Case Law: Offer and Acceptance

Introduction

Disputes can occur between parties resulting in seeking decisions from the civil legal process in the UK courts. Judges follow previously decided cases referred to as the judicial precedent. A binding precedent is a decided case, which the courts must follow on future cases. The benefit from operating a judicial precedence as the rule for law is that it allows consistency, uniformity and certainty. The compilations of the binding decisions from past cases are the basis of case law.

An offer is made by the offeror, when accepted by the offeree results in a binding contract. As well as the agreement consisting of offer and acceptance, there is also consideration which refers to the price of the contract and contractual intention referring to the parties to be contractually bound. These elements create a legally binding contract enforceable under English case law. (Griffiths and Griffiths, 2002)

Events

Tom decides to sell his car by parking it outside his house with a notice on the windscreen stating: "For Sale. Very good condition, one owner full service history, full MOT, £5,000 or nearest offer. Please call at number 37 or telephone 828288 only."

On Monday at 9.00am, Dick sees the car, but as he is late for work he is unable to stop and telephones Tom at 10.00am and makes an offer of £4,750 which Tom says he will consider.

Harry was passing Tom's house on Monday at 11.00am, saw the car and called at the house but Tom was out, however Tom's son Chris was in and Harry left a note stating:

"Monday 11.05am. Please keep the car for me. I enclose a cheque for £5,000, Harry". Chris left the note on the desk in Tom's study.

On Monday afternoon, Tom decides to accept Dick's offer and posts a letter at 2.30pm to Dick's business address stating:

"I agree to sell the car to you, but because of the lower price you have offered, can you pay in cash?"

At 4.30 on Monday, Tom reads Harry's acceptance and immediately phones Dick's business address, leaving a message on the answer machine stating:

"Ignore the letter you will receive - deal off, Tom."

Dick is away on business and only hears the message on Wednesday evening.

Deliberation

In an attempt to advise Tom, Dick and Harry with regards to the possible sale of a car, it is important to reflect on case laws for offer and acceptance in reaching a conclusion.

The first action to consider is manner in which Tom advertised the sale of his car and the wording used in the advert. "For Sale, very good condition, one owner full service history, full MOT, £5000 or nearest offer. Please call at number 37 or telephone 828288 only"

Although in some situations, an advert may be considered as an offer, closely considering the wording of Tom's advert, it is most likely to be viewed as an invitation to treat.

In this situation, Tom has stated an offer of £5000 subject to terms and conditions of communication, which could at first glance, be seen as an offer. However, Tom has also invited nearest offers and therefore the whole advert is most likely seen as an invitation to treat.

It is important to distinguish an offer from an invitation to treat. Reason being, an offer will lead to a binding contract on acceptance as in the case, Carlill v Carbolic Smoke Ball Co (1893), where an advert was placed by Carbolic Smoke Ball Company and was constituted as an offer of a unilateral contract which was accepted by Mrs Carlill performing the conditions stated in the offer.

An invitation to treat can be regarded as an encouragement to third parties to put forward an offer, and hence invitation to treat cannot be bound to acceptance. This is evident from the case Fisher v Bell (1961), where goods on display in a shop were deemed as an invitation to treat by the courts. Hence, an invitation to treat waits for offerors to state their offers.

The first contact is received via telephone from Dick on Monday at 10am, offering the amount of £4750. For an offer to be valid, the offeror has to show intention to be bound by the amount that they are offering. In the case Harvey v Facey (1893), it was ruled Facey had answered a question with an amount of value, however not for intent or purpose to be bound by this value as an offer, but merely to respond to a question.

In this event, the offer made by Dick is very likely to have been made for the intent to be bound and hence, the offer most probably is valid.

Tom responds by saying he will consider. It is fundamental to understand what constitutes a valid acceptance and establish if the parties have entered in to a contractual agreement, as in the case Entorres v Miles Far East (1955), highlights that acceptance must be communicated.

There are three key rules for acceptance to be valid:

1. The acceptance must be communicated to the offeree.

2. The terms of the acceptance must exactly match the terms of the offer.

3. The agreement must be certain.

(Robinson, 2011)

To determine if the offer has been accepted, in view of Tom's immediate response to Dick's offer is that it will be considered, hence very unlikely any acceptance has taken place at this point.

In the afternoon of Monday at 2.30pm, Tom posts a letter to Dick's place of work, willing to accept Dick's offer if the payment is in cash. It needs to be evaluated if this is an acceptance or if it is a counter offer.

As Tom has introduced a new term "if the payment is in cash", yet to be agreed by Dick, this is probably regarded as a counter-offer which destroys the original offer, as in the case of Hyde v Wrench (1840) where it was ruled