An agreement is: generally characterised by an OFFER by one party and an ACCEPTANCE by another Composition of an agreement Is there agreement between the parties? For the agreement to stand there must be a meeting of the parties minds , and one must ask whether there has been a firm offer and acceptance of that offer in this light. The offer and acceptance approach is not the only approach. The courts sometimes use a global approach examining the acts and conduct of the parties (Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110). Rules relating to offer 1. 1. 1. 1. 1. 1. There must be an intention or willingness to be bound or it may be an invitation to treat It must be a firm promise or it may be a request for information It must be communicated to the offeree It may be made to one person, a group or to the world at large It may be kept open if supported by consideration All terms must brought to the notice of the offeree and followed exactly It may be terminated 1. Making an offer It is necessary to distinguish an offer from the following: a mere supply of information an invitation to treat puffs An offer can be addressed to any number of offerees. Has an offer been made? Facts: Smith owns an organic farm. Jones wants to buy Smith s farm. Jones emails Smith asking: Will you sell me your farm? Let me know your lowest price. Smith emails back saying: The lowest price for my farm is $350,000. Jones then responds by saying: I agree to buy your farm for the sum of $350,000 asked by you. What are the legal issues? Issue: Did one party (the offeror) make an offer? Did the other party (the offeree) accept that offer? Harvey v Facey [1893] AC 552 Facts: Facey (F) owns Bumper Hall Pen (BHP). Harvey (H) wants to buy BHP. H sent a telegram to F asking: Will you sell us BHP? Telegraph lowest cash price. F responded: Lowest price for BHP 900. H then responded: We agree to buy BHP for the sum of 900 asked by you. Harvey v Facey Facts (continued): F refused to proceed with the sale. H sued for breach of contract. Issue: H argued that F s response constituted an offer that H had then accepted. Harvey v Facey Decision: The Privy Council rejected H s argument. F was merely supplying information as requested. There was no intention to make an offer. The only offer was, in fact, made by H. There was no contract between the parties. Supply of information Principle: A person who is merely supplying information in response to an inquiry is not making an offer. CASE: Harvey v Facey [1893] AC 552 Offer or invitation to treat? An invitation to treat: is not an offer but an invitation to other persons to make an offer or an offer to consider offers; and cannot create an agreement if there is a purported acceptance. Invitations to treat can include: Advertisements CASE: Partridge v Crittenden [1968] Price lists, circulars and catalogues CASE: Grainger & Sons v Gough (1895) Offer or invitation to treat? Auctions Principle: Where there is a reserve price , the auctioneer calling for bids is not making an offer but is asking for offers from prospective purchasers. If there is no reserve price the auctioneer becomes the offeror and must sell the goods to the highest bidder. CASE: Harrison v Nickerson [1873] Tenders Principle: Tenders are not normally offers unless the tender states its exact needs, as distinct from what it may only require. CASE: Spencer v Harding (1870) Offer or invitation to treat? Goods in shop windows and on shelves CASE: Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] You need to look at the intention of the parties. Number of offerees Principle: In the case of unilateral contracts, the offer will normally be made to the world at large. CASE: Carlill v Carbolic Smoke Ball Co [1893] Options An option arises when the offeror promises to keep the offer open for a specified period. However, it will be unenforceable unless it is supported by the offeree s consideration (e.g. money in the form of a deposit). CASE: Goldsborough Mort & Co Ltd v Quinn (1910) Termination of an offer Termination of the Offer Revocation/ (Withdrawal) Rejection/ counter-offer Lapse of time Death Failure of condition Subject to condition Condition precedent (before contract formed) Condition subsequent (after contract formed) Revocation of an offer Principle: An offer can be revoked by the offeror any time before it is accepted. Exception Where a promise to keep the offer open is made and is given in exchange for consideration A revocation is not effective until the offeree becomes aware of it. CASE: Dickinson v Dodds [1876] CASE: Byrne & Co v Leon Tienhoven & Co [1880] Lapse of time Principles: Where the offer contains a time limit, the offer lapses upon expiry of the time. Where no time limit is specified, the offer will lapse after a reasonable time. CASE: Ramsgate Victoria Hotel v Montefiore [1866] Lapse of offer due to death of party Principle: An unaccepted offer terminates on the death of either the offeror or the offeree. Exception If the offeree dies, an offeror who is unaware of the death can still accept unless the offer requires personal involvement by the deceased. CASE: Carter v Hyde (1923) Principle: An offer will lapse if it expressly or impliedly depends on a particular state of affairs that ceases to exist prior to acceptance. CASE: Financings Ltd v Stimson (1952) Lapse due to change in circumstances (e.g. failure of condition) Rejection of an offer Principle: If the offeree rejects the offer, the offer is terminated and cannot later be accepted. CASE: Hyde v Wrench [1840] Rules relating to acceptance The acceptance: 1. 1. 1. 1. 1. 1. must be made in reliance of the offer. must comply with any conditions in the offer. must be communicated to the offeror. cannot be a cross-offer or counter offer. can only be made by the party to whom the offer was made. must be absolute and unqualified. cannot be revoked without the assent of the offeror. 1. Reliance on the offer Principle: The acceptance must be made in reliance on the offer. CASE: R v Clarke (1927) Communication of acceptance Principle: Acceptance is only effective when it is communicated to the offeror. CASE: Felthouse v Bindley (1862) Exception Acceptance of a unilateral offer need not be communicated. CASE: Carlill v Carbolic Smoke Ball Co (1893) Who can make an acceptance? Principle: Acceptance must be conveyed by someone with authority. CASE: Powell v Lee (1908) Unqualified acceptance Principle: Acceptance must be absolute and unqualified. If a purported acceptance introduces any qualifications or new terms, it is a counter offer, which destroys the previous offer. CASE: Masters v Cameron (1954) Who may accept? Principle: Only the person to whom an offer has been made may accept. CASE: Tinn v Hoffman & Co (1873) Form of communication of acceptance An exception to the communication principle is the postal rule, which states that where it is appropriate to use the post as the method of communicating acceptance: an offer is effective on receipt by the offeree; revocation is effective on receipt by the offeree; the acceptance takes effect at the time of posting by the offeree (even if the offeror never receives the letter). CASE: Adams v Lindsell (1818) Form of communication of acceptance The postal rule does not apply to instantaneous methods of communication (e.g. facsimiles). Principle: Where the communication of acceptance is instantaneous, the contract is effective when the acceptance is received. CASE: Entores Ltd v Miles Far East Corp [1955]