Solicitors (a firm) [2010] EWHC 306
(Ch)
Email communications
• If the receipt rule were to apply, when would be the time of “receipt”
of an email?
Section 13 of the Electronic Transactions Act
• (2) The time of receipt of an electronic communication is the time
when the electronic communication becomes capable of being
retrieved by the addressee at an electronic address designated by the
addressee.
• (3) The time of receipt of an electronic communication at an electronic
address that has not been designated by the addressee is the time when
the electronic communication becomes capable of being retrieved by
Overview of Contract Law
• Contract formation
• Identifiable agreement that is complete and certain
• Consideration (Week 3 topic)
• Intention to create legal relations (Week 3 topic)
• Contract formation-related
• Promissory Estoppel (Week 3 topic)
• Capacity (Week 3 topic)
• Terms of a contract
• Discharge of a contract
• Remedies for breach of a contract
• Vitiating factors