Chapter 1: Offer and Acceptance

How Long Does an Offer Last?

1. Specified time
Where an offeror states that an offer will remain open for a specific length of time, it lapses
when that time is up, though it can be revoked before that.
2. Reasonable Length of Time
Where the offeror has not specified how long the offer will remain open; it will lapse after a
reasonable length of time has passed.
Exactly how long this is will depend upon whether the means of communicating the offer were
fast or slow and on its subject matter: if it is perishable, a commodity whose price fluctuates
daily.
Ramsgate Victoria Hotel Ltd v Montefiore (1866) Defendant applied for shares in the company,
paying a deposit into their bank. After hearing nothing from them for five months, he was then
informed that the shares had been allotted to him, and asked to pay the balance due on them. He
refused to do so, and the court upheld his argument that five months was not a reasonable length
of time for acceptance of an offer to buy shares, which are a commodity with a rapidly
fluctuating price. Therefore, the offer had lapsed before the company tried to accept it, and there
was no contract between them.

3. Failure of a Precondition
Some offers are made subject to certain conditions, and if such conditions are not in place, the
offer may lapse. Financings Ltd V Stimson (1962): COA ruled in favor of the defendant: the
so-called agreement was really an offer to make a contract with the claimants, which was subject
to the implied condition that the car remained in much the same state as it was in when the offer
was made , until that offer was accepted. Defendant saw a car for sale at £350 by a second-
hand car dealer on 16 March. He decided to buy it on hire-purchase terms. In hire purchase, the
finance company purchases the car outright from the dealer, and then sells it to the buyer, who
pays in installments.  the defendant will then buy the car from the finance company. The
defendant signed the claimants’ form, which stated that the agreement would be binding on the
finance company only when signed on their behalf. On 18 March, the defendant paid the first
installment of £70. On24 March, the car was stolen from the dealer’s premises. It was later
found, badly damaged and the defendant no longer wanted to buy it. Not knowing this, on 25
March the claimants signed the written ‘agreement’. They subsequently sued the defendant for
failure to pay the installments.

Rejection
 An offer lapses when the offeree rejects it. E. If Ann offers to sell Ben her car on Tuesday,
and Ben says no, Ben cannot come back on Wednesday and insist on accepting the offer.
4. Counter-Offer
 a counter-offer terminates the original offer. Hyde v Wrench (1840):  Legal principle: a
counter-offer terminates the original offer.  The defendant offered to sell his farm for £1,000,
and the claimant responded by offering to buy it at £950 – this is called making a counter-offer.
 The farm owner refused to sell at that price, and when the claimant later tried to accept the
offer at original price.  It was held that this offer was no longer available; it had been
terminated by the counter-offer. In this situation the offeror can make a new offer on exactly the
same terms, but is not obliged to do so.
6. Request for Information
A request for information about an offer does not amount to a counter-offer, sothe original offer
remains open. Stevenson Jacques & Co v Mclean (1880): The defendant made an offer on a
Saturday to sell iron to the claimants at a cash-on delivery price of 40 shillings, and stated that
the offer would remain available until the following Monday. The claimants replied by asking
if they could buy the goods on credit. They received no answer. On Monday afternoon, they
contacted the defendant to accept the offer, but the iron had already been sold to someone else.
When the claimants sued for breach of contract, it was held that their reply to the offer had been
merely a request for information, not a counter-offer, so the original offer still stood and there
was a binding contract.
7. Death of the Offeror
The position is not entirely clear, but it appears that if the offeree knows that theofferor has died,
the offer will lapse.If not, it probably will not (Bradbury v Morgan 1862).However, where an
offer requires personal performance by the offeror (such aspainting a picture, or appearing in a
film) it will usually lapse on the offeror’sdeath.
8. Death of the Offeree
There is no English case on this point, but it seems probably that the offerlapses and cannot be
accepted after the offeree’s death by the offeree’srepresentatives.
9. Withdrawal of Offer
The withdrawal of an offer is also known as the revocation of an offer. Payne v Cave (1789)
establishes the principle that an offer may be withdrawn at any time up until it is
accepted.Routledge v Grant (1828) held that regardless of any provision that specifies the time
for the offer, the offeror still had the right to withdraw the offer at any moment before
acceptance, even though the time limit had not expired.
Byrne & Co v Leon Van Tienhoven (1880) Legal Principle: an offer can only be withdrawn if
it is communicated. Defendants were a company based in Cardiff.By the time the second letter
reached the claimants, a contract had already been made.
Dickinson v Dodds (1876)Legal principle: the revocation of an offer can be made by the
offeror or some other reliable source. Defendant offered to sell a house to the claimant, the
offer ‘to be left open until Friday, June 12, 9 am’. On 11 June, the defendant sold the house to a
third party, Allan, and the claimant heard about the sale through a fourth man. Before 9 am on
12 June, the claimant handed the defendant a letter in which he said he was accepting the offer.
It was held by the COA that the offer had already been revoked by the communication from
the fourth man, so there was no contract. By hearing the news from the fourth man, Dickinson
‘knew that Dodds was no longer minded to sell the property to him as plainly and clearly as if
Dodds had told him in so many words’.
An offeror who promises to keep an offer open for a specified period may still revoke that
offer at any time before it is accepted, unless the promise to keep it open is supported by
some consideration from the other party (by providing consideration the parties make a
separate contract called an option).
An exception to the rule that the withdrawal must be communicated to the offeree exists where
an offeree moves to a new address without notifying the offeror. In these circumstances, a
withdrawal that is delivered to the offeree’s last known address will be effective on delivery to
that address.
In the same way, where a withdrawal reaches the offeree, but the offeree simply fails to read it,
the withdrawal probably still takes effect on reaching the offeree (The Brimnes 1975).

Cross Offer
This refers to a situation where offering was done by 2 parties at the same time.E.g. If Ann and
Ben write offering to buy/sell the television at £50 at the same time, the two letters will cross at
post. On the principles of offer and acceptance it appears not, since the offeree does not know
about the offer at the time of the potential acceptance.
The point has never been decided in a case but there are obiter dicta in Tinn vHoffman (1873)
which suggest there would be no contract.
Time of the Formation of the Contract
Normally a contract is formed when an effective acceptance has been communicated to the
offeror.
An exception to this is the postal rule, where the contract is formed at the time the acceptance
is posted and there is no need for communication.

Chapter 2: Intention to Create Legal Relations

Introduction to Intention
If two or more parties make an agreement without any intention of being legally bound by it, that
agreement will not be regarded by the courts as a contract. It is important to remember with
regard to this issue that the courts assess the parties’ intentions objectively. So, if to onlookers
their behavior or words would suggest they intended to be bound, the fact that one secretly had
reservations is irrelevant. As far as the intent to be legally bound is concerned, contracts can be
divided into:

Social and domestic agreement

Commercial transactions on the others
 Where an agreement falls into the domestic and social category , there is a rebuttable
presumption that the parties do not intend to create legal relations. The reverse applies in
commercial agreements, where it is presumed that the parties do intend such an agreements to be
legally binding. Again, this principle can be rebutted if there is evidence that the parties did not
intend their agreement to be legally enforceable.

Social and Domestic Agreement

Husband and Wife

Balfour v Balfour (1919) Where a husband and wife who are living together as one
household make an agreement, courts will assume that they do not intend to be legally bound ,
unless there is evidence to the contrary.

 There is another scenario in Meritt v Meritt (1969)  Lord Denning pointed out that the
presumption applied in Balfour v Balfour, that an agreement between husband and wife was a ‘a
family agreement’, was not valid where the parties had separated or were about to do so.
In such circumstances the parties ‘ do not rely on honorable understandings’ , but ‘ bargain
keenly’ , and it could be safely presumed that any agreement between them was intended to be
legally binding.

Parent and Child

Jones v Padavatton (1969) Agreement of a domestic nature between parents and children
are also not to be intended to be binding , though again the presumption can be rebutted.

Social Agreements in General

The rebuttable presumption that an agreement is not intended to be legally binding is also
applied to social life, for relationships between people who are not related.  However, in
Simpkins v Pays (1955), the court upheld the claimant’s claim that claimant can claim a third of
the sum ashis share of the prize, considering that they had all contributed to the competition with
the expectation that any prize would be shared.

Commercial Agreements
There is a strong presumption in commercial agreement that the parties intend to be legally
bound, and, unless there is very clear contrary evidence, this presumption will not be rebutted. 
Case law: Esso Petroleum Ltd v Customs and Excise Commissioners (1976) In this case,
Esso ran a sales promotion in which ‘coins’ showing members of the England football squad for
the 1970 Cup were to be given away free, one with every four gallons of petrol.  The scheme
was advertised on TV and by posters at filling stations. The case arose when for tax purposes it
became necessary to decide whether or not there was a contract of sale The HOL held, by a
majority , that the coins were not being sold and so were not liable for tax , but that there was
intent to create legal relations
Lord Simon pointed out that ‘the whole transaction took place in a setting of business relation’,
that it was undesirable to allow companies to make promises in advertisement that they were not
bound to keep , and that Esso knew that, despite the coins’ negligible monetary value, they
would be attractive to motorists and Esso would therefore derive considerate commercial benefit
from scheme.

Exceptions to Commercial Agreement Presumption

Where a football pools coupon states that it is ‘binding in honor only’, the pools company cannot
be sued for payment by a winner: Jones v Vernon’s Pools (1938).

4. Ambiguity

Where the words of a business agreement are ambiguous, the courts will favour the
interpretation which suggests that the parties did intend to create legal relations , and therefore
find that there is a contract. Edwards v Skyways Ltd (1964)  Claimant was a pilot employed
by the defendants.  As part of a redundancy agreement, Skyways promised to make an ex
gratia payment of a specified amount in return for Mr Edwards not claiming his full pension
rights.Later, the company refused to make the payment, claiming that
the words ‘ ex gratia’ showed that there was no intention to create legal relations.  The Court of
Appeal rejected this argument , stating that this was a commercial agreement and there was
therefore a strong presumption in favour of creating legal relations.  The words ‘ex gratia’
merely signified that the employers were not admitting any pre-existing liability to make the
payment, it did not mean that they were not bound by the agreement.

5. Collective Bargaining Agreements

There is one exception to the rule that the parties to a commercial agreement are presumed to
intend to be legally bound.  Under a collective bargaining agreement, an employer negotiates
pay and conditions with the workforce as a whole (usually represented by a trade union), rather
than on an individual basis. Such agreements are binding in most countries, but not so in Ford
motor Co Ltd v Amalgamated Union of Engineering and Foundry Workers it was held that in
English law such an agreement was not intended to be legally binding.

Contracts Binding to Minor

The only contracts which are binding on a minor are contracts for the supply of necessaries. 
‘ Necessaries’ are interpreted as including not just the supply of necessary goods and services,
but also contracts of service for the minor’s benefit.

Contracts for Necessary Goods and Services

Under the Sale of Goods act 1979, s(2) ‘necessaries’ means‘goods suitable to the condition in
life of the minor or other person concerned and to his actual requirements at the time of sale and
delivery’. 
It therefore includes more than just such essentials as food, shelter and clothing, and in deciding
the issue the courts can take into account the social status of the particular minor:  Items that
are considered ‘necessaries’ are different for different income groups .Items which might not
be considered ‘necessaries’ for a working-class may nevertheless be necessaries for one from a
wealthy background.  When deciding if a contract is one for necessaries, the court first of all
determine whether the goods or services are capable of amounting to necessaries in law and then
consider whether they are in fact necessaries as far as the minor before them is concerned. The
tests are notoriously difficult to apply, but effectively mean that a minor will be bound by most
consumer contracts , but usually not by commercial ones.

Nash v Inman (1908) The only contracts binding on a minor are contracts for ‘necessaries’
under the Sales of Goods Act 1979, section 3(2).  A tailor supplied a Cambridge undergraduate
with‘eleven fancy waistcoat at two guineas each’. When the tailor sued for payment, the
student claimed that the contract could not be enforced against him, as he was a minor. The
Court of Appeal held that although the goods were suitable to the young man’s condition in life
(he was the son of an architect of good position), they did not satisfy the second limb of the
statutory definition. They could not be regarded as suitable to his actual requirement at the
time, because his father had given uncontradicted evidence that he already had a sufficient
wardrobe of clothes.  Therefore the contract was not binding.

Chapple v Cooper (1844) – under Common law

The only contracts binding on a minor are contracts for ‘necessaries’ under the Sales of Goods
Act 1979, section 3(2). An undertaker sued a widow, who was a minor, for the cost of her
husband’s funeral. It was held that this was a necessary service, and so the young woman was
obliged to pay.

In discussing what kind of goods and services could be considered necessary, the court said,
‘Articles of mere luxury are always excluded, though luxurious articles of utility are in some
cases allowed.’ The Sale of Good Act also provides that if necessaries are sold to a minor, but
before receiving the goods the minor decides that they are no longer wanted, there is no
obligation to accept and pay for them. Nor is a minor bound by a contract which contains
oppressive or exceptionally onerous terms.

Whether a term is sufficiently onerous to exclude liability will depend on the circumstances of
each case.
Fawcett v Smethurst (1914):  A minor was held not to be bound by a contract for the hire of
a car, even though it was a necessary service in this case, because the contract included a term
making him liable for damage to the car ‘in any event’, that is, whether or not the damage was
his fault. Where there is a binding contract for necessaries, the minoris only bound to pay a
reasonable price for them, which need not be the contract price.

Contracts of Service for the Minor’s Benefit

 Minors are also bound by contracts of service, providing these are, on the whole, beneficial to
them. In practice this generally means contracts of employment under which a minor gains
some training, experience or instruction for an occupation, e. an apprenticeship.

Clements v London and North Western Railway Co (1894)  A minor made an agreement
under which he gave up his statutory right to personal injury benefit, but gained rights under an
insurance scheme to which his employers would contribute. It was held that the rights gained
were more beneficial than those given up , and so the contract was, on balance, for the minor’s
benefit and therefore automatically binding on him or her. For example, trading contacts are
never binding on minors, even where they are for their benefit.

Contracts Voidable at Common Law

Apart from contracts for necessaries which bind the minor, the general rule at common law is
that a minor’s contracts are voidable. In other words, these contracts are not binding on the
minor but bind the other party. Thus, these contracts are valid when they are made, but can be
terminated by a minor at any time before becoming 18 or within a reasonable time afterwards.

This category covers contracts which involve a long-term interest in property such as land,
shares or partnerships. If such a contract is terminated before any money is paid or obligations
created, the position will be as if the contract had never been made in the first place, but
problems can arise where obligations are incurred or money is paid, and then the minor
terminates the contracts. The law is somewhat unclear, but it seems likely that a minor would
be liable to pay any debts arising before such a contract is terminated.

Where a minor has already paid money under a contract, and then terminates it,whether that
money can be recovered will depend on whether the minor got anything in return for it.Corpe
v Overton (1833)A minor agreed to enter into a partnership, which was to be formed in the
future. He paid a £100 deposit, knowing that he would lose it if he did not, in the end, go
through with the partnership. Before the partnership was put into operation, the minor
repudiated the agreement. The courts held that he was entitled to have his deposit back,
because there was a total failure of consideration. At the time he terminated the contract, he
had received nothing in return for it.
Steinberg v Scala (Leeds) Ltd. (1923) The claimant, a minor, bought shares in
Scala.These shares were not fully paid up, which means that a company issuing such shares
can subsequently demand from a shareholder payments up to the nominal value of the shares.
For example, if a person pays £1 for a share which has a nominal value of £2.50, she can be
asked to pay further £1.50 at a later stage. Scala did make such a request, and Ms Steinberg
paid a further £250.The court case arose because she later decided to reject the contract, and
wanted her£250 back. Her claim failed, the court held that although terminating the contract
meant she was free from any future obligation to make payment, she could not get the £250 back
because there had not been a total failure of consideration. She had the shares, so she had got
something in return for her money.