English Law of Contract

Offer, Acceptance etc.(Part I)

September 12th and 14th 2007

Research Fellow Herman Bruserud

I. Introduction

• Today and September 14th: Offer, Acceptance etc. (formation issues)

• The plan of the lectures– Focusing on the main features– Some comparative remarks to illustrate

similarities to, and differences from, Norwegian law of contract

II. Offer and Acceptance – introductory remarks

• What needs to be apparent to constitute an enforceable agreement (i.e. a contract)? – Agreement (Today and Friday)– Sufficient certainty (Friday)– Intention to create legal relations (Friday)– Consideration (Bygrave) – Other formation issues will not be dealt with in the

lectures

• The objective approach– The existence of agreement and intention are

determined on the basis on external evidence – would a reasonable man say that the parties were in agreement?

II. Offer and Acceptance – introductory remarks (cont.)• The objective approach (cont.)

”In contracts you do not look into the actual intent in a man’s mind. You look at what he said and did. A contract is formed when there is, to all outward appearances, a contract. A man cannot get out of a contract by saying: ‘I did not intend to contract’ if by his words he has done so.” (Lord Denning in Storer v Manchester City Council)

”the governing criterion is the reasonable expectation of honest men”(Steyn LJ in Trentham Ltd v Archital Luxfer Ltd)

II. Offer and Acceptance – introductory remarks (cont.)• The relevance of (purely) subjective

elements to the question of formation– Where the promisee knows or (ought reasonably

to know) that the promisor did not intend to make an offer (on those terms)

Comparative remarks: What is broadly speaking the general criterion for deter-mining the existence of a contract under Norwegian law?

II. Offer and Acceptance – introductory remarks (cont.)• Bilateral and unilateral contracts

Offeror Offeree

Offeror Offeree

Bilateral contracts:

Unilateral contracts:

Obligations subject to acceptance of offer from offeree

Obligations subject to acceptance of offer from offeree

Obligations subject to performance of condition stated in offer by offeree

Performance of condition stated in offer

Distinction:

Is it only possible to respond to the

offer – thus imposing

obligations on the offeror – by performing the condition?

Comparative remarks: Distinction in Norwegian law?

II. Offer and Acceptance – introductory remarks (cont.)• What needs to be apparent to

constitute an agreement – the traditional approach

Offeror Offeree

Communication of Offer

Communication of Acceptance

Q1

Q2

Q3

Q3

Offer

Corresponding Acceptance

III. Offer

• What constitutes an offer?– Expression of willingness to contract on specified

terms without further negotiations:

• The offer must besufficiently specific• Intention to be bound

Offer Q1

Corresponding acceptance Agreement

Not invitations to treat (i.e. to make an offer) (or negotiate) or

mere supply of or request for information

Offers, invitations to treat (or negotiate) and supply of or

request for information must be distinguished

We will come back to the general issues on certainty

and intention to be bound later

III. Offer (cont.)

• What constitutes an offer? (cont.)– General example of distinction:

Offer Q1

“may be prepared to sell the house to you”(Gibson v Manchester City Council)

“if you will sign the Agreement and return it to me, I will send you the Agreement signed on behalf of the (…) in exchange”(Storer v Manchester City Council)

III. Offer (cont.)

• Offer invitation to treat - examples– Advertisements, brochures and price lists

• Partridge v Crittenden and Granger & Sons v Gough – limited stock argument

• Unilateral advertisement – Advertisement of reward for performance of

specific act or condition constitutes an offer if it is sufficiently definite

– Carlill v Carbolic Smoke Ball Co. and Bowerman v ABTA Ltd

Offer Q1

III. Offer (cont.)

• Offer invitation to treat – examples (cont.)– Shop displays (shop windows, self-service

shelves)• Fisher v Bell (Shop window)• Pharmaceutical Society of Great Britain v

Boots Cash Chemists (Southern) Ltd (self-service shelves)

• Policy arguments – Shopkeepers freedom of contract– Practical consequences

Offer Q1

III. Offer (cont.)

• Offer invitation to treat – examples (cont.)– Tickets and timetables

• Unclear case law• Denton v GN Railway, Wilkie v London

Passenger Transport Board, Thornton v Shoe Lane Parking Ltd

– Web sites• Generally (probably) invitations to treat – see

Poole pp. 48-50– Tenders

• Request for tenders are normally invitations to treat (Spencer v Harding)

Offer Q1

III. Offer (cont.)

• Offer invitation to treat – examples (cont.)– Tenders (cont.)

• Exceptions– Contractual obligation to accept most

competitive bid – express or implied (Harvela Investments Ltd v Royal Trust Co. of Canada (CI) Ltd)

Offer Q1

OfferorOffer =

Invitation to submit tenders(Content of promise =

Accept the highest bid and to abide by the other tendering conditions)

Offeree

Condition to be performed = Submitting of the highest bid

Unilateral contract comes into existence

III. Offer (cont.)

• Offer invitation to treat – examples (cont.)

• Exceptions (cont.)– Contractual obligation to consider conforming

tenders – express or implied (Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council)

Offer Q1

OfferorOffer =

Invitation to submit tenders(Content of promise =

Consider all conforming bids)

Offeree

Condition to be performed = Submitting of conforming bid

Unilateral contract comes into existence

III. Offer (cont.)

• Offer invitation to treat – examples (cont.)– Auctions

• Generally (Harris v Nickerson)– Advertisement that an auction is to be held

does not constitute an offer– Request for bids at an auction is no more than

an invitation to treat» The bid is the offer and the fall of the

hammer is the acceptance (Payne v Cave)

Offer Q1

Sale of Goods Act 1979 s. 57 (2)

“A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner; and until the announcement is made any bidder may retract his bid.”

III. Offer (cont.)

• Offer invitation to treat – examples (cont.)– Auctions (cont.)

• Auctions without reserve

Offer Q1

Promise to:•Sell to the highest bidder•Not applying reserve price•Not allowing the vendor to bid

Offer = Invitation to bid

(on an auction without reserve)

(Content of promise = Sell to highest bidder, not reserve prices,

no vendor bids)

Condition to be performed = Submitting of the highest bid

Unilateral contract comes into existence

III. Offer (cont.)

• Offers mere supply of or request for information– Harvey v Facey

• Unilateral offers– The general criteria must be met– Two types of offers

• To an (or several) identified individual(s) • To the public at large or to a class of persons

Offer Q1

III. Offer (cont.)

• Termination of offer– To be capable of acceptance an offer must be

current – must not be terminated before acceptance

– Lapse of time• Express limitation in the offer• Indefinite offers

– Terminates after a reasonable time (Ramsgate Victoria Hotel v Montefiore)

– Failure of condition precedent• An offer may be expressly or impliedly

conditional on occurrence or non-occurrence of events

Offer Q1

III. Offer (cont.)

• Termination of offer (cont.)– Death

• May terminate an offer– Death of offeror

» Offer of personal service by the offeror (exclusive skill)

» Where substitute performance is available – notice of death

– Death of offeree» Unclear case law» Poole suggests: Can probably be accepted

by the offeree’s representatives if the offer is of a non-personal nature

Offer Q1

III. Offer (cont.)

• Termination of offer (cont.)– Revocation (withdrawal)

• An offer may be revoked expressly or impliedly

– General rule: Offeror may revoke offer until it is accepted by the offeree

• Firm offers– A firm offer promise is unenforceable unless

supported by consideration (Routledge v Grant)

Offer Q1

Comparative remarks:Can offers generally be revoked under Norwegian law?

III. Offer (cont.)

• Termination of offer (cont.)– Revocation (cont.)

• Unilateral offers– Special difficulties while the performance of the

condition represents the acceptance– The availability of the power to revoke the offer

until the offer is accepted can potentially cause hardship

» Some authority indicates that the power to revoke might be lost where (the offeror has notice that) an offeree has unequivocally embarked upon performance – but conceptual difficulties:

Offer Q1

Acceptance upon

commencement?

Promissory estoppel?

Collateral Contract?

III. Offer (cont.)

– Rejection by the offeree• A rejection expressly or impliedly causes the

original offer to lapse• Rejection by counter-offer

– A counter-offer will prevent the offeree from later changing his mind – can not accept the original offer (Hyde v Wrench)

» Counter-offers must however be distinguished from a request for further information (coming back to this issue in a few minutes)

Offer Q1

IV. Acceptance

• What constitutes a corresponding acceptance?– The offeree’s unequivocal expression of intention

to be bound in response to the offer, exactly matching that offer:

• Key issues– Matching of offer– Method of acceptance– In response to the offer

Q2Corresponding

Acceptance

Corresponding acceptance Agreement

IV. Acceptance (cont.)

• What constitutes a corresponding acceptance? (cont.)– Matching of offer – The mirror image rule

• The acceptance must be unconditional and correspond with the exact terms of the offer

– Must accept all the terms of the offer – no conditions, qualifications, reservations or additions

Q2Corresponding

Acceptance

Counter-offerCorresponding

acceptance

Agreement No Agreement

Rejection of original offer

+A new offer

Request for further information

Original offer still available for acceptance

(not rejected)

IV. Acceptance (cont.)

• What constitutes a corresponding acceptance? (cont.)– Matching of offer – The mirror image rule (cont.)

• If not acceptance: Is it a counter-offer or request for further information?

– Hyde v Wrench (counter-offer)– Stevenson v McLean (request for further

information)– What is the consequence of the distinction?

Q2Corresponding

Acceptance

IV. Acceptance (cont.)

• What constitutes a corresponding acceptance? (cont.)– Matching of offer – The mirror image rule (cont.)

• Qualifying covering letters (transmittal letters) (The Society of Lloyd’s v Twinn)

• The battle of forms– The traditional analysis applied:

Q2Corresponding

Acceptance

No contractContract on the last terms sent

before performance

Note: Restitutionary remedy may

be available where performance has been

rendered

IV. Acceptance (cont.)

• What constitutes a corresponding acceptance? (cont.)– Method of acceptance

• Starting point: Can be made in writing, orally or by conduct

• Prescribed method of acceptance– Prescribed mandatory method of acceptance

» Explicit words stating that the prescribed method must be followed and that no other method will be sufficient – must be made very clear

» An acceptance not conforming to the requirements will not be sufficient

Q2Corresponding

Acceptance

IV. Acceptance (cont.)

• What constitutes a corresponding acceptance? (cont.)

• Prescribed method of acceptance (cont.)– Prescribed method of acceptance (not

mandatory)» Manchester Diocesan Council of Education

v Commercial & General Investments Ltd):

Q2Corresponding

Acceptance

(1) Equally efficacious method:

Valid if it fulfils the purpose in prescribing the method

(2) Method prescribed in order to benefit the offeree:

Offeree can waive the stipulation as long as the chosen method of acceptance

does not disadvantage the offeror

Alt.

IV. Acceptance (cont.)

• What constitutes a corresponding acceptance? (cont.)– Acceptance must be made in response to the

offer• Especially important when it comes to

unilateral offers– The offeree must have knowledge of the offer– When there is knowledge, the offerees motive

is irrelevant (Williams v Carwardine)

Q2Corresponding

Acceptance