Formation: Offer and Acceptance How do we know if a contract exists? Offer and acceptance Consideration Intention to be legally bound Certainty of the contract and its terms Some contracts need to be in a certain form Capacity to enter into contract, e.g. a young person cannot enter into a contract Offer: Intention to contract is unequivocal. Agreement: a consensus (meeting of the minds) amongst all parties about the arrangement. There must be objective evidence of the agreement Not subjective, there is no agreement if you don’t say or indicate clear agreement/undertaking. Making a commitment: There is an immediate readiness to be bound/undertake obligation/ assume responsibility e.g. language showing commitment or conduct ----- Invitation to Treat (Invitation to Make Offers) Harvey v Facey [1893] Provision of information, not an offer. Fisher v Bell [1961] Shop window invites offers but is not an offer itself. Only providing an example of things they sell, could be out of stock which is unfair on the shop. A shop is a place of bargaining, not of definite sales, and you can haggle about the price (outdated in modern conditions). ‘Snapping-up’ cases Ex. Online shopping at Argos The price + description of a TV set is put on the website £2.99. Customer bought 200 units, and Argos confirmed payment + delivery. Q: Is the website the same as the shop window? ‘Add to basket’ = offer, payment confirmation = acceptance One party knows/should have known about the other’s mistake. In selling, the customer makes the offer. All points above show an immediate readiness to be bound. Pharmaceutical Society v Boots Cash Chemists [1953] Self-service system is invitation to treat, allows customer to change their mind. Spencer v Harding [1870] General advertising circular (e.g. newspaper adverts) is an invitation to treat, not a commitment or offer. However not all adverts are just invitations to treat, it depends on the wording and context. ----- Ex: Customer sits down, looks at menu and orders. Waiter takes down order + gives to Gordon. Give wine list to customer who thinks it is too expensive and leaves restaurant. Is there an immediate readiness to assume obligation? Menu is an invitation to treat, not an offer. Q: When is the offer made? A: Customer looking at the menu is an offer to buy. Waiter takes down order and confirms with customer, but what if your dish has run out? Is the restaurant in breach of contract? Q: When is there acceptance? 3 options – When waiter takes the order, when chef cooks food, when food arrives at table. Commercial problems with these options: Waiter accepting The customer can’t change mind, if a food is out of stock the restaurant would be in breach of contract. Food arriving Wasting time and materials, customer can walk out at any time. A: There is acceptance when the chef begins cooking. This is the best solution/most commercially sensible/most reasonable. The restaurant has committed and everybody is bound. Ex: Jim, a student, went into the university refectory to eat lunch. As he passed along the counter an attendant gave him a plate of meat and vegetables which he put on a tray. He then selected an apple from a glass case and also put it on his tray. As he was proceeding to the cash desk at the end of the counter he reflected that examinations were due to begin in a week's time. He no longer felt hungry and therefore told the cashier that he wished to return the food on his tray. The cashier insisted that he must pay for it. Does Jim have a binding contract to pay for the lunch? Apple in the case is an invitation to treat. His picking it up is an offer to treat, but he has the option to go back and change his mind. The invitation was made to everybody. The hot food is an offer made to him only. The dinner lady giving him the food is an offer and when Jim takes it he is accepting the offer. The payment is just deferred. The food cannot be put back because it is hot, the make-up is bespoke, and there is an issue about hygiene. What would be the position if Jim had taken a bite out of the apple before he reached the cashier? Obligation bailment: one party trusts the other to handle goods. There is a duty to take care of the goods of somebody else. In this problem, Jim is the bailee, and must mind the apple. In tort law, there is a duty not to take somebody’s goods and covert them into your own – civil wrong of theft. ----- Things that are likely to be an offer: Offer for reward – for the capture of a criminal, for the return of a lost item etc. Advertisement for auction sale without reserve Generally, in an auction, the auctioneer asks for bids. The offer is the bidder naming a price/ placing a bid, and the acceptance is when the hammer goes down, i.e. it is “knocked down” to the highest bidder. Most auctions have a reserve price, the stated price in the catalogue. If it does not reach that price then there is no sale, in order to protect the seller. Barry v Davies [2001] An auction “without reserve” means the items go for any price, and it is recognised by the court as an offer, not an invitation to treat. This is because the customer must believe that they will get a good deal so they travel a long way. The person who makes the highest bid accepts the offer. ----- Acceptance 1. The offeree needs to accept the exact terms proposed. Counter-offers: Hyde v Wrench (1840) Offerall A (Wrench) makes offer to offeree B (Hyde). B makes a counter-offer, which is not an acceptance. It also extinguishes the offer first made by A, i.e. the first offer no longer exists and B can no longer accept it. Stevenson v McLean (1880) Sometimes B’s response does not count as a counter-offer, but is rather a request for information, and doesn’t extinguish the first offer. This is up to an examination of the language and conduct. 2. Acceptance by conduct is possible. Brogden v Metropolitan Railway Co (1877) Must be an overt, “unequivocal act of acceptance” with very clear conduct to be an acceptance. 3. The offeree must accept in the method prescribed by the offerall. Manchester Diocesan Council for Education v Commercial Investments Ltd [1969] Where the offerall has stipulated/set out a method of acceptance but has not said that it is the only method of acceptance, then the offeree may accept in another manner as long as it does not prejudice the offerall’s position, i.e. there is no urgency about it, such as with perishable commodities. e.g. A tomato sale should be accepted by email, it might be too late if accepted by letter. Ex: John wants to sell his BMW, says he must get a letter of acceptance. A student send a letter and give him a phone call accepting to show intention to contract, where John says yes. John reconsiders. However his affirmation by telephone is him waiving the original insistent on only accepting by letter. 4. The offeree must know of the offer. Does the offeree need to rely on the offer? Ex: John says to Wayne Rooney, “If you score more than 15 goals for Man U I will give you £10.” Wayne claims this, John says no. He knows of the offer, but doesn’t rely on it He has a salary, and doesn’t always think about the £10, no consideration. Do you have to be induced to fulfil the offer? Yes, but motive doesn’t matter. 5. “Battle of the Forms” An offer + acceptance problem: The issue is not whether there is a contract, but what are the terms of the contract. Which form is more valid? Butler Machine Tool Co v Ex-cello Corporation [1979] Identify the subject matter of the contract. Signed tear-off is the key document, accompanying letter is only a covering letter. Tekdata Interconnection Ltd v Amphenol Ltd [2009] The traditional offer and acceptance analysis had to be adopted unless the documents passing between the parties and their conduct showed that their common intention was that some other terms were intended to prevail. ----- Communication of Acceptance Entores Ltd v Miles Far East Cpn [1955] Acceptance is communicated when it is received. Exception 1: Waiver of notification, e.g. Carlill v Carbolic Smoke Ball Co [1893] where a waiver is implied by the nature of the transaction or language of the offer. Felthouse v Bindley (1862) The offerall cannot compel the offeree to take positive steps to reject the offer by providing that the offeree’s silence should constitute acceptance, i.e. cannot impose/deem your silence to mean acceptance. Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) Must look at the whole of the conduct of the referee. If there is an unequivocal act of acceptance by conduct, there is a contract even if they are just continuing what they have been doing before. See which principle the facts come into. Q: What if someone is selling a car and says to accept you must stay silent, and you want the war so you do what the offerall asks and stay silent? A: Probably not commercially friendly Exception 2: Failure of communication by fault of the offerall. In Entores Ltd v Miles Far East Cpn, Denning LJ makes up a number of hypothetical situations, such as if there was no ink in the printer.