Offer and acceptance in english contract law - Essay Example

? OFFER AND ACCEPTANCE IN ENGLISH CONTRACT LAW 18 March OFFER AND ACCEPTANCE IN ENGLISH CONTRACT LAW Introduction Contracts are agreements, between parties, that are enforceable in a court of law. A number of factors determine enforceability of agreements that qualifies a contractual agreement as valid, void, or voidable. Offer and acceptance, as components of an agreement, are some of the elements of a valid contract. A contract is therefore valid if, among other essential elements, all the rules that pertain to offer and acceptance are honoured. This paper seeks to discuss the principles that have been developed with respect to offer and acceptance. The paper will then apply the principles to a case. Principles that underpins offer and acceptance Agreement is one of the fundamental elements of a valid contract. It depicts the coming to terms of the parties to the contract through consensus over terms of a contract. Agreement is a product of existence of offer and acceptance. An offer is a promise made by one party to another in which the promisor intends to be bound by terms of his promise. Some of the elements of an offer include the intention to be bound by the offer if it is accepted, and existence of terms that creates rights and liabilities in the event of acceptance. Acceptance on the other hand refers to the promisee’s intent to be bound by the promisor’s terms of offer. Once an offer is accepted, an agreement is deemed to have existed between the parties forming ground for a contract. Offer and acceptance are however subject to a number of principles (Antoniolli, 2005, p. 110-129). Developed principles of offer One of the developed principles on offer is the definition of offer and the scope of what constitute an offer. Though an offer is an expression of terms to which the offeror intends to be bound, there are some expressions that do not amount to an offer. These includes “invitation to treat” (Rush and Ottley, 2006, 47). Invitations to treat are expressions that are meant to attract a party to initiating a contract as opposed to an offer that calls for a party to accept terms of a contract. Examples of invitation to treat, not amounting to an offer include “advertisement, goods on display on a shop, and answers to request for information” (Rush and Ottley, 2006, 47, 48). An advertisement is for example a presentation of information over the subject matter and only acts as an invitation to a customer to make an offer. In the case of Partridge v Crittenden (1968), the court held that an advertisement that indicated the price of goods in a vendor’s shop does not amount to an offer. Similarly, exhibition of goods for display does not amount to an offer. The owner of the goods is therefore not bound by the information displayed in an exhibition, as an offer for the good has not yet been made. Such was the ratio decidendi in the case of Pharmaceutical society of Great Britain v Boots cash chemists (1953). The defendant was accused of offering to sell commodities to the public contrary to prescriptions by regulatory bodies. It was held that the display of drugs on the shelf does not amount to an offer (Rush and Ottley, 2006, 47). Similarly, response to question for provision of information does not amount to an offer. This was held in the case of Harvey v Facey (1893) in which a defendant’s statement of the lowest price that could be accepted for sale of a piece of land was considered not to amount to an offer (Rush and Ottley, 2006, 48). The doctrine of invitation to treat is however exempted in some cases under which an advertisement can constitute an offer. In the case of Carlill v Carbolic Smoke Ball Co Ltd (1893), it was held that the defendant’s advertisement amounted to an offer. The defendant stated in its advertisement that a reward would be offered to any person who contracted influenza after using its medicine as prescribed. The advertisement further indicated that money had been deposited for the rewards. The court, in its judgement, held that the mention of the deposited money was a serious commitment that implied an offer (Rush and Ottley, 2006, 48). Termination of an offer Termination of an offer is another principle that has developed to regulate liabilities of parties to a contract. A party is bound by its offer only as long as the offer is effective. The liability ceases with termination of the offer. One of the ways in which an offer can be terminated is upon “expiry of offer” (Rush and Ottley, 2006, 50). An offer expires after the end of its stipulated period, or if the period is not specified, then after expiry of a reasonable period. The reasonability of the period may depend on factors such as customs of trade or nature of commodities in question. It was held in the case of Ramsgate Victoria Hotel v Montefiore (1866) that the nature of the commodity can define reasonability of duration in which an offer can be considered effective (Rush and Ottley, 2006, 50). Antoilli however argues that an offeror who has expressly committed to be bound by the offer over a stipulated period cannot revoke the offer before expiry of the period (Antoniolli, 2005, p. 110-129). One of the ways of terminating an offer is through revocation of the offer. The general principle of agreement is that an offer is followed by an acceptance to yield an agreement that binds the offeror. An offer can however be revoked by the offeror if such offer has not yet been accepted. This was illustrated in the case of Routledge v Grant in which the defendant made an offer to run for a specified period. The offer was however terminated before the expiry of the period and before an acceptance was made. The court held that an offer could be terminated at the discretion of the offeror as long as no acceptance has been made. Revocation of an offer must however be communicated, however, the offeror will be bound by any acceptance that is based on the offer. This principle was set in the case of Byrne v Van Tienhove (1880) in which the court held that the offeror must effectively communicate revocation of an offer (Rush and Ottley, 2006, 47). An offer can also be terminated by rejection. This refers to the expression of the offeree’s intentions not to be bound by the terms of the offer. Rejection may be express or merely implied by actions of the party to whom the offer was made. It however becomes effective when communicated to the offeror. An offer is also terminated by a counter offer. Counter offer refers to the presentation of different terms by the offeree to the offeror. The different terms may be with respect to consideration of time of delivery or any other term to the proposal. Counter offer makes the original offeree an offerer and an agreement is reached only if the original offerer accepts the new terms as presented in the counter offer. An offer can similarly be terminated under law by factors such as changes in legislation that makes the subject matter, of the offer, illegal, expiry of period of offer among other factors. An offer can also be terminated by the death of the offerer, especially if the offer was for provision of personal services (Millerand Hollowell, 2010, 121). Rules of acceptance Acceptance refers to the offeree’s intimation of commitment to an offer. It may be express or implied by actions of the offeree. The first rule of acceptance is that it must be absolute and not attached to any condition. A qualified acceptance amounts to counter offer and terminates the original offer. Qualified acceptance consequently renounces the opportunity of acceptance as was held in the case of Hide v Wrench. Acceptance must also be distinguished from enquiry by the offeree. Seeking more information about the offer does not imply acceptance to the offer. It also does not mean that the offeree, as was held in the case of Stevenson, Jacques v McLean (1880), has rejected the offer (University of London, n.d., p. 27). Acceptance must also be communicated to the offeror. Until such a communication is made, no acceptance and therefore contract is deemed to have taken place. The general consequence of this principle is that silence does not amount to acceptance. A contrary condition by the offerer that the offeree’s failure to communicate will amount to presumption of acceptance is therefore not applicable (University of London, n.d., p. 27). The communication must further be made in the manner as prescribed by the offerer. Using a different method or media, from the prescribed one does not amount to an acceptance. An acceptance that had been presented in person, when the offer prescribed postal communication is therefore considered invalid (Sharma, 2010, p. 28). There are however exceptional cases in which communication of acceptance to the offerer is not a necessity. This has a consequence of allowing for enforcement of a contract in the absence of communication of acceptance. One of the instances is when the acceptance is communicated to the offerer’s agent. This is because an agent is legally empowered to transact on behalf of the principal and any such transaction are assumed to have been done with the principal. Waiver, by the offerer, of the need to communicate acceptance also establishes an agreement without communication of the offeree’s acceptance. Such waiver may be expressly communicated directly to the offeree, alongside the offer or may be by implied conduct of the offerer. Communication is also exempted in unilateral contracts in which communication of acceptance is often waved by customs and traditions. A major exemption to the rule of strict communication is however realized in the postal rule (Sharma, 2010, p. 25). The general rule of communication of acceptance is that communication is effective when it is received by the offerer. This rule is however deviated from when communication is made by post as provided for by the postal rule. Under the postal rule, acceptance is deemed to have been communicated when the letter of acceptance is posted to the offere as opposed to the time at which the letter is received. The doctrine was established in the case of Adams v Lindsel (1818). The plaintiff had accepted an offer by post office. The defendant, having waited for a reasonable period, considered that there was no acceptance from the plaintiff. The acceptance was however posted within the defendant’s stipulated period and the courts held that acceptance was communicated at the time of postage of the letter (Stone, 2009, p. 72, 73). Consequently, the postal rule establishes an agreement even if the offerer does not receive the acceptance, if the communication was within the offerer’s acceptable modes and that the acceptance was communicated before the lapse of its period. The postal rule is however limited to instances in which it is logical and practical to use postage for communication. While an offer by post can, reasonably and practically, be accepted by post as a precedent set by the offerer, communicating acceptance by post while the offer was made through a different means would call for more rationale. Reasonability of using postage for communicating acceptance also relies on the distance between the contracting parties. Long distances between the parties will for example justify the use of postage for communicating acceptance as was held in the case of Henthorn v Fraser (Stone, 2009, p. 74). There are however a number of complications surrounding the postal rule. Mau (2010, p. 17) argues that interpretation and application of the postal rule becomes controversial in cases where “the letter is incorrectly addressed, delayed or lost.” The author further argues that the postal rule is not applicable to communication modes such as “e-mail, telephone, telex or facsimile” (Stone, 2009, p. 17). Acceptance, if made over telephone is only effective if the communication between the two parties was clear. Intimation that the acceptance is understood by the other party is therefore necessary. Disruptions of communication such as noise or termination of the communication before the acceptance is clearly understood therefore undermines communication of acceptance (Sharma, 2010, p. 31). Farah’s case Facts Farah, a businessperson, offered through an advertisement, to sell bronze compasses to the first ten people who complete a ‘two-mile’ walk and to sell fifty jackets with built in touch at ? 70. Fabians then informed Farah of his intention to purchase twenty jackets at ? 60 each. Farah also offered to sell a gold compass to Zara at ? 50 but she left without any communication before the compass was sold to Aki at ? 80. At the same time, Jon communicated his intention to buy 5 bronze compasses at ? 50 with a condition that he would collect the items if Farah did not communicate. On 31 October, Peter, one of ten people who participated in the advertised walk maze claimed a right to sale at a reduced price though he had not completed the walk. Fabian also came to collect the twenty jackets, Zara for the gold compass at a reduced price, and John for the bronze compasses. Legal principles The two advertisements that were posted by Farah were invitation to treat and not offers as explained in the case of Partridge v Crittenden (1968) (Rush and Ottley, 2006, 48). Fabian’s mail was therefore an offer and not acceptance and could either be accepted by Farah or rejected. Even though Farah made an offer to Zara for sale at a reduced price, Zara did not communicate her acceptance of the offer. There was, as a result, no agreement between Farah and Zara to constitute a contract because of absence of an acceptance to Farah’s offer (University of London, n.d., p. 27). An offer can only be accepted when it is still effective. Lapse of the offer that includes lapse of time or lapse of existence of the subject matter therefore terminates an offer which can then not be accepted (Sharma, 2010, p. 27). Another essential element that is applicable to the case is the doctrine of absoluteness of acceptance. The offeree must conform to the terms of the offer for the acceptance to be effective. Qualified acceptance that amounts to counter offer as was established in the case of Hide v Wrench is therefore not an acceptance (University of London, n.d., p. 27). Advice to Farah There was no agreement between Farah and any of Peter, Fabian, Jon, and Zara. Peter’s acceptance to buy the compass at a reduced price was not absolute, as he had not completed the walk. This amounted to counter offer and hence no agreement. Fabian’s ?60 instead of ?70 also amounted to counter offer. Jon’s case did not amount to an agreement because Farah did not accept his counter offer and silence does not amount to an acceptance. Though Zara communicated her acceptance, the offer was no longer in force, and she was aware of this. Farah is therefore not liable to any of the parties for breach of contract based on the rules of offer and acceptance. No remedy would therefore be applicable in the cases. Bibliography Antoniolli, L. (2005). Principles of European contract law and Italian law. Hague, Netherlands: Kluwer Law International Mau, S. (2010). Contract Law in Hong Kong: An Introductory Guide. Hong Kong, China: Hong Kong University Press Miller, R. and Hollowell, W. (2010). Business Law: Text & Exercises. Mason, OH: Cengage Learning Rush J. and Ottley, m. (2006). Business Law. London, UK: Cengage Learning EMEA Sharma, A. (2010). Business Regularoty Framework. New Delhi, India: FK Publications Stone, R. (2009). The Modern Law of Contract: Seventh Edition. New York, NY: Taylor & Francis University of London. (n.d). Offer and acceptance. available from: http://www.londoninternational.ac.uk/current_students/programme_resources/laws/subject_guides/law_contract/contract_ch2.pdf. [Accessed on 18 March 2012] Read More