Are Offers Legally Binding

In this particular problem, the major issue is whether there is an option between Lewis and Benny. And the acceptance of Benny is effective or not. Next, the revocation of Lewis is complete or not. Moreover, we need to examine whether there is a valid contract (offer and acceptance), option contract between the Lewis and Benny, a valid contract between Lewis and James and the revocation is effective or not.

A most basic element of legally binding contract is offer and acceptance. Offer and acceptance is a traditional approach in law of contract used to determine whether an agreement exists between two parties. So explanation of an offer and acceptance will be needed. For offer, according to the section 2(a), Contracts Act 1950 – ‘when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal’. In simply word, an offer is a promise to be bound on particular terms. Section 2(c) of the Act calls the person making the proposal/offer as offeror. The person to whom makes the offer is ‘an offeree’.

When a people make the offer, if it is accepted by an offeree, then will result in a legally enforceable contract. Section 2(b) of said Act state that ‘when the person to whom the proposal is made signifies his assent thereto, the proposal is said to have been accepted’. Once the offeree has assented to the terms offered, a contract comes into effect and both parties are bound to perform it. The offeror can’t longer to withdraw his or her offer. And the offeree also can’t withdraw his or her acceptance.  For example, in a contract for the sale of a piano, the seller may offer the piano to the buyer for $1,000.00. The buyer’s acceptance of that offer is a necessary part of creating a binding contract for the sale of the piano.

In this case, Lewis made an offer to sell his fridge and washing machine to Benny for Rm800. That means Lewis is making an offer to Benny for his fridge and washing machine, and gets a consideration of rm800. At that point it was up to Benny to decide whether want to accept this offer or not. But in fact, Benny replied: ‘I will buy it if I can raise the money’. According to Section 7 of said Act, the acceptance must be absolute and unqualified. This may be seen in LAU BROTHER & CO V CHINA PACIFIC NAVIGATION CO.LTD [1965].In this case the fact is negotiations for the delivery of logs were conducted through a series of telegrams and letters. Whilst still on the negotiating stage, the defendants withdrew. The courts held that parties were still in a stage of negotiations and no agreement was formed. Therefore defendants were justified in withdrawing. A conditional assent is not an acceptance, so there is not acceptance. Although Benny did mentioned he will buy it but with a conditional. So there is not an acceptance.

Promises are not contractually binding without consideration .A promise to keep an offer open is only binding when there is an option contract. An option contract is defined as “a promise which meets the requirements for the formation of a contract and limits the offeror’s power to revoke an offer.” In term of option contract is the offeree must provide consideration to the offeror to keep the offer open. If no such consideration is provided, then the offeror may revoke his’s offer any time before the acceptance if he wants. When the offeror revoke his offer, the offer is no longer open to offeree to accept it. In this case, Lewis promised that he would not sell to anyone before Sunday. Although, he promised, but Benny didn’t provided any consideration so there is not option contract between them. A similar case can found is Routledge v Grant [1828]. In this case although the defendant had given the plaintiff six weeks to accept an offer to buy house, he was entitled to withdraw the offer at any time prior to plaintiff’s acceptance of the offer. So, Lewis had the right to revoke his’s offer any time.

On Thursday, Benny phoned and left a message with answering machines, saying that he had got the money and would come and collect the fridge and washing machine on Sunday morning. Section 7(b) of said Act stated acceptance must be made by same or reasonable manner. Before Lewis making offer with Benny face to face. So there is common sense that Benny should accept it by using the method which is oral. But Benny uses the method that which is phoned and left a message with answering machines. Although that is not the same manner, but there is a reasonable manner. Because we are usually use our phone. That is the faster ways to let Lewis know also. So there is a proper acceptance.

However, the acceptance is effectively communicated only when the offeror has received notice of it. Even through, Benny has made the proper acceptance but Lewis was very busy and forgot to check his answering machine. A similar case can applied here is Powell v Lee [1908]. In this case, the claimant was notified that his job application had been successful by a member of an appointments board, which then decided to give the job to someone else. The person who had told the claimant of his success had not been authorised to do so and therefore acceptance had not been effectively communicated. In this circumstance, acceptance by telephone is held to be effective only on being heard by the offeror. Since the acceptance is not effective, so there is not valid contract between Lewis and Benny.

On Friday, Lewis was invited by James who said that he would pay RM900 for the fridge and washing machine. In law, there is a proper offer. Lewis can decided want to accept it or refused. Lewis accepts the offer. Because Benny did not provide any consideration for Lewis’s promise to give his time to raise money; Lewis can sell his fridge and washing machine anytime. And Lewis has accepted the James’s offer; there is a valid contract between Lewis and James.

Later on, Lewis posted a letter to Benny and telling him that he could not have the fridge and washing machine. As that action, Lewis is making a revocation of his offer. As a general rule, when acceptance is complete, an agreement is formed so that there is no question of revocation. But the acceptance is not complete yet so the revocation is possible. Due to acceptance is not complete; Lewis was therefore at liberty to revoke the offer within that period of time.

But that is an important point to note that, the revocation is not effective until it is in fact received by offeree – Section 4(3) of said Act. In the circumstances of the problem, Brian, the postman, delivered it to the wrong address and Benny, who never received the letter. Which mean the revocation is not effective. In Myrne v Tiehoven [1880], an offer was accepted by post after a letter of revocation had been posted, but before it had reached the offeree, it was held that a contract had been created by the acceptance of the offer. So in other word that, the revocation is only effective when Benny received the letter which he is not.

In conclusion, there is not option contract between Lewis and Benny. Benny’s acceptance is not complete, so there is not valid contract between them. Lewis can make contract with James which he already did. There is a valid contract between James and Lewis. Although revocation is not effective since Benny never received the letter and he appeared with a hired van to collect the fridge and washing machine at 10 am on Sunday. But the Revocation can take place up to the moment. Lewis can make the revocation when Benny appeared on Sunday, since the acceptance of Benny is not complete. In law, Lewis is not wrong at all and Benny can’t sue him for breach of contract.

Q2:

In this question, we need to distinguish between an offer and an invitation to treat. First, we need to define what is offer and some detail or rule of offer. And then the term of ’invitation to treat’, some similar case of offer and invitation to treat. Moreover, the different between the offer and the invitation to treat

According to Section 2(a), Contract Acts 1950 offer is ‘when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal’. In other word offer is a statement of the terms on which the offeror is willing to be bound. Or can say it is promise to be bound on particular terms.

The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made – Section4 (1), of said Acts. This means that an offer or proposal is only effective once the offeree know it. When the offer is made by offeror, offeree can decided whether wanted to accept it or rejected. Once the acceptance is made by offeree before the revocation, the offeror is bound to perform the contract.

An offer can be made through express or implied. The “expression” simply means it may take different forms, such as writing, oral, letter, fax, email and even by conduct, as long as it communicates the basis on which the offeror is prepared to make the contract.

There are ‘bilateral’ and ‘unilateral’ offers. A bilateral offer is one party make offer to another party, both parties make a promise to the other. Bilateral contract normally is comprised of an exchange of promise. For Unilateral contract, it means one party make offer to the group of people or the world at large.

The similar case of offer is Carlill v Carbolic Smoke Ball Co [1893] and it was of a kind known as a unilateral contract.In this case the defendant manufactured smoke ball. They claimed that if use the smoke ball properly that is impossible to catch flu. If still caught flu, they will reward £100, they also bank in £1,000 into bank. Mrs.Carlill used it properly and still caught flu. She claimed for that money. The defendant refused to pay, arguing that their advertisement was not an offer. The court held that it was an offer of unilateral contract. The claimant had accepted this offer by using the smoke ball properly and still caught flu. So, she was therefore entitled to the reward.

An invitation to treat is not an offer, but it is only invitation to make an offer.The courts have tended to take a consistent approach to the identification of invitations to treat, as compared with offer and acceptance, in common transactions. The display of goods for sale, advertisements, catalogues, price list, auctions, tenders are ordinarily treated as an invitation to treat and not an offer. There are two case with the examples of invitation to treat can let u get know more into invitation to treat.

First case is about advertisement; the majority of the advertisements are invitation to treat. Partridge v Crittenden [1968], the defendant had advertised bramblefinces in a magazine at 1.25 each. The defendant is charged with offering for sale a wild live bird, contrary to the Protection of Birds act 1964. The court held that the defendant was not guilty because his advertisement was an invitation to treat, not an offer.

Second case is about Goods display in shop, whether the goods with or without price tag dose not amount to an offer t sell the goods displayed. It is invitation to treat. Fisher v Bell [1961], in this case the defendant was charged with offering sale an offensive weapon, because he displayed a flick knife in his shop window. The court held that the defendant was not guilty also. The display of the knife amounted only to an invitation to treat and not to an offer to sell.

Auctions are sometimes invitations to treat which allows the seller to accept bids and choose which to accept. But, if the seller states that there is no reserve price or the reserve price has been met, the auction will be considered an offer accepted by the highest bidder. The rule is that when the bidder is making an offer to buy and the auctioneer accepts this in whatever manner, usually the fall of the hammer. A bidder can withdraw his or her bid at any time before the fall of the hammer.

An offer is made when a person shows a willingness to enter into a legally binding contract with offeree. While an invitation to treat is merely a supply of information to invite a person into making an offer. However the distinction between the two can often be misleading and misinterpreted. When that is really misinterpret occur then it is depend to the courts to decide and to distinguish between the two terms, so a person is not led into a binding contract of which he does not want to be a part of, but is merely supplying information to which an offer is to be made.

In conclusion, the difference of offer and invitation to treat can sometimes be difficult to determine. In my opinion, the major different between offer and invitation is accepting an offer creates a binding contract while “accepting” an invitation to treat is actually making an offer.