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Topic 3 Offer
THE NATURE OF AN OFFER
- DEFINITION: An offer is “an indication by one person to another of his or her willingness to enter into a contract with that other person on certain terms’’ – Gibson v Manchester City Council 1979
o An offer demonstrates an intention to enter into a legal relationship o Must be on certain terms – an offer cannot be too vague
o There must be an element of invitation as opposed to a command
LEGAL SIGNIFICANCE OF AN OFFER:
- If an offer is made and then accepted, the offeror is bound and is a party to a contractual agreement - An offer alone is not legally binding, nor does it constitute a contract
HAS AN OFFER BEEN MADE?
- Objective test: Does it appear to a reasonable person in the position of the offeree that an offer was intended, and that a binding agreement would be made on acceptance? – Gibson v Manchester City Council 1979
o It does not matter whether an offer was intended or not by the offeror, it is whether their external actions and behaviour indicate an offer has been made to a reasonable person
1. WAS THE OFFER A ‘MERE PUFF’?
- A ‘mere puff’ refers to exaggerated; vague claims often used in advertising made to the world at large o Where a reasonable person would not interpret the conduct as an offer – Carlill v Carbolic
Smoke Ball Co 1893
- Requires the application of the objective test
2. WAS THE OFFER AN INVITATION TO TREAT?
- An invitation to treat is an invitation to others to make an offer or enter into negotiations; it does not constitute an offer because it lacks sufficient indication of the offeror’s willingness to be bound - It is not an offer capable of being accepted such as to give rise to a binding contract
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o Whether conduct amounts to an offer or an invitation to treat can be determined by questioning the facts of an individual case (Whether it can be accepted or not [Acceptance test])
A) ADVERTISEMENTS
- In the case of a catalogue displaying products with their prices, these are not considered offers, but an invitation to treat
o The offer is then made when the customer locates the item in store and takes it to a cashier with the intention of purchasing it
o The law has developed this way primarily due to stock availability
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THE ELECTRONIC TRANSACTIONS (VIC) ACT 2000 – s 14B - INVITATION TO TREAT REGARDING CONTRACTS
(1) A proposal to form a contract made through one or more electronic communications that- (a) is not addressed to one or more specific parties; and
(b) is generally accessible to parties making use of information systems-
is to be considered as an invitation to make offers, unless it clearly indicates the intention of the party making the proposal to be bound in case of acceptance.
(2) Subsection (1) extends to proposals that make use of interactive applications for the placement of orders through information systems.
B) GOODS DISPLAYED IN SHOPS
- The display of goods for sale, whether in a shop window or on the shelves of a self-service store, are ordinarily treated as an invitation to treat and not as an offer
- Customers are regarded as making an offer when they present the items they have selected off of shelves to the cashier and are not bound until the cashier has accepted that offer
o This allows for customers to return their items to the relevant shelf
o Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd 1953
C) ONLINE SALES (ELECTRONIC TRANSACTIONS)
- The common rule of offer and acceptance versus invitations to treat in relation to the display of goods for sale can also be applied to electronic transactions
- The Electronic Transactions Act (Victoria) 2000 is a statute regulating online sales
D) AUCTIONS
- The holding of a public auction will generally be treated as an invitation to treat with the following rules:
o The auction is an invitation to treat;
o The bid is the offer;
o The offer is accepted by the auctioneer’s ‘fall of the hammer’
- This is also said to apply when the auctioneer says the property is ‘on the market’ or advertised for auction ‘without reserve’
- As a result, the following general rules apply:
o The seller can withdraw the property before acceptance of a bid;
o The seller/auctioneer can refuse to accept a bid;
o The seller/auctioneer is not obliged to sell to the highest bidder;
o A buyer can withdraw their bid before the ‘fall of the hammer;
- AGC Advances (Ltd) v McWhirter 1977 E) TENDERS
- The process of tenders refers to each interested party submitting a single bid without knowledge of other bids that have been made
- The general rule is:
o A call for written tenders can referred to as an invitation to treat o Each tender constitutes an offer
o A person calling for tenders can stipulate the basis for the tender process
▪ E.g.: only one tender allowed, confidentiality, etc.
Page 10 of 59 EXCEPTIONS TO THE TENDER RULE
- Where the call for tenders may be an offer
o The wording expressed in a call for tenders may constitute an offer
o For example, a party may bind itself to accepting the highest tender – Harvela Investments Ltd v Royal Trust Co of Canada Ltd 1986
- Where the all for tenders may create a contract in relation to the tender process
o “…it has been held in a number of cases that governments and government instrumentalities calling for tenders have owed contractual obligations to tenderers under preliminary contracts governing the tender process.”
o Plaintiff unsuccessful tenderer – claimed that tendering process not complied with o tender process is a contract
o Hughes Aircraft Systems v Airservices Australia 1997
The fate of the offer An Offer can either be
(1) Revoked or withdrawn by the offeror (2) Rejected by the offeree
(3) Lapse
(4) Accepted by the offeree
1) REVOCATION/WITHDRAWAL
- The general rule states that an offer may be revoked at any time before it is accepted (Routledge v Grant) if it has been communicated to the offeree (by the offeror or another reasonably reliable source)
o Unilateral offers (to the world) can be revoked in the same way or with similar coverage to the way offered it
o Dickinson v Dodds 1876
- At common law, a promise to keep an offer open is not binding unless consideration has been given for that promise
o Consideration = something of value that is exchanged between parties o Goldsborough Mort & Co Ltd v Quinn 1910
OPTION CONTRACTS
- A promise to hold an offer open is binding at common law if consideration has been given in return for that promise.
o This is referred to an ‘option’ agreement.
- Where the ‘option holder’ is entitled to enter into a contract with a ‘grantor’ on specified terms, where and option holder is free to choose whether to exercise the option at that time or within that period - Goldsborough Mort & Co Ltd v Quinn 1910
Page 11 of 59 UNILATERAL CONTRACTS
- In the cases of unilateral contracts, there is no difficulty if the offer is withdrawn before the offeree begins to perform
o Once the offeree has begun to perform, but has not completed the acts required, there is difficulty determining whether the offer can be revoked
- It has been said that there is no universal rule, and that we must ask ourselves the following questions as to whether the offer can be withdrawn:
o Whether the offeror is aware that the offeree has commenced performance
o Whether the offeree understands that incomplete performance is at his or her own risk o Whether the parties intended that the offeror should be at liberty to revoke the offer o Whether the acts towards performance are detrimental or beneficial to the offeree - Depending on the facts of the case, an implied ancillary contract may exist not to revoke
o Mobil Oil Australia Ltd v Wellcome International Pty Ltd 1998
2) LAPSE OF TIME
- An offer which is expressed to be available for acceptance for a particular period of time will lapse at the end of that period
- If no period of time is specified, the offer will lapse after a reasonable time has passed
o What period of time is reasonable will determine on the facts of the case and the offer
2.1) DEATH OF OFFEROR
- Offer will lapse on death of offeror where the offeree is given notice of the death
o Note: there is no clear authority as to whether an offeree may accept an offer after the death of the offeror if the offeree is not aware of the death
o Note: there is also no clear authority as to whether an offer will lapse after the death of an offeree; however, it can be suggested that it would generally lapse depending on the parties’
intentions and circumstances
- If there is an offer of personal services personal to the offeror, then their offer will lapse upon their death – Fong v Cilli 1968
- OPTION CONTRACTS
o Option contracts remain enforceable against the deceased estate unless;
▪ Personal services of the deceased are required; or
▪ Intent of the option was that it not be exercisable after death – Laybutt v Amoco Australia Pty Ltd 1974
2.2) CHANGE OF CIRCUMSTANCES
- An offer may be subject to an express or implied condition that must be fulfilled before the offer can be accepted or that it lapses upon the happening of a certain event
- If the offeror does not expressly stipulate these conditions, an objective test must be applied - The level of change in circumstances must be fundamental for an offer to lapse – Neilson v Dysart
Timbers Ltd 2009
Page 12 of 59 3) REJECTION AND COUNTER OFFER
- Once an offer is rejected, it is no longer available for acceptance - The making of a counter-offer is considered a rejection
- A mere inquiry made by a party is not considered a rejection, and in this case will not cause an offer to be extinguished
o An inquiry refers to a party’s request for information o Stevenson, Jacques & Co -v- McLean 1880
