02_Offer & Acceptance

Contract Case Law_02

Offer and Acceptance

2.1

The Offer Off er

Storer v Manchester City Council [1974] Council [1974]

Facts: Manchester City Council decided to sell council houses to tenants and told its town clerk to create a simple form to create quick agreements agreements which which dispensed dispensed with the legal legal formalities. formalities. Mr Storer applied to buy his council house, and on 9 March 1971 the town clerk wrote to him stating 'I understand you wish to buy your council house and I enclose the Agreement for Sale. If you will sign the Agreement Agreement and return it to me, I will send send you the Agreement signed on behalf of the Council, in exchange'. The Agreement for Sale had been completed completed with details including the purchase price, the amount of the mortgage and the monthly repayments, although the date the tenancy was to cease and the mortgage repayment begin had been been left blank. On 20 March Mr Storer signed and returned the Agreement, but before the town clerk had signed the Agreement for the Council, the Council changed political control and discontinued discontinued sales unless contracts contracts had already been exchanged. Mr Storer sought specific performance alleging a binding contract. Held: The court held that a binding contract had been concluded. The Council's intention was to become contractually bound when Storer had signed the Agreement and returned it, particularly as there was definite language used in the correspondence and there was a clear offer and acceptance.

Gibson v Manchester City Council [1979] Council [1979]

Facts: The Conservative-controlled Manchester City Council advertised details of a scheme for tenants to buy their council houses from the corporation and P expressed interest and asked to be told the price of buying his house. The city treasurer wrote in reply: ‘The corporation may be prepared to sell the house to you at . . . £2,180’, but the letter was not to be ‘regarded as a firm offer of a mortgage’. P had to fill in a form to make a formal application, which he did, leaving blank the purchase price and listing certain defects in the property. He was told by the Council that the price had been fixed in accordance with the condition of the property, and P wrote that he wished to go ahead on the basis of his application. The Council took the house off the list of tenantoccupied houses which had to be maintained by them, and put it on their house purchase list. As a result of a local election, election, Labour gained gained control of the Council and reversed reversed the policy of selling selling council houses. houses. They would sell only those houses where a legally binding contract had already been concluded. Held: The trial judge and the Court of Appeal decided that there was a contract and ordered specific performance (i.e. an order compelling the Manchester Council to sell the property to P). In the Court of Appeal, Lord Denning stated that the parties appeared to have reached agreement on all the material terms and this was evidenced by their correspondence and conduct. He thought that it did not matter that ‘all the formalities had not been gone through’. He was overtly critical of the traditional approach which tries to analyse all contracts into the form of offer and acceptance. The House of Lords allowed the Council’s appeal and made it clear that the Council’s statement of the price of the house was not an offer to Mr Gibson. It was merely one stage in the negotiating process. The language of the treasurer’s letter indicated this with the phrases: ‘may be prepared to sell’ and ‘this letter is not to be regarded as a firm offer of a mortgage’. In reply to the argument that the parties’ agreement could be shown by their conduc conduct, t, it can be said said that that their their conduc conductt was equivoca equivocal. l. The house was taken taken off the list list of proper propertie tiess maintained by the Council, but this could merely indicate that the house was to be sold in the near future and not that agreement had been reached. The most damaging fact for the plaintiff to overcome was the uncertainty over whether he would be granted a mortgage: would he have gone ahead if he had been unable to obtain one?

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Would any court have ordered him to do so? The successive communications between the parties show that they were feeling their way towards agreement, but that the negotiations had not yet ripened into a contract. Analysis: The case can be contrasted with Storer v Manchester City Council (1974), which also arose out of the change of policy in relation to council house sales. The main difference between the cases is that in Storer the plaintiff received a letter from the Council’s representative which stated: ‘I understand you wish to purchase your council house and enclose the Agreement for Sale. If you sign the agreement and return it to me I will send you the agreement signed on behalf of the Corporation in exchange’. He signed and returned the Council’s standard form ‘Agreement for Sale’ before control of the Council changed. Despite the fact that the agreement had not been signed on behalf of the Council, the Court of Appeal decided that there was a binding contract and specific performance was ordered. The conclusion which can be drawn (albeit tentatively) is that, in Storer v Manchester City Council (1974), the letter from the Council was more capable of being interpreted as an offer property than it was in Gibson v Manchester City Council (1979).

2.1.1

A Statement of Intention

Harris v Nickerson [1873]

Facts An auctioneer advertised that certain goods would be sold at a certain location on a certain date. The plaintiff went to the sale but all the lots he was interested in had been withdrawn. He sued the auctioneer for his loss of time and expenses. Held: It was held that the claim must fail as the advertisement of the auction was merely a declaration of intent to hold a sale and did not amount to an offer capable of being accepted and thus forming the basis of a binding contract, that is, that the advertisement merely amounted to an invitation to treat.

Harvey v Facey [1893]

Facts: The appellants sent a telegram to the respondent which read, ‘Will you sell us Bumper Hall Pen? Telegraph lowest cash price’; the respondent replied, ‘Lowest price for Bumper Hall Pen, ￡ 900.’ The appellants then telegraphed, ‘We agree to buy Bumper Hall Pen for ￡ 900 asked by you. Please send us your title deeds in order that we may get early possession.’ The appellants received no reply and thereupon brought an action for specific performance. Held: It was held that the action must fail since the respondent’s reply was not an offer to sell but simply a statement as to the minimum price required should he decide to sell; his reply was a mere response to a request for information. The appellant’s final telegram amounted to an offer to buy, which was not accepted by the respondent. 2.1.3

An invitation to treat

Pharmaceutical Society v Boots [1953]

Facts: The status of goods on the shelves of a self-service shop was called into question. The facts of the case were that the defendants were being prosecuted under the Pharmacy and Poisons Act 1933, s 17, in that they had

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allowed the sale of a listed poison to be effected without the supervision of a registered pharmacist. The arrangement in the shop was that a customer on entering was given a basket and he was then free to walk around the shop selecting items from the shelves. When he had selected such items as he required they were taken to the cash desk, where the customer was required to pay for them. Near to the cash desk was a registered pharmacist who was authorized to prevent a customer removing any drug from the shop. The Pharmaceutical Society alleged that the goods on the shelves were offers to sell, which the customer accepted by placing the goods in the basket and that, thus, the sale took place at that point and not at the cash desk under he supervision of the registered pharmacist. In such a situation, it was alleged, Boots were clearly in breach of the provision and had committed a criminal offence. The court, however, decided that the goods on the shelves were only invitations to treat and that it was the customer who made an offer to buy when he presented the goods for payment at the cash desk. At this point the person at the cash desk or the registered pharmacist could accept or reject that offer. The effect of this reasoning was that the sale did take place under the supervision of the registered pharmacist and no criminal offence had been committed. Held: It was decided that the contract was concluded at the cash-desk. The customer made the offer, and this could be accepted or rejected by the defendants. Therefore, sales were supervised by the registered pharmacist. The court argued (per Somervell LJ) that if the display of items on the shelf amounted to an offer, a customer who picked up items and put them into the basket provided would thereby accept the offer and be contractually bound to pay for the goods even if he later changed his mind and did not want the goods. Somervell LJ stated (at 406): ‘I can see no reason for implying from this self-service arrangement any implication other than that . . . it is a convenient method of enabling customers to see what there is and choose, and possibly put back and substitute, articles which they wish to have, and then go up to the cashier and offer to buy what they have so far chosen’.

Partridge v Crittenden [1968]

Facts: The appellant was charged, under legislation for the protection of wild birds, with unlawfully offering for sale a wild bird. He had placed an advertisement in a magazine: ‘Bramblefinch cocks and hens, 25s each’ . Held: The Divisional Court held that the appellant was not liable for the statutory offence as he had not offered the birds for sale; the advertisement was an invitation to treat.

Carlill v Carbolic Smoke Ball Company [1893]

Facts: In this case the plaintiff bought a medical preparation called ‘The Carbolic Smoke Ball’ on the basis that the defendants advertised that they would pay ￡100 to any person who contracted influenza after using the smoke ball in the prescribed manner and for a specified period. Further, the defendants stated that ‘to show their sincerity’ they had deposited ￡ 1,000 with the Alliance Bank. The plaintiff bought one of the smoke balls and used it in the manner prescribed and promptly caught influenza! She sued for the ￡ 100. The defendants contended that there was no agreement between them and used considerable ingenuity in promoting this contention. One of the defences used was that it was not possible to make an offer to the whole world since this would enable the whole world to accept the offer, which was clearly beyond the realms of commercial reality. Held: The Court of Appeal had no difficulty in rejecting this defence. Bowen LJ stated the position very clearly as follows: It was also said that the contract is made with the whole world – that is, with

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everybody and you cannot contract with everybody. It is not a contract made with all the world. There is the fallacy of the argument. It is an offer made to all the world; and why should not an offer be made to all the world which is to ripen into a contract with anybody who comes forward and performs the condition? . . . Although the offer is made to the world, the contract is made with that limited portion of the public who come forward and perform the condition on the faith of the advertisement. The defendants also contended that the plaintiff had not accepted their offer and therefore there was no consensus ad idem and thus no agreement. This defence, which was rejected, exposes the fact that offers may arise in two forms, either bilateral or unilateral. A bilateral offer arises where one party promises to do something in return for a promise made by the offeree. Both parties are agreeing to do something in return for some reciprocal promise from the other. An example of such an offer would be if A promises to sell their car in return for B promising to pay ￡5,000. The vast majority of offers are of this type . 2.2

Communication of the offer

Gibbons v Proctor [1891]

Facts: A police officer supplied information for which a reward had been offered; he was not aware of the offer at the time that he gave the information but he had become aware of the offer by the time the information reached the relevant party. It was held that the officer was entitled to claim the reward. Held: This case held that the advertisements of rewards for information leading to the arrest or conviction of the perpetrator of a crime, is treated as an offer, as the intention to be bound is inferred from the fact that no further bargaining is expected to result from them. Analysis: The case is sometimes wrongly cited as authority for the proposition that acceptance in ignorance of an offer is effective. A closer inspection of the facts of the case reveals that the party claiming the reward possessed full knowledge of the offer at the time when he gave the information.

R v Clarke [1927] (Australian case)

Facts: It concerned an offer of a reward for information leading to the arrest of certain murderers and a pardon to any accomplice giving the information. C gave the required information but admitted that he had forgotten about the reward at the time that he supplied it (i.e. when he was in custody, himself charged with the murders). Held: C’s claim for the ￡ 1,000 reward was rejected by the High Court of Australia, and the case was treated as if he had never known of the reward. Higgins J stated (at 241): ‘Clarke had seen the offer indeed; but it was not present to his mind—he had forgotten it, and gave no consideration to it, in his intense excitement as to his own danger. There cannot be assent without knowledge of the offer; and ignorance of the offer is the same thing whether it is due to never hearing of it or forgetting it after hearing . . . But for this candid confession of Clarke’s it might fairly be presumed that Clarke, having once seen the offer, acted on the faith of it, in reliance on it; but he has himself rebutted that presumption.’

2.3

Acceptance of an offer

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Bulter Machine Tool Co Ltd v Ex-Cell-O Corporation (England) LTD [1979]

Facts: In

response to D’s enquiry, P made a quotation on 23 May, offering to sell a machine tool to D for £75,535. The offer was stated to be subject to certain conditions which were to ‘prevail over any terms in the buyer’s order’. These conditions included a price variation clause: i.e. that any increase in the cost of the goods, by the date of delivery (which was to be in 10 months’ time), would be added to the purchase price. On 27 May, D replied, ordering the machine, but on their own terms and conditions which did not include a price variation clause. At the foot of D’s order form there was an acknowledgement section to be torn off, stating that ‘We accept your order on the terms and conditions stated thereon’. On 5 June, P completed and signed the acknowledgement, returning it to D, together with a letter stating that D’s order was being entered in accordance with P’s quotation of 23 May. When the machine was delivered, P claimed the price had increased by £2,892, and D refused to pay the increase in price. P’s action was based on the contention that they were entitled to increase the price under the price variation clause contained in their offer. D argued that the contract was on the buyer’s terms and these did not include such a clause. Held: The Court of Appeal decided that the contract did not include the price variation clause and P could not claim the extra ￡ 2,892. It was held that D’s order of 27 May was a counter offer which brought to an end the offer made by P on 23 May, and that P accepted D’s counter offer by completing and returning the acknowledgement of the order on 5 June. The contract was therefore on D’s terms and the price variation clause did not apply. 2.5

Exceptions of communication of the acceptance

Household Fire Insurance v Grant [1879]

Facts: The defendant applied for shares in the plaintiff’s company. The shares were allotted to him but the letter of allotment was never received. The company then went into liquidation and the liquidator claimed the balance of the purchase moneys from him. The defendant disputed the fact that he was a shareholder on the basis that he had not received an acceptance, in the form of the letter of allotment, to his offer to purchase the shares. Held: It was held that the contract had been entered when the letter of allotment had been posted to him despite the fact that it had never arrived. Holwell Securities Ltd v Hughes [1974]

Facts: D offered to sell a house to P in the form of an option ‘exercisable by notice in writing to the intending vendor [D] at any time within six months’. Within the six-month period, P’s solicitors wrote to D, notifying him of P’s acceptance of the offer. The letter was correctly stamped, addressed and posted, but it never arrived. (A copy was received by D’s solicitor, but P admitted that this was not sufficient notice.) No other written acceptance was given or sent to D before the time limit expired. P claimed specific performance, arguing that a contract was concluded on posting the letter of acceptance to D. Held: The Court of Appeal decided that the offer, by stipulating actual ‘notice to [D]’, could not be accepted merely by P posting a letter of acceptance. The offer was so framed as to require that the acceptance be communicated to the offeror and therefore the postal rule did not apply in this instance. Thus the rule can be ousted by the express provision of the offeror. Similarly, the rule does not apply if it causes severe inconvenience or absurdity. (See Holwell Securities at 166–7.) Entores Ltd v Miles Far East Corporation [1955]

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Facts: The plaintiffs were a London company and the defendants were an American corporation with agents in Amsterdam. Both the London company and the defendants’ agents in Amsterdam had telex machines, which allow users to type in a message, and have it almost immediately received and printed out by the recipient’s machine. The plaintiffs in London telexed the defendants’Amsterdam agents offering to buy goods from them, and the agents accepted, again by telex. The court case arose when the plaintiffs alleged that the defendants had broken their contract and wanted to bring an action against them. The rules of civil litigation stated that they could only bring this action in England if the contract had been made in England. Held: The Court of Appeal held that because telex allows almost instant communication, the parties were in the same position as if they had negotiated in each other’s presence or over the telephone, so the postal rule did not apply and an acceptance did not take effect until it had been received by the plaintiffs. Because the acceptance had been received in London, the contract was deemed to have been made there, and so the legal action could go ahead.

Brinkibon Ltd v Stahag Stahl [1982]

Facts: Brinkibon was a London company that purchased steel from Stahag, a seller based in Austria. Brinkibon sent their acceptance to a Stahag offer by Telex to Vienna. Brinkibon later wanted to issue a writ against Stahag and applied to serve an out of jurisdiction party. They would only be able to do so if the contract had been formed in England. The question at issue was where the contract was formed. Held: The Judges decided that the contract was formed in Vienna. They accepted the principle in Entores v Miles Far East Co where in the case of instantaneous communication, which included telex, the formation generally occurs in the place where the acceptance is received. Lord Wilberforce, however, did not see the rule as applying in all circumstances: “Since 1955 the use of Telex communication has been greatly expanded, and there are many variants on it. The senders and recipients may not be the principals to the contemplated contract. They may be servants or agents with limited authority. The message may not reach, or be intended to reach, the designated recipient immediately: messages may be sent out of office hours, or at night, with the intention, or on the assumption that they will be read at a later time. There may be some error or default at the recipient’s end which prevents receipt at the time contemplated and believed in by the sender. The message may have been sent and/or received through machines operated by third persons. And many other variants may occur. No universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie.”

2.6

Method of acceptance

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Manchester Diocesan Council of Education v Commercial & General Investments Ltd [1970]

Facts: P invited offers to buy property and supplied forms of tender on which the offers were to be made. Clause 4 provided: ‘The person whose tender is accepted shall be the purchaser and shall be informed of the acceptance of his tender by letter sent to him by post addressed to the address given in the tender’. A letter accepting D’s tender was sent, not to the address given in the tender, but to D’s surveyor. This did not affect D adversely, as it was P (the offeree) which had introduced this requirement in its standard form and now P waived it. D claimed that the acceptance failed to comply with the method of communication stipulated in the offer. Held: The court decided that P’s acceptance was valid. P included the stipulation, about the method of communicating acceptance, in the form of tender for P’s own purpose. P was entitled to waive the requirement if doing so did not adversely affect D. Buckley J stated (at 246): ‘Where . . . the offeror has prescribed a particular method of acceptance, but not in terms insisting that only acceptance in that mode shall be binding, I am of the opinion that acceptance communicated to the offeror by any other mode which is no less advantageous to him will conclude the contract . . . If an offeror intends that he shall be bound only if his offer is accepted in some particular manner, it must be for him to make this clear. Condition 4 in the present case had not, in my judgment, this effect.’

2.7

The end of an unaccepted offer

Byrne and Co. v Van Tienhoven and Co. [1880]

Facts: In this case, the defendants posted a letter in Cardiff on 1 October offering to sell a quantity of tinplate to the plaintiffs in New York. The offer was received by the plaintiffs on 11 October, and they immediately accepted it by telegram and confirmed their acceptance by a letter posted on 15 October. On 8 October the defendants had posted a letter withdrawing their offer but this was not received by the plaintiffs until 20 October. Held: It was held that a contract had come into existence when the telegram was sent on 11 October and that the letter of revocation sent on 8 October had no effect on the validity of the contract since it was only effective when received on 20 October, after a legally binding contract had already come into existence. Dickinson v Dodds [1876]

Facts: On 10 June the defendant offered to sell his house to the plaintiff for ￡ 800 adding, ‘This offer to be left over until Friday 12th June, 9am’. On Thursday 11 June the defendant sold the house to someone else and that evening the plaintiff was informed of that sale to another individual named Berry. That same evening the plaintiff delivered a formal letter of acceptance to the defendant’s house and followed this up with a duplicate at 7 am the next morning, that is, before the 9 am deadline. When the defendant failed to complete the contract the plaintiff sued him for a decree of specific performance. Held: It was held by the Court of Appeal that the plaintiff should fail in his application since he was aware at the time that he accepted the offer that Dodds, the defendant, no longer intended to sell the house to him. The principle established in the case places a substantial onus on the offeree to decide whether the source of the revocation is reliable or not, or indeed the precise time at which the revocation is deemed to have been communicated to him.

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To a large degree the case reflects the traditional and defunct consensus approach to establishing a legally binding agreement, but therein lies ananomaly, since there would be no consensus even if the withdrawal of the offer had not been communicated to him. A further weakness lies in the case in that the third party, Berry, subsequently became the agent of Dickinson, thus calling into question the notice of revocation being communicated by an independent third party. Perhaps, as Treitel suggests, the rule should simply be that the revocation must be communicated to the offeree by the offeror. Hyde v Wrench [1840]

Facts: The defendant offered to sell his farm for ￡1,000. The plaintiff at first made a counter-offer of ￡950, but two days later agreed to pay ￡1,000 and attempted to accept the original offer. The defendant refused to complete the sale and the plaintiff brought an action against him for a decree of specific performance. Held: It was held that no contract existed since by his letter offering ￡950 the plaintiff had made a counter-offer, the effect of which was to reject and destroy the original offer, so that the latter was therefore not available for him to accept two days later. Financings Ltd v Stimson [1962]

Facts: The defendant, having seen a car at the premises of the dealer, decided to buy it on hire purchase. He signed a form supplied by the dealer which stated that the hire purchase agreement became binding only when signed by the plaintiffs, the finance company. The defendant paid a first instalment of ￡70 and took the car away on 18 March. On 20 March the defendant returned the car, dissatisfied with its performance, and stated to the dealer that he no longer wished to purchase it. On 25 March the plaintiffs signed the agreement, thereby purporting to accept the offer of the defendant. On the night of 24/25 March the car was stolen from the premises of the dealer and badly damaged. The plaintiffs eventually sold the car and claimed damages from the defendant, who counter-claimed for his first instalment of ￡70. Held: It was held that the defendant would succeed since by returning the car to the dealer the defendant had revoked his offer and there was thus no concluded contract between the parties. Further, on the facts of the case, there was an implied condition in the offer of the defendant that the car would remain in substantially the same condition until the time of acceptance. Since the damage occurred before acceptance the plaintiffs were not in a position to accept the offer which had lapsed due to the fact that the implied condition had not been complied with.

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02_Offer & Acceptance

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