Chapter 4- Contract: Offer &

Acceptance
A contract occurs when an agreement occurs between two or more
people and that can be enforced by the court of law. A contract can
be:
Entirely in writing or
Easier to prove existence of contract
Entirely oral or
Partly both
(express and implied)
The court will use the following questions to determine whether a
contract exists or not:
Has offer been made?
May be an invitation to treat and not an offer
May be an indication of possible course of future
conduct and not an offer
May be an offer or conduct as part of a negotiation and
not an offer
Has offer been accepted?
Offer has to be properly communicated
Did the parties intend to make a contract?
The parties should have originally intended to bind a
contract
Was consideration provided?
Agreement will be enforced if both parties have
provided something of value

In general a contract cannot be

1 Misleading
2 Fraudulent
3 Unconscionable

Making the offer

Meaning of offer
An offer occurs when one person indicated his or her willingness to
enter into a contract with another person on certain terms. The
court will determine that an offer exists when using the available
information the court will be able to conclude that under such
circumstances a reasonable person would have indicated willingness
to be bound by a contract (Ref. 1).
Offer? Or merely an indication of present intention?
Sometimes a communication may be an expression of intention. For
example in Harvey v Facey, Facey quote of 900 was wan expression
of intention (Ref. 1, 2, 3, 4 & 5).

Offer? Or an invitation to treat?

Sometimes people may take actions with the intention of inviting
people to treat that action. For example when an advertisement is
places, it is not an offer but an invitation to treat (Ref. 6). An
invitation to treat can also be an indication of invitation to negotiate.
Display of goods
In retail stores e.g. retail windows with price tag-
invitation to treat (Ref. 7)
In supermarkets- the prices on the shelf are considered
invitations to treat, its only when a customer checks out,
an offer is made (Ref 8).
Catalogues
Trader not making offer by advertising goods through
catalogues including price catalogues (Ref. 9).
Same applies to goods sold on the internet
Advertisements- who makes the offer?
Can be an invitation to treat
Ref 1-9 where only price information had been
discussed
Can be an offer
Ref 10 where advertising was taken to a whole
new level with a reward offering. Thus that
advertisement of Carbolic Smoke Ball would count
as an offer and not an invitation to treat.
Auctions- who makes the offer?
The bidder makes the offer
The auctioneer can either accept or reject that offer.
In a properly conducted auction,
The auctioneer will make the bidders aware of the
risks of the auction
This will prevent any legal issues as the
bidder will make an offer willing to engage in
a binding contract.
Tender- who makes the offer?
The tenderer makes the offer
The person calling for tenders can accept or reject the
tender
It is not necessary that the lowest tender has to be
chosen, however all tenders should be considered.
Ref (11-12)
Offer? Or merely part of the negotiations?
If the negotiations are complex and complicated an offer will not
arise just because part of the negotiations have been made. For
example a negotiations for the sale of a large industrial firm may
involve complex negotiations and the deal may be refashions a
number of times to suit the needs of the party, under such
circumstances only the final deal will be considered as an offer.

The fate of the offer

Offers can be:
Withdrawn be offeror
Offeror may accept the offer = agreement
Offeror may reject the offer
Offer may lapse due to passage of time
Offer may lapse due to passing of time
Offer may lapse due to death of offeror/offeree
May lapse due to failure of a conditional precedent

Withdrawing the offer

An offer can be withdrawn, but is subject to the following:
Once an offer has been accepted it cannot be revoked or be
withdrawn. It can however be revoked anytime before
acceptance (Ref 13)
The revocation must be clearly communicated to the offeror
otherwise it will not be effective (Ref 14)
In case if the offeror is revoking he or she must
communicate revocation with the offeree, not
necessarily in person.
Communicated in reasonable manner
The revocation does not have to be communicated personally
Special problems exist with unilateral offer
Options are offers that cannot be withdrawn even prior to
acceptance (Ref. 15)
An option is a separate enforceable obligation
It exists where oferee had provided something of value
to keep the offer open.
In other words an option is effectively a contract to
keep the offer open.
In Routledge v Grant (ref 13) if Routledge had given
grant some money in exchange for keeping the offer
open then it would have been equivalent to an option.

Rejecting an offer
Offer can be rejected through implications or expressly
 Once an offer is terminated on revocation it cannot be
successively accepted
Rejection through action
Basically meaning that the offeree does something that
goes against an offer signalling rejection
Counter offer will result in termination of contract (Ref 16)
For example after negotiations the former offer will
automatically be terminated and give rise to a new offer
which will be subject to further acceptance or
revocation.
Ref 16 & 17
Sometimes there may be a complaint with an offer. This would
not result in revocation because a complaint differs from
rejection.
Sometime the offeree may just seek a clarification of a term of
an offer. This does not mean that a counter offer has been
made.
For example an offer for sale occur, the offeree may
simply ask the offeor whether the to pay be cheque or
cash. This will not mean that a counter offer is being
proposed.
When determining whether a statement made is a
counter offer or enquiry the court will use the
reasonable person test

Accepting the offer

The offeree accepts an offer. The following rules apply:
Only the offeree can accept
Acceptance must be final and unqualified and
A final and unqualified acceptance basically means that
the offer will either be accepted or not. there cannot be
any counter offers or additions to the offer (Ref 18).
When negotiation takes place the court will only hold
the final offer as the one that is being accepted (Ref 19)
Any changes to an offer post acceptance will be
rendered irrelevant by the court (Ref 20)
It must be effectively communicated to the offeror
unless one of the exemptions apply
Intention to communicate is irrelevant
As a general rule silence does not mean acceptance
Acceptance will depend on the intention of the parties to
bind in a contract. For example in a large company an
acceptance may take time to be seen just because it
was received a little late wouldnt mean that offer had
not been accepted.
 In case of electronic mails the email has to be present in
the offerors inbox for it to be considered as an effective
communication
Express communication may not be required under the
following scenarios:
Sufficient past dealing between parties thus
having a intention of accepting offer
Dealing between parties in similar industry thus
not requiring a formal acceptances
Where acceptance is indicated by conduct
In case of unilateral contract (Ref 10)
The postal rule applies
When the ordiary post has been chosen as a
mean of communication, effective
communication s made as soon as the
acceptance is posted regarless it reaches
the offeror or not. it has to be addressed
correctly thugh.
o Does not apply to instantaneous mode
of communication e.g. sms, phone
calls, face to face (ref 21)
Only where the postal rule has been
accepted by the offeror as an acceptable
means of communication. There must be
proof to this in express or implied terms.
Offer must be accepted under the terms (time and
method) set by the offeror.
Time is a must method might be considered
A authorised third party can also accept the offer on
behalf of the offeree

Lapse of offer
Lapse due to death of offeror or offeree
Offer must be accepted with the stipulated time frame
If no time is stipulated the acceptance has to be made within
a reasonable time period. Reasonable time depends on
circumstances:
Method of offering
Nature of transaction
Terms of a contract as a whole
Actions of the parties between the making of the offer
and the purposed acceptance and
Any evidence that a time frame had been stipulated by
the offeror
Lapse dur to failure of condition precedent
 Offer may have certain conditions that need to be met
thus failure to do so will result in lapse of the offer

The agreement must be certain

Contract must be sufficiently certain in all its essential
elements, otherwise it is void
Could be uncertain due to unclear, ambiguous or
contradictory terms, or incompleteness
Ref 22
An agreement to agree is not binding
However if the fix a mechanism for future conduct then
agreement will be enforced
Agreement to negotiate in good faith is not binding
subject to contract agreements are not binding (ref 18)
Cases- Ch 4
Re Page
Related to the Related in
f. Case Numb
issue of what way
er
1 Harvey v 163 Making an offer The court did not
Facey consider Faceys
telling of Harvey
the price of the
pen as agreeing to
an offer. Faceys
actions did not
show any signs of
willing to agree to
enter a binding
agreement.
2 Australian 164 Not Offer- The
Woollen merely an announcement of
Mills Pty Ltd indication of subsidy was an
v present indication of
Commonwe governments
intention
alth present intention
at that time which
was expected to
be proposed with
schemes from the
wool industry,
thus the plaintiffs
claim was
dismissed.
3 Harris v 165 Not Offer- Advertising is not
Nickerson merely an an offer
indication of
present
intention
4 Kelly v 165 Not Offer- Caledonians price
Caledonian merely an quote was a
Coal Co indication of statement of
present present intention
and not an offer.
intention
5 Collonial 166 Not Offer- Not an offer. The
Ammunition merely an NSW government
Co v Reid indication of was not obligated.
present At the end of the
contract it has the
intention
right to switch to a
different supplier.
6 Partridge v 167 Not Offer- Advertising is not
Crittenden invitation to an offer but
treat invitation to treat
7 Fisher v Bell 168 Not Offer- The price tag on
invitation to the item was
treat (retail considered as an
stores) invitation to treat
and not an offer.
8 Pharmaceut 168 Not Offer- The price tag on
ical Society invitation to the item was
of Great treat (retail considered as an
Britain v stores) invitation to treat
Boots Cash and not an offer.
Chemists The offer was
(Southern) made when the
Ltd customer decided
to check out the
items
9 Grainger & 169 Not Offer- The court held
Sons v invitation to that the catalogue
Gough treat was an invitation
(catalogue) to treat and not an
offer. However the
wine catalogue
had claimed to
supply an
unlimited quantity
of wine thus as
soon as a person
makes an offer,
there will be a
binding contract.
10 Carlill v 170 Advertisement The reward that
Carbolic considered an was offered by
Smoke Ball offer Carbolic Smoke
Ball make the
advertisement
more than an
invitation to treat.
11 Hughes 172 Calling for CAAs call for
Aircraft tender treated tender was
Systems as an offer treated as an
Internationa offer, as CAA
lv intended to
Airservices engage in a
Australia binding contract
and was bound by
the procedures set
out in the Request
for Tender which it
breached, with
Hughes. Thus a
contract (process
contract) existed.
12 Harvela 173 Calling for In this case Royal
Investments tender treated Trust who was
Ltd v Royal as an offer calling for the
 Trust Co of tender was
Canada Ltd making the offer,
which the
tenderers
responded to.
Thus by not
selecting the
highest bid Royal
Trust breached its
contractual duties.
13 Routledge v 177 Revocation Grant had a right
Grant before to withdraw the
acceptance offer before
accepting.
14 Byrne & Co 177 Communicating Revocation can
v Van revocation only occur before
Tienhoven acceptance. As it
& Co was revoked post
acceptance it was
a breach
15 Goldsborou 179 Options- cannot As five shillings
gh Mort & be revoked had been paid to
Co Ltd v keep the offer
Quinn open, it couldnt
be revoked. The
court ordered
specific
performance of
the contract that
is perform the
terms of the
contract that
existed as a result
of the option.
16 Hyde v 180 Rejection As Hyde had put
Wrench through forward a counter
counter offer offer the initial
offer was rejected
thus no offer
existed
17 Turner 181 Rejection The case was
Kempson & through settled in favour
Co Pty Ltd v counter offer of Turner as
Camn Camns
acceptance did
amount to an
acceptance as the
terms had been
played with. Thus
the initial offer
made by Turner
was rejected right
that moment
freeing Turner of
 any liability.

18 Masters v 183 Acceptance has The court decided

Cameron to be final and that there werent
unqualified any acceptance
from Masters as
the terms used by
Masters did not
amount to a final
and unqualified
acceptance.
19 Butler 184 Acceptance and The court decided
Machine exchange of in favour of Ex-
Tool Co Ltd forms (price Cell-O Corp saying
v Ex-Cell-O variation that the final offer
Corp clause) was made by him
England Ltd which Butler had
accepted thus the
price should be
what the buyer
had set.
20 Reese Bros 185 Acceptance and The initial offer
Plastics Ltd additions to had been
v Hamon offer post accepted by fax
Sobelco acceptance thus the new offer
Australia was considered
Pty Ltd irrelevant.
21 Brinkibon v 188 Effective The court held
Stahag communication that the postal
Stahl - postal rule- rule does not
instantaneous apply to
comm. instantaneous
modes of
communication
and thus
acceptance
occurred when the
fax was received
in Austria.
22 Whitlock v 191 Contract must The term to lease
Brew be sufficiently to Shell was an
certain uncertain term as
the lease period
was not
mentioned.