Offer

The nature of an offer:- An offer is an expression of willingness to enter into a contract on

specified terms

How to determine whether an offer was made:

 Must give offeree the choice between acceptance and rejection
 Reasonable Persons Test (INTENTION)
o Would it appear to a reasonable person in the position of the offeree that an
offer was intended, and that a binding agreement would be made upon
acceptance
o Does not matter whether the offeror actually intended to make an offer (the
court will determine this intention objectively using reasonable person)

Always use this case as authority for an offer:

Carlill v Carbolic Smoke Ball Co:
 Facts:
o D manufactured and sold a device, which prevented influenza. Placed an ad
in various newspapers that 100 pounds would be made to anyone if they got
influenze and used the product properly
o Said they had deposited 1000 pounds in bank, showing sincerity in the matter
o Carlill used smoke ball. Used the product and got influenza
 Legal Arugments
o Carlill said he met all requirements
o Defendant made 5 arguments:
 No promise and the ad was mere puff
 No offer was made to a particular person
 Plaintiff had not notified D of acceptance of any offer
 Didn’t stipulate a period in which the disease had to be contracted
 P had no consideration to D promise
o First instance (Trial judge) held:
 Ruled in favour of Carlill, said contract had been formed
o CoA held:
 Ad was not a puff, by them saying they had deposited 1000 pounds in
the bank showed that this was a promise they intended to keep,
company should be bound by it
 Offer was made to whole world and would have to pay up any person
who completed the requirements
 Although acceptance of offer must normally be notified to the offeror,
the offeror may dispense with that notification. An offer that calls for
the performance of particular conditions may be accepted by
performance of those conditions
 Use of smoke ball constituted both a benefit to the D and a detriment
to the P, either of would have been enough to constitute
consideration for the promise
 Unilateral Contract
Unilateral Contracts
The offeree accepts his or her offer by performing their side of the bargain -> this
performance is the consideration
 E.g. in Carlill, acceptance of this unilateral contract was when P agreed to use the
device according to the instructions put forth, and then contracted influenza
 Woollen Mills Pty Ltd v Commonwealth
o Facts:
 1946 the Commonwealth announced in a series of letters to
manufacturers, that it would pay a subsidiary on all wool purchased
for domestic use by AUS manufacturers (Woollen Mill – AWMs)
 AWM purchased large quantities of wool over the next 2 years
 In June 1948, The Cth announced the discontinuance of the scheme
 Cth said AWM had too much wool and ordered them to repay the
subsidiary which had been paid to them (above subsidiary limit) –
AWM repaid the amount, and then later sued for that repayment
o Arguments:
 AWM claimed that the announcements made by the Cth constituted
an offer to pay the subsidy in return for the purchase of wool
 AWM claimed that each purchases of wool constituted both
acceptance of that offer, as well as consideration for that promise to
pay the subsidy
o High Court held:
 For unilateral contracts to arise, the promise must be made in return
for the doing of the act- relation of quid pro quo – this for that –
between the offerees act and the offerors promise
 3 ways of stating this requirement:
o Whether the offeror has expressly or impliedly
requested the doing of the act by the offeree
o Whether the offeror has stated the price, which the
offeree must pay for the promise
o Whether the offer was made in order to induce the
doing of the act
 AWM failed to establish this relationship of quid pro quo
between the Cth promise and their own acts – AWM also
failed to establish that, viewed objectively, that the offer was
intended to give rise to contractual obligations
 Principle shown by case”
o An offer is effective only if it identifies a valid
consideration and manifests an intention to create a
legal obligation

Offer vs a mere supply of information:

 Mere supply of info – offer is not a mere supply of info
 Where a statement is made that is intended only to convey some info to the other
party
o Harvey v Facey [1893]
Offers and Invitations to treat:
Invitation to treat is an invitation to others to make offers or enter into negotiation

Types:
1. Shop sales:
a. Display of goods in a shop window are generally treated as an invitation to
treat, and not an offer
b. Even picking up an item off the shelf still isn’t an offer, as customers can
return the goods back to where they were (Pharmaceutical Society of Great
Britain v Boots Cash Chemists)
c. Offer would be when the customer places the goods on the counter –
acceptance is when cashier accepts offer
2. Auctions:
a. Auctioneer merely puts out invitations to treat, and the bids made by those
present constitutes an offer, with acceptance being the fall of the hammer
3. Tenders:
a. Each individual party submitting a tender or a quotation, without knowing
the other parties’ bids
b. The actual tenders received will constitute offers made by parties
c. Exception – When the call for tenders is announced, and the vendor
promised the highest offer would be accepted, this would mean that would
be the offer, and the acceptance would be the highest tender submission

Ticket Cases:
MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) – Judges
give different reasons

Barwick CJ – says no agreement

Action Legal Implications
Issue of ticket Receipt for payment of fare
Passenger presents for travel Offer from passenger – ready and willing,
offering us up for travel
Airline provides seat on the plane Acceptance by airline by conduct (the
conduct is the allowance to board)

Stephen J
Action Legal Implications
Issue of ticket Offer from airline (handed over money)
Upon receipt, passenger taking no action or Acceptance by passenger by conduct
presenting to board (passenger getting ready to board) or
failure to reject
Electronic Transactions:
Principle -> The new legislation provides, first that a proposal to make a contract through
electronic communications which is not addressed to a particular person, but is made
generally accessible to people using information systems, is to be treated as an invitation to
make offers, unless it clearly indicates an intention to be bound in the case of acceptance
 If made to whole world, then invitation to treat

Next consider whether the termination of the offer, by the offeree was justified and
correct
 May have to look at this in conjunction with when acceptance was made

Termination of an Offer

Types:
1. Withdrawal:
a. An offer may be revoked at any time before it is accepted (Dickinson v Dodds
(1876)
b. Common Law – a promise to hold an offer open for a period, is not binding,
unless consideration is given
c. Only effective when communicated to the offeree (no exception via post)
2. Options:
a. When consideration is given to keep an offer open for a certain period,
option holder can then choose whether to exercise their option in the mean
time
3. Lapse:
a. Period in which the offer can be accepted lapses
b. If no period specified, use reasonable person test
i. Nature of the subject matter
ii. Means to communicate this offer
4. Failure of condition and changed circumstances
a. Offer may be made condition upon the happening of a certain event
b. If the condition is not fulfilled, the offer will lapse
i. E.g. McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957 – involved an option to
renew, can choose to accept or reject
ii. Option to renew, subject to 2 conditions, hadn’t fulfilled one of the
conditions, and thus acceptance was not possible
5. Rejection and Counter Offer:
a. Counter offer technically extinguishes the original offer
b. Must make the distinction between a counter offer and merely inquiring
about more information (look at intention)
6. Unilateral Contract
a. Difficulty here is when the offeree begins to perform acts within a unilateral
contract which pertain to acceptance, but the offer is withdrawn before the
offeree can complete the acts which constitute acceptance
i. Principle – held that an offer made in exchange for the doing of an
act, cannot be revoked once the offer is partly performed
 ii. E.g. Mobil v Welcome
 Facts:
o Incentive scheme by Mobil to improve the
performance of its franchise stations, stated that if
they could meet performance expectations over a 6
year period, they would be granted a 9 year renewal
deal
o After 4 years, Mobil abandoned this scheme, however
a lot of franchises had spent a lot of money and time
trying to adhere to these performance goals
 Principle through Held Judgment:
o An offer made in return for performance of an act is,
like any other offer, revocable at any time. The offeree
will only be prevented from revoking the offer where
there is an implied contract not to revoke or an
estoppel

Was correct acceptance made?

Acceptance
Conduct constituting an acceptance:
Principle -> “if whatever a man’s true intention may be, he so conducts himself that a
reasonable man would believe, that he was assenting to the terms proposed by the other
party, and that the other party upon that belief enters into the contract with him, the man
thus conducting himself would be equally bound as if he had intended to agree to the other
terms” Smith v Hughes (1871)

Need to have Consciousness of the offer:

 Have to have that motive of intent to perform the act with the purpose of
acceptance
 Crown v Clarke
o 1000 pound reward for catching the murderers of 2 police officers
o Clarke was arrested as an accomplice with the murderer – Clarke gave
evidence which basically lead to the capture of the murderer and his acquittal
o He tried to claim the reward – High Court held that a unilateral contract will
only be made where acts required for acceptance are performed on the faith
of the offer
 He did this act as a way for his own acquittal, not for the money,
therefore he can’t claim he accepted this unilateral contract as the
intention was not there
o Looks at the subjective approach, and not merely the objectively approach
o Clarke would have been given the reward if he didn’t speak up, and we relied
purely on the objective approach
Communication of Acceptance
 General Rule:
o Acceptance MUST be communicated by offeree to the offeror
o Bryne v Tienhoven (1880) – Acceptance can be done by an agent
 BUT can be dispensed with by offeror
 Offeror can stipulate what constitutes acceptance (i.e. method of acceptance), but
cannot impose a contract on the offeree
 If the offeror mandates an exclusive mode of communication, then only that mode
of communication can be used, all others won’t be valid
o See Felthouse v Bindley (1862) – Plaintiff wrote to nephew to buy his horse,
said if I hear no more from him, then I will assume the horse is mine. The
auctioneer was the Defendant who had sold the horse to a 3rd party. Nephew
had instructed the auctioneer not to sell the horse
o Issue – had the horse been sold to the P?
o Held – no acceptance, and uncle had no right to impose sale of horse, and
nephew had not communicated acceptance (even though nephew actually
did intend for uncle to have the horse, but it was sold to a 3rd party)

Other Methods:
1. The Postal Rule
a. General Rule -> Acceptance is when the post is posted (even if its received
sometime later, or is lost in the post)
i. Why should posted acceptance be effenctive on sending, rather than
on receipt?
 One of the parties must bear the risk that the letter was lost in the
post
 Henthorn v Fraser [1892] – taken that post would be a means of
communication
 Rule that parties must have contemplated that acceptance must go
through post
2. Modern Electronic Communications
a. Generla Rule -> Acceptance is when the message is received by the offeror
from the offeree
i. This applies to communication through websites and email
b. If communication has been sent to an address which was not designed by the
addressee, then communication is only effective once both:
i. The communication has become capable of being retrieved by the
addressee and
ii. The address has become aware that the electronic communication
has been sent to the address
iii. Applies to:
 Telex: Brinkibon v Stahag Stahl
o Rule: that when the message was sent out of office hourse
(which this one was done 6pm) and is not intended to be
read immediately (it was the start of a long weekend), then
it may become effective some time after it is received by the
offeror
  Fax: Reese Brothers Plastics
 Email: Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA
3. Silence as acceptance + Conduct = Acceptance
a. Contract cannot be forced onto the offeree by stipulating silence as the
prescribed method of acceptance
i. Felthouse v Bindley
 Horse case – Auction
b. Requires more in depth analysis. Can silence bind you?
c. A duty to communicate rejection of offer?
d. See Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Lts (1988)
i. Lots of apartments are going up, property developers needed.
McMachon (architect) offered job, accepted verbally, then did some
work, after 2 weeks asked for a progress payment and for the
execution of a contract to be signed, send 2 copies to Empirnall
ii. 2 weeks later, the architects sent an email saying “we are proceeding
with the understanding that the T&C in the contract are met”,
however no response from Empirnall
iii. Architects continued to work, and then Empirnall became insolvent –
Architects wanted payment, despite there being no contract as it
wasn’t signed
e. Question? Was the contract formed? Would a reasonable bystander think
Emprinall’s silence was acceptance of an offer?
i. Therefore silence with other conduct = Acceptance – Empirnall didn’t
say anything + facts (Empirnall had reasonable opportunity to reject
the offer, and Empirnall took the benefit of what McMachon was
providing) therefore reasonable person would believe that Empirnall
had accepted the contract on silence
ii. So because Empirnall both had reasonable time to reject the contracts
which were sent to them, and in conjunction with them continuing to
be ok with them receiving benefit from McMahon, the silence
constituted acceptance

Battle of Forms:
 Where each party uses itw own standard form of T&C during negotiations
 Question: who wins the “battle of forms?”
 Two different approaches:
o Conflict approach
o Synthesis approach

Example:
Butler Machine Tool Co v Excell-O Corp (1979)
 Facts:
o Seller (Butler) – Issues quotation to buyer (Excell) on seller’s standard form
o Buyer (Excell) – submits order on buyer’s standard form (includes tear off
slip)
o Seller – sends printed slip and letter (entered in accordance with revised
quotation) to buyer
  Dispute:
o Seller – relied on price variation clause in standard form (claims $$ for cost
increase between date of order and expected date of delivery)
o Buyer – rejects excess charge. Relies on buyer’s standard form
 Issue:
o Which stand form prevails?
 First instance:
o Seller’s form prevails – price variation clause
 Original quotation “these T&C shall prevail over T&C in the buyer’s
order”
 Appeal:
o English CoA: Buyer’s form prevailed
 Dennings LJ:
 Synthesis approach explained
 This case: Buyer’s standard terms prevailed (no price variation
clause)
 Sales office – printing slip + letter = decisive
 Lawton LJ:
 Seller (quotation) = offer
 Buyers (order) = rejection (materially different, could not be
reconciled) and counter offer

Agreement without Offer and Acceptance

Principle -> The essential question in such cases is whether the parties conduct, including
what was said and not said and including the evident commercial aims and expectations of
the parties, reveals an understanding or agreement or, as sometimes expressed, a
manifestation of mutual assent, which bespeaks an intention to be legally bound to the
essential elements of a contract
 Brambles Case:
o Brambles managed a solid water depot for the council and charged
depositors
o B was instructed by the council to increase the rate at which it charges and
remit the additional income to the council
o B sent letter and said this was not viable, however did so and kept the
additional money
o Council claimed a contractual entitlement to all the additional income which
they had received – depended on contract
o B argued that no offer had been made towards to them (the letter was a
command and not an offer which could be accepted or rejected)
o TJ said that B had accepted a contract through their conduct by charging the
higher rates and adhering to the T&C of the contract
Consideration
When is consideration required?
 The doctrine of consideration requires that something must be given in return for a
promise in order to make it binding (an exchange takes place)

Firstly consider the: Elements of Consideration:

1. The promise must incur a detriment or confer a benefit on the promisor (the benefit
of detriment requirement)
a. Detriment to the promisee or benefit to the promisor
i. Detriment can include: performance of services, transfer or some
property, or even the promise to do this in the future
b. Good example is if one party makes a promise in return for another party’s
promise
i. One party will have an enforceable legal right to the promise being
fulfilled (benefit) and the other party will have an obligation to
perform this promise (detriment)
2. The benefit/detriment must be given in return for the promise (the bargain
requirement)
a. The benefit conferred on the promisor, or the detriment suffered by the
promisee must be given in return for the promise

 Bargains and Conditional Gifts -? AWM case shows distinction

o A promise to pay someone $100 IF they perform a certain act is a conditional
gift, whilst a promise to pay someone $100 IN RETURN for performance of
that act is capable of giving rise to another contract
o For a conditional gift, necessary relationship doesn’t exist
 Bargains and reliance – distinguish an act performed as the agreed price of a promise
and an act performed in reliance on a promise
o An act performed in reliance on a promise will not constitute good
consideration

Next consider some of the principles:
 Principle: Consideration must move from the promisee
 Where two or more parties to a contract are regarded as joint promisees’,
consideration may be provided by one of them on behalf of both or all of them
(provided party is involved with contract)
o If A, B and C are parties to a contract, and A promises B and C that he will pay
$1000 if B erects a gate for him (consideration by B), C cannot compel A to
carry out his promise, because though C is a party to the contract, C is a
stranger when it comes to the consideration (he gave none)
o Both parties have to give consideration

Then consider sufficiency of consideration:

 Consideration must be sufficient, but need not be adequate
o Sufficient means something is valuable in the eyes of the law (doesn’t matter
whether it’s equal or more than that of the promise)
  Thomas v Thomas – found 1 pound was sufficient consideration for
right to occupt a house for life

Other things to consider in the facts:

1. If the party has discretion as to performance of their duties – no consideration
a. Principle: A promise will not constitute good consideration if the promisor
retains an unfettered (not confined or restricted) discretion as to the
performance
i. E.g. may not have to perform, the consideration is poor if it doesn’t
impose this performance
b. If the promisor is not bound to perform, then the promise will constitute an
illusory consideration
i. E.g. Placer Development v Cth
 Gov said they would pay subsidiary of an amount or rate
determined by the Cth from time to time
 HC held that no obligation to pay
 J Kitto said: “The general principle is that wherever words which by
themselves constitute a promise are accompanied by words showing
that the promisor is to have a discretion or option as to whether he
will carry out that which purports to be the promise, the result is
that there is no contract”
2. Past Consideration
a. Principle: Past consideration is not considered sufficient consideration
i. Roscorla V Thomas
 D sold a horse to P. After this transaction, later on, D on the request
of P stated that horse was tame, turned out to be untrue
 P sued for breach of contract – Judge held no breach of contract
because consideration had not been given, this was a new contract
and past consideration wasn’t sufficient as consideration for this
new contract
b. Promise to pay for past services: This is an exception to the general rule
above:
i. Where services are provided, and payment is to be made later, then
the providing of those services for payment, does constitute
consideration
ii. Treated as the same transaction
iii. Lampleigh v Barthwait
3. The existing legal duty rule
a. Principle: Neither the promise to perform an existing legal duty not the
performance of an existing legal duty is regarded as sufficient consideration
to support a contract
i. If the beneficiary has not agreed to do anything more than what they
were already oblighed to do under the original contract, the courts
will generally be reluctant to enforce the promise, even if it was
intended to be binding
ii. Wigan v Edwards – Principle
iii. Stilk v Myrick – principle raised here
 b. Principle: Part payment of debt does not constitute consideration -> Pinnels
Case rule
i. Must do something extra to provide consideration

If there is an existing legal duty, check whether any exceptions apply

Exceptions to the existing legal duty rule:
1. Fresh consideration:
a. If the beneficiary provides fresh consideration, then the exisiting legal duty
rule will not apply – this new consideration is enough to start a new contract
b. Fresh consideration in the form of new duties
i. Hartley v Ponsonby
ii. Stilk v Myrick:-
 The guy didn’t provide consideration with these new duties because
in his contract it said “act accordingly in emergency” but in this we
aren’t given the conditions of the employment, so just argue it well
and proceed logically from this conclusion
2.