Business Law Presentation on Offer and Acceptance

Business Law Project

Offer and Acceptance

By Kelvin Koh Tong Weng (1.1)Tan Jing Ren (1.2)Lee Yan Gen (1.3)

Huang Zhongming (2.1)Philip Tai Khan Siong (2.2)Joash Goh Zhi Rong (2.3)

Letter of Offer sent from “A” to “H” – Terms: RECEIVES Letter of Acceptance by 11am the next day

“H” posted Letter of Acceptance

“A” sold memorabilia to someone else

“A” wrote Letter of Revocation at 5pm

“A” receives Letter of Acceptance at 9am

“H” receives Letter of Revocation at 830am

Monday Tuesday

Qn 1.1Timeline of Events

Qn 1.1 (a)

Advise Hannah on her legal rights, if any.

Monday Tuesday

Issues (a)1. Which came first?

Acceptance or Revocation?

2. Does Postal Acceptance Rule Apply?

Rules Applied

1. Postal Acceptance Rule: Acceptance by post takes place when the Letter of Acceptance is posted- Adams v Lindsell (1818)

2. Exception to PAR: The PAR cannot apply when there are express terms in the offer specifying that acceptance must reach the offeror – Holwell Securities Ltd v Hughes (1974)

3. Revocation: Revocation occurs when the offeree receives the communication - Byrne v Van Tienhoven (1880)

Analysis and Application

Letter of Offer sent from “A” to “H” – Terms: “go ahead with sale at $100,000 if she RECEIVES Letter of Acceptance by 11am the next day”

Intention to EXCLUDE Postal Acceptance Rule- Letter of Acceptance only valid upon RECEIPT

Applying the Exception to PAR rule: The PAR cannot apply when there are express terms in the offer specifying that acceptance must reach the offeror – Holwell Securities Ltd v Hughes (1974)

Monday Tuesday

Qn 1.1Timeline of Events

Letter of Offer sent from “A” to “H” – Terms: “go ahead with sale at $100,000 if she RECEIVES Letter of Acceptance by 11am the next day”

Intention to EXCLUDE Postal Acceptance Rule- Letter of Acceptance only valid upon RECEIPT

*Receipt of: LOR – 830am LOA – 900am

Offer REVOKED before accepted

Conclusion

The letter of revocation came into effect BEFORE the letter of acceptance.

Thus, Hannah would not be in a strong legal position to sue Alyson for breach of contract.

Qn 1.1 (b)

Would it make any difference to your answer if the letter from Alyson to Hannah withdrawing the offer had been received by the latter at 9.30am instead of 8.30am?

“H” receives Letter of Revocation

at 930am

Monday Tuesday

Issues (b)1. What if the Letter

of Revocation is received 1 hour later?

Rules Applied

2. Exception to PAR: The PAR cannot apply when there are express terms in the offer specifying that acceptance must reach the offeror – Holwell Securities Ltd v Hughes (1974)

3. Revocation: Revocation occurs when the offeree receives the communication - Byrne v Van Tienhoven (1880)

Contract comes into existence when “A” received Letter of Acceptance from “H” because….

*Receipt of: LOA – 900am(in effect) LOR – 930am (too late)

Offer was ACCEPTED before being revoked

Conclusion (b)

The situation would be the exact opposite if the letter of revocation was received at 9.30am instead of 8.30am.

In that situation, the contract would have come into existence at 9am, and Hannah would be in a legal position to sue Alyson for breach of contract

Letter of Offer sent from “Er” to “K” – Terms: $50,000 contract. Reply by post

“Ed” offered “Er” contract for $30,000

“Er” counter offered a contract of $40,000 that was accepted by “Ed” and in place

c. “K” posted Letter of Acceptance at 11am

Qn 1.2 Timeline of Events

a. Er” faxed to “K” to tell him offer of 1 Nov withdrawn

b. Fax received by “K” at 10.45am. Read at 5pm

1Nov 4 Nov 5 Nov 6 Nov

Qn 1.2 (a)

Advise Erwin, Kevin and Edgar of their legal positions.

Issues (a) 1. “K” letter of acceptance or “Er” letter of revocation occurred first?

2. Was contract between “Er” and “Ed” valid?

Rules Applied – “Er” and “K”

2. Revocation received but NOT read: Revocation by telex/fax occurs when the communication was received on the recipient’s machine. There is no need to be actually read by any person in the organization. – The Brimnes (1975)

Analysis and Application- “Er” and “K”

Letter of Acceptance sent by POST from “K” to “Er” on 6th Nov @ 11am - Applying “Postal Acceptance Rule”, acceptance happens right after letter is posted

However, Letter of Revocation received by “K” at 1045am on fax machine

– This precedes the sending out of Letter of Acceptance. Applying the rule from the case “The Brimnes”, it doesn’t matter whether it is read or not.

a. Er” faxed to “K” to tell him offer of 1 Nov withdrawn (revoke)

b. Revocation Fax received by “K” at 10.45am. Read at 5pm

However, Letter of Revocation received by “K” at 1045am on fax machine

– This precedes the sending out of Letter of Acceptance. Applying the rule, it doesn’t matter whether it is read or not.

Thus, no contract for “K” to accept since Letter of Revocation is in effect

Rules Applied – “Er” and “Ed”

1. Counter Offer: Acts as a rejection of 1st offer and stands as a new offer to be accepted by offeror- Hyde v Wrench (1840)

Analysis and Application- “Er” and “Ed”

• $30,000 offer from “Ed” to “Er”

Counter Offer

• $40,000 counter offer from “Er” to “Ed”

Acceptance

• “Ed” accepts terms counter offered by “Er”

Thus, the contract between Erwin and Edgar valid and is binding

Conclusion (a)

For the attempt at establishing a contract between Erwin and Kevin, since the letter of revocation from Erwin to Kevin comes into effect before the letter of acceptance from Kevin to Erwin, the contract is void, and the two parties are not contractually bound.

The contract between Erwin and Edgar is binding from the information given in the case.

Qn 1.2 (b)

What would your answer be if 6 November was a non‐working weekend?

1. Will the case be altered if 6 Nov is a non-working weekend?

Issues (b)

Rules Applied

1. Communication outside working hours not considered instantaneous: - Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels GmbH (1983)2. Apply working hours to give business efficacy to contract:- The Moorcock (1889)

Analysis and Application- Non-Working Hours

Applying “Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels GmbH (1983)”

If it was a non-working weekend, communication would not be considered instantaneous

Apply working hours to GIVE business efficacy to the contract – The Moorcock (1889)

Revocation letter deemed received at start of following Monday instead of weekend

Therefore, when we apply the Postal Acceptance Rule, the Letter of Acceptance comes into effect on 6 Nov before the revocation was communicated and takes effect

Conclusion (b)

Yes, the conclusion of the case will be different. If 6 November was a non-working weekend, the letter of revocation would be deemed to have been received after the letter of acceptance had been posted out, and Erwin and Kevin would be contractually bound.

Qn 1.2 (c)

What is your opinion if Erwin had withdrawn the offer by e‐mail instead, which was sent at 10.45am but received at 11.15am?

b. “K” posted Letter of Acceptance at 11am

a. “Er” faxed to “K” to tell him offer of 1 Nov withdrawn

c. Email sent by “Er” at 1045am and received by “K” at 1115am

Issues (c)

1. Will the case be altered if revocation is sent by email at 1045am but received at 1115am?

Rules Applied – “Er” and “K”

2. Revocation received but NOT read: Revocation by telex/fax occurs when the communication was received on the recipient’s machine. There is no need to be actually read by any person in the organization. – The Brimnes (1975)

However, Letter of Revocation received by “K” at 1115am on by email

Applying the rule from the case “The Brimnes”

– This is after the sending out of Letter of Acceptance. Letter of Revocation does not take effect but Letter of Acceptance does

Thus, “Er” and “K would be contractually bound

b. “K” posted Letter of Acceptance at 11am

a. “Er” faxed to “K” to tell him offer of 1 Nov withdrawn

c. Email sent by “Er” at 1045am and received by “K” at 1115am

Issues (c)

1. Will the case be altered if revocation is sent by email at 1045am but received at 1115am?

Conclusion (c)

If the notice of revocation had been sent by email and had been received at 11.15am, the letter of acceptance would have been posted before the notice of revocation was received, and Erwin and Kevin would be contractually bound.

a. Palin makes Nicki an offer

Monday

b. No reply by Thurs means no

Wednesday

Palin makes Glenda same offer, she accepts

Thursday

Nicki calls Palin up, but bag is gone

Qn 1.3 (a)

Does Nicki have any right of action for breach of contract against Palin?

Monday Wednesday Thursday

Issues (a)1. Is Palin obliged to keep offer open until Thurs?

b. No reply by Thurs means No

Rules Applied

1. Offeror’s promise unenforceable– Routledge v Grant (1828)*exception to be discussed later

2. Revocation needs to be communicated- Byrne v Van Tienhoven (1880)

Analysis and Application- “Palin” and “Nicki”

Routledge v Grant

- Palin is not obliged

Palin may still retract the offer whenever she wishes to do so

However, Is the offer still open?

Byrne v Van Tienhoven

- Effective revocation needs to be properly communicated

Palin did NOT communicate any revocation notice

Therefore

Palin is contractually bound

Conclusion (a)

- Non-communication of revocation- Offer still in existence

Nicki would be in a legal position to sue Palin for breach of contract

Qn 1.3 (b)

What if Nicki told Palin instead that if she did not reply by Thursday, that means that she would be able and willing to buy the bag?

Issues (b)

2. Is silence a valid form of acceptance?

b. No reply by Thurs means Yes

RulesApplied

1. Silence generally does not constitute a mode of acceptance

Unless - offeree expressly states his wish for silence to be construed as acceptance

- Re Selectmove Ltd (1995)

Re Selectmove Ltd

If Nicki (offeree) indicates silence as willingness to buy…

Nicki will be requesting for acceptance by silence

Acceptance by silence is valid, since offeree made this request

However, from Byrne v Van Tienhoven

- Palin would still need to communicate revocation for it to be effective

Facts of the case unchanged, hence

Palin is still liable for breach of contract

Conclusion (b)

- Nicki’s silence could be construed as acceptance

- However, facts of the case remain unchanged

Nicki would still be in a legal position to sue Palin.

Qn 1.3 (c)

How can Nicki ensure that Palin will keep the offer open only to her up till the end of Thursday?

Issues (c)3. How may Nicki bind Palin to keeping offer open until Thurs?

b. No reply by Thurs means No

Rules Applied

1. Offeror’s promise unenforceable

Unless- Separate contract supported by consideration is in effect (option)– Mountford v Scott (1975)

Mountford v Scott

- If Nicki wanted the offer to be open only to her until Thursday, she would have had to provide consideration in return for Palin’s promise to keep the offer open exclusively to her until Thursday.

- Such consideration may be furnished by ‘buying an option’, e.g. making a token payment

Conclusion (c)

If Nicki provided some form of consideration e.g. through buying a contract, Palin would be contractually obliged to keep offer open until Thurs

“For the purposes of offers, the law distinguishes shop displays from certain advertisements. It is therefore essential that those who wish to contract over the Internet understand this difference.” (per Clive Gringras, “The Laws of the Internet”).

What in your view is this “difference” which the author is referring to and how would knowing such information impact upon the way owners of websites create their web advertisements?

You may wish to consider the factual scenario below to assist you in your answer: A web site that offers advertising space to vendors/sellers runs a promotion. The advertisement reads, “If you visit our website four times this month and do not buy anything from our vendors, we will credit S$10 to your bank account”. What is the effect of section 14 of the Electronic Transactions Act (2010) and does it change the current common law rules distinguishing ITT and offer in any way?

Qn 2.1

“For the purposes of offers, the law distinguishes shop displays from certain advertisements. It is therefore essential that those who wish to contract over the Internet understand this difference.” (per Clive Gringras, “The Laws of the Internet”).

What in your view is this “difference” which the author is referring to and how would knowing such information impact upon the way owners of websites create their web advertisements?

You may wish to consider the factual scenario below to assist you in your answer: A web site that offers advertising space to vendors/sellers runs a promotion. The advertisement reads, “If you visit our website four times this month and do not buy anything from our vendors, we will credit S$10 to your bank account”. What is the effect of section 14 of the Electronic Transactions Act (2010) and does it change the current common law rules distinguishing ITT and offer in any way?

Qn 2.1

What is the “difference” between shop displays from certain advertisements?

Invitation to Treat (ITT)

• Willingness of 1 party to enter into negotiations with the other

• No intention to be bound

• Clear terms of exchange• Intention to be bound• Binds offeror upon

acceptance

What is the “difference” between shop displays from certain advertisements?

Shop Display and most advertisements:

E.g. Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953)

Goods on shelf (ITT) Brought to counter (offer to buy) Shop accepts $ and offer

Certain Advertisements:

E.g. Carlill v Carbolic Smoke Ball Company (1893)

Used smoke ball 3 times daily according to printed instructions clear and definitive terms

What is the relevance and impact of these differences on web advertisements?

Difference, Relevance and Impact

Normal Advertising v.s Web Advertisements

1. Either traditional advertising or display of goods in shop

Traditional advertising, display of goods and act of purchase can be combined in 1 web page

Difference between ITT, Offer, Acceptance not as distinct

Impact: Risk of buyer construing web advertisements as Offer Web merchants may inadvertently be bounded

Therefore, Web merchants should be careful with their use of language

Email confirmation

Immediate and Automated Acceptance

What is the relevance of this?

Difference, Relevance and Impact

Shop Setting v.s Web Advertisements2. Shop representative at counter can reject buyer’s offer

No “checkpoint”. No appropriate qualifiers

Acceptance is usually by automated email confirmation right after purchase

Impact: Risk of buyer construing web advertisements as Offer to sell unlimited quantity of goods when web merchants only have limited stock

Therefore, web merchants would need to specify qualifying conditions and “escape clauses”

The advertisement reads, “If you visit our website four times this month and do not buy anything from our vendors, we will credit S$10 to your bank account”.

No instructions (Ambiguous)

Invitation to Treat

Section 14 of the Electronic Transactions Act applies the common law position to the internet, establishing that internet advertisements and interactive online purchase systems are considered invitations to treat unless the language specifically indicates the intention of the party making the proposal to be bound once the proposal is accepted.

The purchaser would thus be the offeror, and the web merchant would be the offeree.

Affirms common law

Using the services of a Search Engine (Google or Yahoo!) or open/public news portal (e.g. www.channelnewsasia.com) –

Who are the parties involved in the process and is there Offer and Acceptance?

If there is, what makes it appear (fact) and what legal reasoning (law) can you give that the use of such websites is contractual in nature or otherwise? Explain.

Qn 2.2

Users Web Developers

Who are the parties involved?

Issues

Does an offer exist?

What constitutes acceptance?

What kind of contract?

What constitutes an offer?

Terms of exchange

Willingness to be boundBinds offeror upon acceptance

Rules Applied:

• Willingness of 1 party to enter into negotiations with the other

• No intention to be bound

• Clear terms of exchange

• Intention to be bound

• Binds offeror upon acceptance

To use: • You must first agree to the Terms.

• You may not use the Services if you do not accept the Terms.

• You can accept the terms by actually using the Services.

• In this case, you understand and agree that Google will treat your use of the Services as acceptance of the Terms from that point onwards.

• The terms of service form a legally binding agreement between the user and Google.

The availability of usage of Search Engines and News Portals are Offers rather than ITTs due to certainty of terms.

What constitutes an offer?

Terms of exchange

Willingness to be boundBinds offeror upon acceptance

Acceptance

Must be final and unqualified

May take place through written or spoken words or actions

Acceptance must be communicated to the offeror

To use: • You must first agree to the Terms.

• You may not use the Services if you do not accept the Terms.

• You can accept the terms by actually using the Services. (acceptance by conduct)

• In this case, you understand and agree that Google will treat your use of the Services as acceptance of the Terms from that point onwards.

• The terms of service form a legally binding agreement between the user and Google.

Rules Applied:

Unilateral Contracts

Bilateral Contracts

Offeror makes a promise in return for an act to be performed by Offeree

Offeror makes a promise in return for a promise on the part of the Offeree

Which is it?

Unilateral Contract

Bilateral Contract

Offeror makes a promise in return for an act to be performed by Offeree

Offeror makes a promise in return for a promise on the part of the Offeree

It is an exchange of the service providers’ promise to provide the said services in exchange for the user’s promise to abide by the terms and conditions outlined in the terms of service Both Offeree and Offeror enforces contract

Conclusion

All elements of contractual offer in place:• In certain terms • Mode of acceptance is clearly

specified• Consideration in place• Intention to create legal relations is

clearly evident

Thus, a user would be obliged to abide by his contractual obligations laid out in the terms of service.

Conclusion

Contract concluded is a bilateral contract, a promise in return for a promise

break.

a) What is your understanding of the “objective test” to contract law formation issues?

b) What is its relevance and why is it necessary to have such a test?

c) What is the role and function of the test?

d) Finally, in your opinion, is the “subjective test” more or less desirable a test? Use examples and give reasons for your answer.

Qn 2.3

a) What is your understanding of the “objective test” to contract law formation issues?

a) What is it?

Objective Test

The “objective test” is a standard…what a reasonable man would conclude from observation of the action the parties …whether agreement has taken place….

Qn 2.3

b) What is its relevance and why is it necessary to have such a test?

b) What is the relevance and necessity of the objective test?

Offer• Objective test takes into account actions

rather than intentions• Intention is considered irrelevant• Reasonable man perceives offer has been

made, then legal intent is considered• Establish consensus ad idem• Clarity for agreement

Qn 2.3

Smith v Hughes (1871)• Facts: Smith offered to sell oats to

Hughes, showing him a sample of green oats. Hughes accepted the offer. However, upon receiving the first batch of oats, Hughes claimed that he intended to buy old oats and not green oats.

• Hughes refused to pay for the rest of the green oats.

• Smith sued for breach of contract

Qn 2.3

Smith v Hughes (1871)• Defendant’s intention was to buy old oats• Because of mistake about the oats not

liable• Objective test used by court:• Intentions were ruled irrelevant• Conduct and words of parties in

forming the contract was considered instead

• Court ruled in favour of Smith• Establish clarity and a standard

Qn 2.3

c) What is the role and function of the test?

Objective Test• Clarity through actions• For courts to recognize intentions of

parties through tangible means• Set determinable precedence• Certainty for contract law

• Credibility of legal system • stable framework for business

Qn 2.3

d) Is the “subjective test” more or less desirable a test?

Qn 2.3

Objective Test Subjective TestConclusion by reasonable person observing actions taken by parties involved

Conclusion by intention and own judgment

Qn 2.3

Hyde v Wrench (1840)• Parties made multiple offers and counter

offers

Subjective test Objective test• Both had intention to

conclude contract• But did the intentions meet?• Unable to determine

consensus ad idem

• Based on actions of parties• Examine documents

exchanged• No consensus ad idem

occurred

Qn 2.3

Conclusion• Hyde v Wrench (1840)• Subjective test is less desirable compared

with objective test

• Less clarity• No consideration of tangible evidence

Qn 2.3

questions?

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