#7423 - Offer And Acceptance - Contract Law

Offer and acceptance

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When is an offer not available for acceptance?

• When the offer has been withdrawn by the offerer.

  • You must communicate the withdrawal to the offeree.

• When there is no binding option to keep an offer open for acceptance.

  • In the common law, an offer can only be withdrawn if there has not been a promise to hold an offer open and this offer has due consideration.

  • The offer is irrevocable for the option holder. This means that the option grantor has a conditional contract.

• If the offer available for acceptance has lapsed.

  • At the end of the option period, the other party can no longer accept. The offeror is free to withdraw.

  • The judge may decide what a reasonable time is depending on the circumstance.

  • Also the offeror might have die.

• When the person wanting to accept the contract has failed to fulfil an implied or expressed condition.

  • For example, subject to finance, is a condition that must be fulfilled before acceptance can occur. If this does not occur, the offeror can withdraw.

• When there is a rejection of the old offer and a counter offer is made.

  • A rejected offer can be revived.

  • However a counter offer kills the old offer. The offer is no longer available for acceptance.

• Unilateral contract.

  • There are questions of whether an offer can be withdrawn when the act had been partly performed. Offeror is subject to an implied obligation not to revoke an offer after performance has started.

  • Usually a contract becomes irrevocable in this instance.

  • However this was not the case in Mobil Oil Australia Ltd v Welcome Int Pty Ltd.

What is acceptance?

• An unqualified assent to the terms of the offer.

  • Subjective approach. No contract is formed unless the parties have real consensus.

  • Objective approach. Disregards the offeree’s state of mind. Looks at external manifestations of consent.

• Consciousness of the offer.

  • In bilateral contracts this is formed verbally or in writing. It is clear that the offeree deliberately accepts the offer.

If an offeree performs an act requested by an offeror without intending to accept the offer, has a contract been formed?

• The answer depends on an objective or a subjective approach.

• In The Crown v Clarke a subjective approach was applied. If the person is not acting on the faith of the offer there is no unilateral contract.

• An objective approach looks at whether a reasonable person would believe that a person was accepting an offer by their actions.

Cases

Revocation of an offer when there is a purchased option

Page 50

Goldsbrough Mort and Co v Quinn (1910)

Facts:

• Quinn offered Mort a written and signed contract transferring his lands to them for a price.

• Mort paid 5 shillings to keep the offer open for a week.

• Before Mort had a chance to accept, Quinn withdrew the offer, saying that it was a mistake.

• Mort had accepted the offer in the week in which the offer was available.

Remedy sought:

• Mort wants to get damages.

Prior proceedings:

• Mort lost at the Supreme Court of NSW.

• Mort is appealing to the High Court.

Legal issue:

• Can a person revoke an offer before the other party accepts the offer if the agreement states that the offer will not be withdrawn for one week?

Outcome:

• Appeal allowed.

• Mort won and was given specific performance.

Legal reasoning:

• Griffith CJ reasoned that there was a contract of the sale of the property, conditional upon the option being exercised within the specified period. Quinn sold Mort time to make a decision about whether to accept the offer. He treated the agreement as a conditional sale which was enforceable by specific performance once the condition was satisfied.

• O’Connor J treated the option and the contract to sell the land as two different contracts. The original contract gives Mort the entitlement to have the full week to decide whether to accept the offer. Quinn broke this contract by revoking and prevented Mort from accepting the second contract. A court of equity would disregard the withdrawal and treat the offer as if it had been accepted. During that week Quinn could not legally withdraw from the contract.

• Isaacs J reasoned that the option was a preliminary contract to hold open an offer to sell the property. The exercise of the option gave rise to a separate contract of sale. He believed damages should be awarded because specific performance of the primary agreement is inappropriate and impossible.

Ratio decidendi:

• An offer cannot be revoked if the offeree has provided consideration for an option. The offeree is entitled to the full amount of time given to them to decide whether to accept the offer.

Can an offer be revoked before it is accepted in a unilateral contract?

Page 53

Mobil Oil Australia v Wellcome International (1998)

Facts:

• Mobil introduced an incentive scheme, the Circle of Excellence Scheme, to improve franchise performance.

• The franchises had to achieve 90% improvement in performance or better for six years to get a free nine year renewal of their franchise.

• After 4 years, Mobil abandoned the scheme and the franchises were no longer judged.

Remedy sought:

• 154 franchises sued Mobil. 5 cases were selected to be trialled.

• Wellcome wants its 9 year franchise renewal or damages.

Prior proceedings:

• Wellcome won a prior case in the Federal Court under Wilcox J. All those franchise that had achieved 90% for the past four years should be treated as if they had achieved the same in the remaining years.

• Mobil is appealing to the Full Court of the Federal Court.

Arguments:

• Wellcome argued that they were induced by a videotape, regional meetings, a brochure with a tear off slip to confirm participation and yearly judging. Mobil had misleading conduct.

• Mobil argued that their representative said that “we have work to do” which showed thea the scheme was at the developmental stage. The offer was totally left to the discretion of the franchises. The scheme was in both party’s favour and the franchises suffered no detriment. There was no consideration. Acceptance can only happen at the end of the 6 years and Mobil is free to revoke. Mobil did not have the serious intention to contract.

Legal issues:

• Can an offer in a unilateral contract be revoked if the other party has already begun performance?

• Where the terms in the offer by Mobil certain?

Outcome:

• Mobil did not make an offer to the franchises. Wellcome lost.

Legal reasoning:

• Lockhardt, Lindgren and Tamberlin JJ reasoned that Mobil did not make an offer. Mr Stumbles, the representative, made it clear that the scheme was at the developmental stage. Therefore there was no offer. The commitment to “find a way” was too vague and uncertain to create a contractual obligation.

• In some unilateral cases a person will be prevented from revoking an offer. Revocation in breach of a contract would be effective. An estoppel may arise where the offeree has acted to their detriment on an assumption that the offer will not be revoked. However there is no universal principle that the offeror may not revoke once the offeree embarks on performance of the act of acceptance.

• If there is no contract and no estoppel, the offeror can revoke the offer.

• The scheme was a benefit to both parties and the franchises had no detriment when the offer was revoked. There is no basis for an implied contract not to revoke the offer.

Ratio decidendi:

• The offeror will only be prevented from revoking an offer before acceptance if there is an implied contract or an estoppel. An estoppel arises when a revoked offer causes the offeree detriment.

In a unilateral contract, does acceptance have to be made in response to the offer?
(It is obvious in a bilateral contract. In this case the subjective approach is used)

Page 62

The Crown v Clarke (1927)

Facts:

• The Crown offered 1000 pounds to anyone who had information that would lead to the arrest and conviction of a person who murdered two police officers.

• Clarke had been arrested for one of the murders.

• Clarke saw the reward notice and gave evidence that put the murderer in prison.

• Clarke was refused the reward.

• In the trial, he claimed that he gave evidence to clear his name and not with the intention of the reward.

Remedy sought:

• Clarke wants the 1000 pound reward.

Arguments:

• Clarke argued that the Crown was under a contractual agreement to pay him the reward. The unilateral contract had been completed.

• The Crown argued that Clarke failed to accept the offer because there was no consensus of minds or wills (ad idem) between the parties.

Legal issue:

• Does a contract exist if the acceptance of an offer is not in response to the offer but another factor?

Outcome:

• Clarke lost.

Legal reasoning:

• Isaacs ACJ reasoned that acceptance is essential to contractual obligation because without it there is no agreement and then there is no contract. Clarke never intended to accept the offer in the proclamation.

• Higgins J reasoned that Clarke’s admission that he had not acted in reliance of the offer prevented the presumption that he had acted upon reliance.

• Starke J reasoned that in a unilateral contract, subjective intention can be taken into account. Whereas in a bilateral contract a person’s contractual intentions are judged from their outward expressions.

Ratio decidendi:

• In a unilateral contract a person will not be shown to accept a contract if the evidence shows the offeree was not acting on the faith of the offer.

• A subjective construction may be used to establish whether there is acceptance in a unilateral contract and not a bilateral contract.

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