Offer and acceptance analysis is a traditional approach in contract law used to determine whether an agreement exists between two parties. Agreement consists of an offer by an indication of one person (the “offeror”) to another (the “offeree”) of the offeror’s willingness to enter into a contract on certain terms without further negotiations.
A contract is said to come into existence when acceptance of an offer (agreement to the terms in it) has been communicated to the offeror by the offeree and there has been consideration bargained-for induced by promises or a promise and performance. The offer and acceptance formula, developed in the 19th century, identifies a moment of formation when the parties are of one mind.
This classical approach to contract formation has been weakened by developments in the law of estoppel, misleading conduct, misrepresentation and unjust enrichment. Offer Treitel defines an offer as “an expression of 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”, the “offeree”.
An offer is a statement of the terms on which the offeror is willing to be bound. It is the present contractual intent to be bound by a contract with definite and certain terms communicated to the offeree. The “expression” referred to in the definition may take different forms, such as a letter, newspaper, fax, email and even conduct, as long as it communicates the basis on which the offeror is prepared to contract. Whether two parties have an agreement or a valid offer is an issue which is determined by the court using the Objective test (Smith v. Hughes). Therefore the “intention” referred to in the definition is objectively judged by the courts.
In the English case of Smith v. Hughes the court emphasised that the important thing is not a party’s real intentions but how a reasonable person would view the situation. This is due mainly to common sense as each party would not wish to breach his side of the contract if it would make him or her culpable to damages, it would especially be contrary to the principle of certainty and clarity in commercial contract and the topic of mistake and how it affects the contract. As a minimum requirement the conditions for an offer should include at least the following 4 conditions: Delivery date, price, terms of payment that includes the date of payment and detail description of the item on offer including a fair description of the condition or type of service.
Without one of the minimum requirements of condition an offer of sale is not seen as a legal offer but rather seen as an advertisement. Unilateral contract The contract in Carlill v Carbolic Smoke Ball Co was of a kind known as a unilateral contract, one in which the offeree accepts the offer by performing an act which indicates their agreement with the bargain. This can be something as simple as raising an eyebrow or wearing a certain color t-shirt. It can be contrasted with a bilateral contract, where there is an exchange of promises between two parties.
In Australian Woollen Mills Pty Ltd v. The Commonwealth (1954), the High Court of Australia held that, for a unilateral contract to arise, the promise must be made “in return for” the doing of the act. The court distinguished between a unilateral contract and a conditional gift. The case is generally seen to demonstrate the connection between the requirements of offer and acceptance, consideration and intention to create legal relations. Invitations to treat An invitation to treat is not an offer, but an indication of a person’s willingness to negotiate a contract.
In Harvey v. Facey, an indication by the owner of property that he or she might be interested in selling at a certain price, for example, has been regarded as an invitation to treat. Similarly in Gibson v Manchester City Council the words “may be prepared to sell” were held to be a notification of price and therefore not a distinct offer, though in another case concerning the same change of policy (Manchester City Council underwent a change of political control and stopped the sale of council houses to their tenants) Storer v.
Manchester City Council, the court held that an agreement was completed by the tenant’s signing and returning the agreement to purchase, as the language of the agreement had been sufficiently explicit and the signature on behalf of the council a mere formality to be completed. The courts have tended to take a consistent approach to the identification of invitations to treat, as compared with offer and acceptance, in common transactions. The display of goods for sale, whether in a shop window or on the shelves of a self-service store, is ordinarily treated as an invitation to treat and not an offer.
The holding of a public auction will also usually be regarded as an invitation to treat. Auctions are, however, a special case generally. The rule is that the bidder is making an offer to buy and the auctioneer accepts this in whatever manner is customary, usually the fall of the hammer. A bidder may withdraw his or her bid at any time before the fall of the hammer, but any bid in any event lapses as an offer on the making of a higher bid, so that if a higher bid is made, then withdrawn before the fall of the hammer, the auctioneer cannot then purport to accept the previous highest bid.
If an auction is without reserve then whilst there is no contract of sale between the owner of the goods and the highest bidder (because the placing of goods in the auction is an invitation to treat) there is a collateral contract between the auctioneer and the highest bidder that the auction will be held without reserve (i. e. , that the highest bid, however low, will be accepted). The U. S. Uniform Commercial Code provides that in an auction without reserve the goods may not be withdrawn once they have been put up.
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. However, an offer may not be revoked if it has been encapsulated in an option (see also option contract). 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.
For the Acceptance, the essential requirement is that the parties had each from a subjective perspective engaged in conduct manifesting their assent. Under this meeting of the minds theory of contract, a party could resist a claim of breach by proving that he had not intended to be bound by the agreement, only if it appeared subjectively that he had so intended. This is unsatisfactory, as one party has no way to know another’s undisclosed intentions. One party can only act upon what the other party reveals objectively to be his intent.
Hence, an actual meeting of the minds is not required. Indeed, it has been argued that the “meeting of the minds” idea is entirely a modern error: 19th century judges spoke of “consensus ad idem” which modern teachers have wrongly translated as “meeting of minds” but actually means “agreement to the [same] thing”. The requirement of an objective perspective is important in cases where a party claims that an offer was not accepted and seeks to take advantage of the performance of the other party.