Agreement
Understanding an Offer
An offer may be described as an expression to another of a willingness to be legally
bound by the stated terms.
Three features that must be present for the offer to be legally effective:
1. Statement by offeror containing stated terms. The statement must contain all
the elements of the proposed agreement and be sufficiently certain.
2. Statement made to another person. The offer must be made to another legal
entity.
3. Offeror indicates a preparedness to be bound. The offeror must be prepared
to be legally bound upon acceptance by the offeree.
Offers in Bilateral Contracts
A bilateral contract is one which, if accepted, is effective to bind both parties to his or
her undertaking. Each party undertakes to the other party to do or refrain from doing
something.
Offers in Unilateral Contracts
If contracts – One party (promisor) agrees to do or refrain from doing something if
another party (promisee) does or refrains from doing something but the promisee does
not himself undertake to do or refrain from doing that thing. A unilateral contract
differs from a bilateral contract in that it does not immediately impose an obligation
on either party to perform. The obligation on the offeror arises only if the offeree
performs the required task. The offeree will never be under an enforceable obligation
to perform.
Examples:
 Offers of Reward
 Offers for Prizes
What is not an Offer
Mere Puff
A mere puff is an exaggerated or unsustainable claims about products. In deciding
weather an advertisement is a mere puff or an offer capable of being accepted and
forming a contract, the courts must decide on how a ‘reasonable person” in the
position of the offeree would interpret the advertisement taking into consideration the
vagueness and other details of the advertisement itself.
Supply of Information
A request for information must be discerned from a contractual offer. A clearer
indication of a preparedness to enter into a contract than merely providing terms or
information upon which a party maybe prepared to enter into such a contract is
needed (Harvey v Facey).
Invitation to Treat
An invitation to treat is an indicator of a parties willingness to negotiate entry into a
contract. It is a technique used by a party who desire another party to make an offer
and cannot be construed or the terms be accepted as if it were a valid legal offer in
itself.
Categorizing Transactions
Advertisements
Most advertisements are considered invitations to treat but some may be regarded as
offers depending on language used and other relevant factors.
a) Advertisement in a Catalogue or in a Circular
Circulars which provide information about items for sale and their prices are regarded
as invitations to treat. If it were regarded as an offer and the manufacturer ran out of
stock, they would be in breach of contract for anyone who accepted such an offer as
they could not provide stock (Grainger v Gough [1896]).
b) Advertisements in Newspapers and Magazines
These are also considered invitations to treat unless the advertisement is couched in
terms which indicate the retailers willingness to be bound if the specified terms are
accepted ie there is a promise (Carlill) rather than a mere invitation (Partridge v
Crittenden [1968]).
c) Advertisements appearing on the internet
Application of the same principle as newspapers and magazines.
d) Display of Goods
Items appearing in retail outlets, even if the price is attached, is regarded as an
invitation to treat (Pharmaceutical Society of Great Britain v Boots Cash Chemists
[1953]).
Auction: AGC Ltd v. McWhirter
a) Advertisement of Auctions
The advertisement of an auction is considered an invitation to treat on the part of the
auctioneer. The auctioneer may withdraw items from the auction or cancel the
auction all together without incurring any liability from potential bidders.
b) Auctions with Reserve
Each bid represents an offer which the auctioneer may reject or accept. Acceptance of
the offers occurs and an agreement is formed when the auctioneer knocks down the
property to the successful bidder.
c) Auction without a Reserve
Even in an auction without a reserve, each bid represents an offer that could be
accepted or rejected by the auctioneer.
Tendering
An advertisement for tenders will generally be the same as an advertisement for an
auction which is akin to an invitation to treat. Therefore no liability will be incurred
if the person does not accept any of the tenders or even consider then in a bona fide
way (Spencer v. Harding). Each tender will be considered an offer which can be
accepted or rejected.
Standing Offers
A standing offer is an indication by one party of his/her willingness to provide goods
over a specified period of time. An offeror may withdraw the offer, anytime, before
acceptance of the offer is made in the form of an order. Further, unless the parties
agree to the contrary, there is no obligation of the offeree to order goods only through
the offeror, ie the offeree may choose not to accept the standing offer (Great Northern
Railway Co v. Witham).
Options
If the offeree provides consideration (eg paying money) to the offeror to keep the
offer open for some period, the offer cannot be withdrawn during this period. If no
consideration is paid, and only a promise to keep the offer is made, the offer may still
be revoked (Routledge v Grant (1828)).
Communication of an Offer
An offer becomes effective once it is communicated to the offeree (Taylor v Laird
(1856)). Acceptance must take place in reliance upon an offer. If the offeree
performs a particular act that corresponds to the terms of the offer without knowledge
of the offer, there is no agreement, and no contract comes into existence. If it is an
offer to the world at large, the offer could be accepted by any fulfilling the
requirements of the offer (Carlill).
Termination of an Offer
An offer may be terminated at any time before it is accepted (Goldsbrough Mort &
Co Ltd v Quinn (1910)). However, once an offer is accepted it becomes irrevocable.
An offer may be terminated by:
a) Revocation by the offeror
Revocation is the formal withdrawal of the offer by the offeror. Before acceptance,
an offer can be freely revoked unless a promise by the offeror to keep it open for a
fixed period is supported by consideration or under seal (Routledge v Grant (1828)).
A revocation will only be effective once it has been communicated to and received by
the offeree (Bryrne v Van Tienhoven (1880). In unilateral contracts, the offer cannot
be withdrawn after the offeree has begun to perform the necessary condtions of
acceptance of the offer and completion of the contract (Abbot v Lance (1860)).
b) Reject by the offeree
The rejection must be communicated to the offeror before it is effective. Once
rejected, an offer cannot be later accepted. If an offeree attempts to accept the offer
but introduces new terms, the offeree is rejected the offer and making a counter offer
(Stevenson Jaques & Co v McLean (1880)).
c) Lapse of time
An offeror may stipulate that his or her offer must be accepted within a certain period
of time, and if the offeree fails to accept, the offer will lapse. If no time is prescribed,
the offer must be accepted within a reasonable time (Ramsgate Victoria Hotel Co v
Montefiore)
d) Failure of a condition subject to which the offer was made
If a condition upon which the offer is made is not fulfilled the offer will lapse
(McCaul Pty Ltd v Pitt Club Ltd (1959)).
e) Death
If the offeror dies and the offeree has not been notified of that death, it is still possible
for the offeree to accept the offer, thus binding the offeror’s estate. If the offeree has
been notified of the death he/she cannot except the offer (Coulthart v Clementson
(1879)) nor can a representative of the offerors estate accept the offer on their behalf
thus the offer lapses (Reynolds v Atherton (1921)).
Requirements of Acceptance
Acceptance of an offer is the expression, by words or conduct, of assent to the terms
of the offer in the manner prescribed or indicated by the offer. Thus acceptance may
be expressed or implied (HBF Dalgety v Morton [1987]). There are two requirements
to satisfy for valid acceptance to occur:
1. The offeree must agree to accept the terms of the offer
2. This information must be communicated to the offeror.
Acceptance must Correspond to Offer
Offeree must have knowledge of and act in reliance to an offer
The offeree must have knowledge of the terms of the offer at the time of purported
acceptance. Acceptance is not valid if two identical offers are made or if a party
performs the act of acceptance without knowledge of the offer (Tinn v Hoffman &
Co).
A Counter Offer is not Acceptance
If a counter offer is made, the original offer is rejected and the counter offer can then
itself be accepted or rejected. Once a counter offer is made and the original offer
rejected, the offeree can no longer accept the original offer (Hyde v. Wrench). A
purported acceptance that departs from the terms of the offer but only in a minor nonmaterial way may be effective and not amount to a counter offer (Turner Kempson v
Camm [1932]).
Mere Inquiry does not Constitute Acceptance
After receiving an offer, an offeree may want further clarification of one or more
terms. This inquiry can at most, only communicate interest but not acceptance nor
rejection of an offer (Stevenson Jaques v McLean (1880)).
Notification to the Offeror of the Fact of Acceptance
The offeree must communicate acceptance of the offer to the offeror and agreement is
not complete until such communication is accepted (Byrne & Co v Leon Van
Tienhoven & Co (1880)).
Method of Acceptance
What is an appropriate method of acceptance in any given situation will depend on
each situation, whether the offeror has outlined a specified method of acceptance with
in the offer or if it is not stipulated the appropriate method of acceptance will depend
on the intention of the parties as derived from the particular facts. Whether
acceptance has occurred depends on whether the offeree has complied with the
requirements for the method of acceptance for the particular situation.
a) Method of Acceptance Stipulated by Offeror
The offeror may stipulate how acceptance should take place eg the performance of an
act, return post. If acceptance does not occur in this way, generally there is no
agreement.
b) Acceptance by Silence
The offeror cannot stipulate silence to constitute consent.
c) Acceptance by Conduct
An offeror may stipulate the manner of acceptance by advising the offeree that if
he/she wishes to accept the offer, the offeree should perform stipulated acts waiving
the need to communicate acceptance. Acceptance can be express or implied.
Instantaneous Communication: Acceptance must be communicated
a) General Rule
When the mode of acceptance is instantaneous communication, the general rule of
law is that the contract will be formed when acceptance of the offer is communicated
to the offeror and that communication is received.
b) Meaning of instantaneous Communication
Face to face communication, telephone conversations and telex messages are all
considered forms of instantaneous communication.
Postal Acceptance Rule
a) Statement of the rule
An agreement will be formed when the offeree posts the letter, not when the offeror
actually receives it (Henthorn v Fraser [1892]). The rule operates only where the
post is an acceptable method of communication between the two parties eg the offer
was made by post or it is stipulated in the offer that the post is an acceptable method
of communication (Adams v Lindsell (1818)).
b) To what communication does the rule extend
The postal acceptance rule applies to forms of communication that are akin to mail
but does not extend to any form of instantaneous communication, even if that
communication bears some similarities to communication by post.
c) Where is the rule displaced?
The rule is displaced if the court decides that it was not within the contemplation of
the parties that the post was an accepted method of communication. Whether the
postal rule is displaced turns the intention of the offeror. If the offeror says or implies
that actual notification is required before an agreement if formed the postal
acceptance rule will be displace (Bressan v Squires).
d) Revocation of the acceptance prior to receipt
The agreement is formed when the offer is accepted, once accepted the offer can not
be refused or revoked.
Acceptance in Unilateral Contracts
Acceptance commonly by conduct
The requirement for acceptance to be communicated is often impliedly waived.
Acceptance is effected by the offeree performing the requirements specified by the
offeror.
Withdrawal of an offer after acceptance has commenced
Generally, once an offeree has begun to accept the offer by performing the acts
stipulated, it is likely to be too late for the offeror to withdraw the offer and claim
there has been no contract formation.
Who may accept an offer?
An offer can only be accepted by the person to who it was made. Acceptance may be
communicated only by the offeree or his or her agent (Powell v Lee (1908)). If an
offer is made to the public at large it can sometimes be accepted by a number of
people. In Carlill’s Case the offer was capable of acceptance by anyone who
qualified under the terms of their offer ie anyone who purchased a smoke ball,
however, in the case of a reward, while many people may have the information which
qualifies them for the reward, only the first person to come forth will be eligible.