FORMATION OF A CONTRACT INTRODUCTION A contract may be defined as an agreement between two or more parties that is intended to be legally binding

The first re!"isite of any contract is an agreement #consisting of an offer and acceptance$ At least two parties are re!"ired% one of them& the offeror& ma'es an offer which the other& the offeree& accepts OFF(R

An offer is an e)pression of willingness to contract made with the intention that it shall become binding on the offeror as soon as it is accepted by the offeree A gen"ine offer is different from what is 'nown as an *in+itation to treat*& ie where a party is merely in+iting offers& which he is then free to accept or re,ect The following are e)amples of in+itations to treat-

. AUCTION/ In an a"ction& the a"ctioneer0s call for bids is an in+itation to treat& a re!"est for offers The bids made by persons at the a"ction are offers& which the a"ctioneer can accept or re,ect as he chooses /imilarly& the bidder may retract his bid before it is accepted /ee1ayne + Ca+e #.234$ 5 Term Rep .63

7 DI/18A9 OF :OOD/ The display of goods with a price tic'et attached in a shop window or on a s"permar'et shelf is not an offer to sell b"t an in+itation for c"stomers to ma'e an offer to b"y /eeFisher + ;ell <.4=>? 5 All (R 25. 1 / : ; + ;oots Chemists <.4@5? . All (R 637

5 ADA(RTI/(M(NT/ Ad+ertisements of goods for sale are normally interpreted as in+itations to treat /ee1artridge + Crittenden <.4=3? 7 All (R 67. Bowe+er& ad+ertisements may be constr"ed as offers if they are "nilateral& ie& open to all the world to accept #eg& offers for rewards$ /eeCarlill + Carbolic /mo'e ;all Co <.345? . C; 7@=

6 M(R( /TAT(M(NT/ OF 1RIC( A statement of the minim"m price at which a party may be willing to sell will not amo"nt to an offer /eeBar+ey + Facey <.345? AC @@7 :ibson + Manchester Co"nty Co"ncil <.424? . All (R 427

@ T(ND(R/ Dhere goods are ad+ertised for sale by tender& the statement is not an offer& b"t an in+itation to treat% that is& it is a re!"est by the owner of the goods for offers to p"rchase them The process of competiti+e tendering came "nder scr"tiny in the following casesBar+ela In+estments + Royal Tr"st Co of Canada <.43@? 7 All (R 4== ;lac'pool Aero Cl"b + ;lac'pool ;oro"gh Co"ncil <.44>? 5 All (R 7@ ACC(1TANC(

An acceptance is a final and "n!"alified acceptance of the terms of an offer To ma'e a binding contract the acceptance m"st e)actly match the offer The offeree m"st accept all the terms of the offer Bowe+er& in certain cases it is possible to ha+e a binding contract witho"t a matching offer and acceptance /ee-

;rogden + Metropolitan Railway Co #.322$ 7 App Cas === 8ord Denning in :ibson + Manchester City Co"ncil <.424? abo+e 1ercy Trentham 8td + Archital 8")fer 8td <.445? . 8loyd0s Rep 7@ The following r"les ha+e been de+eloped by the co"rts with regard to acceptance. COUNT(R OFF(R/ If in his reply to an offer& the offeree introd"ces a new term or +aries the terms of the offer& then that reply cannot amo"nt to an acceptance Instead& the reply is treated as a *co"nter offer*& which the original offeror is free to accept or re,ect A co"nterEoffer also amo"nts to a re,ection of the original offer which cannot then be s"bse!"ently accepted /eeByde + Drench #.36>$ 5 ;ea+ 556 A co"nterEoffer sho"ld be disting"ished from a mere re!"est for information /ee/te+enson + Mc8ean #.33>$ @ C;D 56= If A ma'es an offer on his standard doc"ment and ; accepts on on a doc"ment containing his conflicting standard terms& a contract will be made on ;0s terms if A acts "pon ;0s comm"nication& eg by deli+ering goods This sit"ation is 'nown as the *battle of the forms* /ee;"tler Machine Tool + ()cellEoECorp <.424? . All (R 4=@ 7 CONDITIONA8 ACC(1TANC( If the offeree p"ts a condition in the acceptance& then it will not be binding

5 T(ND(R/ A tender is an offer& the acceptance of which leads to the formation of a contract Bowe+er& diffic"lties arise where tenders are in+ited for the periodical s"pply of goods#a$ Dhere F ad+ertises for offers to s"pply a specified !"antity of goods& to be s"pplied d"ring a specified time& and 9 offers to s"pply& acceptance of 90s tender creates a contract& "nder which 9 is bo"nd to s"pply the goods and the b"yer F is bo"nd to accept them and pay for them #b$ Dhere F ad+ertises for offers to s"pply goods "p to a stated ma)im"m& d"ring a certain period& the goods to be s"pplied as and when demanded& acceptance by F of a

tender recei+ed from 9 does not create a contract Instead& F0s acceptance con+erts 90s tender into a standing offer to s"pply the goods "p to the stated ma)im"m at the stated price as and when re!"ested to do so by F The standing offer is accepted each time F places an order& so that there are a series of separate contracts for the s"pply of goods /ee:reat Northern Railway Co + Ditham #.325$ 8R 4 C1 .= 6 COMMUNICATION OF ACC(1TANC( The general r"le is that an acceptance m"st be comm"nicated to the offeror Until and "nless the acceptance is so comm"nicated& no contract comes into e)istence8ord Denning in (ntores + Miles Far (ast Corp <.4@@? 7 All (R 645 The acceptance m"st be comm"nicated by the offeree or someone a"thorised by the offeree If someone accepts on behalf of the offeree& witho"t a"thorisation& this will not be a +alid acceptance1owell + 8ee #.4>3$ 44 8T 736 The offeror cannot impose a contract on the offeree against his wishes by deeming that his silence sho"ld amo"nt to an acceptanceFeltho"se + ;indley #.3=7$ .. C;N/ 3=4 Dhere an instantaneo"s method of comm"nication is "sed& eg tele)& it will ta'e effect when and where it is recei+ed /ee(ntores + Miles Far (ast Corp <.4@@? 7 C; 572 The ;rimnes <.42@? C; 474 ;rin'ibon + /tahag /tahl <.435? 7 AC 56 @ (FC(1TION/ TO TB( COMMUNICATION RU8( a$ In "nilateral contracts the normal r"le for comm"nication of acceptance to the offeror does not apply Carrying o"t the stip"lated tas' is eno"gh to constit"te acceptance of the offer b$ The offeror may e)pressly or impliedly wai+e the need for comm"nication of acceptance by the offeree& eg& where goods are dispatched in response to an offer to b"y c$ The 1ostal R"le E Dhere acceptance by post has been re!"ested or where it is an appropriate and reasonable means of comm"nication between the parties& then acceptance is complete as soon as the letter of acceptance is posted& e+en if the letter is delayed&

destroyed or lost in the post so that it ne+er reaches the offeror /eeAdams + 8indsell #.3.3$ . ; G Ald =3. Bo"sehold Fire Ins"rance Co + :rant #.324$ 6 () D 7.= The postal r"le applies to comm"nications of acceptance by cable& incl"ding telegram& b"t not to instantaneo"s modes s"ch as telephone& tele) and fa) The postal r"le will not apply#i$ Dhere the letter of acceptance has not been properly posted& as in Re 8ondon and Northern ;an' #.4>>$& where the letter of acceptance was handed to a postman only a"thorised to deli+er mail and not to collect it #ii$ Dhere the letter is not properly addressed There is no a"thority on this point #iii$ Dhere the e)press terms of the offer e)cl"de the postal r"le& ie if the offer specifies that the acceptance m"st reach the offeror In Bolwell /ec"rities + B"ghes #.426& below$& the postal r"le was held not to apply where the offer was to be accepted by *notice in writing* Act"al comm"nication was re!"ired #i+$ It was said in Bolwell /ec"rities that the r"le wo"ld not be applied where it wo"ld prod"ce a *manifest incon+enience or abs"rdity*

Re+ocation of posted acceptance Can an offeree withdraw his acceptance& after it has been posted& by a later comm"nication& which reaches the offeror before the acceptanceH There is no clear a"thority in (nglish law The /cottish case of D"nmore + Ale)ander #.35>$ appears to permit s"ch a re+ocation b"t it is an "nclear decision A strict application of the postal r"le wo"ld not permit s"ch withdrawal This +iew is s"pported by decisions in- New Iealand in Den'heim + Arndt #.325$ and /o"th Africa in AEI ;aJaars + Ministry of Agric"lt"re #.426$ Bowe+er& s"ch an approach is regarded as infle)ible = M(TBOD OF ACC(1TANC( The offer may specify that acceptance m"st reach the offeror in which case act"al comm"nication will be re!"ired /eeBolwell /ec"rities + B"ghes <.426? . All (R .=. If a method is prescribed witho"t it being made clear that no other method will s"ffice then it seems that an e!"ally ad+antageo"s method wo"ld s"ffice /eeTinn + Boffman #.325$ 74 8T 72.

9ates ;"ilding Co + 1"lleyn 8td #.42@$ ..4 /K 52> 2 LNOD8(D:( OF TB( OFF(R An offeree may perform the act that constit"tes acceptance of an offer& with 'nowledge of that offer& b"t for a moti+e other than accepting the offer The !"estion that then arises is whether his act amo"nts to a +alid acceptance The position seems to be that#a$ An acceptance which is wholly moti+ated by factors other than the e)istence of the offer has no effect R + Clar'e #.472$ 6> C8R 772 #b$ Dhere& howe+er& the e)istence of the offer plays some part& howe+er small& in ind"cing a person to do the re!"ired act& there is a +alid acceptance of the offer /eeDilliams + Carwardine #.355$ @ Car G 1 @== 3 CRO//EOFF(R/ A writes to ; offering to sell certain property at a stated price ; writes to A offering to b"y the same property at the same price The letters cross in the post Is there #a$ an offer and acceptance& #b$ a contractH This problem was disc"ssed& obiter& by the Co"rt in Tinn + Boffman #.325$ 74 8T 72. Fi+e ,"dges said that crossEoffers do not ma'e a binding contract One ,"dge said they do T(RMINATION OF TB( OFF(R

. ACC(1TANC( Once an offer has been accepted& a binding contract is made and the offer ends 7 R(K(CTION If the offeree re,ects the offer that is the end of it 5 R(AOCATION The offer may be re+o'ed by the offeror at any time "ntil it is accepted Bowe+er& the re+ocation of the offer m"st be comm"nicated to the offeree#s$ Unless and "ntil the re+ocation is so comm"nicated& it is ineffecti+e /ee-

;yrne + Aan Tienho+en #.33>$ @ C1D 566 The re+ocation need not be comm"nicated by the offeror personally& it is s"fficient if it is done thro"gh a reliable third party /eeDic'inson + Dodds #.32=$ 7 ChD 6=5 Dhere an offer is made to the whole world& it appears that it may be re+o'ed by ta'ing reasonable steps /ee/h"ey + United /tates <.32@? 47 U/ 25 Once the offeree has commenced performance of a "nilateral offer& the offeror may not re+o'e the offer /ee(rrington + (rrington <.4@7? . All (R .64 Da"lia + Fo"r Millban' Nominees <.423? 7 All (R @@2 6 COUNT(R OFF(R /ee abo+e for Byde + Drench #.36>$ @ 8A1/( OF TIM( Dhere an offer is stated to be open for a specific length of time& then the offer a"tomatically terminates when that time limit e)pires Dhere there is no e)press time limit& an offer is normally open only for a reasonable time /eeRamsgate Aictoria Botel + Montefiore #.3==$ 8R . () .>4 = FAI8UR( OF A CONDITION An offer may be made s"b,ect to conditions /"ch a condition may be stated e)pressly by the offeror or implied by the co"rts from the circ"mstances If the condition is not satisfied the offer is not capable of being accepted /eeFinancings 8td + /timson <.4=7? 5 All (R 53= 2 D(ATB The offeree cannot accept an offer after notice of the offeror0s death Bowe+er& if the offeree does not 'now of the offeror0s death& and there is no personal element in+ol+ed& then he may accept the offer /ee-

;radb"ry + Morgan #.3=7$ . BGC 764