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Published: Fri, 02 Feb 2018

Offer and acceptance in regards to the formation of a contract

This problem involves ‘Law of Contract’ in particular offer and acceptance in regards to the formation of a contract.

The main issue here is, ‘Whether a contractual agreement was reached between Futuretronics &Graphix-Labels?’ to reach to it we have to sort out-

Was there an offer? Who made &when?(if yes)

When &where did acceptance take place?(valid acceptance?)

Does agreement construe legally-enforceable contract?

After construction of contract, was there any breach which could affect the enforcement of contact?

Relevant rules to solve it.

What is a contract?

Contact is a legally binding agreement where two or more parties agree upon terms of it with value consideration.

To be precise, the valid &legally enforceable contact has five prerequisites;

Agreement(generally with form)-


Intention to create legal relation

Certainty and genuine consent

Capacity to enter in the contact

To identify the entity of a valid contact, one has to apply these 5essentials during verification.

Agreement contains offer followed by the acceptance.

1] What is an Offer?

This is the first essential step towards the formation of a contract. Contract cannot be initiated without a valid offer.

An ‘offer’ is an indication by one person to another of his or her willingness to enter into a contract with certain terms without further negotiations to those proposed terms.

A clear statement made by one party so as to constitute an agreement once accepted by another party.

It is not a mere advertising puff or invitation to treat. [1] 

It must be promissory in nature. [2] As it is a communication which gives the power to the listener to construe a contract. This way, the offer binds the offeror to the terms of the offer if offeree accepts it.

An offer must be communicated. Doing something without knowing of an offer is not accepted, as parties acting independently cannot have any agreement.

It can be to a particular person(to form a ‘Bilateral contract’)or to the public at large(to form a ‘Unilateral contract’).

Bilateral contract can be concluded if the offeree accepts the offer by promise whereas; performance of the terms of the offer can construe Unilateral contract (no need to communicate the acceptance, as performance of it construe acceptance) [3] 

Formation of an agreement starts with an offer &concludes with an acceptance. In order for there to be a valid acceptance there must be an offer to which that acceptance is a response.

This principle expects not only that an offer has been made, but also it was existed at the time of the acceptance. [4] 

Offer will terminate on acceptance as that offer would not be available for any other for acceptance generally. Before the offer gets accepted to form a contract it can end by number of ways-

Revocation-offeror requires to communicate to the offeree, that the offer is no longer open. The offeror can withdraw the offer any time before the acceptance. [5] 

Revocation must always be communicated to the offeree but need not by the offeror personally. [6] 

Rejection- (explicitly or by counter offer)-

Rejection of an offer by offeree can terminate the offer. OR if you respond to an offer by alternative proposal, it would construe a new or counter offer [7] ; the effect of which will to terminate the original offer. [8] 

Mere enquiry cannot be constituted as a ‘Counter offer’. [9] 

Offer would lapse after stipulated or within reasonable time. [10] 

Death- terminates offer if it’s for the personal services, if not then personal representatives must carry out services.

Condition bringing an offer to an end-

Valid or existed offer can be accepted by the offeree.

2] What is an Acceptance?

It is an unqualified assent to the terms of the offer, so as to form the contract.

Qualified acceptance destroys the original offer and there can be a counter offer by offeree.

The rules of acceptance-

Acceptance must be made in at least partial response [11] to the offer. [12] 

Must be unqualified & without Conditional assent.

Must be clear and certain; silence is generally inefficacious. [13] 

Must be express or implied. [14] 15, must be communicated to the offeror

May be retrospective- the conduct of the parties can conclude acceptance.

Counter-offer is a rejection of original offer.

There is one more aspect to consider known as ‘ battle of the forms’, where two parties exchange inconsistent standard forms during contract negotiations and reach agreement on the principle terms without deciding about the standard form so as the construe the final contract.

Communication of offer and/or acceptance can be through electronic communication.

{With an assumption that the Electronic Transaction Bill 2011 (WA) has passed and will come in force}

This Act provides us the information so as to solve the issues in contract where mode of communication was Electronic.

It is very important to note that this Act(ETA) is not designed to deal contractual issues, but just to guide when communication took place.

3] Breach of Contract

It’s when a party fails to perform his/her duties or obligations imposed by the contract.

Breach may be either actual [16] or anticipatory. [17] 

The innocent party can opt for remedies for breach of contract-

Terminate the contract

Recover damages

Specific performance (court order to fulfil the contract)

Apply the rules to the facts to sort out the issues of the problem case.

Graphix Label provided quotations which were requested by Futuretronics. This can be an indication of future offer&can be categorised as an invitation to treat.

On 4th of January 2006, Futuretronics placed an order for 21000units with total amount of $32,099 including GST.

Whether this statement constitutes an offer?

It was a clear statement & promissory in nature ; not a mere invitation to treat, as clear order of goods with specific cost for it.

Mr. Chonja on behalf of Futuretronics communicated the offer through text to specific person, Mr. Lo. (to form bilateral contract.) who was working on behalf of Graphix Labels.

That was a valid offer.

Was there acceptance to this offer if yes, where and when?

Mr Lo sent an email, so communicated acceptance &acceptance was express.

It was made in response to the offer.

Acceptance was clear and certain, as Graphix Labels intended to complete that order.

BUT Considering given facts-

The email was mistakenly addressed to ‘Futuretonics’ and it was redirected at 11am on 5th January 2006. Mr. Chonja had cancelled the order on 4th of January 2006 by 10pm; i.e. before this email of acceptance was received

So acceptance occurred after offeror had revoked the offer, &it is not a valid acceptance, so as to construe a valid contract.

This view is supported by Dickinson v Dodds [18] where defendant agreed to sell the property to plaintiff within specified time. Before that time expired, defendant agreed to sell the same property to third-party. Plaintiff heard and delivered acceptance & sued for specific performance.

Action failed. A revocation must be communicated to the offeree but need not be by the offeror personally.

Offer can be revoked any time before acceptance.

If Graphix-Labels has emailed before 10pm.on 4th January which mistakenly addressed to Futuretonics, then acceptance seemed to be delivered before revocation of offer. s.14(2) of ETA [19] if acceptance amounts to be the time of dispatch, then its when originator pressed the ‘send’key, by which communication leaves an information-system under the control of originator.

AND if Graphix-Labels can show it with support of the reliance, like they have started production of skins i.e. Consideration involved.

Now Graphix-Labels can sue for Damages under Contract-Law(or specific-performance under equity) [20] 

This view is supported by Byrne & Co Van Tienhoven [21] ,where letter of revocation posted before acceptance but received after the acceptance was posted and telegraphed.

Contract was completed when telegraph of acceptance was posted. The offer could have been revoked any time before acceptance, but once it was accepted, it construed the contract.

Offer cannot be revoked once accepted.

Mr. Lo emailed, “Received order, usual terms confirmed, new prices from May. This acceptance sounds to be qualified; i.e. not accepting the price mentioned in offer, so it can constitute as a counter offer’, which in a way destroys the original offer. [22] 

Thirdly, if the acceptance has to be communicated, that means offeror must have received that acceptance or known about it.

To illustrate it with the help of s.14A(1)(b)(i)&(ii) of ETA [23] Time of dispatch –is when both originator &addressee of electronic communication were capable of being retrieved by the addressee at that address and(ii)the addressee has become aware that the electronic communication has been sent to that address.

Here, Mr. Lo mistakenly sent the email to &was redirected that to Futuretronics;so time of dispatch varies. Addressee(Mr.Chonja) was not aware of the acceptance through email. As he received the email from different address.

Lastly, Mr.Chonja discovered that Graphix-Labels planned to produce and market its own skins, in competition with Futuretronics,

Even if the acceptance assumed to be valid to construe a valid contract, Futuretronics can terminate contract with contention of ‘anticipatory breach’, as this could be the breach of a term either in relation to confidentiality or prospective harm to the business.

It would appear that there was no construction of a valid contact between Futuretronics &Graphix-Labels.


For the above reasons, as per my opinion, I would advise that contractual agreement between Futuretronics and Graphix-Labels did not form to construe legally enforceable contract.

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