11

FORMATION OF A CONTRACT (1)FORMATION OF A CONTRACT (1)

1.1. OfferOffer

2.2. AcceptanceAcceptance

3.3. ConsiderationConsideration

4.4. CapacityCapacity

5.5. Intention to create legal relationsIntention to create legal relations

6.6. No vitiating factors presentNo vitiating factors present

22

OFFEROFFER Person who makes offer is Person who makes offer is offerorofferor, person , person

who receives offer is who receives offer is offereeofferee..

Promise to be bound on particular terms.Promise to be bound on particular terms.

Must be capable of being accepted (i.e. Must be capable of being accepted (i.e. not too vague).not too vague).

Sets out terms upon which offeror willing Sets out terms upon which offeror willing to enter into contractual relations with to enter into contractual relations with offeree.offeree.

May be made to a particular person, group May be made to a particular person, group of people, world at large. of people, world at large.

Carlill v Carbolic Smoke Ball Co (1893).Carlill v Carbolic Smoke Ball Co (1893).

33

7.7. Distinguish an offer from:Distinguish an offer from:

i.i. Statement of IntentionStatement of Intention

i.i. Cannot form basis of contract even Cannot form basis of contract even though party to whom made may have though party to whom made may have acted upon it.acted upon it.

ii.ii. Re Fickus [1900Re Fickus [1900].].

ii.ii. Supply of InformationSupply of Information

i.i. Cannot form basis of contract, i.e. Cannot form basis of contract, i.e. supplying information about price does supplying information about price does not mean that you contract at this price.not mean that you contract at this price.

ii.ii. Harvey v Facey [1893Harvey v Facey [1893]. ].

44

iii.iii. Invitation to TreatInvitation to Treat

i.i. An invitation to others to make offers. An invitation to others to make offers. Person making invitation not bound to Person making invitation not bound to accept any offers made.accept any offers made.

ii.ii. Fisher v Bell [1961Fisher v Bell [1961]. Display of goods ]. Display of goods in shop window.in shop window.

iii.iii. Pharmaceutical Society of GB v Boots Pharmaceutical Society of GB v Boots Cash Chemist [1953Cash Chemist [1953]. Display of goods ]. Display of goods on the shelves of a self service shop.on the shelves of a self service shop.

iv.iv. Partridge v Crittenden [1968Partridge v Crittenden [1968]. Public ]. Public advertisement.advertisement.

55

8.8. Rejection of OffersRejection of Offers

i.i. Express rejection of offer terminates Express rejection of offer terminates offer. Offeree cannot subsequently offer. Offeree cannot subsequently accept it.accept it.

ii.ii. Counter offer (where offeree tries to Counter offer (where offeree tries to change terms of original offer) also change terms of original offer) also terminates offer.terminates offer.

iii.iii. Distinguish from a request for Distinguish from a request for information.information.

iv.iv. Hyde v Wrench [1840Hyde v Wrench [1840]. ].

9.9. Revocation of OffersRevocation of Offers

i.i. Offeror withdraws original offer.Offeror withdraws original offer.

66

v.v. Offer may be revoked at any time Offer may be revoked at any time before acceptance.before acceptance.

vi.vi. Routledge v Grant [1828].Routledge v Grant [1828].

vii.vii.Revocation not effective until actually Revocation not effective until actually received by offeree.received by offeree.

viii.viii.Byrne v Van Tienhoven [1880Byrne v Van Tienhoven [1880].].

ix.ix. Communication of revocation may be Communication of revocation may be made through a reliable third party (e.g made through a reliable third party (e.g a broker).a broker).

x.x. Dickinson v Dodds [1876Dickinson v Dodds [1876].].

77

viii.viii.Promise to keep offer open only binding Promise to keep offer open only binding where there is a separate contract to that where there is a separate contract to that effect.effect.

ix.ix. In unilateral contracts revocation not In unilateral contracts revocation not permissible once offeree started permissible once offeree started performing task requested.performing task requested.

x.x. Errington v Errington and Woods [1952Errington v Errington and Woods [1952].].

10.10. Lapsing of OffersLapsing of Offers

i.i. Offer no longer capable of being Offer no longer capable of being acceptedaccepted::

i.i. At the end of a stated period or after a At the end of a stated period or after a reasonable time if no time limit set.reasonable time if no time limit set.

ii.ii. Where the offeree/ offeror die.Where the offeree/ offeror die.

88

ACCEPTANCEACCEPTANCE

1.1. Once offeree assents to terms offered Once offeree assents to terms offered contract contract comes into effectcomes into effect. Both parties bound, offeror . Both parties bound, offeror cannot withdraw offer and offeree cannot cannot withdraw offer and offeree cannot withdraw acceptance without consent.withdraw acceptance without consent.

2.2. Forms of AcceptanceForms of Acceptance

i.i. Acceptance must correspond with terms of Acceptance must correspond with terms of offer. Offeree must not seek to introduce offer. Offeree must not seek to introduce new contractual terms into acceptance.new contractual terms into acceptance.

ii.ii. Neale v Merrett [1930Neale v Merrett [1930] & ] & Hyde v Wrench Hyde v Wrench [1840[1840].].

iii.iii. Acceptance may be in the form of express Acceptance may be in the form of express words (oral or written) or may be implied words (oral or written) or may be implied from conduct. from conduct. Brogden v Metropolitan Rly Co Brogden v Metropolitan Rly Co [1877[1877].].

99

3.3. Communication of AcceptanceCommunication of Acceptance

i.i. General rule, acceptance must be General rule, acceptance must be communicated to offeror.communicated to offeror.

ii.ii. Silence cannot amount to acceptance.Silence cannot amount to acceptance.

iii.iii. Felthouse v Bindley [1863Felthouse v Bindley [1863].].

iv.iv. Exceptions to general rule:Exceptions to general rule:

v.v. Where offeror has waived right to Where offeror has waived right to receive communicationreceive communication. E.g in . E.g in unilateral contracts or reward cases unilateral contracts or reward cases acceptance occurs when offeree acceptance occurs when offeree performs required act.performs required act.

vi.vi. Carlill v Carbolic Smoke Ball Co [1893Carlill v Carbolic Smoke Ball Co [1893].].

1010

vii.vii.Where acceptance is through the postal Where acceptance is through the postal serviceservice. Acceptance is complete as soon as . Acceptance is complete as soon as the letter, properly addressed and stamped is the letter, properly addressed and stamped is posted. The contract comes into effect even if posted. The contract comes into effect even if the letter subsequently fails to reach the the letter subsequently fails to reach the offeror. offeror.

viii.viii.Adams v Lindsell [1818Adams v Lindsell [1818].].

ix.ix. Postal rule does not apply when instantaneous Postal rule does not apply when instantaneous communications are used. When acceptance communications are used. When acceptance made by telephone, fax or telex etc… offeror made by telephone, fax or telex etc… offeror must actually receive acceptance.must actually receive acceptance.

x.x. Entores v Far East Corp [1955Entores v Far East Corp [1955].].

xi.xi. Postal rule only applies where both parties Postal rule only applies where both parties contemplated that post would be used as contemplated that post would be used as method of acceptance.method of acceptance.

1111

xii.xii.Postal rule can be excluded if:Postal rule can be excluded if:

i.i. Offeror insists that acceptance only Offeror insists that acceptance only to be effective on receipt or in a to be effective on receipt or in a particular manner.particular manner.

Holwell Securities v Hughes [1974Holwell Securities v Hughes [1974].].Yates Building Co v J Pulleyn & Sons Yates Building Co v J Pulleyn & Sons

[1975[1975].].

If offeror does not actually insist on If offeror does not actually insist on acceptance in a particular manner, acceptance in a particular manner, then acceptance effective if it is then acceptance effective if it is communicated in a way that is no communicated in a way that is no less advantageous to offeror.less advantageous to offeror.

1212

4.4. TendersTenders

i.i. Where one party wishes particular Where one party wishes particular work to be done and issues a work to be done and issues a statement requesting interested statement requesting interested parties to submit the terms on which parties to submit the terms on which they are willing to carry out the work.they are willing to carry out the work.

ii.ii. Person who invites tender is making Person who invites tender is making an invitation to treat not an offer. an invitation to treat not an offer. Person who submits tender is offeror.Person who submits tender is offeror.