Rules of Offer and Acceptance

Introduction:

Rules of Offer and Acceptance are applied to enforce an agreement by the law. This agreement is the first requisite of any contract of the business. In order to a contract come into being between parties, the offer is made by the offeror and the oferee accept that offer. In 21st century, there are rapid changes in business trend which create lots of new business model such as e-business and global business. The more business participates, the more requirements of Offer and Acceptance Rules to adapt to the change. In this essay, we are going to look at the Rules of Offer and Acceptance, how do they affect business contract and whether these rules make good business sense in 21st century or not.

Offer And Acceptance, How These Rules Affect Business:

Offer:

First of all, we need to know what offer is. Poole (2008, p42) suggested that offer is an “expression of willingness to contract” on the exact terms with no other negotiation, so that an obligatory contract can be formed with acceptance only. In addition, Keenan and Riches (2007) defined an offer is a proposal made by the offeror on the specific terms with a promise to be bound by that proposal if the acceptance of stated terms is made by oferee; an offer can be made expressly or impliedly. If an offer is truly made, the agreement is bound once offeree accept.

Moreover, offer is distinguished from invitation to treat such as offers to negotiate, offers to receive offers and offer to chaffer (Cheshire, Fifoot & Furmston, 2007). In this aspect, the display of goods for sale with a price attached in a shop window or shelf is an invitation for customers to make an offer to buy – Fisher v Bell (1960) and Pharmaceutical Society of GB v Boots Cash Chemists (Southern) ltd (153). In term of advertisement, price list, catalogues and brochures, Poole (2008) propose a general rule which is that they amount to invitation to treat; however he also indicated the exception which is that advertisement about a reward of specific act will amount to unilateral offer – Carlill v Carbolic Smoke Ball Co (1893). In the same opinion, the use of press, TV, commercial radio and Internet to sell products to the public is an invitation to treat, even if they used the word “offer” (Keenan & Riches, 2007). In the other hand, Treitel (2003, p13) argued that “advertisement of rewards for the return of lost or stolen property, or for information which can lead to arrest or conviction of the perpetrator of a crime, are invariably treated as offers”. Turning to Timetables and passenger tickets, there a varied view on whether the contract is made between carrier and passenger (Treitel, 2003). There is a view that the advertisement stating the times and conditions is the offers made by rail carriers; and the act of running bus is the offer from road carrier. Another view is the offer is made when the carrier issue the ticket. In addition, with the advance booking through travel agent, the passenger is the offeror and the carrier accept the offer when indicates to accept the booking. Therefore, the exact time of contracting in each case depends on the relevant documents and the issued conditions. Another issue which need to distinguish between offer and invitation to treat is auctions, according to Sale of Goods Act 1979 s.57(2) “a sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; and until the announcement is made any bidder may retract his bid”. Keenan and Riches (2007) propose that the call for bids is an invitation to treat and the advertisement about a forthcoming auction sale is not an offer. However, Treitel (2003) set a general rule which is that the bidder is the offeror and the auctioneer makes the acceptance. When there is a reserve price, no contract will be formed with lower price; but if there is no reserve price, the property must sell to the highest bid however low the bid might be. In aspect of tender, at common law, an invitation to tenders is normally not an offer, unless the two exceptional situations occur: inviter accepts the most competitive offer or inviter consider tenders which conform to the bid conditions (Poole, 2008). Finally, for Sales of Shares, if a company makes an statement to the public for selling their shares, this statement cannot be consider as a offer because it just invites members to apply for the shares and this company can decide how many shares to issue. However, in case of right issue, the letter informing the shareholder of his rights amount to a offer (Treitel, 2003).

We are now moving to analyse when offer is terminated. To begin with, if an offer is accepted, that offer is no longer available for acceptance. Secondly, an offer can end if it is rejected. There are three main ways to reject an offer: the offeror is notice that the offeree does not want to accept the offer, or the offeree wish to accept the offer subject to certain conditions, or the offeree makes a counter-offer (Keenan & Riches, 2007). Nevertheless, asking for further information which does not reject the offer must be distinguished from counter-offer (Poole, 2008). Thirdly, an offer can be terminated by revocation before acceptance, Keenan and Riches (2007) suggest that the offeror has right to revoke his offer at any time before the acceptance but the revocation is only effective if it reaches the offeree before the acceptance takes effect. In addition, the revocation do not need to be told by the offeror, it can be informed by a reliable third party. Keenan and Riches also proposed that a second subsequent offer can revoke the first offer but it must be “sufficiently at odds with the first offer, so that both cannot be accepted” (p219)