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103 Cards in this Set
- Front
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Introduction
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The body of Contract Law is straightforward. It is essentially made up of four key areas:
1. The Formation of a Binding Contract (a) What are the essential elements of a legally enforceable contract? (b) What other terms may be included in a contract? (c) Other essential requirements. (d) Legislative Provision. 2. Invalidating Factors, Void and illegal Contracts (a) Under what circumstances may the law invalidate a contract that comprises all of the essential ingredients listed above? (b) Under what circumstances may the courts fmd a contract void or illegal 3. Discharge of Contracts (a) How or when is a contract terminated 4. Remedies (a) What remedies are available when one party to a contract breaches the terms of that contract? |
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The Eurymedon [1974] 1 AllER 1015 at 1020:
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The words of Lord Wilberforce:
It is only the precise analysis of this complex of relations into which the classical offer and acceptance with identifiable consideration that seems to present difficulty, but this same difficulty exists in many situations of daily life, e.g. sales at auction, supermarket purchases; boarding an omnibus; purchasing a train ticket, tenders for the supply of goods; offers of rewards; acceptance by post .. . These are all examples which show that English law, having committed itself to a rather technical and schematic doctrine of contract, in application takes a practical approach, often at the cost of forcing the facts to fit uneasily into the marked slots of offer, acceptance, and consideration. |
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Offer Defined
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According to Clark:
"[a]n offer may be defined as a clear and unambiguous statement of the terms upon which the offeror is willing to contract, should the person or persons to whom the offer is addressed decide to accept." Thus, to constitute a valid offer " ... the terms must be unconditional, clear and certain". The person who makes an offer is known as the offeror; the person to whom the offer is made is known as the offree. |
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Partridge v Crittendon [1968] 2
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Where a magazine advertised " Bramblefinch cocks and hens", which were to be sold for 25 shillings each. At the time it was an offence to sell wildlife under British law.
However, the court held that this was not an offer it was a mere invitation to treat, and therefore it did not contravene the law. |
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Leonard v PepsiCo (1999)
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This case involved a promotional television advertisement for Pepsi. The advertisement featured a young teenager on his way to school, during which a number of statements scrolled across the television screen. These statements included the following: "T-Shirt 75 Pepsi Points", "Leather Jacket 1450 Pepsi Points", "Shades 17 5 Pepsi Points". The advert also featured a Harrier Jet, which landed beside the school building. The teenager proceeded to open the cockpit of the jet, where he found a bottle of Pepsi. Smiling he claimed, "Sure beats the bus", at which point a statement appeared that read: "Harrier Fighter 7,000,000 Pepsi Points".
Having consulted the Pepsi Catalogue, which contained various promotional items, the plaintiff discovered that he could purchase additional points for 10 cents each, provided that at least 15 authentic Pepsi Points accompanied the order. The plaintiff managed to raise $700,000 and in March 1996 he submitted an order form indicating 1 Harrier Jet, 15 original Pepsi Points and a cheque for $700,008.50. Pepsi refused to supply the Jet; the plaintiff sued for specific performance. In the District Court of New York, Wood J. reasserted the general rule that an advertisement does not constitute an offer. He noted that the exception to this is where the offer is clear, defmite and explicit and leaves nothing open for negotiation. This exception was not satisfied. First of all, the commercial was not clear enough to constitute an offer as it left the details of the offer to be discovered by way of catalogue. Furthermore, even if the commercial and the catalogue had included the Harrier Jet, this would still not be clear and explicit enough for the purposes of an offer in the absence of some words of limitation, such as "first come, first served" . |
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Carlill v Carbolic Smokeball Company [1893] 1 QB
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In this case the defendant, the Carbolic Smokeball Company, placed an ad in a newspaper for the sale of a smokeball. The ad claimed that anyone who used the smokeball as
directed would not contract the influenza virus, which at the time often proved fatal. Moreover, the ad contained a number of testimonials as to the effectiveness of the product. In fact, the defendants were so confident as to the effectiveness of their product that they promised to pay £100 to anyone who purchased the Smokeball, took it as prescribed, but still contracted influenza. Indeed, as a mark of their sincerity the defendants deposited £1,000 with a nearby bank to meet any claims, should they arise. The plaintiff, Ms Carlill, having read the ad, purchased the Smokeball and took it as prescribed- three times a day. Nonetheless, she did contract the influenza virus. Ms Carlill sued the defendants, claiming that the ad was a unilateral offer- an offer made to the world at large- and that she had accepted by her conduct and thus was entitled to £100 compensation from the defendants. However, the defendants claimed that since the advertisement was not addressed to any one person in particular, it could not have been an offer. Moreover, they claimed that even if the ad could be said to have been an offer to the world at large, or indeed to the readers of that particular newspaper, that that would be too uncertain for it to constitute an offer. Lindley L.J. in the Court of Appeal held that there was nothing wrong with the newspaper advertisement in this case amounting to an offer to the world at large (a unilateral offer). A contract will only occur with that portion of the world's population who decide to accept the offer by way of conduct. The Court was of the opinion that since £1,000 had been deposited in the bank, this was a testament to the fact that it was not a mere sales puff but a distinct promise. Thus Ms Carlill was entitled to receive the £100 compensation. |
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Kennedy v London Express Newspapers [1931] IR 532
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The Daily Express invited its
readers to become registered and, as an incentive to do so, offered those who did so free accident insurance for 1929. The plaintiff's wife registered in 1929. An advertisement appeared in the newspaper renewing the offer for 1930, stating that registration was not needed for anyone who had already registered in 1929. The plaintiff's wife died as a result of an accident in 1930, and the plaintiff sought to recover the insurance payable under the alleged contract. However, the defendants claimed that the plaintiff's wife had failed to satisfy one of the conditions, i.e. to take the newspaper out on a daily basis. Nonetheless, the defendants conceded that their advertisements constituted an offer, which Ms Kennedy could validly accept through registration and taking the newspaper out on a daily basis. Kennedy C.J. was of the opinion that the contract was completed when the plaintiff placed an order with the local newsagent. Two cases with broadly similar facts, but very different conclusions, are instructive in this regard. |
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Billings v Arnott [1945] 80 ILTR 50
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A very different outcome was
reached. In the latter case, as an incentive to their employees to join the Defence Forces, the defendants offered any of their employees who joined the Defence Forces half of their salaries, up to £2 per week. The plaintiff responded and told the defendants he was accepting their offer. However, the defendants informed him that this would not be possible as someone else from the plaintiff's department had already signed up and they could not spare him also. Nonetheless the plaintiff signed up for the Defence Forces anyway and subsequently sued for half of his salary. Maguire J. in the High Court held that the notice was clear and unconditional and thus went beyond a mere statement of intention. It was a unilateral offer and acceptance was completed when the plaintiff signed up to the Defence Forces. |
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Wilson v Belfast Corporation [1921] 55 ILTR 205
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The facts of this case are similar where an unauthorised newspaper report indicated that Belfast Council would pay half wages to any employee who enlisted during the Great War.
In this case, the advert was held not to amount to an offer as the newspaper report was not intended to be the medium by which the local authority intended to communicate with its employees. |
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Leftkowitz v Great Minneapolis Surplus Store [1957] 86 NW
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The defendants placed an advert for fur stoles in a Minneapolis newspaper, stating that on a specified day It. would sell the remaining stoles (worth $139.50) for $1 each on a first-come first-served basis. The ship refused to sell a stole to the plaintiff, Mr Leftkowitz, on the basis
that the advert was only intended for women. However, the court was of the opinion that the advert was sufficiently clear, definite and explicit' and 'left nothing open for negotiation'. Thus, It constituted a valid offer. The use of the words "first come, first served" was crucial as it added an area of certamty and finality about the statement and eliminated any vagueness. |
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Pharmaceutical Society of Great Britain v Boots Cash Chemist (1953)
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At the time, under the Pharmacy and Poisons Act 1933 it was against the law
to sell certain pharmaceutical products in the absence of a qualified chemist. The Act expressly stated that It was unlawful to sell any poison unless the sale was carried out by, or under the supervision of a qualified chemist. Boots Chemist, in a quite a novel move at the time, had stocked Its open shelves with certain drugs and medicines that were deemed poisons under the aforementioned Act. The question before the Court on this occasion was whether the display of goods on the shelves of Boots Cash Chemist was indeed an Offer, or an Invitation to treat. If it constituted an offer, then the defendants were violating the relevant legislation as there was no qualified chemist present when someone accepted the offer by removing the goods from the shelf and placing it in his/her basket. Somervell L.J. of the English and Welsh Court of Appeal held that the display of goods in these Circumstances merely constituted an Invitation to Treat. The offer to purchase the goods took place when the purchaser brought the goods to the cashier, at which point the cashier could accept or reject the offer to purchase the goods, in the presence of a quahfied chemist. Thus Boots Cash Chemist was not in contravention of the Pharmacy and Poisons Act 1933. |
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Minister for Industry and Commerce v Pimm [1966] IR
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Under Irish law at the time, it was an offence to offer for sale goods on credit terms
Without specifically and clearly setting out those terms. The defendant was prosecuted for offering for sale on credit terms a coat that he had displayed in a shop window with a tag attached statmg the cash price and indicating that credit terms were available, but without stating those terms. The Court reiterated the fact that merely displaying goods in a shop window is not an offer but rather an invitation to treat, and so the prosecution failed. |
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Auctions - s 58(2) of the Sale of Goods Act 1893
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The general rule in respect of auctions is that putting the item up for auction is an invitation to treat and the bids constitute the offer, which may be accepted or rejected.
Acceptance of an offer takes place with the fall of the hammer. In Ireland, sale by auction is governed by s 58(2) of the Sale of Goods Act 1893. This states that a sale by auction is complete when the auctioneer announces its completion - normally by the fall of the hammer. Where an auctioneer announces that a sale will take place at a certain place at a particular time, this will not constitute an offer. This rule was established in the case of Harris v Nickerson (1873) |
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Harris v Nickerson (1873) LR 8 QB
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An auctioneer advertised that furniture would be auctioned on a particular day. The plaintiff sued for damages for loss of time when he travelled to the auction to find that the furniture had been withdrawn from sale. The Court of Queen's Bench rejected the plaintiff's claim.
However, McDermott is of the opinion that this is not an "entirely satisfactory" solution. 14 He points out the fact that not only is the auctioneer merely acting as the principal's agent but the statement "without reserve" amounts to a collateral offer and therefore there is no reason why the principal should not be bound by it directly. 15 (1-32) This principle in respect of the use of the phrase "without reserve" has been reafTmned in the leading Irish case in the area, Tully v Irish Land Commission [1961] |
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Warlow v Harrison (1859)
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An auction was stated to be without reserve. At this auction, the plaintiff bid 60 guineas for a mare. The owner of the mare bid 61 guineas. The plaintiff discovered the identity of the new bidder and declined to bid any higher;
the mare was knocked down to its owner. When the plaintiff subsequently tried to claim the mare, the owner refused to hand her over. On account of the fact that the auction was to be held without reserve, the Court found that the highest bona fide bidder may sue the auctioneer liable for breach of contract. Furthermore, the court was of the opinion that if the owner of the mare had caused the auctioneer to be in breach of contract, then the auctioneer would be entitled to claim indemnity for this from the owner. |
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Tully v Irish Land Commission [1961]
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Kenny J. reaffirmed the fact that by commencing the auction sale, the auctioneer is making a unilateral offer to all of the bidders in attendance that he will sell to the highest bona fide bidder.
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Spencer v Harding (1870) LR 5 CP 561
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In this case, the defendant had invited tenders for the purchase of stock. The highest bidder's bid was declined and he sued, claiming that his bid was an acceptance of the offer to sell the stock. The Court asserted that the invitation to tender did not amount to an offer, therefore there was no obligation on the defendant to accept the highest bid.
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Tenders
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Friel asserts that "(t]enders are little more than written auctions where people are invited to tender an offer to undertake some work or purchase some goods."
Thus, the advertisement soliciting tenders constitutes an invitation to treat. Each tender received in response to the advert, setting out the terms upon which the supplier or builder is prepared to contract, constitutes an offer that the offeree is free to accept or to reject. The locus classicus in this respect is the case of Spencer v Harding (1870). Analogous to auctions stated to be held "without reserve", a tender may be advertised with the stipulation that it will go to the highest or the lowest bidder. If this is the case, then the tender may be transformed into an offer, as opposed to an invitation to treat. However, this has led to the introduction of the "referential bid", as exposed in the case of Harvela Investments v Royal Trust of Canada [1985] Nonetheless, it seems that Harvela does not represent the law in Ireland. Howberry Lane v Telecom Eireann [1999] 2 ILRM However, it would appear that a referential bid can only be made in response to an offer to II make tenders where the offer is expressly permitted by the terms of the request for tender. Smart Telecom pic v RTE (2006) - The court approved Harvela to the effect that a referential bid will only be valid where it is expressly permitted by the terms of the request for tenders. |
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Harvela Investments v Royal Trust of Canada [1985]
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In this case, the defendant invited sealed bids to purchase shares and offered to accept the highest bid. The second defendant made a bid that was considerably lower than the plaintiff's bid, but added a referential clause to the effect that he would alternatively pay $101,000 more than any higher bid submitted. The first defendant
accepted the referential bid and the plaintiff, who was the bona fide highest bidder, sued as a result. The House of Lords held that it was an implied term that referential bids were excluded, thus the referential bid was invalid. In doubting the logic of this judgment, Friel asserts that the reasoning behind this decision was " ... presumably on the grounds that otherwise future tendering could consist of nothing but referential bids and therefore there would be no real offer to base such referential bids on." Nonetheless, it seems that Harvela does not represent the law in Ireland. |
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Howberry Lane v Telecom Eireann [1999] 2 ILRM
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The first and second-named defendants invited bids for Cablelink. The plaintiff had made the de facto highest bid, but the third-named defendants had made a referential bid of 15 per cent more than the highest bid. The first-and second-named defendants then requested that the
parties submit new bids. The third defendant was awarded the contract after making the highest bid. The plaintiff argued that the referential bid submitted by the third defendant was invalid and, as a result, that the plaintiff's bid was the highest bid. They also argued that it was improper for the first and second defendants to open up a new round of bidding, and that even if it had been proper, the third defendants should have been excluded from the process. The plaintiff sought an injunction preventing the first- and second-named defendants from selling Cablelink to the third-named defendant. In this case, the court rejected the reasoning adopted in Harvela that it was an implied term that referential bids were excluded. Indeed, the tendering documents contained an express term that the seller reserved the right to sell the company to any person at all, at any time and that it was under no obligation to accept the highest bid, or any bid at all. |
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Smart Telecom pic v RTE (2006)
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RTE indicated that it was seeking a sponsor for its broadcasted weather forecasts. RTE stated that it would "accept the best offer in the form of a sealed bid" clearly stating that the offer was to be stated as a gross
figure including any agency commission. The CEO of Smart Telecom made a bid to the effect of "a sum equal to 5% above the highest price bid" received by RTE. Was this a valid response to RTE's offer? The High Court held that it was not. The terms of RTE's offer required parties to submit their best offer clearly outlining the price to be paid. The court approved Harvela to the effect that a referential bid will only be valid where it is expressly permitted by the terms of the request for tenders. |
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Privilege Clauses
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McDermott defines a privilege clause as " ... a clause in the tender document that permits the person placing the advertisement to disregard a tender altogether." In Howberry Lane, Morris P. held that the existence of a privilege clause meant that the invitor was not obliged to
sell to the plaintiff-regardless of whether or not the plaintiff could establish that the only bid higher than its own was invalid. McDermott is of the opinion that the Canadian approach is preferable, particularly given the " ... risks and costs of bidding in circumstances where the invitor is free to accept non-compliant bids and to act unfairly." per MJB. |
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MJB Enterprises v Defence Construction [1951] Ltd (1999) 1 SCR 619
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The Supreme Court of Canada was required to consider a privilege clause that stated that "[t]he lowest or any tender shall not necessarily be accepted".
The court first inquired into whether or not there was any express term in the tender document that imposed an obligation to award the tendering contract to the lowest valid tender. While the court concluded that there was no express term to that effect, it found that there was an implied term that a compliant tender would be accepted. |
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Tansey v College of Occupational Therapists Ltd [1995] 2 ILRM 601
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The plaintiff was enrolled in St Joseph's College for a preparatory course for the defendant's Diploma examinations.
The defendant had published a manual that provided the examination details and that specifically stated that two re-sits were permitted. However, during the year when the plaintiff joined the course, the defendant decided to amend its rules and allow only one examination re-sit. A page containing this amendment was included in some, but not all, of the manuals handed out the year the plaintiff enrolled. A notice of the amendment was sent by the defendant to St Joseph's and was posted on a notice-board in the college throughout the year. The amendment was also pointed out to some of the students undertaking the course. The plaintiff failed her Psychiatry exams twice and claimed that the defendant had a contractual relationship with the plaintiff. While Murphy J. accepted that an examination board could make a unilateral offer, the plaintiff had not been aware of any offer made by the defendant when she enrolled in respect of examination re-sits. The manual supplied to the students only amounted to the provision of information regarding the course and was not to be read as a term of the contract between the parties. |
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Harvey v Facey [1893] AC 552
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The plaintiffs telegraphed: "will you sell us Bumper Hall Pen? Telegraph lowest cash price". The defendants telegraphed back stating that "Lowest cash price for Bumper Hall Pen £900". The plaintiffs indicated that they would pay that price. When the defendants refused to sell, the plaintiffs sued claiming that a valid contract had been made.
However, the Privy Council rejected the plaintiffs' claim and held that the defendant's telegram was merely an indication of the price that they would be prepared to accept should they decide to sell the pen in the future. |
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Boyers v Duke [1905] 2 IR 617
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The plaintiff requested the lowest quotation the defendant would make for 3,000 yards of canvas. The defendant replied with its lowest cash price, and the plaintiff subsequently sent in an order at this price. However, the defendant realised that the quotation given was the result of a clerical error and that it was excessively low. It refused to supply the canvas at the initial price quoted. The plaintiff sued for breach of contract.
Madden J. asserted that a quotation was not meant to be an offer but an invitation to treat and that " ... a quotation invites an offer which will be honoured or not according to the exigencies of his business". |
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Dooley v Egan [1938] 72 ILTR
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Where the question arose as to whether the contract in question had been concluded in Dublin or in Cork. The plaintiff posted a letter on 22 June stating that it could supply the enclosed list of goods at certain fixed prices, with the quotation being for immediate acceptance only. The plaintiff attempted to rely on Boyers v Duke [1905] 2 IR 617, claiming that this was not really meant to be an offer but merely an invitation to treat.
Meredith J. rejected this argument, despite the use of the word "quotation". The use of the words for "immediate acceptance only and are subject to change without notice" changed the nature of the quotation and transformed it into an offer capable of acceptance. |
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Carroll v An Post National Lottery [1996] 1 IR 443.
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In this case it was held that the lottery playslip constitutes an offer by An Post, whereby it offers to sell lottery tickets to members of the public who complete the playslips in accordance with the prescribed rules and regulations.
This offer is then accepted when the member of the public completes the playslip and gives it to the Lotto agent together with the appropriate money. |
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Smart Telecom pic v RTE (2006)
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RTE indicated that it was seeking a sponsor for its broadcasted weather forecasts. RTE stated that it would "accept the best offer in the form of a sealed bid" clearly stating that the offer was to be stated as a gross
figure including any agency commission. The CEO of Smart Telecom made a bid to the effect of "a sum equal to 5% above the highest price bid" received by RTE. Was this a valid response to RTE's offer? The High Court held that it was not. The terms of RTE's offer required parties to submit their best offer clearly outlining the price to be paid. The court approved Harvela to the effect that a referential bid will only be valid where it is expressly permitted by the terms of the request for tenders. |
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Royen v British Columbia Lottery [1997] 33 BLR (2d) 246
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The Canadian Courts have adopted a different approach to lotteries, however.
Here, the plaintiff used historical data from past lottery draws to develop a system for narrowing the odds and planned to purchase one million lottery tickets for an upcoming 'Sweetheart Bonus Draw'. Upon becoming aware of this, the defendant made a decision to forbid Lottery agents selling massive amounts of tickets to individual purchasers. The plaintiff sued for breach of contract, but Wong J. in the British Columbia Supreme Court found that, at best, the defendant had made an invitation to treat as opposed to an offer to the general public. |
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Privilege Clauses
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McDermott defines a privilege clause as " ... a clause in the tender document that permits the person placing the advertisement to disregard a tender altogether." In Howberry Lane, Morris P. held that the existence of a privilege clause meant that the invitor was not obliged to
sell to the plaintiff-regardless of whether or not the plaintiff could establish that the only bid higher than its own was invalid. McDermott is of the opinion that the Canadian approach is preferable, particularly given the " ... risks and costs of bidding in circumstances where the invitor is free to accept non-compliant bids and to act unfairly." per MJB. |
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Termination of Offer
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Once an offer has been validly terminated, it cannot be accepted. Moreover, once an offer has been accepted, it cannot be terminated. There are generally four main ways by which an offer may be terminated. These include:
(i) Revocation; (ii) Rejection; (iii) Delay or lapse of time; and (iv) Death. |
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MJB Enterprises v Defence Construction [1951] Ltd (1999) 1 SCR 619
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The Supreme Court of Canada was required to consider a privilege clause that stated that "[t]he lowest or any tender shall not necessarily be accepted".
The court first inquired into whether or not there was any express term in the tender document that imposed an obligation to award the tendering contract to the lowest valid tender. While the court concluded that there was no express term to that effect, it found that there was an implied term that a compliant tender would be accepted. |
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Tansey v College of Occupational Therapists Ltd [1995] 2 ILRM 601
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The plaintiff was enrolled in St Joseph's College for a preparatory course for the defendant's Diploma examinations.
The defendant had published a manual that provided the examination details and that specifically stated that two re-sits were permitted. However, during the year when the plaintiff joined the course, the defendant decided to amend its rules and allow only one examination re-sit. A page containing this amendment was included in some, but not all, of the manuals handed out the year the plaintiff enrolled. A notice of the amendment was sent by the defendant to St Joseph's and was posted on a notice-board in the college throughout the year. The amendment was also pointed out to some of the students undertaking the course. The plaintiff failed her Psychiatry exams twice and claimed that the defendant had a contractual relationship with the plaintiff. While Murphy J. accepted that an examination board could make a unilateral offer, the plaintiff had not been aware of any offer made by the defendant when she enrolled in respect of examination re-sits. The manual supplied to the students only amounted to the provision of information regarding the course and was not to be read as a term of the contract between the parties. |
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Harvey v Facey [1893] AC 552
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The plaintiffs telegraphed: "will you sell us Bumper Hall Pen? Telegraph lowest cash price". The defendants telegraphed back stating that "Lowest cash price for Bumper Hall Pen £900". The plaintiffs indicated that they would pay that price. When the defendants refused to sell, the plaintiffs sued claiming that a valid contract had been made.
However, the Privy Council rejected the plaintiffs' claim and held that the defendant's telegram was merely an indication of the price that they would be prepared to accept should they decide to sell the pen in the future. |
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Boyers v Duke [1905] 2 IR 617
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The plaintiff requested the lowest quotation the defendant would make for 3,000 yards of canvas. The defendant replied with its lowest cash price, and the plaintiff subsequently sent in an order at this price. However, the defendant realised that the quotation given was the result of a clerical error and that it was excessively low. It refused to supply the canvas at the initial price quoted. The plaintiff sued for breach of contract.
Madden J. asserted that a quotation was not meant to be an offer but an invitation to treat and that " ... a quotation invites an offer which will be honoured or not according to the exigencies of his business". |
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Dooley v Egan [1938] 72 ILTR
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Where the question arose as to whether the contract in question had been concluded in Dublin or in Cork. The plaintiff posted a letter on 22 June stating that it could supply the enclosed list of goods at certain fixed prices, with the quotation being for immediate acceptance only. The plaintiff attempted to rely on Boyers v Duke [1905] 2 IR 617, claiming that this was not really meant to be an offer but merely an invitation to treat.
Meredith J. rejected this argument, despite the use of the word "quotation". The use of the words for "immediate acceptance only and are subject to change without notice" changed the nature of the quotation and transformed it into an offer capable of acceptance. |
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Carroll v An Post National Lottery [1996] 1 IR 443.
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In this case it was held that the lottery playslip constitutes an offer by An Post, whereby it offers to sell lottery tickets to members of the public who complete the playslips in accordance with the prescribed rules and regulations.
This offer is then accepted when the member of the public completes the playslip and gives it to the Lotto agent together with the appropriate money. |
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Royen v British Columbia Lottery [1997] 33 BLR (2d) 246
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The Canadian Courts have adopted a different approach to lotteries, however.
Here, the plaintiff used historical data from past lottery draws to develop a system for narrowing the odds and planned to purchase one million lottery tickets for an upcoming 'Sweetheart Bonus Draw'. Upon becoming aware of this, the defendant made a decision to forbid Lottery agents selling massive amounts of tickets to individual purchasers. The plaintiff sued for breach of contract, but Wong J. in the British Columbia Supreme Court found that, at best, the defendant had made an invitation to treat as opposed to an offer to the general public. |
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Termination of Offer
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Once an offer has been validly terminated, it cannot be accepted. Moreover, once an offer has been accepted, it cannot be terminated. There are generally four main ways by which an offer may be terminated. These include:
(i) Revocation; (ii) Rejection; (iii) Delay or lapse of time; and (iv) Death. |
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Revocation
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Revocation essentially means that the person who originally made the offer has withdrawn it.
The general rule is that an offer may be revoked at any time before it is accepted. The offeror is not obliged to provide any reason for such revocation. Moreover, revocation is valid even in a situation where the offeror has stated that the offer will remain open for a certain period of time. Unless there is a separate enforceable contract, i.e. one supported by consideration, to the effect that the offer will remain open until a certain date, the offeree will have no cause of action if the offer is revoked before this deadline. In order to be effective, revocation must be communicated to the person to whom the offer was made originally. Communication may be express or implied. Thus, even if the offeree hears of circumstances that are inconsistent with the existence of the original offer, revocation will be deemed to be communicated, albeit impliedly. For the purposes of contract law, acceptance is communicated once the offeror learns of the acceptance by the offeree. It is important to note that the postal rule (to be discussed below) does not apply to letters that seek to revoke an offer. Revocation becomes effective in respect of post only when it has been received by the offeree: Byrne v Tienhoven [1880] 5 C.PD. 344. According to Friel, in order to revoke an offer in a unilateral contract, the revocation should be displayed with the same prominence for the same duration as the original offer. |
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Dickinson v Dodds (1876) 2 Ch.
D. 463 |
The defendant had initially offered to sell property to the plaintiff. This offer was to be accepted before 9.00am on Friday, 12 June. On the Thursday afternoon, the plaintiff heard from a third party that the property had been sold to another party. The defendant had not authorised the third party to communicate this information to the plaintiff.
Nonetheless, the Court of Appeal was of the opinion that once the plaintiff had notice of the sale, the original offer was no longer capable of acceptance. The minds of the parties were not ad idem and the original offer was validly revoked, despite the fact that the revocation came as a result of information passed on by a third party. According to Friel, the latter is a poor decision and "[t]here are sound jurisprudential reasons for requiring the revocation of an offer to come exclusively from the offeror and not to permit the actions of the offeree to determine revocation. " |
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Entores Ltd. v Miles Far East Corporation [1955]
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The question before the court here was where the contract was completed.
The general rule in this respect is that a contract is concluded where acceptance takes place. The plaintiffs had sent an offer via telex from their office in London to the defendants' office in Amsterdam. The Court of Appeal was of the opinion that the contract came into being where a.cceptance took place and this was in London, when the notice of acceptance was received, i.e. when acceptance was communicated to the offeror. |
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Parkgrange Investments v Shandon Park Mills (1991)
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Carroll J. acknowledged that not only did the defendant lack the intention to accept but he had failed to communicate any acceptance to the other side.
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Mondial Shipping & Chartering BV v Astarte Shipping Ltd [1995] CLC
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Lord Wilberforce was expressly applied and elaborated upon. It was asserted that where a telex was sent to a business outside "ordinary business hours", the person who sent the message cannot expect the recipient to have received the message until the open of business on the next available working day.
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The Brimnes [1975] QB 929
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A telex arrived at the offeree's telex machine between 5.30 and 6pm but was not read until the next day. It was held that as the telex arrived during office hours it took effect on the day it arrived on the
machine. Thus the court held that communication of acceptance had taken place when the telex should have been read. |
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Brinkibon Ltd v Stahag Stahl
und Stah/warenhandelgesel/schaji GmbH [1983] |
The House of Lords added the caveat that the general rule will not always provide the most appropriate solution in cases where, for example, the telex is sent by or to an agent with limited authority, or where the telex arrives outside normal business hours. Indeed, Lord Wilberforce pointed out that:
[n]o universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks lie. |
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Unilateral Offers and Revocation
|
Generally speaking, if a unilateral offer has been made, it may be revoked at any stage before acceptance. However, this is prone to causing problems as acceptance will generally take the form of conduct on the part of the offeree. In the case of revocation of a unilateral offer revocation is possible provided that the communication of revocation takes the exact same form as the original offer.
So, for example, where a unilateral offer has been made through an advertisement in a newspaper, revocation of this offer must take place appearing in the same newspaper in a similar fashion and for the same duration of time. Problems arise where someone has already begun to perform according to the terms of the offer. The general rule is that acceptance does not take place until the act is complete. |
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Daulia v Four Milbank Nominees [1978]
|
The English Court of Appeal held that where such circumstances arise, the offer becomes irrevocable once the offeree has initiated performance according to the terms of the offer. However, this ruling was stated obiter because in this particular case the offeree had completed performance before revocation took place.
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Errington v Errington [1952]
|
Here, a father made an agreement with his son and daughter-in-law that he would pay one-third of the purchase price of a house, in cash, if they paid the balance of the mortgage on the house. He would then convey the house to them once the final instalment was paid. The father subsequently died and left the house to hiswidow, who sought possession of the house.
The Court of Appeal held that no tenancy existed, nor was there any contract requiring the son and daughter-in-law to pay the installments. Nevertheless, the court held that the offer by the father became incapable of revocation once the son and daughter-in-law began performance on the basis of an implied term that the offer would not be revoked once performance commenced. |
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Luxor ( Eastbourne) Ltd v Cooper [1941] AC 108
|
In that case an owner of land promised to pay an estate agent a commission if he facilitated the sale of the land at a certain price. The House of Lords held that the owner of the land could revoke his promise at any time before the completion of the sale.
However, the House of Lords also held, that in the circumstances of the case, it would not be appropriate to imply a term that the owner could not revoke his promise once performance had begun. |
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Byrne v Tienhoven [1880] 5 C.PD. 344
|
It is important to note that the postal rule (to be discussed below) does not apply to letters
that seek to revoke an offer. Revocation becomes effective in respect of post only when it has been received by the offeree: According to Friel, in order to revoke an offer in a unilateral contract, the revocation should be displayed with the same prominence for the same duration as the original offer. |
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Rejection
|
If the offeree rejects the original offer, he cannot later decide to change his mind and accept it. A fresh offer must be made, which he can validly accept or reject. An offer may be rejected by express or implied words or conduct. The courts often need to distinguish between a rejection of an offer and a mere inquiry as to the possibility of altering the terms of the offer.
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Counter-Offer
|
In many cases, a rejection may be accompanied by an offer with new terms. As acknowledged by McDermott,
"[i]f the response to the offer is anything less than a clear and unequivocal acceptance of the exact terms of the offer, then the response will be seen as a counter-offer." In practical terms, a counter-offer has the effect of terminating the original offer made and becoming a fresh offer. Hyde v Wrench (1840) |
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Hyde v Wrench (1840)
|
The defendant offered to sell property to the plaintiff for £1,000. However, the plaintiff responded by indicating that he would only pay £950. The defendant refused to sell the property for £950. The plaintiff then attempted to accept the original offer of £1,000.
The Court held that the original offer had been terminated by the plaintiff's counter-offer. |
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Requests for Information
|
In some cases the offeree may be merely seeking clarification or further information concerning the offer that has been made. If the enquiry is merely "exploratory" it does not change the nature of the original offer. However, where the enquiry purports to change a material element of the offer such as the price, payment method, mode of delivery etc. then it may be deemed to be a counter-offer. Stevenson, Jacques & Co. v McLean (1880)
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Stevenson, Jacques & Co. v McLean (1880)
|
a telegram was sent in response to an offer, asking whether delivery could take place over a penod of four months.
This was held to constitute a mere inquiry and not a rejection of the original offer that was made. |
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Delay or lapse of lime
|
In cases where a specified deadline has been set by the offeror for the acceptance or rejection of the offer clearly lapses after the deadline passes.
Where no express deadline has been set by the offeror acceptance must take place within a reasonable time, that being judged on a case-by-case basis. In particular, where there is a contractual relationship between the parties, what constitutes "reasonable time" will be considered much more leniently than a situation where the parties are strangers, meeting for the first time. |
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Parkgrange Investments v Shandon Park (1991)
|
Carroll J. asserted that
"fa] purchaser who ignores a time limit for accepting an offer runs the risk that the offer will lapse" |
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Commane -v- Walsh (1983)
|
O'Hanlon J asserted that "[w]hat is reasonable time is a question of fact depending on the circumstances of the particular case"
In particular, where there is a contractual relationship between the parties, what constitutes "reasonable time" will be considered much more leniently than a situation where the parties are strangers, meeting for the first time. |
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Ramsgate Victoria Hotel Co v Montefiore (1860) LR 1 Exch
|
The Defendant applied to purchase shares in the plaintiff company in June. He heard nothing until November when he was told that the shares had been allotted to him and he was required to pay the balance owed.
It was held that his refusal to take the shares was justified on the basis that the offer had not been accepted within a reasonable time. Given the volatile nature of the share price, the period of time between June (offer) and November (acceptance) was excessive. |
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Death
|
Friel draws attention to the fact that
" . . . the effect of death on an offer is far from clear" The prelmunary question is when the death occurred - before or after acceptance of the offer? Death of the Offeror after Acceptance of the Offer If death occurs after acceptance of the offer, it seems that the question as to whether or not the contract will be performed will ultimately depend on the nature of the contract and will be judged on a case-by-case basis. There are two possibilities: (i) the contract will be capable of being performed from the estate of the deceased, or (ii) that the death of one of the parties will have the effect of frustrating the contract. Death of the Offeror before Acceptance of the Offer In cases where the offeror dies " . . . notice of the death to the offeree constitutes revocation of the offer. Where the offeree was not aware of the death of the offeror, it seems that the offer may still be accepted. However, the actual enforcement of the contract will depend on the nature of the contract. Analogous to the situation regarding death after acceptance - where the contract is capable of being performed out of the estate of the deceased - the contract will be enforced. However, where the contract requires that the offeror does something personal, the offeror's obligation cannot be satisfied from his estate and so may not be capable of enforcement. Death of the Offeree The law is clear in this regard. As acknowledged by Friel, "[a]n offer, even one made to the world at large, is made on the assumption that it is to living people and that it is not made to dead people." Thus the offer lapses on the death of the offeree. |
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In Re Irvine [1928] 3 DLR
268 |
A father received an offer to purchase some of his land. He went some way towards accepting the offer, but then died a few hours later. Before he died, he asked his son to post his acceptance to the purchaser's solicitor. The Court found that since, in accordance with the postal rule, acceptance by post takes place when the letter is posted in the letterbox, acceptance was not complete before the father died. Fisher J. opined that
"[a] valid act cannot be done in the name of a dead man". |
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Lynch v Governors of St. Vincent's Hospital (1987)
|
In cases where the offeror dies, "notice of the death to the offeree constitutes revocation of the offer"
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The Rules of Acceptance
|
Friel describes acceptance as simply" ... a response to an offer, a response which completes the contract". Acceptance is "... a final and unequivocal expression of agreement to the terms of an offer. "
Indeed, acceptance must be a mirror image of the offer that has been made. Acceptance may also be defined as a final, unconditional and certain indication of agreement to the terms of the offer communicated to the offeror with the intention of accepting the offer. Acceptance is generally divided into two distinct areas: (i) Fact of Acceptance and (ii) Communication of Acceptance. Acceptance can still occur where the offeree requests a variation in the terms of the offer while also making it clear that if no variation is possible, the offer is still accepted on the original terms. Moreover, if a new term is included in the acceptance that is clearly of benefit to the offeror, this can still be a valid acceptance. However, as Friel notes, this would be interpreted more correctly as a counter-offer that has been accepted by the original offeror by way of conduct |
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Parkgrange Investments v Shandon Park Mills
[Unreported, High Court, 2 May 1991] |
Carroll J. was of the opinion that a contract signed by the seller of property did not constitute a valid acceptance of the purchaser's offer to buy the property. The seller had not signed with the intention of accepting the offer, rather he had signed for the purposes of gaining a capital gains tax certificate in the event that the sale did not go ahead.
This lack of intention was further evidenced by the fact that the seller did not communicate acceptance of the offer to the plaintiff. |
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Butler Machine Tool Co. v Ex-Cell-O Corp. [1979] 1 WLR 401
|
In this case the sellers of a machine tool made an offer to sell it at a price of £75,000 on a printed form that, as standard, included a price variation clause. This clause provided that the quoted price could rise if the costs for the sellers rose before the tool was delivered. The tool in question was not to be delivered for another 10months.
The purchasers responded by placing an order on their own standard printed order form, which did not contain such a clause. While the sellers did not object to this, they did return a portion of the buyers' printed form, acknowledging the contract took place, but on the buyers' conditions. The Court of Appeal held for the buyers under the circumstances, on the basis that the sellers' original quotation was an offer, to which the buyers responded with a counter-offer. The sellers accepted this offer by returning the slip that acknowledged the buyers' terms and conditions. It is noteworthy, however, that a cover letter sent by the sellers reasserting their own terms was ignored. |
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Brogden v Metropolitan Railway Co. (1877)
|
In this case the plaintiff had been delivering coal to the railway company for many years. The railway company decided to put the agreement on a more formal footing and sent a written contract to Brogden setting out the terms of the contract.
Brogden made changes to the contract and signed and returned it to the railway company. The company never signed the contract but Brogden proceeded to deliver the coal on the terms of the contract (as amended by him) and the railway company accepted the coal. This was considered by the court to be tacit acceptance of the terms by the railway company. |
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Anglia Television v Cayton (The Independent, 17
February 1989) |
Hirst J. in two factors must be present before an offer can be accepted by conduct.
First there must be a clear and unambiguous offer, which exists in a form capable of being accepted. Secondly, there must be some form of subsequent conduct by way of acceptance that is applicable exclusively to the offer. |
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Silence as Acceptance
|
The general rule is that silence will not amount to acceptance of an offer, save in the most exceptional cases. According to Treitel, " ... an offeree who simply does nothing on receipt of an offer which states that it may be accepted by silence is not bound."
This rule has been confirmed in Felthouse v Bindley (1862) |
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Felthouse v Bindley (1862)
|
An uncle wrote to his nephew offering to buy a horse for a fixed sum. In the letter, the uncle stated: "If I hear no more
about him, I shall consider the horse mine at that price." An auctioneer acting on behalf of the offeree mistakenly sold the horse to a third party. The uncle sued the auctioneer, claiming that a contract had come into existence despite the silence of the offeree. The court rejected his claim, holding that mere silence on the part of the offeree was insufficient to impose a contract. |
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Russell & Baird v Hoban [1922] 2 IR 159.
|
The plaintiff had sent a sale note to the defendant, by way of post, offering to sell oatmeal. The note indicated that if there was no response within three days, this would be deemed to constitute acceptance.
Ronan L.J. asserted that "No man can impose such conditions upon another" and that silence did not constitute consent under the circumstances. |
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s 47 of the Sale of Goods and Supply of Services Act 1980
|
s 47 of the Sale of Goods and Supply of Services Act 1980 applies to a situation where unsolicited goods are sent to someone without his/her prior request or consent. There are two options open to the recipient under such circumstances:
(1) If the seller does not seek to retrieve the goods within a period of 6 months of sending the goods, and the receiver does not unreasonably prevent him from doing so, the recipient may treat the goods as if they were an unconditional gift to him or her and any rights of the seller to retrieve the goods thereafter is extinguished. (2) The recipient may send a written notice to the sender stating that they have 30 days within which they may take back the goods. They must provide their name and address at which the goods may be repossessed and they must expressly state that the goods were unsolicited. If the sender fails to retrieve the goods within this period, the goods will be treated as an unconditional gift to the sender. |
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Exceptions to the General Rule
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There are three main exceptions to the rule that silence cannot be deemed to constitute acceptance:
(i) Both parties may expressly agree that silence will constitute acceptance. This exception was affirmed in Re Selectmove Ltd [1985] 2 ALL ER 531. As acknowledged by Friel, " ... the offeree has voluntarily assumed the risk of acceptance by way of silence, and the law will not stand in the way of enforcement of such a contract." (ii) As a result of previous business dealings, there is a legitimate expectation that silence will constitute acceptance: Rust v Abbey Life Assurance [1979] 2 Lloyds Law Rep 334. (iii) Silence will constitute acceptance where the contract in question involves a service which, by its nature, cannot be returned once given. |
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Who may accept an Offer?
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This will always depend to some extent on how the offer has been made. Generally, in the case of a bilateral contract a person may accept an offer only if that offer has been made specifically to him/her.
However, if a unilateral offer is made (to the world at large), thus to more than one person, acceptance may occur through the performance of a specified action. See, for example, Billings v Arnott [1945] 80 ILTR 50; Car/ill v Carbolic Smokeball Co. [1893] 1QB 256. In that case, an employer put a notice on the staff notice-board stating that the company would pay a salary to any employee who joined the army during the war. An employee did so and the company then tried to claim that the offer was not directed to him. The court upheld the contract as valid. |
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Communication of Acceptance
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The fact that an act of acceptance has occurred is not sufficient. The acceptance must also be communicated to the offeror. Thus, acceptance is complete only when it is communicated to the offeror. While the offeror may stipulate that it will be sufficient to communicate acceptance to his agent, or indeed the offeror may waive the need for communication, he cannot oblige the offeree to respond by deeming silence as acceptance (see above).
Mode of Communication stipulated by the Offeror The offeror may require, as a term of the offer, a certain mode of acceptance. For example, if the offeror requires that acceptance take place via e-mail, then acceptance by post will not suffice. But if the offeree utilises an equally effective method of acceptance, then this will probably suffice. However, as already stated, a stipulation that silence will constitute acceptance will not bind the offeree. Internet & Email Communications- When and Where Does Acceptance Take Place? The development of email and the internet has complicated aspects of contract law. In particular, it raises questions as to when and where acceptance takes place when forming an agreement over the internet or via email. The traditional view is that contained in Entores i.e. acceptance takes place when the offeror learns of it i.e. when he reads his email. However, Entores is a decision based on an "instantaneous" form of communication i.e. telex/telephone whereas, technically, it could be argued that email is not instantaneous. The alternate view in such cases is that email should be treated like traditional postal methods and that the "postal rule" should apply in such cases i.e. the acceptance is communicated once the offeree sends the email, regardless of whether the offeror has read the email or not. As Clark has noted (p25) the answer to this question depends on a number of factors including assessing how "the communications are phrased, whether prescribed modes of acceptance exist and whether any statutory rules are in place." We await a judicial pronouncement on the matter, but for the present purposes the following might be said: the question as to when/where acceptance took place is a question of fact. Ultimately, the question might be resolved by the court on the basis of where it thinks it is best that the risks might lie (per Lord Wilberforce in Brinkibon). Thus, an offeror who does not want to run the risk of his offer being "accepted" by email where he has not accessed his mail should simply prescribe a different form of acceptance. Where he does not do so it may be open to the court to find in favour of the offeree who, after receiving a straightforward offer via email, responds via email and thereby is of the view that the agreement has been completed. In cases where the email communication is taken place between businesses, the court may apply the principle in Brinkibon i.e. acceptance has not occurred until such time as the receipt should have come to the attention of the offeror. |
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Email - Academic Commentary
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Dickie argues that the postal rule should not be extended to email. Haigh has argued that email should be treated as received once downloaded or after a reasonable time when it could be said that it should have been downloaded. Cheshire, Fifoot & Furmston prefer the approach adopted in the "telex" cases i.e. the acceptance is communicated once the message is received and not when it is actually read. McDermott has commented that the courts will:
.. . make this decision based on a fair allocation of the risks between the parties combined with the need to ensure certainty in contract law . .. In the absence of judicial clarification, these uncertain issues can be avoided by the trader specifying on his website the means of acceptance, applicable law and choice of forum. |
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Electronic Contracts and the Electronic Commerce Act 2000
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Sections 20 and 21 of the Electronic Commerce Act 2000 provided for the regulation of acknowledgment of receipt of electronic communications. In summary, in the case of "sent" and "received", the 2000 Act provides that:
Section 21 (I) - unless otherwise agreed, an email is sent when it enters the first information system outside the control of the originator. Section 21(2) - if receiver designates a receiving system (by sending an email or giving an email address), then the email is deemed to be received when it enters that system. Section 21(3) - If no receiving system designated, then email is deemed to have been received when it comes to the attention of the addressee i.e. when he downloads the email. Section 21 (5) -- unless agreed otherwise, the place of sending and receiving an email is the "place of business" of the sender and the receiver respectively. Clark has stated that the neutral phrases "sent" and "received" are not synonymous with "offer" and "acceptance" and therefore the issue of whether the postal rule applies to email is not resolved by the legislation |
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EC Regulations 2003
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Art 14 provides that, notwithstanding the Electronic Commerce Act 2000, the order and acknowledgement of receipt are deemed to have been received when the parties to whom they are addressed are able to access them. However, it should be noted that the regs apply apply to business to consumer contracts and to business to business contracts - not to private contracts. Business to business parties can "contract out" of the provisions.
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Exceptions to the Rule that Acceptance must be communicated to the Offeror
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There are two main exceptions to the general rule that acceptance must be communicated to the offeror:
(a) Unilateral Contracts and (b) The Postal Rule. |
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Adams v Lindsell [1818] I B. & Ald. 681
|
In this case, the defendants wrote to the plaintiffs on 2 September 1817 with an offer to sell wool. The letter required that acceptance should take place via post. However, as a result of the defendant's misdirecting the letter, it didn't arrive to the plaintiffs until 5 September. The plaintiffs wrote a letter of acceptance that evening and this arrived with
the defendants on 9 September. In the meantime, the defendants thought that they could have reasonably have expected a reply by 7 September, and since they had not received anything by then, they proceeded to sell the wool to a third party on 8 September. The question before the court was: when did the contract actually come into existence? The court held that acceptance took place when the letter was posted and came into the possession of the postal service. |
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The Postal Rule
|
Friel points out that it " .. . is not irrational if placed in the context of its time". Indeed, the harshness of the rule can still be avoided if the offeror stipulates the preferred mode of acceptance (see above).
As acknowledged by Clark, while this rule has not received universal acceptance, it is still the 11- 761 preferred approach under Irish law. Exceptions to the Postal Rule 11- 77) There appear to be three main exceptions to the postal rule. However, as McDermott points out " .. . if one defines the postal rule simply a manifestation of the true intentions of the parties many of these are not true exceptions at all but simply examples of scenarios where the rule could never have applied. "43 The exceptions include: (i) Prescribed Method of Acceptance (ii) Manifest Inconvenience and Absurdity (iii) Public Policy |
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Household Fire Insurance v Grant (1879) L.R. 4 Ex. 216,
|
The defendant made an offer to take out an insurance policy. The insurance company posted its acceptance, but the letter never arrived. Despite this, the defendant was held to be liable to pay the premiums, even though he was unaware that his offer had been accepted.
The contract was complete upon the posting of the acceptance. While this rule may seem rather unconventional and at times capable of leading to great injustice, as |
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Sanderson v Cunningham [1919) 2 IR 234
|
The plaintiff, through a Dublin insurance broker, offered to purchase insurance from a London company. The insurer accepted the plaintiff's offer by issuing an insurance policy by letter from London. The plaintiff wished to sue the defendants in Ireland, but could only do so if the contract was concluded in Ireland.
The Court of Appeal rejected his claim, stating that the contract was formed in London, from where the letter of acceptance was posted. |
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Dooley v Egan [1938] 72 ILTR 155.
|
This case concerned the sale of two medical cabinets. The issue before the court was whether the contract was formed in Dublin or in Cork. The defendants had sent a postcard to the plaintiffs to inquire whether the plaintiff could supply them with a medical cabinet. On 22 June the plaintiffs sent a letter stating that they could supply an enclosed list of goods at fixed prices, the quotation being for "immediate acceptance" only. The defendants replied on 24 June and ordered two medical cabinets. The plaintiff replied on 26 June' agreeing to sell two medical cabinets.
Meredith J. held that the letter of 22 June was an offer, and that the reply was not an acceptance but a counter-offer, which was accepted in Dublin by the letter dated 26 June. Thus, the contract was formed in Dublin. |
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Kelly v Cruise Catering [1994] 2 ILRM 394.
|
The plaintiff was an employee working on a ship called the Royal Viking Sun, which was en route from Mexico to Texas. His contract of employment had been sent from Oslo to Dublin.He signed the contract in Dublin and returned it by post to Oslo. In order for the Irish courts to have jurisdiction to hear the case, the contract had to be concluded in Ireland.
Blayney J. in the High Court concluded that the plaintiff's acceptance was complete when he signed and posted the contract from Dublin. Thus, Dublin was the place the contract was made. Furthermore, he asserted that the fact that the rule could cause injustice in some cases was not a reason for refusing to apply it in the present case. |
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Holwell Securities v Hughes [1974] I WLR 155.
|
In this case the contract provided that if the plaintiff wanted to exercise an option to buy a house owned by the defendant, this would have to be done "by notice in writing" within six months. Before the time elapsed, the plaintiff sent a letter, but the letter never arrived. Lawton L.J. in the English Court of Appeal held that the words of the agreement indicated that the defendant was bound only when he received the letter. The postal rule did not apply.
Lawton L.J. went further and stated that the postal rule " . .. probably does not operate if its application would produce manifest inconvenience and absurdity". |
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Apicella v Scala [ 1931] 66 ILTR 33
|
Meredith J. asserted that the postal rule " .. . will not be
allowed to operate so as to breach principles of international law such as the rule relating to comity of nations". |
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Certainty of Terms
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The courts will not enforce an agreement which is deemed too vague or uncertain. As noted by Ryan, a general rule is that the contract should be clear on the 3Ps (price, property (subject matter of the contract) and the parties).
A contract will not be enforced where the essential terms of the contract are so ambiguous or unclear that it would be impossible to accurately gauge the intentions of the parties. In the words of Viscount Maugham in Scammell v Duston [1941] AC 251: In order to constitute a valid contract, the parties must so express themselves that their meaning can be determined with a reasonable degree of certainty. It is plain that unless this can be done' it would be impossible to hold that the contracting parties had the same intention; in other words the consensus ad idem would be a matter of mere conjecture. While the courts will not uphold a contract which is deemed uncertain as to its essential terms, they will do so reluctantly. As Lord Denning observed in Greater London Council v Connolly "the courts are always loath to hold a contract bad for uncertainty. They will give it a reasonable interpretation whenever possible." Apparent agreements will be declared void for uncertainty in one of two ways: (i) Ambiguous Terms (ii) Illusory Terms |
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Scammell v Duston [1941] AC 251
|
Viscount Maugham:
In order to constitute a valid contract, the parties must so express themselves that their meaning can be determined with a reasonable degree of certainty. It is plain that unless this can be done' it would be impossible to hold that the contracting parties had the same intention; in other words the consensus ad idem would be a matter of mere conjecture. |
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Greater London Council v Connolly
|
Lord Denning observed:
"the courts are always loath to hold a contract bad for uncertainty. They will give it a reasonable interpretation whenever possible." |
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Ambiguous Terms
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Such a term is one that can be interpreted in more than one way. In such circumstances, the court will attempt to discern the true intention of the parties. However, where the terms are so ambiguous the courts may decide that no agreement was reached between the parties. The courts may adopt a number of different approaches towards clarifying "vague" terms:
1. The contract might provide for a resolution of the dispute itself e.g. an arbitration clause. See Foley v Classique Coaches [1934] 2 KB 1. 2. The term may be clarified by the introduction of oral (or parol) evidence. In ESB v Newman (1933) 67 ILTR 124. 3. Certain terms may be implied by statute e.g. The Sale of Goods Act 1893. 4. The courts might imply a "reasonableness" term into the contract e.g. where no delivery date is specified in the contract a term may be implied that the goods should be delivered within a reasonable time. 5. A term may be implied in order to give 'business efficacy' to the contract. See later: The Moorcock (1889) 14 PD 64. 6. A term may also be implied by a previous course of dealing or through custom and practice which might clarify what would otherwise be an uncertain or vague term - Spurling v Bradshaw [1956] 1 WLR 461. In the interests of commercial convenience the courts will seek to enforce apparent agreements - Fitzsimons v O'Hanlon [1999] 2 ILRM 551. In so doing, the courts will not rewrite the agreement but they will adopt an objective approach towards such interpretation. |
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ESB v Newman (1933) 67 ILTR 124
|
The defendant had agreed to "discharge the accounts for electricity" supplied to a Mrs Waddington. Mrs Waddington had four different premises. The defendant claimed that the term was only intended to cover one premises only. In such circumstances the court will attempt to discover the true intention of the parties but will not attempt to rewrite the contract. The court favoured the testimony of the defendant and found
that he intended to indemnify the plaintiff re the accounts of one of the premises only. |
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Mackey v Wilde (No 2) [1998] 2 IR 578;
|
The court found that an agreement between the plaintiff and the defendant re the issuing of 25 annual fishing permits and 'a few' day tickets was too vague and the agreement was declared void.
Barron J. held that the number of day tickets to be made available was not sufficiently certain and could not be determined by what is reasonable: Reasonableness in law is an expression capable of certainty. But there can be no certainty here. The learned trial judge had held that the ten day tickets would be reasonable. But equally any other number between two and ten would have been said also to have been reasonable. When an apparently uncertain term is saved on the basis of what is reasonable, it is because this impairing certainty, something which cannot be done by choosing which of several reasonable answers is the correct one. |
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Hillas v Arcos (1932) Com Cas 23;
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The courts upheld a term in a contract for the sale of timber which referred to '100,000 standards' on the basis that the parties had a course of dealing and the previous year's contract had referred to '22,000 standards of fair specification' which provided greater clarity as to what was expected.
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Rooney v Byrne [ 1933] IR 609
|
A promise to purchase a house "subject to getting an advance on the property" was held not to give the promisor a choice whether to apply for a loan or advance. It was held that the promisor was obliged to make reasonable efforts to secure an advance on reasonable terms.
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MacRobertson Miller Airline Services v Commissioner
of State Taxation (1975) 133 CLR 125 |
A term in a contract by an airline company which promised to fly passengers from on point to another but allowed the company to avoid liability if it cancelled the flight.
The question came before the High Court of Australia as to whether this was a valid agreement for stamp duty purposes. It was held that the term was illusory and the contract was void due to uncertainty. There was no contract until the airline company provided the customer with a seat on the plane. |
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Provincial Bank of Ireland v Donnell (1932) ILTR 142;
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A guarantee to a bank regarding future loans to be advanced to another party was held to be void for uncertainty where the bank retained the absolute discretion as to whether such future loans.
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O'Mullane v Riordan (20 April 1978, unreported)
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The Plaintiff purchaser agreed to pay 1,500 pounds an acre or such greater price which could be varied by the purchaser. This term was not deemed illusory as it stipulated a minimum price and did not provide that the purchaser would retain the discretion as to whether he paid anything at all. McWilliam J stated:
To me the clause appears to be quite clear. The plaintiff has an absolute discretion as to whether he will increase the price or not ... Although the clause may be useless to the defendant, this does not render the contract void for uncertainty. |
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Agreements to Negotiate
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Generally, where the terms of a contract are vague, or where what has been left out renders the remainder of the contract " . .. unworkable or void for uncertainty", then the contract will not be enforceable.
Indeed, according to Lord Ackner in Walford v Miles [1992] 2 AC 128: [T]he reason why an agreement to negotiate, like an agreement to agree, is unenforceable is simply because it lacks the necessary certainty. An exception to this general rule may arise in the context of lockout agreements, where one party undertakes not to negotiate with a third party for a certain period of time. These lockout agreements arise most frequently in the context of company take-overs. However, in Guardian of Kells Union v Smith (1917) 52 ILTR 65, there was some acknowledgement of the validity of "contracts to contract". In that case, the plaintiff advertised by tender for the supply of meat. The advertisement provided that the formal contract was to be signed on a certain day. The defendant was successful in his tender, but refused to sign the formal contract. The defendant was held liable on the basis that the defendant had entered into a valid contract to enter into a formal contract for the supply of the meat. There are two remedies available where the terms are deemed to be uncertain: (i) If part of the contract has been performed, the other party is entitled to seek restitution on the basis that the defendant has been unjustly enriched. (ii) The illusory or ambiguous term may be severed where if it is not considered essential Mackey v Wilde [1998] 2 IR 578 |
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Guardian of Kells Union v Smith (1917) 52 ILTR 65,
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There was some acknowledgement of the validity of "contracts to contract". In that case, the plaintiff advertised by tender for the supply of meat. The advertisement provided that the formal contract was to be signed on a certain day. The defendant was successful in his tender, but refused to sign the formal contract.
The defendant was held liable on the basis that the defendant had entered into a valid contract to enter into a formal contract for the supply of the meat. |
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Mackey v Wilde [1998] 2 IR 578
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The illusory or ambiguous term may be severed where if it is not considered essential
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Walford v Miles [1992] 2 AC 128
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Lord Ackner:
[T]he reason why an agreement to negotiate, like an agreement to agree, is unenforceable is simply because it lacks the necessary certainty. |
