Ninth Edition, Summary of Chapters 7 and 8
FACT SITUATIONS APPLICABLE TO TOPICS COVERED - PART 1
1. Offer vs. Invitation to Treat:
Example 1: A goes onto a department store, where the clothes
are displayed on the racks with the prices on them. A
takes an article of clothing from the rack priced at $ 6.00
and takes it to the cashier. A hands $ 6.00 to the cashier.
The cashier, who has the ability to accept or reject the
money, takes it.
Here, the display of goods on the racks, is merely and
invitation to treat. The offer is made by A when hands the
money to the cashier. Then the cashier accepts the offer,
there is acceptance and a contract is made.
Example 2: A and B are discussing the purchase of A's car which
is 3 years old. During the discussions, A says to B, "I am
happy to sell you the car", or "here are copies of my work
orders for repairs and upkeep to the car."
In this case, both of A's statements are merely invitations
2. Termination of Offer:
Example 1: On June 10, A delivered to B a written offer to sell his
property for $ 6,000.00. The offer stated that it would be open
for acceptance until 9 a.m. on June 12. On June 11, B heard that
A was agreeing to sell his property to C. On the evening of the
11th, B delivered an acceptance of A's offer to the place where A
was staying and on the following morning, personally delivered
his acceptance to A, who declined the acceptance stating, you
are too late. I have sold the property. B now sued A alleging
that there was a contract between them.
The court held that, although the offer stated that it would be 2
open for acceptance until 9 a.m. on the 12th, this did not bind A,
who was not required to keep the offer open to 9 a.m. on the
12th. For this reason, A could revoke his offer at any time
before acceptance. This was the main reason for holding that
the offer had been revoked. However, the court went further
and also found that the offer had been effectively revoked
because B had learned in advance that A was selling to someone
In this example had A given B an Option to buy the property
which could be exercised up to 9.a.m. on the 12th, then A would
have had to wait until that time to see whether B would accept
the offer. Similarly had A made his offer irrevocable to 9 a.m.
on the 12th, (could not be revoked until that time) then B's
acceptance would have been good to create a contract between
A and B.
Example 2: On October 1st, A mailed an offer to sell to B 1,000 boxes of tin
plates at a fixed price. The offer was received by B on October
11th and B immediately accepted the offer by telegram on
October 11th and confirmed by letter on October 15th. On
October 8th, A mailed a revocation of the offer which was
received by B on October 20th. On the assumption that he had
purchased the tin plates, B had already sold them to a third
party, C. Consequently, B brought an action against A for
breach of contract for failure to deliver.
The court held that there were two issues to be decided. First,
whether a withdrawal of an offer has any effect until it is
communicated to the person to whom the offer has been sent;
and secondly, whether the posting of a letter of withdrawal is a
communication to the person to whom the letter is sent. On the
first issue the court found that there was an effective
acceptance of A's offer and a complete and binding contract had
been entered into on October 11th since B had no reason to
suppose the offer had been withdrawn. Thus there must be
communication of revocation to effectively bring an offer to an
end. An offer can be accepted at any time before
communication of its withdrawal.
Example 1: On August 1st, A sent an offer to B which said I offer to sell you 3
my car for $ 6,500.00 and my offer is open until August 15th for
acceptance. A received no other offers between August 1st and
15th and on August 17 , B decided to accept A's offer.
Here, because the offer specified a time for acceptance, since
the offer was not accepted within that time, there is no contract.
The offer was revoked (at law) because of B's failure to accept
within the specified time period.
Example 3: On June 1st, A offers to sell 40 bushels of grapes to B. B waits
until June 22nd to accept A's offer. However, by this time, A has
sold the grapes to C. B now sues A saying they have a contract.
In this case we will assume that the storage period for
perishable grapes is 2 weeks after which they cannot be sold for
their full value.
Here and leaving aside the ability of A to accept another offer,
given the assumption above about the storage period for
grapes, a court would probably hold that the contract had lapsed
around June 14th if not sometime before that date, so that A
was at liberty to sell to someone else after the offer had lapsed.
Example: A offers to sell his car to B for $ 6,000.00. However, B says, I will
not buy it at that price and walks away, never to be heard from
Here B has rejected A's offer.
D: Counter Offer:
Example 1: A offers to sell his car to B for $ 6,000.00 and B says I will buy
the car from you for $ 4,000.00. B has made a counter offer
which is actually two things, a rejection of A's offer and a new
offer by B.
In this situation A was the original offeror and B the offeree.
However, the moment that B made his offer of $ 4,500.00, B
became the offeror and now A is the offeree. If A accepts B's
offer of $ 4,500.00, there is a contract. However, assume that
A's response to B's counter offer is simply "I will not sell it for 4
less than $ 5,000.00”. Here, A's statement is a new counter-
offer, making A once again the offeror and B the offeree and if B
agrees to pay the $ 5,000.00 amount, there is a contract.
3: Communication of Acceptance:
Example 1: A offers to sell his car to B for $ 6,000.00.
Since no method of communication of acceptance is specified, B
can accept A's offer in a number of ways:
(i) by orally accepting it.
(ii) by acceptance in writing;
(iii) by acceptance by fax, phone, e-mail etc...
(iv) in ordinary circumstances, by mailing his
acceptance to B.
Example 2: A offers to sell his car to B for $ 6,000.00 and the offer specifies
that acceptance must be by hand delivering a written
acceptance to A. However, B decides to send A a fax accepting
Here there is no contract, because the manner of acceptance
has been specified.
PART 2: CONSIDERATION
Example 1: A offers to sell his car to B for $ 6,000.00.
Here the consideration given by A is the car and the
consideration given by B is the money.
Example 2: A agrees with B to provide B his services as a body-guard for 1
month at a price of $ 2,000.00.
Here the consideration paid by A is the performance of his
services as a bodyguard for 2 months and the consideration paid
by B is the $ 2,000.00.
Example 3: A agrees with B that A will repair B's fence in return for B 5
painting A's house.
The consideration given by A is the repair of B's fence and the
consideration given by B is the painting of A's house.
Example 4: A a