Transcript Slide 1
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
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Writing
Contracts need not be in writing
Exceptions
Sale of Land
Guarantees
Credit contracts
Other statutory requirements
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Analysing a Contract
Is there a contract?
What are the terms?
Is it valid & enforceable?
Has it been discharged?
Has there been a breach?
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Six Elements
1.
2.
3.
4.
5.
6.
Offer
Acceptance
Consideration
Intention to create a contract
Contractual Capacity
Certainty
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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
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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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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
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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.
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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)
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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
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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
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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
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Provision of Information
A statement supplying information may not be
an offer
Harvey v Facey (Graw 3.2.2)
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Termination of Offer
Revocation
Rejection
Lapse of time
Failure of condition
Identical cross offers
Death
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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?
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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
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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
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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)
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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)
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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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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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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
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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)
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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
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Was acceptance
made under the
postal rule?
No
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