FORMATION OFFER: (2) Elements: Sufficiently clear and promissory (Gibson v Manchester) More than a mere puff (Carbolic Smoke Ball)

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Caitlin Spencer
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1 FORMATION [A] will argue that a binding contract exists, and seeks to enforce [B] s promise of. In this case, the elements of and are likely uncontentious, but [A] will have to make out and _. OFFER: [A] will argue an offer was made in [X]. To do this [A] must prove the offer was sufficiently clear and promissory in nature, and did not terminate before acceptance occurred (1) Introduction: An offer is the objective manifestation of willingness to be bound by certain terms, upon the acceptance of those terms by the relevant party per Lord Denning in Gibson v Manchester A statement will be an offer if the person to whom it is addressed would reasonably interpret is as such, even if the promisor was not actually prepared to be bound upon acceptance (Carbolic Smoke Ball) (2) Elements: Sufficiently clear and promissory (Gibson v Manchester) More than a mere puff (Carbolic Smoke Ball) (2.1) Distinction from an Invitation to Treat: An invitation to treat lacks sufficient indication of willingness to be bound (2.1.1) Advertisements Advertisements are usually non-contractual (Carbolic Smoke Ball) (2.1.2) Shop Sales Pharmaceutical Society v Boots Chemist o Goods displayed on shelves are an invitation to treat o Offer occurs when the customer presents their chosen item at the counter o The store can thus choose to accept or reject this offer by allowing or refusing sale (2.1.3) Online Sales The mere advertisement of an item for sale falls under invitation to treat- extension of Boots principle S14B of the Electronic Transactions Act (ETA) a proposal is considered to be an invitation to make offers, unless it clearly indicates the intention of the party asking the proposal to be bound in case of acceptance. (2.1.4) Auctions AGC v McWhirter o General rule is auction is invitation to treat o Bid offer o Acceptance = fall of the auctioneers hammer (2.1.5) Tenders General rule is a request for tenders is an invitation to treat Tender from an interested supplier constitutes an offer but depends on the circumstances o From wording of the call for tender may be such that certain bids must be accepted where vendor promises to accept highest bid i.e. we bind ourselves to accept (Harvela Investments v Royal Trust Co) o Sometimes the call for tenders in itself will create a contract regarding the tender process (Hughes Aircraft v Airservices Australia) (2.2) Ticket Cases More difficult to identify the offer (processes of ticketing vary; often contain new terms and conditions; often contain broad exclusion clauses). Conventional approach: ticket is an offer, which purchaser can accept or reject after having reasonable opportunity to do so

2 Conventional Approach MacRobertson v Commissioner of State Tax o Ticket = offer o Purchaser can then choose to accept or reject after they have had a reasonable opportunity to read the terms More on ticket cases in express terms (3) Termination of Offer (3.1) Revocation by Offeror Can occur at any time before acceptance, even if there has been a previous promise by the offeror to keep offer open (as the offer itself has no contractual force; requires consideration) Revocation effective when communicated to the offeree (Dickinson v Dodds) (3.1.1.) Exceptions If the offeree has paid to keep of the offer open (Goldsborough Mort v Quinn) o Conditional contract (exercising option to proceed with sale) vs two separate contracts (one to keep initial offer open, second to sell the land) If performance of a unilateral contract has already commenced, and it is unfair to revoke the offer (NB: not a general rule)/ or there is an implied K to not revoke or an estoppel (Mobil Oil v Wellcome) o There may be times where there is an ancillary contract not to revoke the offer once the offeree commences performance, considering: Does the offeror know of the offeree commencing performance? Does the offeree understand that incomplete performance is at their own risk? Did the parties intend that the offeror should be able to revoke the offer? Is the performance beneficial or detrimental? o Note: an ancillary contract is one that is related to the main contract but is subordinate to it. See Article 16 CISG below (3.2) Lapse of Time Offer may be open for a specified period, and will lapse at the end of that period If no period is specified, the plain objective test says that it will lapse after a reasonable time (Empirnall Holdings) o Judged on context If an offer is sought to be accepted after it ends, the purported acceptance will be invalid (Farmer s Mercantile Union) (3.3) Death of Offeror (3.3.1) Contract for personal services Contract will terminate immediately if the contract involved personal services of the offeror (Fong v Cilli) o i.e. if it is essential for the personality of the contract that the offeror remains alive (3.3.2) Contract not for personal services The contract will terminate on receipt of notice of death of offeror o Unless there is an enforceable option contract (Fong v Cilli) Option contracts remain enforceable against deceased estates unless the intention of the option was not to be exercisable after death (Laybutt v Amoco Australia) (3.4) Rejection by Offeree Once an offer has been rejected, and this rejection communicated to the offeror, it is no longer available for acceptance (Stevenson, Jaques & Co v Mclean) (3.4.1) Counter Offer v Mere Inquiry Counter offer constitutes rejection of the initial offer, and transfers onus of acceptance to initial offeror.

3 Mere inquiry (e.g. would you accept? or is there room for movement? ) as opposed to (I ll give yo X instead) does not terminate offer (Stevenson Jaques & Co. V McLean) See Article 19 Below for CISG s interpretation (3.5) Failure of Condition/Changed Circumstances Offeror may stipulate a condition that affects whether offer may stay open or lapse (e.g. offer subject to board approval) Even if no express condition, may be implied condition which is obvious to objective observer that the offer is made on basis of certain circumstances and if those circumstances change offer will lapse TEST: Not every change in circumstance will cause the offer to lapse; must be a fundamental change in circumstances (Neilson v Dysart) from NZ so can conclude otherwise (4) CISG If the contract is one to which the United Nations Convention for the international Sale of goods (CISG) applies: Article 14: Invitation to Treat o A proposal that is not sufficiently definite and does not indicate the intention of the offeror to be bound in case of acceptance is to be considered as merely an invitation to make offers, unless the contrary is clearly indicated. (conflicts with Carbolic) Article 16: o An offer may be revoked before contract is concluded if revocation reaches the offeree before acceptance o An offer cannot be revoked if it indicates that it is irrevocable: By stating fixed time for acceptance; or If it was reasonable for offeree to rely on that offer as being irrevocable and offeree has acted in reliance of the offer Article 19: Rejection and Counter-Offer: o A reply to an offer which contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter offer. If the reply to the offer contains additional or different terms that do not materially alter the terms of the offer, this may constitute acceptance, unless without delay the offeror objects to the discrepancy. ACCEPTANCE: [A] will argue that acceptance was established by [X]. To do this, [A] must show that it was the objective intention of [B] to accept the offer, and this acceptance was communicated to the offeror. (1) Introduction: Acceptance is unqualified assent to the terms of an offer (2) Intention: Objective test for intention to accept an offer = would the reasonable person consider the parties to have reached agreement having regard to their external manifestations? (Fitness First v Chong) o Does not require a meeting of the minds as in Smith v Hughes which applied subjective intention of the parties. o Parties need not be of the same mind, or have read and understood the terms of the agreement (Fitness First v Chong) (General Rule: bound if signed, regardless of not reading.) (2.1) Consciousness of the Offer For unilateral offers. There must be knowledge of the offer, and acceptance must be in response to the offer (The Crown v Clarke) o Exception to the general rule of external manifestations (3) Communication of Acceptance: General Rule: Acceptance must be communicated to the offeror, and does not occur otherwise (Latec

4 Finance v Knight) (3.1) Exceptions Acceptance may be inferred from conduct (Empirnall Holdings, Brambles) Offeror may dispense with need to communicate depending on the terms of the offer (Carbolic Smoke Ball) o Common in unilateral contracts: acceptance = performance (Mobil Oil) o Bilateral: requires clear language to dispense need (Jacobs JA in Latec Finance) (3.2.) When is communication effective? General Rule o Contract is formed when and where acceptance is received by the offeror (Latec Finance; Brinkibon Ltd Stahag Stahl) o Applies for instantaneous communication E.g. Telephones, face-to-face, s etc. (3.2.1) Exceptions Postal Acceptance Rule (PAR) Applies to non-instantaneous communication Acceptance occurs when the letter is posted, even if it is received some time later or is lost in the post (Adams v Lindsell) May apply depending on the intention of the parties o Note: must be handled via the Post Service NOT a courier (Brinkibon Ltd Stahag Stahl) o UK CASE suggests that postal response shall ony be made when stated to return by post Hawthorn v Fraser o Just contemplation must be required Bressan v Squires o NB: postal acceptance rule does not apply under CISG Articles 18(2), 24 Electronic Transactions (Victoria) Act 2000 Applies to electronic communication of acceptance Electronic communications sent to a designated address are effective when capable of being retrieved by addressee (s13a ETA) o s3 ETA: electronic communication definition o s13a(1)(b): If no electronic address has been designated, the time when both: The electronic communication becomes capable of being retrieved by the addressee; AND The addressee has become aware that the electronic communication has been sent to that address o Parties may agree otherwise (3.3) Non-verbal Acceptance (3.3.1) Silence Acceptance may not be inferred from silence alone (Felthouse v Bindley) o Even if the contract stipulates silence as the prescribed method of acceptance (3.3.2) Conduct Conduct may amount to acceptance (Empirnall v Machon Paull, Brambles Holdings) o Test = would a reasonable bystander regard the conduct of the offeree as signaling to the offeror that the offer has been accepted? (Empirnall) (4) Correspondence between Offer and Acceptance General Rule: Acceptance must correspond with the offer. Any variation or addition to the proposed terms by the offeree is a counter-offer, and original offer is terminated (distinguish from mere enquiry) CISG: however, reply to offer containing non-material alterations to the offer still constitutes acceptance rather than a counter-offer (Article 19(2)) but if it materially changes then counter offer (Article 19(1)). Material/non-material: Article 19(3)

5 (4.1) Battle of the Forms It is common practice for parties to exchange their standard terms of contracting in a battle of the forms, to attempt to impose their own terms and conditions on the contract, there are 2 approaches to this (Butler Machine v Ex-Cell-O) (4.1.1) Conflict Approach Traditional approach whereby the last shot prevails (Lawton and Bridge LJJ) o When the last form was agreed and uncontested (4.1.2) Synthesis Approach Requires Analysis of the contract as a whole to identify the terms included. (looks at all the shots fired ) (Denning LJ) o May have a combination of terms o In most cases, the battle of won by whoever fires the last shot, but in some cases the battle is won by whoever gets in first Conflict approach is more predictable, know the last document is decisive, whereas synthesis approach more uncertain. If traditional approach (conflict approach) of offer and acceptance not effective, then consider Lord Denning s approach in Butler, or Heydon J s approach in Brambles can the agreement be inferred in all circumstances by a reasonable person? (5) CISG Article 19: Rejection and Counter-Offer - Allows for certain non-material discrepancies between the offer and acceptance

Nature of Contract An agreement or set of promises that the law will enforce (i.e. for breach of which the law will provide a remedy)

Nature of Contract An agreement or set of promises that the law will enforce (i.e. for breach of which the law will provide a remedy) Definitional elements: An agreement (or a promise) Enforceability at