LAWS1204 Lecture Notes - Lecture 2: Liquidated Damages, Metropolitan Railway, Consideration
Lecture three
Lecture Three will examine the doctrine of acceptance. Both offer and acceptance are
deeply inter-related concepts. Where an offeror makes an offer to the offeree, the offeree
may (i) accept the offer; (ii) reject the offer or (iii) propose new terms (counter-offer).
Where the offeree accepts the offer a contract forms; see Taylor v Johnson (1983) 151 CLR
422. An acceptance is an unqualified assent to the terms of an offer; see Quadling v
Robinson & Anor (1976) 137 CLR 192; Ballas v Theophilos (No 2) (1957) 98 CLR 193. The
general rule, subject to some qualifications, is that the acceptance must be communicated;
see Felthouse v Bindley (1862) 142 ER 137. There must be a real consensus between the
parties – “a meeting of the minds”. Read Chapter Four of Thampapillai for this lecture.
1. Fundamentals of offer
•A contract is a legally binding agreement between two parties.
•A contract contains obligations and duties.
•There are two views of formation: (i) the orthodox view (offer, intention, acceptance
etc.) and (ii) the global view.
•Express or implied (formed on implication – commercial) contracts
•An offer is a statement of the terms upon which the offeror is prepared to be
contractually bound by the offeree.
•An offer must be promissory.
•The offer must have a degree of precision and quid pro quo.
•An offer must be contrasted with an invitation to treat and mere puffery
•An invitation to treat is mere approach to others which instigates the dealing
process.
•An invitation to treat falls short of being an offer.
•Likewise, mere puffery refers to statements that are normal marketing claims
that are clearly exaggerated.
•However, an invitation to treat can become an offer if it is clear and precise
enough.
•While the general rule may be that advertisements are invitations to treat the use of
words of limitation may move them into the category of offer.
2. Revocation
•An offeror may revoke his offer at any time prior to acceptance. --- Financings Ltd v
Stimson [1962] 3 All ER 386.
•However, the revocation must be communicated in order to be effective. –
Stimson
•Where the offeree is aware that acceptance is no longer possible, the offeree
cannot accept the offer.
•In Dickinson v Dodds (1876) LR 2 Ch D 463 -- The Court held that the
acceptance was ineffective as the offeree was aware that the offeror no
longer wanted to sell him the property. In effect, the revocation does not
have to be directly communicated to the offeree.
•Knowledge of the revocation is essential and will preclude acceptance ---
Patterson v Dolman [1908] VLR 354.
•Where an offer has been made to the world at large the offeror may revoke the offer
in the same way. --- Shuey v United States [caution: 19thC precedent – to reference
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earlier cases check whether they been endorsed recently (2010s onwards) by an
Australian court]
•In Shuey an offer of reward was made by a public notice.
•The offer was withdrawn in the same way.
•The plaintiff was unaware of the withdrawal and sought to accept the offer.
•It was held that the revocation was valid.
•An offer may lapse because a reasonable time has passed since the offer was made.
-- Ballas v Theophilos (No 2) (1957) 98 CLR 193
•What constitutes a reasonable time depends upon factors such as: (i) the
nature of the contract; (ii) the industry; (iii) any factors indicating a time-
sensitivity; (iv) past dealings etc.
•Where it is clear than an offer is time-sensitive, a late attempt to accept will
not be effective. - In Bartolo v Hancock [2010] SASC 305 an attempt to accept
a settlement offer several days after a trial commenced failed.
•An offer may lapse because either the offeror or the offeree has died. ---
Fong v Cilli (1968) 11 FLR 495.
3. Acceptance
•Where an offeror makes an offer to the offeree, the offeree may
•(i) accept the offer contract;
•(ii) reject the offer or
•(iii) propose new terms (counter-offer – not acceptance).
•Where the offeree accepts the offer a contract forms --- Taylor v Johnson (1983) 151
CLR 422.
•An acceptance is an unqualified assent to the terms of an offer. Quadling v Robinson
& Anor (1976) 137 CLR 192; Ballas v Theophilos (No 2) (1957) 98 CLR 193.
•The general rule, subject to some qualifications, is that the acceptance must be
communicated (Felthouse principle). --- Felthouse v Bindley (1862) 142 ER 137.
•There must be a real consensus between the parties – “a meeting of the minds”.
(i) The objective approach to acceptance
•The objective approach looks to the external manifestation of consent – disregarding
the state of mind of the offeree – which in turn lessens the emphasis on the meeting
of the mind.
•An offeree who acts in such a way as to suggest to all and sundry that they are
accepting the offer, and to induce the offeror to contract with them on that basis,
will be bound – Taylor v Johnson (1983) 151 CLR 422.
•An approach that can be adopted is whether the reasonable person would believe
that the offeree is assenting. ---- Taylor v Johnson; Toll v Alphapharm
(ii) Acceptance and Counter Offer
•The act of acceptance must be contrasted with that of a counter-offer.
•In Turner Kempson v Camm [1922] VLR 498, the offeree’s response constituted a
counter-offer.
•In Turner Kempson, the offeree suggested new terms as to the delivery of the
goods.
•In Dunlop v Higgins (1848) 9 ER 805 the acceptance was accompanied by a mere
request as to delivery (mere request is not a counter offer).
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•Similarly, a mere error contained in the statement of acceptance does not constitute
a counter-offer. --- Carter v Hyde (1923) 33 CLR 115.
•Redowood Pty Ltd v Mongoose Pty Ltd [2005] NSWCA 32, [66], Spigelman CJ stated:
•“Commonly, offer and acceptance fail to correspond where the offeree in
purporting to accept the offer …. it fails to reflect accurately what was
originally offered.”
•“Unless it can be reasonably established that the offeror ignored any such
restatement as a misdescription, the failure to accept exactly what was
offered results in the purported offer being cast as a counter-offer and there
is no acceptance of the offer.”
•“However, where an offeree in error misdescribes what is being offered, the
misdescription is not fatal if it is clear that the offeree really intended to
accept the terms and conditions contained in the offer.”
(iii) Awareness of the offer
•The alleged offeree must actually be aware of the offer. The acceptance must be
referable to the offer.
•The acts required for acceptance must be performed in faith of the offer. --- Fitch v
Snedakar 38 NY 248 (1886).
•The bargain theory requires a relationship between the offer and the acceptance.
•Crown v Clarke (1927) 40 CLR 227
•A prisoner tried to claim a reward for information he provided in order to
exonerate himself. At the time that he provided the information he was
unaware of the offer of reward.
•Isaacs ACJ: “It is unquestionable ……. that to create a contractual obligation
there must be both offer and acceptance. It is the union of these which
constitutes the binding tie, the obligation. …... “It is not true to say that since
such an offer calls for information of a certain description, then, provided only
information of that description is in fact given, the informant is entitled to the
reward.” “…… the word "given" is interpreted as "given in exchange for the
offer"—in other words, given in performance of the bargain which is
contemplated by the offer and of which the offer is intended to form part.”
(iv) The acceptance must be communicated
•The general rule is that an acceptance has effect only when communicated to the
offeror.
•See Bowen LJ in Carlill – notification of acceptance is required because this
establishes the meeting of the minds.
•The acceptance must be communicated by someone who has the actual authority to
communicate the acceptance --- Powell v Lee.
•It is possible for the offeror to waive communication of the acceptance. --- Carlill
•Latec Finance v Knight [1969] 2 NSWR 79
•Latec Finance accepted an offer of purchase of a TV set from Knight under a
hire-purchase agreement, but they did not tell Knight.
•When Knight found that the TV set did not work he returned it. There was no
contract.
•The NSW Court of Appeal said that ordinarily a contract is not made until
acceptance is communicated.
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Document Summary
Lecture three will examine the doctrine of acceptance. Both offer and acceptance are deeply inter-related concepts. Where an offeror makes an offer to the offeree, the offeree may (i) accept the offer; (ii) reject the offer or (iii) propose new terms (counter-offer). Where the offeree accepts the offer a contract forms; see taylor v johnson (1983) 151 clr: an acceptance is an unqualified assent to the terms of an offer; see quadling v. Robinson & anor (1976) 137 clr 192; ballas v theophilos (no 2) (1957) 98 clr 193. The general rule, subject to some qualifications, is that the acceptance must be communicated; see felthouse v bindley (1862) 142 er 137. Read chapter four of thampapillai for this lecture: fundamentals of offer, a contract is a legally binding agreement between two parties, a contract contains obligations and duties. There are two views of formation: (i) the orthodox view (offer, intention, acceptance etc. ) and (ii) the global view.
