Q&A Contract Law

Richard Stone

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317675709
• Edition: 11
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

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1	Offer and Acceptance

INTRODUCTION

There can be few contract exam papers which do not contain a question on offer and acceptance. Students will often make this one of their ‘banker’ questions, but you will need to make sure that you are prepared to deal with any of the forms in which a question about offer and acceptance may be asked. The topics covered within this general heading are quite varied, but are nevertheless fairly predictable. General issues that will need to be understood include:

1. The nature of an offer and an acceptance – is an advertisement an offer? What if an ‘acceptance’ does not match the offer precisely? What is the effect of a ‘counter-offer’?

2. The relationship between offer and acceptance on the one hand and ‘agreement’ on the other – the objective approach to determining the existence of a contract.

3. The differences between unilateral and bilateral contracts.

As will be seen from the questions in this chapter, problems concerning the communication of offer and acceptance are often asked. In particular, students will need to be familiar with:

the ‘postal rule’ (Adams v Lindsell (1818)) – the types of communication to which it applies, and the situations in which it does not apply;

silence as acceptance – the rule in Felthouse v Bindley (1862), and possible exceptions to it;

the problems, many of them unresolved by the courts, of electronic communications, such as faxes, email and Internet contracts. Does the postal rule apply to them? If not, when and where do they take effect?; and

the rules governing revocation of an offer, in both bilateral and unilateral contracts – can there be revocation once performance of a unilateral contract has started?

Finally, it should be remembered that a question involving offer and acceptance may also sometimes require you to touch on other issues. You may find, for example, that an offer and acceptance question (although this is not the case with those contained in this chapter) will also involve discussion of intention to create legal relations, consideration or mistake.

Checklist

You should be familiar with the following areas:

■ the meaning of offer – the distinction from an ‘invitation to treat’;

■ the meaning of acceptance – the distinction from a ‘counter-offer’, and the possibility of acceptance by conduct or silence;

■ the differences between unilateral and bilateral contracts;

■ the postal rule and its limitations;

■ revocation of offers; and

■ recall of acceptance.

QUESTION 1 ^{----------------------------------------}

Abel Movers plc and Cain Construction Co Ltd have been in negotiations over a contract to move a large quantity of equipment owned by CCC, and currently stored in a warehouse, to its main premises. CCC asks for a quote for this work to be carried out over a weekend. On 30 May AM sends CCC an email quoting a price of £15,000 to complete the work over a Saturday and Sunday. CCC replies asking what the difference in price would be if the work was carried out over a longer period during weekdays. AM sends a second email on 31 May quoting a price of £12,000 to spread the work over four days during the week. Both AM’s emails have an order form attached, and state ‘If you wish to accept this quotation, please print off and sign the attached order form and return it to us by post.’ When CCC reads the second email, on the morning of 1 June, it decides at once that the difference in price is insufficient to be worth the greater disruption of having the work done during the week. It immediately prints off the order form attached to the first email, signs it and posts it to AM. Meanwhile, AM has realised that it has underestimated the costs of doing the work over the weekend, and that it should have quoted a price of £20,000. On 2 June it sends an email to CCC stating ‘This is to confirm that, following our quotation of 31 May, the quotation in our email of 30 May is no longer available for acceptance.’ On 3 June CCC’s signed form is received by AM.

Has a contract been made, and if so on what terms?

How to Read this Question

In reading a question it is important to be clear as to what the examiner is asking you to do. In this question, the instruction is to examine whether a contract has been made, and if so on what terms. The elements of a contract are offer, acceptance, consideration and intention. A quick read of the facts should tell you that there are no real issues of consideration or intention here. So your focus will be almost exclusively on offer and acceptance. The issue as to the terms is related to that of the offer and acceptance, since the answer depends on whose offer has been accepted.

How to Answer this Question

This question is of a common type, raising issues about the communication of offers and acceptances, and which of two parties is entitled to enforce a contract. In answering such a question, in which the timing of events may be very important, it is a good idea to make a chronological plan – for example:

1. 30 May – first offer from AM (email).

2. 30 May – request for information from CCC.

3. 31 May – second offer from AM (email).

4. 1 June – acceptance of first offer posted by CCC.

5. 2 June – withdrawal of first offer by AM (email).

6. 3 June – CCC’s acceptance of first offer received by AM.

This should make it easier to pinpoint the issues for discussion. Particular areas to be considered here are: offers, counter-offers and requests for information; the operation of the postal rule (Adams v Lindsell (1818)); and the revocation of offers. This problem raises the issue of whether there is a matching offer and acceptance, so that a contract has been made, and if so on what terms. The answer to this will depend on the point at which communications between the parties take effect, particularly acceptances and revocations of offers.

Applying the Law

This diagram highlights the main issues to consider in your answer.

ANSWER ^{----------------------------------------}

The English law on the formation of contracts generally requires there to be an offer and a matching acceptance. This is particularly the case with contracts made by correspondence, whether by letter, fax or email. The offer must set out, or refer to, all of the important terms of the contract; the acceptance must indicate agreement to all these. If it does not do so, not only will it not be a valid acceptance, but it will be regarded as a counter-offer, which prevents the original offer from being accepted later (Hyde v Wrench (1840)). An offer can generally be withdrawn at any time before acceptance is complete (Payne v Cave (1789)).

In this case there has been an exchange of emails between AM and CCC, and a letter sent by CCC to AM. The question is whether these exchanges have ended up with a contract being formed, and if so on what terms?

The first communication to consider is AM’s email of 30 May. Is this an offer, or an invitation to treat? A communication will be an offer if it is apparently intended by the person sending it that they will be bound to a contract if the addressee simply says ‘yes, I accept’. It...