Nature of Contractual Offer and Acceptance

Table of case law

Partridge v Crittenden (1968)

Scammell v Ouston (1941)

Carlill v Carbolic Smoke Ball Co (1893

Butler v Ex-Cell-O Corp (1979)

Pickfords Ltd v Celestica (2003)

Leonidas D, CA, 1985, Goff L.J

Routledge v Grant, (1828)

Dickinson v Dodds (1876)

Adams v Lindsell (1818)

Byrne v VanTienhoven (1880)

Henthorn v Frase (1892).

Contract Law

In this assignment, I will be looking at the problems concerning the communication of offer and acceptance. I will be touching on issues such as the meaning of offer and acceptance, approaches to agreement, the postal rule and its limitations, revocation of offers and recall of acceptance.

The English law on the structure of contracts generally requires there to be an offer and a corresponding acceptance. This is predominantly the case with contracts made by an invitation to treat. [1]

In the scenario, there was an advertisement placed by Chris in a specialist book magazine on offer for £1000. The question is whether the advertisement is an invitation to treat or an offer leading to an acceptance. In reference to Partridge v Crittenden (1968), an advertisement of goods on sale is an invitation to treat not an offer. In this case, the advertisement placed by Chris in the magazine is an invitation to treat not an offer.

It is clear and certain that Al’s initial phone call to Chris is an offer to buy the book. This is the first offer stated in the text by Al to Chris. In the case of Scammell v Ouston (1941) [2] , an offer must be clear and certain. An offer may be defined as a statement of willingness to contract on specified terms made with the intention that, if accepted, there will arise a binding contract. [3] An offer may be expressed or implied, in most cases an offer may be made to a specific person or addressed to a group of people or even to the general public. In reference to Carlill v Carbolic Smoke Ball Co (1893). [4]

Chris replied that he would sell it for £900 [5] . This offer terminates the initial offer made by Al making Chris’s offer a counter offer. This principle was adopted by the Court of Appeal in Butler v Ex-Cell-O Corp (1979) [6] and Pickfords Ltd v Celestica (2003) [7] it was held that a counter offer introduces new terms.

Al then said that he would need some time to think about buying the book at that price, in reply, Chris made a conditional offer to Al, agreeing not to sell the book to anyone else until Al has phoned him back in three days time with his final decision. At this point in time there has been a conditional offer but at any point in time could be revoked by Chris if he chooses to because there is no contract between the two.

On the same day, Dan came into Al’s shop and offered to pay Al £1500 for any first edition copies of the Bruce book and Al accepted the offer. In contract law, acceptance is accepted when communicated effectively to the offeree by the offeror. In the case Leonidas D, CA, 1985, Goff L.J [8] , stated that “the communication of acceptantance must be actually received by the offeror, and, where the means of communication are instantaneous (Oral, telephone, telex), the contract will come into being when and where acceptance is received.” [9]

Al immediately phoned Chris to say that he would accept his original asking pricing of £1,000. However, Chris informed him that he had already sold the book to Eve for £1250.

At this point in time, Al may suggest that there was a contract when Chris agreed not to sell the book to anyone else until Al had phoned him back in three days time with his final decision. However the basic rule in contract law is that an offer can be revoked at any time before it has been accepted.

In the case of Al and Chris, there was an offer made but no acceptance between the individuals, making the offer not binding. Chris’s rejection to Al’s offer terminates Al’s offer. In Routledge v Grant, (1828) [10] it was held that a promise to keep the offer open for a period of time will not be binding unless supported by consideration. The reason being that if Al would had given Chris money in return for him agreeing to keep the offer open, then he would have offered consideration, and would be able to hold him accountable for the promise. In addition, the revocation of an offer does not have to be communicated by the offereor, for example Dickinson v Dodds (1876). [11]

Subsequently Al wrote to Eve offering her another rare book for £1,000. In this situation, there was an offer which was made clear and certain. In reference to Scammell v Ouston, an offer must be clear and certain.

Eve replied to Al by return of post stating that she agreed to buy the book on offer at his asking price. The postal rule for acceptance by post in contract law states that the acceptance is effective when posted. This rule was implemented in Adams v Lindsell (1818) [12] . As it happens, Eve decides to go ahead with the contract, and writes and posts the letter that clarifies her acceptance to Al’s terms. This creates a binding contract between Al and Eve.

However, a complication arises. After posting the letter of acceptance Eve decided that she had already spent too much money on books. Eve has changed her mind about the contract and has tried to withdraw by sending a fax to Al to ignore her letter when it arrived. The question is, is her revocation effective?

The rule about revocation of offers is that they will be effective provided that they are communicated before the acceptance has taken effect [13] . For example Dickinson v Dodds (1876). In addition, in civil law, where an acceptance is posted after the offeror posts a revocation of the offer, but before the revocation has been received, the acceptance will be binding (posted revocations take effect on revocations). In reference to the case of Byrne v VanTienhoven (1880) [14] and Henthorn v Frase (1892) [15] .

In conclusion, it is unlikely that Al will be able to sell Dan any first edition copied of the Bruce book. Understanding the rules of revocation, even though Eve made an acceptance by post, agreeing to buy the book, she will be able to revoke her acceptance because it was communicated through fax. Al could ague that Eve sending the post created a contract between them. However he would lose his argument because she followed the appropriate procedures of withdrawing an acceptance. In addition, Al could also argue about an unfair contract between Chris and him, but there would not be any success, because there was no binding contract between the two. The outcome for Al and Dan is that they will be left without a remedy.