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Published: Fri, 02 Feb 2018
An offer can be made in oral form, written form or conduct
Question: How is an offer terminated? Please provide examples and case law in order to support your answer.
Offer, Acceptance and Consideration are the three main components to form a legally binding contract. And before any contracts are being made, there must be reasonable and proper means of communication between parties. An offer is a definite and specific promise made by the offeror to an offeree of which there is an intention to be bound on specific terms if it is accepted. An offer can be made in oral form, writing form or by conduct, noted that it should not be vague but definite.
In order to terminate an offer, there are five ways to do so which will be shown below:
There are two forms of rejection to an offer. The first form is that the offer is simply rejected by the offeree for not willing to be bound by the terms of the offer through communication, this will permanently destroy the offer. The offeree cannot change his/her mind afterwards and purport to accept the offer again. For example, Jean wanted to buy Peter’s car and offered him a price of $32,000. Peter then replied to say that $32,000 was below his expectation. In this case, Peter had rejected Jean’s offer and the offer no longer existed. Therefore, Peter could not change his mind and tell Jean that it was a mistake not to accept the offer. But then he can now sell the car to Jean by making a new offer, and Jean is free to accept it, contract will therefore formed.
The second form of rejection to an offer is that the offeree rejects the offer made to him/her by a counter offer. This counter offer will destroy the original offer and introduces a new offer. In this case the original offeror may accept or deny this new offer. According to Hyde v Wrench (1840), where “A”, the offeror offered to sell an estate at a price of 1000 pounds, “B”, the offeror replied that he was willing to pay 950 pounds only. The offer was refused, but afterwards, “B” sought to accept the initial offer. It was held that the offer has already terminated by the counter offer of 950 pounds, therefore no contract could be made at the time “B” tried to accept the initial offer as it no longer existed.
However, it should be noted that a mere inquiry about the terms of offer to make the bargain more favourable, while he is willing to accept the offer is not a counter offer nor rejecting the offer. This principle lied in Stevenson v. McLean (1880), where “A” offered to sell iron to “B” for cash. “B asked if they could have 4 months credit. He has no intention to reject the offer made to him.
The offeror is free to withdraw or revoke from an offer at anytime given that the offer has not been accepted by the offeree. Given that revocation will not be effective until it is communicated to the offeree. Communication is not necessarily made by the offeror himself provided that the offeree has been brought to notice of the revocation through a reliable source.
As shown in Dickinson v Dodds (1976), “A” offered to sell his property to “B” in writing and stated that the offer would be left over until Friday 9:00am, 12 June 1874. However, “B” was told by “D” on 11 June 1874 that the land had been sold to a third party. He then purported to accept the offer. It was held that there was no contract as at the time of acceptance he was aware that the offer has been validly revoked.
In the case Routledge v Grant (1828), an offer can be revoked even if the offeror has promised to keep the offer open for a specified time. And according to Byrne v Van Tienhoven (1880), the withdrawal of the offer was not effective until it was communicated, in this situation, revoke an offer merely by posting a letter to notify the offeree was not an effective means of communication. Therefore, even he posted the letter before the offer being accepted by the offeree, and reached the offeree after the time of acceptance, it is still held to be not effective.
3. Lapse of time
If an offer was expressed to be last for a specific time limit, it would be expire at the end of that time. Any acceptance after that time period would not be bound by legal terms. Where no time has been stipulated by the offeror, then the offer will lapse after a reasonable time depending on the subject matter.
In the case Ramsgate v Montefiore (1866), “A” offered to purchase shares in the company on 8 June by letter and the shares were allotted on 23 November but “A” refused the shares. It was held that the offer to take shares lapsed through unreasonable delay in accepting.
4. Death of Party
In the case that either offeror or offeree dead before the acceptance of an offer, it will terminate the offer. If the death of either party is after the acceptance, it will have no effect to the offer unless the contract is of personal nature. Where the offeree accepts an offer but doesn’t know that the offeror is dead, the offer must be regarded as being capable of acceptance, where the deceased’s contractual obligations can be performed by his personal representative.
According to Bradbury v Morgan (1862), “A” said that he would guarantee certain debts of “B”. However “A” died and later the creditors required the guarantee to be honored as “B” has failed to pay the debts. It was held that “A’s” estate was liable as the offer to honor the debts had not been withdrawn and was independent of A. Otherwise, if the performance is personal to the offeror then the offer is automatically terminated.
Lastly, an acceptance to the offer by the offeree will complete the contract and end the offer.
Hyde v. Wrench (1840) 49 E.R. 132
Stevenson v. McLean (1880) 28 W.R. 916
Dickinson v Dodds  2 Ch D 463
Routledge v Grant (1828) 4 Bing 653; 130 ER 920
Byrne v Van Tienhoven (1880) 5 CPD 344
Ramsgate v Montefiore (1866)
Bradbury v Morgan (1862) 1 H & C 249; 158 ER 877
Course Manual of LW2903 P.6-7
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