Week 4
Law of Contract
Offer and Acceptance
Copyright Guy Harley 2008
1
Contract
 An agreement between two or more persons
that will be enforced by law
 May be
 In writing
 Oral
 Partly in writing and partly oral
 Implied
Copyright Guy Harley 2008
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Writing
 Contracts need not be in writing
 Exceptions
 Sale of Land
 Guarantees
 Credit contracts
 Other statutory requirements
Copyright Guy Harley 2008
3
Analysing a Contract
Is there a contract?
What are the terms?
Is it valid & enforceable?
Has it been discharged?
Has there been a breach?
Copyright Guy Harley 2008
4
Six Elements
1.
2.
3.
4.
5.
6.
Offer
Acceptance
Consideration
Intention to create a contract
Contractual Capacity
Certainty
Copyright Guy Harley 2008
5
Offer

An offer exists only where a reasonable person
would conclude on the facts that the person
was willing to be bound in a court of law
 Distinguish
 Statements of future intention
 Puffery
 Negotiations
 Invitation to treat
 Provision of Information in response to
enquiry
Copyright Guy Harley 2008
6
Statements of Future Intention

A mere statement of a present intention to do
something in the future is not an offer
 Harvey v Facey (Graw 3.2.2)
 Australian Woollen Mills v Commonwealth
Harris v Nickerson
 Kelly v Caledonian Coal Co
 Often called “a mere promise”
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7
Puffery


Sales talk
Exaggerated statements that no reasonable
person would believe to be true
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Negotiations




An indication of a willingness to negotiate is
not an offer
An offer will not arise merely because parties
have reached agreement on one aspect of the
deal
Implied (or express) understanding that parties
not bound until formal contract executed
Heads of Agreement
Copyright Guy Harley 2008
9
Invitation to Treat

An invitation to
 Negotiate
 Make an offer
is not an offer but an “Invitation to Treat”
 The distinction lies in the objective intention of
the person making the offer or invitation to
treat.
Copyright Guy Harley 2008
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Invitation to Treat




Retail Displays
Advertisements
Auctions
Tenders
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Retail Displays



Fisher v Bell (Graw 3.4.2)
Pharmaceutical Society v Boots
In most circumstances the retailer does not
make an offer by displaying goods for sale,
even where the goods are marked with a price
 But
 Display of goods in an automatic vending
machine is an offer
 Thornton v Shoe Lane Parking (Graw 3.2.2)
Copyright Guy Harley 2008
12
Advertisements




If the advertiser was making an offer then it
would be bound by every acceptance even if
their stock was exhausted.
Depends on circumstances
Carlill v Carbolic Smoke Ball Co (Graw 3.5.1)
But note legislative restrictions e.g. Trade
Practices Act
Copyright Guy Harley 2008
13
Auctions





Bidder makes the offer
Auctioneer accepts
S64 Sale of Goods Act (Vic)
Auctioneer announces terms at start
Anyone who bids then offers on the
auctioneers offer as to terms
Copyright Guy Harley 2008
14
Tenders


Person submitting the tender makes the offer
Body calling for tenders accepts any tender
 Not bound to accept lowest
 BUT, the request for tenders may be an offer to
deal with tenders in a certain manner
 Hughes Aircraft v Aeroservices Australia
Copyright Guy Harley 2008
15
Provision of Information


A statement supplying information may not be
an offer
Harvey v Facey (Graw 3.2.2)
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16
Termination of Offer






Revocation
Rejection
Lapse of time
Failure of condition
Identical cross offers
Death
Copyright Guy Harley 2008
17
Revocation



Can be withdrawn before accepted
A contract is made when the offer is accepted
The withdrawal of the offer must be
communicated to the offeree
 Byrne v Van Tienhoven (Graw 3.10.3)
 Dickinson v Dodds (Graw 3.10.4)
 Would a reasonable person in the position of
the offeree conclude that the offer had been
withdrawn?
Copyright Guy Harley 2008
18
Revoking a Unilateral Offer


Involves a unilateral promise e.g. Carllil v
Carbolic Smoke Ball Co
If offeree has acted on the promise then offeror
cannot withdraw until offeree has had a
reasonable opportunity to complete
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Rejection

Restating the offer when accepting is not a
counter offer
 Asking for clarification is not a counter offer
 Reasonable person test
 examine all circumstances
Copyright Guy Harley 2008
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Rejection






Once rejected, an offer cannot be accepted
 Hyde v Wench (Graw 3.8.2)
A counter offer is a rejection
Any material alteration is a counter offer
A conditional acceptance is a rejection
May be rejected expressly or by implication
Implied
 Offeree’s actions are inconsistent with an
intention to accept
Copyright Guy Harley 2008
21
Lapse Due to Time




Express time limit
Otherwise, offer remains open for a reasonable time
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
Promise to keep offer open for certain time is
unenforceable unless consideration given (e.g. option)
Copyright Guy Harley 2008
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Lapse Due to Death

Due to death of either party if involves
personal skill or service by the deceased
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Terms of Offer
• All terms of offer must be brought to
attention of offeree before acceptance
– Causer v Browne (Graw 10.3.2)
– Olley v Marlborough Court (Graw 10.3.8)
Copyright Guy Harley 2008
24
Accepting the Offer
 Acceptance must be final & unqualified
 Must be made with knowledge of and in reliance
on offer
 R v Clarke
 Fitch v Snedaker (Graw 3.7.1)
 Only person to whom the offer was made may
accept
 Must be communicated to the person who made
the offer
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25
Subject to Formal Contract
1. There is a contract & one of terms is that
documentation be prepared
2. There is a contract but nothing can happen
until contract prepared
3. There is no contract
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Acceptance Must be Communicated
 Express Communication of Acceptance is not
necessary where
 Implied from past dealings between parties
 Industry custom
 Acceptance indicated by conduct
 Brogden v Metroploitan Railway (Graw
4.5.5)
 Unilateral contracts
 Postal rule applies
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27
Accepting the Offer
 Silence is not acceptance
 Communications after acceptance are irrelevant
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Method of Acceptance
 If Offerror stipulates method of acceptance
 Must be in form stipulated by offeror, or
 Must use equally expeditious method
 Presumption that acceptance in same form as
offer
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The Postal Rule
 Applies where offeror has expressly or impliedly
accepted post as the means of communication
of acceptance
 Acceptance occurs at time of posting not receipt
even if lost
 Household Fire & Carriage Accident
Insurance Co v Grant (Graw 4.5.11)
 Applies to all situations where noninstantaneous communications are used
 Often determines jurisdiction
Copyright Guy Harley 2008
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The Postal Rule
 Does not apply where
 Negotiations protracted - Tallerman v Nathan’s (Graw
4.5.9)
 If would lead to manifest inconvenience or absurdity
 Where offeror requires actual communication of
acceptance – Holwell Securities v Hughs (Graw
4.5.10)
 Acceptance not delivered due to fault of acceptor –
Getreide-Import Gmbh v Contimar SA Compania
(Graw 4.5.12)
 Instantaneous communications used – Entores Ltd v
Miles Far East Corp (Graw 4.5.13)
Copyright Guy Harley 2008
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Has an offer been
made?
No
No Contract
Yes
Did the offeror
intend to revoke
the offer?
Yes
Did the offeror
communicate
revocation?
No
Has the offer
lapsed?
No
Yes
Yes
No
Has acceptance
been received by
the offeror?
Yes
No
Contract
Yes
Copyright Guy Harley 2008
Was acceptance
made under the
postal rule?
No
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