Composition of an agreement

1. Composition of an agreement An agreement is: • generally characterised by an ‘OFFER’ by one party and an ‘ACCEPTANCE’ by another

2. 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).

3. Rules relating to offer • 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

4. 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.

5. Has an offer been made? • Facts: • Smith owns an organic farm. • Jones wants to buy Smith’s farm. • Jonesemails Smith asking: “Will you sell meyour farm? Let me know your lowest price.” • Smithemails 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.”

6. What are the legal issues? Issue: Did one party (the offeror) make an offer? Did the other party (the offeree) accept that offer?

7. 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 usBHP? Telegraph lowest cash price.” • F responded: “Lowest price for BHP£900.” • H then responded: “We agree to buyBHPfor the sum of £900 asked by you.”

8. 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.

9. 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.

10. 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

11. 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)

12. 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)

13. 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.

14. 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]

15. 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)

16. Termination of an offer Termination of the Offer Revocation/ (Withdrawal) Rejection/ counter-offer Lapse of time Failure of condition Death Subject to condition Condition precedent (before contract formed) Condition subsequent (after contract formed)

17. 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]

18. 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]

19. 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)

20. Lapse due to change in circumstances (e.g. failure of condition) • 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)

21. 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]

22. Rules relating to acceptance • The acceptance: • 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.

23. Reliance on the offer • Principle: • The acceptance must be made in reliance on the offer. • CASE: R v Clarke (1927)

24. 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)

25. Who can make an acceptance? • Principle: • Acceptance must be conveyed by someone with authority. • CASE: Powell v Lee (1908)

26. 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)

27. Who may accept? • Principle: • Only the person to whom an offer has been made may accept. • CASE: Tinn v Hoffman & Co (1873)

28. 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)

29. 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]