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Published: Fri, 02 Feb 2018

An agreement arises from offer and acceptance


‘A contract is based on agreement, which arises from offer and acceptance. One person makes an offer; another person accepts that offer. When that has happened, and provided that the other necessary factors, consideration and intention to contract, are present there is a contract. ,

A contract is an agreement supported by consideration made between two or more individuals with the intent to create legal relations and is not illegal or unenforceable under the law. An agreement is the net result of mutual promises. An agreement is said to come into existence when an offer made by the offeror is accepted by the offeree.


The offer may be made to one person, or to a group of persons, or to the public at large; it may be made expressly or by conduct. An offer is an expression of willingness to contract on specified terms , made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed pg 8 g.h treitel

Essential elements to an offer:

The offeror must objectively intend to be bound with to further negotiation, by a simple acceptance of his terms.thus ther is no offer where the owner of a house, in response to an enquiry from a person who wishes to buy it, states the prices at which he might be prepared to sell.

The terms of the offer must be definite or reasonably certain.

The offer must be communicated to the offeree.

Offer distinguished from invitation of treat.

It is necessary to distinguish an offer from an invitation to treat . the importance of the distinguish is that, if an offer is made and accepted , the offeror is bound ; on the other hand , if what the offeror said or did does not amount to an offer, the other person cannot create a contract by accepting it. The process leading to an agreement may be long. It may consist of requests for information, statements made to encourage interest and the like . when the negotiations have reached the point where one the parties has made it clear that he is willing to contract on specific terms that need no futher elaboration or clarification , and all that is required is acceptance by the other party , at the stage it can be said that an offer has been made . in Gibson v MANCHESTER CITY COUNCIL (1979). HL)


Assuming that an offer has been made, a contract comes into existence when the offer is accepted. To accept an offer, the offeree must indicate his assent to the terms of the offer. He may do this either expressly (by words of acceptance) or by conduct. An ‘acknowledgement’ of an offer does not amount to an acceptance if it amounts merely to a confirmation that the offer has been received ; but it can amount to an acceptance if by its terms or in a particular context (e.g. in website trading ) it means that the person making it has agreed to the terms of the offer. Pg 10 paper

Acceptance by conduct

Just as an offer may be made by conduct, so may an acceptance. This is clearly so in the case of a unilateral contract. In Brogden v Metropolitan Railway Co (1877,HL), Brogden had for years supplied the railway company with coal without a formal agreement. The company wished to regularize the situation, and so they sent a draft form of agreement to Brogden. He inserted a new term into the draft and returned it, marked “approved” the company’s agent put it in his desk and it laid there for two years. For two years Brogden sent, and the company paid for, deliveries of coal in accordance with terms of the draft. Then a dispute arose, and Brogden denied that any binding contract existed. The House of Lords held that a contract had been created by conduct, and and that it came into existence either when the company ordered its first load of coal upon the terms of the draft or at least when Brogden supplied it.

Counter offers

A counter offer takes place where one party changes the terms contained in the other’s offer. So for example, Hyde v Wrench(1984) , Wrench offered to sell his farm for £1,000. Hyde responded by saying that he would give £950 for it. Wrench wrote rejecting this proposal. Hyde then wrote to say that he would give £1,000. After all, Hyde sued Wrench, trying to enforce a sale at £1,000. He failed .It was held that no contract came into existence. Hyde’s response (£950) was a counter –offer, which put an end to the offer (£1,000). The counter –offer was refused, and so did not lead to contract. The subsequent “acceptance” by Hyde of the original offer was not an acceptance at all; it could not be because there was no offer in existence. It was itself another offer (by Hyde) which Wrench was quite entitled to refuse. Pg 15

There are limits to the rule, however. It would be a mistake to think that every answer which does not exactly accept the offer is a counter-offer. It is quite possible for an offeree to respond to an offer by making an inquiry as to whether the offeror would be prepared to amend some term of his offer. Thus, in Stevenson v Mclean (1880) the defendants offered to sell some iron to the plaintiffs for cash. The plaintiffs asked whether they could have four months’ credit. That inquiry was held not to be a counter-offer, but only a request for information, with the result that later acceptance of the original offer created a binding contract.

The communication of acceptance

It is not enough for the offeree to decide that he accepts the offer, he must be communicate his acceptance to the offeror. If the words of acceptance are ‘drowned by an aircraft flying overhead’, or spoken into a telephone which has gone dead, there is no contract. Entores ltd v miles far east corp ( 1955) 2 QB 327 at 333. Foot notes . the reason for this rule is the might be unjust to the offeror to hold him bound if he did not know that his offer had been accepted. On the other hand, no injustice is normally caused to the offeree by holding that there is no contract. Paper 12.

However, particularly the use of fax machines and emails, which may enable communications to be stored out of business, hours until the next working day , the continuing relevance of this decision must be in doubt. In Mondial Shipping and Chartering B.V v Astarte Shipping Ltd (1996), Gatehouse J, suggested that receipt of a contractual notice should be deemed to take place at the start of the next working day if it was received and stored outside normal working hours. Pg 19

Termination of the offer

Events may occur after an offer has been made which bring it to an end so that it can no longer be accepted. When the offer is withdrawn by the offeror, or rejected by the offeree; and it may happen by lapse of time , by the occurrence of a condition, or by the death or superving incapacity of one of the parties .

An offer can be revoked or withdrawn at any time before it is accepted. Revocation to be effective , must be communicated to the offeree. Dickinson v Dodds (1876, CA), Dodds offered to sell a house to Dickinson for £800, the offer “to be left over until Friday , June 12, 9am”. On Thursday, June 11, Dodds sold the house to one Allan, and that same evening Dickinson was told of the sale by a man called Berry. Before 9am on June 12, Dickinson handed to Dodds a letter of acceptance. The court of Appeal held that there was no contract; Dodds’s offer had been withdrawn before acceptance.

The revocation must be actually communicated to the offeree. This is so even though the post is used as the channel of communication the rule that an acceptance by post take effect from the moment of posting does not apply to a revocation of offer. In Byrne v Van Tienhoven (1880) On October 1, the defendants posted a letter in Cardiff to the plaintiffs in New York, offering to sell 1,000 boxes of tinplates . On October 8 they posted a letter revoking the offer. On October 11 the plaintiffs received the offer letter and telegraphed their acceptance. On October 20 the letter of revocation reached the planiffs. It was held that the revocation took effect only on October 20, and that, that was too late, as the plaintiffs had already accepted. This is a clear instance of how the law prefers an objective to a subjective view of agreement. Subjectively viewed, there was no agreement here; at the moment of acceptance, on October 11, the offeror was not willing to contract. But because the offeree did not know of this unwillingness he was held entitled to accept.

But in July the price of fuel oil were increases greatly on the global market. So Beta Ltd emails Alpha Oil offering Alpha an additional 5% on the purchase price if Alpha is able to deliver on time.

An offer is a proposition put by one person to another person coupled with an indication that he is willing to be held to that proposition. The offer may be in writing , or spoken or by conduct. the indication that the offeror is willing to be bound need not be stated in words (written or spoken), it may be, and frequently is, inferred from the nature of the offeror’s proposition or from the circumstance in which the proposition is made

On next day 2 august , Alpha reply back to Beta to confirm that it will do so . but on the same day , Beta sends fax to Alpha withdrawing the offer . the fax is received by alpha’s machine but is not seen by the staff . Alpha is now insisting on the payment having made delivery on 30 September. Beta refuses to pay the 5%.

An offer will not ripen into contract until it is accepted by the offeree communicated to him. This is the necessary ingredient for turning an offer into a agreement. There may be questions, however, as to whether the offeree,s action amounts to an acceptance. To do so, it must be made in response to the offer and must correspond to its terms. This means that if , for example , the offeree tries to introduce different terms, his action may be treated as a counter –offer which puts an end to the original offer.

Two questions are therefore involved here: (1) has there been an acceptance in fact and (2) has there been communication of that acceptance to the offeror ?

When parties carry on complex negotiations it is sometimes difficult to say when (if at all) an offer has been accepted . as in the case of Clifton v Palumbo, it is sometimes hard to determine whether or not an offer has been made. It is sometimes harder still to say whether an acceptance has been made . this is because it is necessary to find two things instead of only one; an acceptance as well as an offer. What is more, it is necessary to find an acceptance that exactly fits the offer: see below. As negotiations go on , each party may advance a new point or withdraw a former pint, and in the end they may disagree asto whether they have ever agreed . The court must then look at the whole course of the negotiations and decide whether the parties ever did agree to the same terms.

An example of this type of problem is to br found in Walford v Miles (1992, HL). The defendants owned a photographic business, which they were interested in selling. After negotiations with the plaintiffs, they agreed in principle to sell the business to them “subject to contract” . soon after , it was further agreed that if the plaintiffs provided a comfort letter from their bank, the defendants would terminate negotiations with any third party and would not deal further with any third party. The comfort letter was duly provided, but the defendants sold the business to a third party. The planitiffs argued that there was a binding “lock –out” agreement , under which they had been given an exclusive opportunity to try to come to terms with the defendants and which was collateral to the negotiations for the sale of the business . the house of Lords said that a lock –out agreement may be an enforceable agreement, but went on to say that an agreement to negotiate in good faith for an unspecified period is not enforceable. On there hand, in Pitt v PHH Management Ltd (1993, CA), the court of appeal founf that there was a lock-out agreement , in the context of negotiations for the sale of land, and that the defendants were in breach of it .pg 27 .

Acceptance must exactly fit the offer

A reply to an offer is only effective as an acceptance if it accepts all the terms of the offers without qualification or addition. Thus, in Jones v Daniel(1894) Daniel made a written offer to purchase Jones’s property for £1,450. In reply Jones’s solicitors wrote “accepting” the offer, and adding: “We enclose contract for your signature”. The enclosed draft contract contained special terms not referred to in the offer, including the payment of a deposit of 10 per cent by the purchaser , a stipulation fixing the date for completion and a provision limiting the title to be shown by the vendor. Daniel returned the document unsigned. It was held that the letters did not constitute a contract; the solicitors’ letter with its enclosure was not an acceptance but a counter –offer. Daniel was free to accept or reject this counter –offer; he chose to reject it, and so no contract came into existence.

Part b

On 3rd October, an executive at Beta phones up Alpha and asks an executive at Alpha whether the synthetic oil is suitable as a diesel replacement. The Alpha executive replies “I think so, but I suggest you do your own checks”.

Negligence as a tort

Negligence is one of the most important torts in the study of English commercial /business law. As a tort, it is ever developing. It mirrors changes in the social and economic clime.

In order to demonstrate that the defendant is liable in negligence the following must be proved:

There exists a duty of care between the defendant and claimant.

There is breach of that duty by the defendant

The breach results in damage or injury to the claimant.

All three ingredients must be present before liability is established

In this sanction

Part c

Beta the sells the synthetic oil on to Cara, a company which uses diesel in its manufacturing processes. The synthetic oil causes damage to Cara, s machinery. Cara’s machinery. Cara wishes to claims damages against Beta for failure to deliver to it goods of a satisfactory quality.

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