1. Week 4
Law of Contract
Offer and Acceptance

2. Contract
An agreement between two or more persons that will be enforced by law
May be
In writing
Oral
Partly in writing and partly oral
Implied

3. Writing Contracts need not be in writing Exceptions Sale of Land
Guarantees
Credit contracts
Other statutory requirements

4. Analysing a Contract Is there a contract? What are the terms?
Is it valid & enforceable?
Has it been discharged?
Has there been a breach?

5. Six Elements Offer Acceptance Consideration
Intention to create a contract
Contractual Capacity
Certainty

6. Offer
An offer exists only where a reasonable person would conclude on the facts that the person was willing to be bound in a court of law
Distinguish
Statements of future intention
Puffery
Negotiations
Invitation to treat
Provision of Information in response to enquiry

7. Statements of Future Intention
A mere statement of a present intention to do something in the future is not an offer
Harvey v Facey (Graw 3.2.2)
Australian Woollen Mills v Commonwealth Harris v Nickerson
Kelly v Caledonian Coal Co
Often called “a mere promise”

8. Puffery
Sales talk
Exaggerated statements that no reasonable person would believe to be true

9. Negotiations
An indication of a willingness to negotiate is not an offer
An offer will not arise merely because parties have reached agreement on one aspect of the deal
Implied (or express) understanding that parties not bound until formal contract executed
Heads of Agreement

10. Invitation to Treat An invitation to Negotiate Make an offer
is not an offer but an “Invitation to Treat”
The distinction lies in the objective intention of the person making the offer or invitation to treat.

11. Invitation to Treat
Retail Displays
Advertisements
Auctions
Tenders

12. Retail Displays Fisher v Bell (Graw 3.4.2)
Pharmaceutical Society v Boots
In most circumstances the retailer does not make an offer by displaying goods for sale, even where the goods are marked with a price
But
Display of goods in an automatic vending machine is an offer
Thornton v Shoe Lane Parking (Graw 3.2.2)

13. Advertisements
If the advertiser was making an offer then it would be bound by every acceptance even if their stock was exhausted.
Depends on circumstances
Carlill v Carbolic Smoke Ball Co (Graw 3.5.1)
But note legislative restrictions e.g. Trade Practices Act

14. Auctions Bidder makes the offer Auctioneer accepts
S64 Sale of Goods Act (Vic)
Auctioneer announces terms at start
Anyone who bids then offers on the auctioneers offer as to terms

15. Tenders Person submitting the tender makes the offer
Body calling for tenders accepts any tender
Not bound to accept lowest
BUT, the request for tenders may be an offer to deal with tenders in a certain manner
Hughes Aircraft v Aeroservices Australia

16. Provision of Information
A statement supplying information may not be an offer
Harvey v Facey (Graw 3.2.2)

17. Termination of Offer Revocation Rejection Lapse of time
Failure of condition
Identical cross offers
Death

18. Revocation Can be withdrawn before accepted
A contract is made when the offer is accepted
The withdrawal of the offer must be communicated to the offeree
Byrne v Van Tienhoven (Graw )
Dickinson v Dodds (Graw )
Would a reasonable person in the position of the offeree conclude that the offer had been withdrawn?

19. Revoking a Unilateral Offer
Involves a unilateral promise e.g. Carllil v Carbolic Smoke Ball Co
If offeree has acted on the promise then offeror cannot withdraw until offeree has had a reasonable opportunity to complete

20. Rejection Restating the offer when accepting is not a counter offer
Asking for clarification is not a counter offer
Reasonable person test
examine all circumstances

21. Rejection Once rejected, an offer cannot be accepted
Hyde v Wench (Graw 3.8.2)
A counter offer is a rejection
Any material alteration is a counter offer
A conditional acceptance is a rejection
May be rejected expressly or by implication
Implied
Offeree’s actions are inconsistent with an intention to accept

22. Lapse Due to Time Express time limit
Otherwise, offer remains open for a reasonable time
What is reasonable time depends on:
Method by which offer made
Nature of the transaction
Terms of Proposed Contract
Actions of parties between offer & purported acceptance
Intimations as to time by offeror
Promise to keep offer open for certain time is unenforceable unless consideration given (e.g. option)

23. Lapse Due to Death
Due to death of either party if involves personal skill or service by the deceased

24. Terms of Offer
All terms of offer must be brought to attention of offeree before acceptance
Causer v Browne (Graw )
Olley v Marlborough Court (Graw )

25. Accepting the Offer Acceptance must be final & unqualified
Must be made with knowledge of and in reliance on offer
R v Clarke
Fitch v Snedaker (Graw 3.7.1)
Only person to whom the offer was made may accept
Must be communicated to the person who made the offer

26. Subject to Formal Contract
There is a contract & one of terms is that documentation be prepared
There is a contract but nothing can happen until contract prepared
There is no contract

27. Acceptance Must be Communicated
Express Communication of Acceptance is not necessary where
Implied from past dealings between parties
Industry custom
Acceptance indicated by conduct
Brogden v Metroploitan Railway (Graw 4.5.5)
Unilateral contracts
Postal rule applies

28. Accepting the Offer Silence is not acceptance
Communications after acceptance are irrelevant

29. Method of Acceptance If Offerror stipulates method of acceptance
Must be in form stipulated by offeror, or
Must use equally expeditious method
Presumption that acceptance in same form as offer

30. The Postal Rule
Applies where offeror has expressly or impliedly accepted post as the means of communication of acceptance
Acceptance occurs at time of posting not receipt even if lost
Household Fire & Carriage Accident Insurance Co v Grant (Graw )
Applies to all situations where non-instantaneous communications are used
Often determines jurisdiction

31. The Postal Rule Does not apply where
Negotiations protracted - Tallerman v Nathan’s (Graw 4.5.9)
If would lead to manifest inconvenience or absurdity
Where offeror requires actual communication of acceptance – Holwell Securities v Hughs (Graw )
Acceptance not delivered due to fault of acceptor – Getreide-Import Gmbh v Contimar SA Compania (Graw )
Instantaneous communications used – Entores Ltd v Miles Far East Corp (Graw )

32. Did the offeror intend to revoke the offer?
Has an offer been made? No
No Contract
Yes
Did the offeror intend to revoke the offer?
Did the offeror communicate revocation?
Yes
Yes No
Has the offer lapsed? No
Yes No
Has acceptance been received by the offeror?
Yes No
Was acceptance made under the postal rule?
Contract No
Yes