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Offer, Acceptance, Revocation Case Summary
Business law (BLO1105)
Victoria University
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Lecture 3 – Offer, Acceptance,
Revocation
Offer Requirements
Harvey v Facey HELD [1893] AC 552
This case considered the issue of offer and acceptance and whether or not a series of telegrams regarding a property which was for sale amounted to a binding contract.
HELD: He accepted established authority that tickets for carriage constitute an offer rather than a completed agreement. However he adopted a complex interpretation involving two distinct contracts. Jacobs considered that the carriers offer is accepted by the passenger accepting the ticket and paying the price, forming an executory contract between the carrier and the purchaser. The ticket also constitutes an offer of carriage to the proposed passenger (who may differ from the purchaser of the ticket) capable of acceptance by presentation of the ticket. If the purchaser of the ticket is the proposed passenger, the two contracts merge. In neither case however, does the ticket constitute the agreement, making it liable to stamp duty.
Goldsborough Mort & Co Ltd v Quinn (1910) 10 CLR 674
This case considered the issue of mistake and irrevocable offers regarding the sale of land and whether or not a man could revoke an offer where that offer had been given for consideration.
HELD: Mere promise to leave an offer open for a period of time is not enforceable
- the promise without consideration is nudum pactum. But if there is consideration for the promise, it becomes binding. It is often said that "an option given for value is not revocable". The true principle is that an option is an offer to sell upon condition - a conditional contract. If the promise were only not to withdraw the offer ie an irrevocable offer, then a breach could be compensated for in damages [thus implying that there could be no specific performance of the sale].
Display of Goods for Sale
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 QB 795
Boots operated a self-serve chemist chain, where goods (including prescribed drugs) were displayed on shelves and customers could select items themselves
before paying for them at the counter.
HELD: The offer was made by the customer when they took the items to the cashier. The offer is then accepted or rejected by the cashier. If accepted, this is when the contract is formed.
Fisher v Bell [1961] 1 QB 394
Bell was charged with offering an offensive weapon for sale when he displayed a flick-knife in his shop window with a price tag. This was a breach of s1(1) of the UK Offensive Weapons Act (1959)
HELD: Bell was not guilty. The display of the item was merely an invitation to treat.
Display of Goods in Brochure/Catalogue
Grainger & Sons v Gough [1896] AC 325
Distribution of brochures, circulars, catalogues or other advertising material appear to be making offers, but are likewise legally only invitations to treat.
Display of Goods in Advertisements
Partridge v Crittenden [1968] 2 All ER 421
An advertisement on TV, in a paper or other media such as the Internet is also
generally regarded as only an invitation to treat. The prospective buyer has to
make an offer that the advertiser can accept or reject.
Carlill v Carbolic Smokeball Co (1893) 1 QB 256
The defendants argued the general rule that an advertisement is not an offer, and there was thus no contract with Mrs. Carlill.
HELD: The court rejected this argument, noting that when an advertisement offers a reward and prescribes conditions for the reader to fulfill, the ad becomes an offer the reader can accept by conduct (fulfilling the conditions)
Exception to Tenders
Hughes Aircraft Systems Int. v Air Services Australia (1997) 146 ALR 1
by wagon to certain place. The place where letter to be sent was an essential part of offer. D sent letter to diff place then P wanted and at later date then P said
HELD: There was no acceptance and hence no contract formed. Not accepted within proper time, right place or correct manner
Entores Ltd v Miles Far East Corp
A contract was formed by telex, the offer being telexed from London to Amsterdam, and vice versa. The issue was whether the contract was formed in London or Amsterdam?
HELD: Acceptance occurred when and where the telex accepting the offer was received, i., in London.
Postal Rules of Acceptance
Adams v Lindsell (1818) 106 ER 250
The defendant wrote to the claimant offering to sell them some wool and asking for a reply 'in the course of post'. The letter was delayed in the post. On receiving the letter the claimant posted a letter of acceptance the same day. However, due to the delay the defendant's had assumed the claimant was not interested in the wool and sold it on to a third party. The claimant sued for breach of contract.
HELD: There was a valid contract which came in to existence the moment the letter of acceptance was placed in the post box.This case established the postal rule. This applies where post is the agreed form of communication between the parties and the letter of acceptance is correctly addressed and carries the right postage stamp. The acceptance then becomes effective when the letter is posted.
Rules of Acceptance – Rule 3 (given with knowledge and reliance)
R v Clarke (1927) 40 CLR 227
A reward was offered for information leading to the arrest and conviction of wanted criminals in W. Clarke was arrested and questioned, and provided the information sought.He claimed the reward. The Government refused to pay him. He sued for breach of contract.
HELD: Clarke was not entitled to the reward.Even though he knew of the reward, he only provided information to remove suspicion from himself. He would not have provided the information but for this.No valid acceptance of offer as information was not provided in reliance of offer
Rules of Acceptance – Rule 4 (must be communicated)
Felthouse v Bindley (1862) 142 ER 1037
Paul Felthouse offered to buy a particular horse from his nephew and stated (in a written offer) that ‘if I hear no more about him, I consider the horse mine at £ 15s’. His nephew did not reply but instructed the auctioneer, Bindley, not to sell the horse. Bindley mistakenly sold the horse. Felthouse sued the auctioneer for conversion.To succeed in an action for conversion Felthouse needed to demonstrate that he owned the horse at the time of the sale; to do this he needed to prove that there was a contract between himself and his nephew for the sale of the horse.
Acceptance by Agent
Powell v Lee (1908) 99 LT 284, cf
P applied for a job as a headmaster. A third party at the school informed P was appointed, without authority. Can a third party communicate acceptance?
HELD: Third party must be authorised to communicate acceptance
Cross Offers
Tinn v Hoffman & Co (1873) 28 LT 271
If 2 identical offers cross in transit there is no offer and acceptance in this situation. I., no contract.
HELD: Two identical offers are not the same as an offer and an acceptance. One offer has to be accepted.
Counter –Offers
Hyde v Wrench 1840 49 ER 132
Wrench (D) offered to sell his estate to Hyde for 1200 pounds and Hyde (P) declined. Wrench then made a final offer to sell the farm for 1000 pounds. Hyde in turn offered to purchase the property for 950 pounds and Wrench replied that he would consider the offer and give an answer within approximately two weeks.Wrench ultimately rejected the offer and the plaintiff immediately replied that he accepted Wrench’s earlier offer to sell the real estate for 1000 pounds. Wrench refused and Hyde sued for breach of contract and sought specific performance, contending that Wench’s offer had not been withdrawn prior to
that the contract for sale was not complete and hence damages only were payable.
HELD
A mere promise to leave an offer open for a period of time is not enforceable - the promise without consideration is nudum pactum. But if there is consideration for the promise, it becomes binding. It is often said that "an option given for value is not revocable". The true principle is that an option is an offer to sell upon condition - a conditional contract. If the promise were only not to withdraw the offer i an irrevocable offer, then a breach could be compensated for in damages [thus implying that there could be no specific performance of the sale]
Revocation – not affected by postal rule
Byrne v Van Tienhoven (1880) LR 5 CPD 342
D's offered to sell goods to P by letter dated 1 October. On 8 October, prior to acceptance, D's posted a letter revoking the offer. This letter was received by P on 20 October. In the meantime, on 11 October P received the letter and dispatched an acceptance. Was there a contract?
HELD: To be effective revocation must be communicated. Where post is used for acceptance, acceptance occurs when and where sent (provided it is contemplated as a means of acceptance) (the 'postal rule'). However, this rule does not apply in relation to revocation of offers - thus, if post is used for revocation, communication is only effective if and when it is received by the offeree. As this occurred after acceptance there was a contract formed in this case. An offer was containing a price escalation clause. A counter offer was then made without this clause; it contained a detachable receipt which the company (original offeror) sent back with a notation that they assumed it was on their terms.
Revocation – not communicated by offeror
Dickinson v Dodds (1876) 2 Ch D 463
On 10 June Dodds offered to sell house to Dickinson, stating ‘this offer to remain open until 9 on 12 June". Dickinson decided to accept on 11 June but did not advise Dodds immediately. Later on the 11th Dickinson was informed by a third party that Dodds had sold to someone else. Dickinson then purported to accept the offer. Dodds replied that it was too late - the property had already been sold.
HELD: No particular form of revocation is required. All that is required is that the offeror in some way conveys (directly or indirectly) to the offeree that s/he had changed his or her mind about the offer. There was no question that this had
occurred here - Dickinson knew Dodds was no longer prepared to sell before purporting to accept. The promise to keep the offer open was not binding because it was not supported by consideration.
Lapse of Offer
Ramsgate Victoria Hotel v Montefiore (1888)
The defendant offered to purchase shares in the claimant company at a certain price. Six months later the claimant accepted this offer by which time the value of the shares had fallen. The defendant had not withdrawn the offer but refused to go through with the sale. The claimant brought an action for specific performance of the contract.
HELD: The offer was no longer open as due to the nature of the subject matter of the contract the offer lapsed after a reasonable period of time. Therefore there was no contract and the claimant's action for specific performance was unsuccessful.
Offer, Acceptance, Revocation Case Summary
Course: Business law (BLO1105)
University: Victoria University
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