Offer and Acceptance

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  • Topic: Contract, Offer and acceptance, Option contract
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  • Published : August 1, 2012
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FORMATION OF A CONTRACT

OFFER AND ACCEPTANCE

For a contract to be valid, firstly there must be an AGREEMENT between the parties i.e. one party must make an OFFER which is UNCONDITIONALLY ACCEPTED by the other.

OFFER

What is an offer ?

An offer is a promise that the person making the offer (known as the offeror) is prepared to be legally bound upon specified terms – he is making a statement of the terms on which he is prepared to be legally bound, for example A says to B would you like to buy my car for £1000.

Who are the parties to an offer ?

The offeror - this is the person who makes the offer
The offeree - this is the person to whom the offer is made

THE RULES RELATING TO OFFERS ARE AS FOLLOWS:

1. The offer must not be too vague:

Gunthing v Lynn (1831)

The offeror promised to pay a further sum for a horse if it was ‘lucky’, this was held to be too vague.

An apparently vague offer is capable of being made certain where there have been previous dealings between the parties.

Hillas v Arcos (1932) 38 Com Cas 23

There was an agreement in writing for the supply of wood during 1930, and it contained an option to buy more wood during the following year – however it did not specify the kind or size of timber to be supplied. Held: the contract was binding because it was assumed to be on terms similar to those agreed in previous dealings between the parties.

2. An offer can be made to the following person(s):

a) A specific person.
b) A class of persons
c) The whole world (for example reward cases)

3. The offer must be communicated to the other party:

An offeree unaware of an offer cannot accept it.

Taylor v Laird (1856) 1 H&N 266

The captain of a ship resigned his command in a foreign port. However he did help to work the ship home and he claimed payment for this. Held: the owners could refuse payment as they were unaware that he had offered his services (as he had not communicated this fact to them) so they could neither accept or reject his offer.

(This rule also applies to reward cases).

An offer communicated by post is only effective when it is RECEIVED.

An offer can be made ORALLY, in WRITING or by CONDUCT.

4. An offer must be distinguished from an invitation to treat:

As we have seen an offer is a promise to be bound by certain specified terms, an invitation to treat however merely INVITES OFFERS from another (it does not make an offer).

For example goods on a supermarket shelf are NOT being offered for sale, they are merely inviting offers. The price ticket indicates the amount the shop may be prepared to accept.

An invitation to treat is a first step in negotiations which may or may not, be a prelude to a firm offer by one of the parties.

Fisher v Bell [1961] 1 QB 394

A shop keeper was prosecuted for offering offensive weapons for sale by having flick knives in his shop window. Held The shop keeper was not guilty of offering for sale the flick knives as a display in a shop window is only an invitation to treat.

Pharmaceutical Society of Great Britain v Boots Cash Chemists [1952] 2 All ER 456

The defendants had particular drugs on display in their self-service store. They were charged with breaking a law which provided that drugs could only be sold under the supervision of a qualified pharmacist. A qualified person was however stationed at the cash desk. Held the display of goods on the shelf was only an invitation to treat (an invitation to make an offer). The customers offer could be accepted or rejected at the cash desk where the pharmacist was situated.

Other examples of invitation to treat:

• Advertisements in newspapers and magazines

Partridge v Crittenden [1968] 2 All ER 421

Partridge advertised for...
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