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Rules of Offer and Acceptance Essay

In this essay, I am going to analyse the rules of offer and acceptance and then come to a conclusion as to how satisfactory I think each of them are and why.

In its general sense, an offer is an indication or proposal by one person or party (offeror) to another (offeree). It consists of one party promising to do or give something for the other party’s promise to do or give something in return. There must be willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed.

An offer can be given in one of many forms which are: letter, newspaper, fax, email, and conduct (if suitable and all terms are understood by both parties). There are also different types of offers, one which involves a specific individual or group, and one which refers to the world as a whole. A unilateral offer is an offer which the offeree accepts by performing his or her side of the bargain. A bilateral offer is responded to with an exchange of promises between two parties.

Another area in making an offer is an invitation to treat. This is not an offer, but an indication of a person’s willingness to negotiate a contract. Or in other words, it invites someone else to make an offer for what they are displaying. An example of a case where an invitation to treat was present was in Fisher V Bell, it was established that, where goods are displayed in a shop together with a price label, such display is treated as an invitation to treat by the seller, and not an offer. The offer is instead made when the customer presents the item to the cashier together with payment. Acceptance occurs at the point the cashier takes payment.

One of the rules of an offer concerns its termination. An offer may come to an end in various ways. So long as this happens before acceptance then there cannot be a contract. (Of course if someone tried to withdraw an offer after acceptance, this would simply be a breach.).These are now explained bellow:

With revocation, an offeror may revoke an offer before it has been accepted, but the revocation must be communicated to the offeree, although not necessarily by the offeror. If the offer was made to the entire world, such as in Carlill’s case, the revocation must take a form that is similar to the offer. I find this rule to be quite satisfactory as first of all, if no one has accepted the offer and the offeror wants to cancel it, what reason would s/he need to keep it open for. Also, I think it is also necessary to communicate revocation of an offer as, if someone has thoughts about whether they want to take up this offer or not, not informing them that you have revoked it will give them the excuse to use it against you.

However, an offer may not be revoked if it has been encapsulated in an option. So in other words, if the offeror has, for a consideration, promised not to withdraw the offer for a certain time, they must keep the offer open until the specified time.

If the offer is one that leads to a unilateral contract, then unless there was an ancillary contract entered into that guaranteed that the main contract would not be withdrawn, the contract may be revoked at any time. Other reasons for termination of an offer that are held to be valid so long as the offer has not been accepted are: If the offer may simply lapse, either because the offeror makes it clear that it will lapse after a certain time or because it has become stale. An offer may also lapse on the death of the offeror. It is also possible to stipulate in the offer that it will come to an end if a certain event happens or does not happen. A final reason that an offer is allowed to be terminated is if the offeree makes a counter-offer. With a counter offer, the mirror image rule states that if you are to accept an offer, you must accept it exactly, without modifications, if you change the offer in any way, this is a counter offer and kills the original offer.

In Hyde V Wrench (1840), in response to an offer to sell an estate at a certain price, the claimant made an offer to buy at a lower price. This offer was refused and subsequently, the claimant sought to accept the original offer. It was held that no contract was made as the initial offer did not exist at the time that the claimant tried to accept it, due to the fact that it was destroyed by the counter offer. I find this rule to be unsatisfactory as, if the defendant puts the house up for a specified price and, the claimant asks for lower but then offers to accept the original price, what changes have been made that the defendant should have reason not to accept the claimants offer. They would be getting the price that they asked for in the first place. However, I understand the fact that when the claimant then offers to buy the house for the original price stated, this is his/ her offer and so, the defendant should have the choice of whether to then accept this or not.

However, it is held that a mere enquiry about the terms of the offer will still keep it in-tact and is not held the same as a counter offer. It may be possible to draft an enquiry such that it adds to the terms of the contract while keeping the original offer alive, but this is something that will be decided by the courts. If the offeror has died and the offeree knows this, the offer cannot be accepted. In cases where the offeree accepts in ignorance of the death, the contract may still be valid, although this proposition depends on the nature of the offer.

For example, if the contract involves some characteristics personal to the offeror, the offer is destroyed by death. I find this to be satisfactory as, a dead person cannot possibly be held liable for breach of contract if they don’t carry out their side of it. This is the same if the offeree dies in which case the offer is rendered invalid. This can be seen in the case of Re Irvine** An acceptance is a final and unqualified expression of assent to the terms of an offer. The essential requirement of an acceptance is that there must be evidence of formal agreement that can be seen by both of the parties.

An acceptance can also be given in many forms such as: Oral, in writing, or by conduct. It is a general rule that acceptance cannot be revoked once made. What this means is that once a person (offeree) accepts an offer, they can not change their mind afterwards and say that they do not wish to resume the contract. This is different with unilateral contracts where, in the case of Carlil V Carbolic Smokeball, if the claimant wanted to stop taking the ball after 2 days of having started the consummation, she could do this and, would not be obliged to carry on with the process. However, if she wanted to sue the smokeball company for breach of contract, this would be when she would be obliged to finish the whole two weeks of consummation of the smokeball.

One of the rules of acceptance is that it must be communicated. Depending on the construction of the contract, the acceptance may not have to come until the notification of the performance of the conditions in the offer as in Carlill’s case, but nonetheless the acceptance must be communicated. Prior to acceptance, an offer may be withdrawn. Another rule is that an offer can only be accepted by the offeree, that is, the person to whom the offer is made. So if someone wishes to sue for breach of contract, they need to prove that they were the one/s who accepted the offer. This rule seems to be satisfactory where it would not seem normal for any 3rd party to have the authority to sue for breach of they were not actively involved in the contract. A further rule is that an offeree is not bound if another person accepts the offer on his behalf without his authorisation. This rule is very satisfactory as, it would be seen as absurd for a person to be liable in a contract even though someone else has accepted it and has carried out what ever act they felt necessary.

However, in Commercial Law, an “Agent” is a person who is authorised to act on behalf of another (called the Principal) to create a legal relationship with a Third Party. So I think that it is necessary to regard whether a third party had authorisation for acting on behalf of one of the parties bound in the contract or not. Another rule is that it may be implied from the construction of the contract that the offeror has dispensed with the requirement of communication of acceptance. So in other words, it may be assumed that acceptance of the contract requires communication so to signal acceptance. A further rule regarding communication is that if the offer specifies a method of acceptance (such as by post or fax), you must accept it using a method that is no less effective than the method specified. With the postal rule, it states that if the offer is accepted by post, the contract comes into existence at the moment that the acceptance is posted. In the case of Adams V Lindsell (1818), it was held that the defendant’s offer was accepted by the claimant “in course of post” as specified.

The final sentence of the judgment states: “Then as to the delay in notifying the acceptance, that arises entirely from the mistake of the defendants, and it therefore must be taken as against them, that the claimants answer was received in course of post”. Therefore, there was a valid contract between the claimant and the defendant and, the defendant was in breach of contract by selling the wool to a third party. I don’t find this rule to be entirely satisfactory. I think that if post is used as the method to promote the offer, then it is suitable to use the same means of communication to make your acceptance. However, with the postal rule, I think complications can occur where, even if the letter is lost in the post, the contract is still valid, even if the offeror is not aware of the acceptance. With another rule, it is held that Silence cannot amount to acceptance.

In the case of Felthouse v. Bindley (1862), the court ruled that Felthouse did not have ownership of the horse as there was no acceptance of the contract. Acceptance must be communicated clearly and can not be imposed due to silence of one of the parties. The uncle had no right to impose sale through silence whereby the contract would only fail by repudiation. Though the nephew expressed interest in completing the sale, there was no communication of that intention. I find this rule to be satisfactory. The essential requirement of an acceptance is that there must be evidence of formal agreement that can be seen by both of the parties, and so, due to this, silence cannot possibly amount to a valid acceptance. In conclusion, after having looked at all of the rules of offer and acceptance, I think that most of them happen to be satisfactory where, it would be assumed that this would be the outcome for each of them.

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