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Published: Fri, 02 Feb 2018
What is an offer & what is an invitation
– Offer – An invitation communicated by one party to another to enter into a legally binding contract on certain specified terms.
– Invitation to Treat – An invitation to enter into negotiations with a view to creating an offer
What are the main differences between the two?
– Carlill v Carbolic Smoke Ball Co  – Are the terms clear enough to be an offer or are further negotiations necessary? Are the terms a mere ‘puff’.
– Harvela Investments Ltd v. Royal Trust of Canada (CI) Ltd  – Were words used indicating a clear intention to be bound – Here the words “we bind ourselves to accept” were used? If so, there is likely to be an offer.
Look at the type of notice/advertisement it is, however do not rely too much on this alone…
– Chapelton v Barry Urban District Council  – In this case there was a display of deckchairs. On the face of it there would have been an invitation to treat, but here the display of deckchairs for hire on the beach constituted an offer which could be accepted by taking a chair and sitting on it.
– The key factor here was that there was that all the terms of the offer were clear before/at the time of taking the chair, so no further discussions were required, and by conduct i.e. taking the chair, acceptance took place.
– [If individuals could not take the deckchairs, for example, because they were locked away or padlocked, there would likely only be an invitation to treat by the deckchair attendant and a customer would have to make an offer to the attendant to gain access to the chairs, which he could either reject or accept].
Display of Goods
Pharmaceutical Society of GB v Boots Cash Chemists Ltd 
– Display of goods is usually an invitation to treat
Partridge v Crittenden 
– An advertisement is usually an invitation to treat. Here it was the starting point for negotiations with anyone reading it and responding to it. However be careful, because if clear words intending to be bound are used and there is certainty of all the terms an advertisement could be an offer, rather than an invitation to treat.
Statement of Price
Harvey v Facey 
– Statement of price is usually an invitation to treat. Be careful however, as if the shop binds itself to accept a certain price by signs there may be an offer which is accepted by going to the counter. For example, if a shop says “We will sell every item in our shop for 99p” this could be construed as i) containing all the terms, ii) sufficient certainty of all the terms and iii) capable of being accepted without further negotiations.
In practice there is usually an agreement every bidder and seller must sell setting out whether bids can be withdrawn, etc. and the two cases below are subject to contrary indication.
Payne v Cave 
– Calling for bids is usually an invitation to treat and when someone make a bid that person is making an offer, which the auctioneer can either accept or reject.
Barry v Davies 
– Where there is no reserve calling for bids is an offer. Why is this? It is because the auctioneer binds himself to accept the highest bid. As stated above there will usually be an express agreement on selling items with “no reserve”.
s52, Sale of Goods Act 1979
– The sale by auction is complete at the fall of the hammer, signifying acceptance by the auctioneer himself.
How can an offer come to an end?
Termination of an offer can occur in the following ways:-
2. The death of offeree
(Death of offeror continues unless a personal element involved)
3. Counter-offer (i.e. making a new offer)/Qualified acceptance (i.e. not accepting the terms in their entirety)
4. Lapse of Time (e.g. where an offer states a time when it will lapse, the offer will lapse (i.e. end) at that time). If an express time is not stated, the offer will lapse after a reasonable time.
5. Revocation before acceptance
6. Failure of a condition precedent
Main caselaw on termination of an offer
Errington v Errington and Woods  – Once acceptance (by conduct) begins, cannot revoke original offer.
Revocation communicated to the offeree before acceptance ends the original offer– Byrne v Van Tienhoven 
Lapse after a specified period of time or after a reasonable period of time if no time scale was given – Ramsgate Victoria Hotel v Montefiori 
By a counteroffer – Hyde v Wrench . Be careful however that there is not simply a request for information – Stevenson v McLean .
Acceptance of an offer
Be careful that there was an offer, because if there was only an invitation to treat the person “accepting” would strictly speaking only be making an offer and would not be accepting the original offer.
What is the key point about acceptance?
The key point is that all the terms as offered must be accepted and communicated by the offeree to the offeror.
If the offeree proposes a variation of any of the terms there will be a counteroffer which has the effect of ending the original offer (Hyde v Wrench ).
How does acceptance of a unilateral offer take place?
Acceptance by conduct will be enough (Carlill v Carbolic Smoke Ball Company ).
How does acceptance of a bilateral offer take place?
By communication to the offeror.
What if the offeree specifies one method of communicating acceptance, but uses another?
The main case to remember is Tinn v Hoffman  which said that means of delivery is flexible as long as acceptance takes place within the same timescale, so if the offeror states communication must be by telephone sending a letter would not bind the offeror.
What about simultaneous communication of acceptance?
Entores v Miles Far East Corp  – if acceptance is sent electronically acceptance takes place when deemed received.
What about postal acceptance?
Adams v Lindsell  is a key case on the postal rule, which says that acceptance is deemed accepted upon posting. If this would cause injustice however the court could vary the postal rule (in particular please see Tinn v Hoffman  above).
What is the consequence of acceptance of an offer?
Provided all the other essential elements of a contract are present (i.e. consideration, intention to create legal relations, etc.) there will be a valid and enforceable contract.
The meaning of consideration is defined in Currie v Misa  – put simply consideration requires each party to a contract to give money or money’s worth to the other party. Remember always to mention the consequences of a failure to give consideration.
What if parties do not want to hand over money or money’s worth?
The parties should enter into a deed and provide covenants to each other.
How much consideration needs to be given?
Consideration must be sufficient but need not be adequate – Chappell & Co Ltd v Nestle Co Ltd .
Re McArdle  says the general rule is consideration must not be past consideration.
Exception 1: The parties had a common intention payment would be made after performance by one of the parties – Pao On v Lau Yin Long .
Exception 2: Here one of the party’s promise to pay could be linked to the earlier request to perform an act – Lampleigh v Braithwait .
Exception 3: In a business situation where an act is done at the request of A and there was an understanding that payment would be made to B, the subsequent promise to pay merely fixed the amount – Re Casey’s Patient .
Exception 4: Composition agreements
Exception 5: Promissory estoppel
The general rule is where a person has an existing duty to act (whether a public duty or a private duty) that person is not providing any considering in return for doing the act.
Compare Collins v Godefroy  – existing duty to attend court with Glasbrooke v GCC  where the police provided consideration over and above that ordinarily required.
Compare Stilk v Myrick  where the sailors provided no additional consideration with Hartley v Ponsonby  where the sailors placed themselves in extra danger and so provided extra consideration.
However look at Williams v Roffey  where it was stated that if extra consideration is given by one party and the other party obtains a benefit/doesn’t suffer a disadvantage, it is consideration over and beyond the existing contractual duty.
– Here a bonus was offered to avoid a disadvantage and it was held that there was consideration over and above the existing duty.
Part-payments of a debt
Part payments of a debt is linked to consideration. Where a person owes a debt and only pays a debt payment in part does not relieve that person of liability for the rest of the debt even if it is stated to be in full consideration.
Pinnel’s Case  – Part-payment in itself is not good consideration – already contractually bound to pay the whole
Exceptions to the general rule
Part-payment on an earlier date than the due date
A chattel instead of money
Part-payment in a different place from that originally specified
Part payment of a debt by a third party expressing it to be in full satisfaction – Hirachand Punamchand v Temple 
– Agreement between a debtor and a group of creditors
Intention to create legal relations
Commercial arrangements – presumption of intent – Esso Petroleum v Commissions of Customs & Excise 
This is rebutted if an intention is expressed for it not to be binding – Rose & Frank Co v Crompton Bros .
Domestic arrangements – presumption of no intention to create legal relations – Jones v Padavatton .
Exception one: Husband and wife no longer living together – was effectively an agreement as to finances before getting divorced – Merritt v Merritt .
Exception two: The presumption may be rebutted if not to enforce the agreement would have serious consequences for one of the parties – Tanner v Tanner .
Exception three: One of the parties to the agreement was not a family member and this rebutted the presumption – Simpkins v Pays .
The Parol Evidence Rule states that where there is a written agreement it contains all the terms agreed by the parties and therefore extrinsic evidence should not be allowed to contradict the written terms.
Main exceptions to the Parol Evidence Rule:
– Incompleteness exception – Evans v Andrea Merzario Ltd .
– The written agreement should be read in light of custom – Smith v Wilson .
– Extrinsic evidence is needed to prove/disprove the validity of the agreement where one or both of the parties are arguing over this.
– To prove a collateral agreement exists that affects the written contract – City & Westminster Properties v Mudd 
– Rectification – to prove that the contract does not accurately record the agreement between the parties.
Different types of express terms
– A fundamental term of the contract going to the root of the contract.
– A breach of condition entitles the injured party to repudiate the contract and claim damages. If he wants to continue with the contract he may do so however and claim damages.
Poussard v Spiers  – Opera singer case where they had to employ another opera singer.
– A warranty is a less important term: it does not go to the root of the contract.
– Only entitled to claim damages.
Bettini v Gye  – Opera singer case where only missed some of the rehearsal time.
3. Intermediate or Innominate Terms
– Where it is unclear whether there is a condition or a warranty need to look at the consequences of the breach.
Case 1: Hong Kong Fir Shipping Co Ltd v Kawasaki Ltd  – Look at what happened as a result of the breach and then decide if the innocent party was deprived substantially of the whole benefit which it was the intention of the parties he should obtain.
Case 2: The Mihalis Angelos  – The vessel was “expected ready to load” on a particular date. It was discovered not to be so. Held – the term was a condition – the charterers could treat the contract as discharged.
Case 3: The Hansa Nord  – Pellets for use in animal food were sold with “shipment to be made in good condition”. Part of the goods were of a lesser quality and so had a lesser value. They were only entitled to the difference in value between damaged and sound goods at the agreed destination.
Representations and Terms
Representation = statement of fact inducing the other to enter the contract
Term – If a term is breached, the innocent party may be able to sue for damages and/or repudiate the contract (depending upon the importance of the term)
Matters to consider when deciding if a statement is a term or a representation:-
i) Timing – Routledge v McKay  – the greater the lapse of time, the more likely to be a representation than a term
ii) Importance of the statement – Bannerman v Hill  – Buyer said would not even consider purchasing oats if they contained sulphur. Was told that they did not. The assurance was held to be a term of the contract. Without the assurance the buyer would not have contracted.
iii) The statement was reflected in the written agreement – Routledge v McKay  – Non-inclusion of an express term means it is likely the parties did not intend the statement to be a term.
iv) Special skills/knowledge – Harling v Eddy  – Sellers said nothing wrong with heifer being sold. They were in a special position to know of the ill health of the heifer being sold. This was held to be a condition.
Remember also that it may be possible to prove a collateral contract exists.
Remember to mention exceptions to the Parol Evidence Rule where appropriate.
Terms implied by custom
Terms implied by custom – Smith v Wilson 
Terms implied by law
Test 1: Business Efficacy Test
– Courts will imply a term into a contract in order to give effect to the obvious intentions of the parties e.g. The Moorcock  – case where it was obvious the ship would be kept reasonably safe.
Test 2: Officious Bystander Test
– If an officious bystander were to suggest some express provision both parties would reply “oh, of course” e.g. Wilson v Best Travel .
Terms implied because of the parties’ relationship/implied by law
E.g. Liverpool CC v Irwin  where the lease was silent on the maintenance of the common parts.
Sales of Goods Act 1979 & Supply of Goods & Services Act 1982
– Make sure you know the sections inside and out, although you may be able to take a statute book into the exam, but check.
– Parol evidence meant that the lease could not be interpreted without reference to the second contract i.e. the collateral contract – City of Westminster v Mudd 
– To prove a misrepresentation – Esso Petroleum v Mardon 
– To prove privity of contract – Shanklin v Detel Products 
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