In which of the following ways may an offeree accept a unilateral contract

1. OFFER AND ACCEPTANCE

1.1 OFFER

Definition: To amount to an offer, the offeror must make a clear, unequivocal statement that he will regard himself as legally bound to perform his promise if the other party accepts his offer.

Rule: There must be an offer. All negotiations are commenced with an offer. The offer requires valid acceptance for a binding contract to be formed. An offer can only make an agreement if it is accepted in its entirety.

It may be made to a group of people, the whole world, or just one person (Carlill v. Carbolic Smoke Ball). The court held that an offer could be made to the whole world, but could only make an agreement once accepted by action of a prospective offeree. If something other than an offer is accepted, then no agreement or contract has been reached.

Intention to be bound: Gibson v. Manchester City Council (1979) contrasts the decision in Storer v Manchester City Council (1974).

INVITATION TO TREAT

An invitation to treat is an example of something similar to an offer, and must not be confused because an invitation to treat cannot be accepted and cannot form a contract. Leading case is Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd. Examples of invitations to treat are as follows:

1.      Advertisements, brochures, price lists and catalogues. They are all invitations to treat, and there is no remedy if price is changed without notice. Advertisements are generally an invitation to treat and not an offer (Partridge v. Crittenden).

Ø Exception: An advertisement for the sale of goods could be seen as an offer if it is written on the advertisement that if one wants to buy something from them, he can do it. Moreover, it should be written that there is an endless amount of stock to be seen as an offer (IMPOSSIBLE).

Ø Exception: Where the advertisement is unilateral, “reward” contract. If a reward is advertised for the performance of a specified act, such as supplying information, that advertisement will constitute a unilateral offer, assuming that the language is sufficiently definite to be viewed as such. (Carlill v Carbolic Smoke Ball Co.).

2.      Shop displays/Price tags in shop windows. Items displayed for sale in a shop window are generally an invitation to treat (Fisher v Bell). These are invitations for others to come into the shop and offer for the goods (Pharmaceutical v Boots).

Ø Exception: But a display will not always be an invitation to treat: (Thornton v Shoe Lane Parking).

3.      Websites. Electronic Commerce Regulations 2002 state that the customer’s order “may be the offer”. DFCR suggests that a display of goods is an offer to supply until all the stock is exhausted. Mispricing: in some case the customer “ought to have known” of the mistake and would therefore be seeking to snap it up (Chwee Kin Keong v Digilandmall.com Pte Ltd – Singapore case).

4.      Tenders. A tender is generally taken as an invitation to treat (or invitation to tender). Because the company inviting tenders from those interested in supplying the goods or services needed, may have criteria other than price that needs to be taken into account prior to awarding the contract. The offer in tenders comes from the company’s (offeree) acceptance of one of the bids presented by those interested (offeror) in supplying the goods or services requested (Spencer v Harding).

Ø Exception: An express contractual promise to accept the most competitive bid (Harvela Investments Ltd v Royal Trust Co. of Canada (CI) Ltd).

Ø Exception: A contractual obligation to consider tenders that conform to the bid conditions (Blackpool and Flyde Aero Club Ltd v Blackpool Borough Council).

5.      Auction sales. It is a point of law that the bidder is making the offer and the auctioneer accepts the offer by the fall of the hammer. Therefore, the bidder may withdraw an offer before the fall (Payne v Cave).

6.      Advert for an auction. If the auction is cancelled, there is nothing one can do (Harris v. Nickelson). One cannot accept the advert which is not an offer. Sometimes auctions are held without reserve, and this means the auctioneer will accept the highest bid/offer (Warlow v. Harrison).

SUPPLY OF INFORMATION

Supply of information is the fact of giving information on something without binding obligation from this party, even though the other party really wants it. A statement may simply be a statement of information, there is neither an offer nor an invitation to treat (Harvey v. Facey, Clifton v. Palumbo).

STATEMENT OF INTENTION

Parties sometimes communicate that they intend to do something. The communication is not intended to be binding and thus there is no offer (Harris v Nickerson).

TERMINATION OF AN OFFER

Unless and until acceptance occurs, there is no agreement and either party may withdraw from negotiations. Acceptance must occur for a binding contract to be reached. Offers terminate in many ways (revocation, rejection, expiry, or lapse) but as long as they are open, they are not binding.

1.      Lapse of time. If a time limit is placed on the length the offer will remain open, it will lapse at the end of that period. Where time is not stipulated, an offer will lapse at the end of a reasonable period of time (Ramsgate Victoria Hotel v. Montefiore, Lauring v. City of Boston).

2.      Death. Death of the offeree: If he dies the offer will immediately lapse, provided he has not already accepted. Death of the offeror: If the offeror dies and the offer was for personal services, so will the offer. If, however, is for a non-personal service, and the offeree does not know of the death, the offer still exists and is capable of acceptance (Bradbury v. Morgan).

3.      Failure to comply with a condition. If the offer was made subject to a condition being fulfilled, and it is not, the offer lapses (Financings v. Stimson). Goods must be in the same or similar condition as when the agreement was made.

4.      Rejection: There are two main ways to reject an offer: a) Outride rejection by the offeree, or b) a counter-offer, it is in itself an offer, so it needs acceptance (Hyde v Wrench, Society of Lloyd’s v Twinn). They both destroy the offer. A request for further information is not a counter-offer (Stevenson v. McLean).

5.      Revocation: An offer may be revoked, an offer which is not accepted is not binding (Payne v Cave). An offer may be expressly terminated, or the revocation may occur by implication (e.g. counter-offer: Hyde v Wrench). 

In a bilateral contract the general rule is that the offeror is free to withdraw the offer at any time before acceptance (Offord v Davies), revocation of an offer after the time of acceptance if ineffective. The offer can be open for a given period of time, the offer cannot be accepted once that period has elapsed, there is a pre-contractual promise not to revoke the offer within that period of time.

A firm-offer promise is freely revocable in English law unless supported by consideration (authority case: Routledge v Grant, example: Holwell Securities Ltd v Hughes). The English rule on firm offers is not accepted by most of the other legal systems.

The revocation must be communicated to the offeree, although not necessarily by the offeror, one cannot accept an offer that is known to be revoked (Dickinson v. Dodds).

Ø The postal rule of acceptance does not apply to revocations of offers (If a letter of acceptance is posted after a letter of revocation has been posted, but before that revocation is receives, the acceptance will be effective to form a binding contract, although it was dispatched after the revocation à timing). Byrne and Co. v Van Tienhoven and Co. If an offeree purports to accept an offer in ignorance of the purported revocation, the revocation is not good and there is a binding contract (Byrne).

Ø Special rule applicable in the case of revocations of unilateral offers made to the whole world in which the offerees are necessarily unidentified, so that actual communication of a revocation to individual offerees cannot occur (Shuey v United States). The revocation need not be authorized by the offeror, provided that the offeree ought reasonably to believe it. An offeree will have to decide whether to believe revocation information that is communicated by a third party (Dickinson v Dodds).

1.2 TYPES OF CONTRACTS

BILATERAL CONTRACTS: Contracts in which there is an outstanding obligation on either side.

UNILATERAL CONTRACTS

Contracts under which one party (the promisor) binds itself to perform a stated promise upon performance of a stated act by the promisee, but under which the promisee gives no commitment to perform the act and instead is left free to choose whether to perform or not (Carlill v Carbolic Smoke Ball).

There are two types of unilateral OFFERS:

1.      Unilateral offer (requesting performance of an act) may be made to an identified individual: Great Northern Railway Co. v Witham.

2.      The offer may be made to the public at large, or to a particular class of persons: Carlill v Carbolic Smoke Ball, offer made to the world.

Acceptance and consideration of a unilateral CONTRACT:

Ø General rule: In unilateral contracts, performance of the requested act constitutes both the acceptance and the consideration to support the offeror’s promise to pay the reward (Daulia Ltd v Four Millbank Nominees Ltd). Acceptance must be made in response to the offer, there cannot be acceptance where there is no knowledge of the offer.

Revocation:

Difficulties due to the fact that acceptance in a unilateral contract is constituted by performance of the act requested. It would be open to the offeror to revoke the offer at any time before completion of that performance, since the revocation would have occurred before the moment of acceptance.

Ø Generally accepted that it would be desirable for the power to revoke to be lost once the offeror has notice that an offeree has unequivocally embarked upon performance (Daulia Ltd v Four Millbank Nominees Ltd, Soulsbury v Soulsbury).

Ø Promissory estoppel: It is not difficult to identify both a representation that the offer would be held open long enough for performance to be completed and a reliance by the other party on that representation (Errington v Errington and Woods). Inability to revoke the promise as based on estoppel, since he (Denning LJ) referred expressly to the fact that the couple had acted on the promise. In many cases this analysis would not work as there is no pre-existing legal relationship and because, in English law he doctrine cannot currently be used to found a cause of action

Ø Acceptance upon commencement: It is argued that acceptance in a unilateral contract can occur by commencing performance of the requested act, although there is no entitlement to the reward until the consideration (full performance of the act) has been supplied. If acceptance were to be constituted by starting performance, the offence would be obliged to complete performance or face a claim of breach of contract (no unilateral contract then). Acceptance occurs, then, when the offeror has notice of the performance of the act, when the offeror has indicated that conduct without notice is envisaged as acceptance, there is acceptance.

Ø The collateral contract: Identification of two contracts in such cases:

1.      The main unilateral contract: acceptance and consideration furnished in the orthodox way of performance of the act stipulated in the offer, and under which, until complete performance of the act, no reward will be payable.

2.      Additional collateral unilateral contract: consists of an offer not to revoke the main offer once the offeree has commenced performance of the stipulated act. Breach of a collateral contract would result in remedy of damages.

Clear support in the case law for he “two contract” approach to revocation (Luxor (Eastbourne) Ltd v Cooper, Daulia v Four Millbank Nominees).

None of the above explanations is entirely satisfactory. Courts will continue to find offers of unilateral contracts to be irrevocable after performance has begun, that principle cannot be stated in al embracing terms. Motivation: to prevent revocation.

Revocation of unilateral contracts: Up to what point can such offers be revoked?

1.      Errington: Once performance has commenced.

2.      Luxor v Cooper: When complete performance has occurred.

3.      Daulia: (per incuriam) revocation possible until full performance subject to implied obligation on the offeror not to prevent performance.

Communication of revocation of a unilateral OFFER: Offers made to the whole world makes it difficult for communicating the revocation to the offeree, since the offerees will be unidentified. Shuey v United States “same notoriety be given to the revocation that was given to the offer”, same channel, same level of publicity.

The unilateral contract device: Typical unilateral contract: offer of a reward for the performance of some service (R v Clarke). Used sometimes to manipulate cases in where there is an intuitive contractual relationship but not sufficient facts:

1.      The Eurymedon

2.      Harvela Investments Ltd v Royal Trust Co. of Canada

1.3 ACCEPTANCE

What turns an offer, made with the intention to be bound, into an agreement.

Requirements for a valid acceptance:

ACCEPTANCE IN RESPONSE TO THE OFFER: To constitute acceptance, the offeree’s unequivocal expression of intention and assent must be made in response to, and must exactly match, the terms of the offer. This concerns the fact of acceptance. Knowledge is required, it is not sufficient that the wishes of the parties simply coincide through accident (R v Clarke, Williams v Carwardine, Gibbons v Proctor).

Ø If two parties both make offers to each other more or less simultaneously (cross-offers), even if they are identical terms, there is no contract because there is no acceptance (Tinn v Hoffman).

Ø Any small act of performance can be taken or regarded as acceptance by conduct leading to an agreement.

COMMUNICATION OF ACCEPTANCE: The matching acceptance MUST be communicated to the offeror in order to be effective (in the sense of being actually received).

Exceptions:

Implied waiver of the communication requirement in the case of unilateral contracts:

In a unilateral contract performance of the act constitutes the acceptance and there is no need to communicate the fact that you are attempting to perform that act (Carlill v Carbolic Smoke Ball). In some unilateral contracts, though, communication may be requested or required (reward for supplying information).

In bilateral contracts, the general rule is that the offeror cannot waive the need for communication and stipulate that silence will constitute acceptance: an offer cannot be accepted by silence (Felthouse v Bindley, Brogden v Metropolitan Railway). However, in some contexts silence (or conduct) can be sufficient:

1.      If there has been a course of dealing whereby the offeree has taken the benefit of services offered, the offeree’s silence (or conduct) can be taken as acceptance.

2.      If it is the offeree who is attempting to hold the offeror to the offeror’s stipulation of silence, then the offeree’s silence will constitute acceptance. Estoppel: in English law is not permitted to be used as a cause of action. It must be the case that the estoppel would operate to prevent the defendant (offeror) from raising lack of communication of the acceptance as a defence to the offeree’s claim for payment.

3.      If it were the offeree, rather than the offeror, who initiated the proposal that the offeree’s silence would constitute acceptance: “offer to be accepted if he doesn’t indicate to the contrary” (Re Selectmove Ltd).

4.      If a party initiates a proposal and receives that proposal, but then does not respond for a lengthy period, this may be treated as acceptance in some circumstances.

Acceptance by post, where the parties are necessarily not in each other’s presence:

General rule: Words of acceptance must not only be spoken, but must also be communicated to the offeror.

Two types of communication: a) Instantaneous communication (treated as if they were in each other’s presence); b) and non-instantaneous communication (special rules apply).

Acceptance and the risk of the post: letters may either be delayed or lost. Who should bear this risk of loss or delay? Adams v Lindsell: where acceptance is communicated by post, the contract is formed as soon as the letter of acceptance is sent/posted without need for it to reach the offeror (Despatch Rule). Even if the postal acceptance never arrives and the offeror is ignorant of the fact that an acceptance was posted.

Ø Justifications of the postal rule:

·        Without it, offerees would never know whether a contract had been formed. That would be commercially inconvenient.

·        It prevents offerees from speculating by posting an acceptance and then (if the market changes) withdrawing it by speedier means.

·        The offeror, unlike the offeree, will not be prejudiced by delays or loss in the post, since the offeror is expecting a response and will check.

·        If the offeror has indicated that use of the post is permissible, then it is the offeror who should bear the risks of the system.

Ø Criticisms of the postal rule:

·        Confusion in terms of acceptance and mistakes possible.

·        The operation of such rule is arbitrary, it is not prudent to use it (Bramwell LJ in Household Fire and Carriage Accident Insurance Co. Ltd v Grant.

·        Difficulties: Henthorn v Fraser, Holwell Securities Ltd v Hughes.

Avoiding the postal rule:

Ø Holwell Securities Ltd v Hughes: The acceptance had to be noticed in writing to the defendant at a given address within six months. The plaintiff posted a letter of acceptance that failed to arrive. The option had not been validly exercised, so there was no contract (other options were available).

Ø It is possible to oust the operation of the postal rule of acceptance by using express words.

Retraction of a postal acceptance:

Ø Countess of Dunmore v Alexander: Scottish case of questionable authority.

Ø Two opposite positions:

1.      It is not possible to retract a postal acceptance.

2.      It is possible to retract a postal acceptance where the offeror is not disadvantaged. So that as long as a postal acceptance is retracted before any postal acceptance arrives, the offeror suffers no disadvantage. The offeror can rely on any other methods if he wishes. Hudson (1966).

Instantaneous methods of communication and non-instantaneous messages:

Post: Non-instantaneous, Telephone: Instantaneous (receipt rule), Fax and Telex: Instantaneous.

General principle of instantaneous communication: If the offeree has done all that might be reasonably expected to do to get his message through, acceptance should take effect when the offeree might reasonably expect it to be communicated to the offeror. It is the offeror’s fault if he does not receive the message of acceptance through an instantaneous method of communication.

Principles in the judgment of Denning LJ (Entores Ltd v Miles Far East Corporation) as they apply to communication of acceptance by an instantaneous method:

Ø The onus is on the communicator (offeree) to get his message through.

Ø If the line goes dead and the communicator know this, then the offeree must repeat the message and ensure that it is received.

Ø If the recipient (offeror) knows that a message is being sent and that it has not been received, but the offeree believes the message has got through, then the offeror must ask for the message to be repeated. If he does not do so, the offeror will not be able to deny that the acceptance was effectively received.

Ø If no one is at fault (i.e. the offeree believes the message got through and the offeror does not know that any message was being sent), then the acceptance will not have been communicated and there will be no contract.

NOTE:

1. Communication to a business during office hours: the offeree could reasonably expect the offeror to be monitoring the fax machine and would expect communication to occur when the message was received by the machine, there is actual communication (The Brinmes, Brinkinbon Ltd v Stahag Stahl.

2. Communication to a business outside office hours: Receipt of a contractual notice should be deemed to occur at the start of the next working day if it was in fact received and stored outside normal working hours. The “ordinary business hours” meaning varies according to the knowledge of the parties in any particular case. In the case of messages left on telephone answering machines, the message will not be communicated until actually played back. Another view: as postal rule acceptance, where the machine message is the point of communication. The Brinmes.

3. Telegraph acceptance rule: Where it is reasonable to use the telegraph, acceptance takes place when the acceptance is handed to the person authorised to take telegrams (Bruner v Moore).

4. Telexes and telephones: Postal acceptance rule does not apply because they are instantaneous methods of communication. Acceptance to be effective must be communicated (Brinkinbon Ltd v Stahag Stahl, Apple Corps Limited v Apple Computer Inc.

Electronic means of communicating:

General contractual principles will be applied to issues raised by electronic correspondence.

1.      Email. Email contract is viewed generally to follow the receipt rule. Responsibility for getting the message through to its destination should lie with the communicator. Receipt: refers to notice transmitted by electronic means being received “when it can be accessed by the addressee” (when it is available to read). J Pereira Fernandes SA v Mehta, Allianz Insurance Co-Egypt v Aigaion Insurance Co SA.

2.      Website or Internet contracting. Internet contracting is instantaneous, so the receipt rule should apply. Card details are required to be accepted the order, a confirmation email is sent and there is a binding contract when the items are dispatched. Receipt of the order: will be deemed to be received when the parties to whom they are addressed are able to access them. The receipt rule does not apply to internet contracting.

FAILURE TO FOLLOW THE PRESCRIBED METHOD OF ACCEPTANCE: If an offeror prescribes that acceptance is made in a certain way (e.g. by messenger), the offeree must accept using the prescribed method for a binding contract to be created because the offeror clearly states that he will be bound if the prescribed method is followed (Manchester Diocesan Council for Education v Commercial & General Investments Ltd).

1.      Explicit words are required in order for a stipulated method to be considered mandatory.

2.      When the offeror has not made it very clear that the stipulated method is mandatory and that no other will suffice, the method is permissive under the following principles:

Ø Any equally efficacious method of acceptance will be valid if it fulfils the purpose in prescribing the method (e.g. quick response, fax).

Ø If the method was prescribed in order to benefit the offeree, the offeree can waive a stipulation for its benefit and use a different method as long as this method does not disadvantage the offeror (Yates Building Co. Ltd v Pulleyn & Sons (York) Ltd*).

How can a unilateral contract be accepted?

In which of the following way's May an offeree accept a unilateral contract?

Which of the following types of contracts would be a unilateral contract?

What would be considered a unilateral contract?