BetterLawNotes-5 (2)

CONTRACT LAW

Offer and Acceptance Problem Question 1 Answer Notes

It seems clear that the showroom discussions on Saturday result in Sid (S) making an offer to Bert (B): the new car with free servicing and insurance in exchange for the old car and £9,000 (ie the statement contains all the material terms and it is implicit that S agrees to be bound by those terms should B accept them).

When B then leaves saying he thinks the two may be wasting each other’s time, this might amount to a rejection of S’s offer. If so, S’s offer would not be capable of being accepted later in the week. Looking at subsequent events, it could be argued that S regarded this first offer as having been rejected: the fact that he goes to the trouble of expressly revoking his second offer may indicate that he assumed that his first offer was no longer capable of being accepted, ie had been rejected. Strictly, S’s subjective intentions are not relevant: the issue is how a reasonable person in S’s shoes would have treated B’s conduct.

In arguing that S’s offer remains open, it could be said that B does not expressly reject it and that his words and conduct are ambiguous – is he merely trying to extract a better offer while reserving the option of accepting this one? Further, it could be said that S does not himself revoke the offer and at this stage does nothing to indicate that he regards it as having been rejected.

If B is treated as having rejected the offer, then S has no liability to B, as S does not repeat this offer and B does not purport to accept S’s revised offer.

If we assume that B’s actions do not amount to a rejection of S’s offer, we must next consider whether S’s revised offer, the new car without free servicing and insurance in exchange for the old car and £8,000, is to be treated as revoking his first offer. The alternative analysis, which in principle is perfectly feasible, is that S is giving B a choice: he can accept either offer 1 or offer 2. The answer would depend on what a reasonable person in B’s shoes would think that S intended.

The case of Pickfords v Celestica involved successive offers being made by Pickfords. The court concluded that, on the facts, the first offer was impliedly revoked by the second. In that case though the second offer was far more detailed than the first and sought to incorporate Pickfords’ standard terms and conditions, which the first offer did not. Here, there are no such differences. Rather, it seems that the second offer is regarded by S as more generous to B, ie S would get a better deal were B to accept the first offer rather than the second offer. It follows that S might be happy for the first offer to remain on the table, even though the likelihood of B accepting it might be very small.

Again, if S’s second offer is treated as revoking his first offer, S has no liability to B, as S does not repeat the first offer and B does not purport to accept S’s second offer.

Assuming that the first offer remains open for acceptance, the posting by B of his acceptance would seem to bring the contract into being, as the postal acceptance rule should apply: given that S wrote to B, it would seem to be reasonable for S to contemplate that B might use the same means for accepting the offer (Adams v Lindsell; Henthorn v Fraser). Any argument that S might contemplate the use of the post for acceptance of his second offer, but not the first, seems tenuous.

The operation of the postal rule would mean that the time at which S actually receives B’s acceptance is irrelevant. Given that S’s letter of revocation relates only to his second offer, the letter and the time of its communication are also irrelevant as B is not purporting to accept the offer.

The final substantive point concerns the damage sustained by B’s old car. One of two consequences would seem to follow. Either, B would be in breach of an implied term of the contract that the car would be delivered in substantially the same state as it was on the previous Saturday (although the question does not make clear whether on that first visit S inspects B’s car or not). This might be construed as a condition entitling S to reject the car, meaning that S would not have to proceed with the deal. Alternatively, but which achieves the same outcome, S’s offer might be construed as conditional. That is, acceptance was made conditional on B delivering his car in substantially the same state as it was on the previous Saturday (see, eg, Financings v Stimson). Failure to perform the condition would render the contract void.

For what it’s worth, the better view may well be that B’s conduct on the Saturday should be treated as a rejection of S’s offer. It would seem reasonable to infer from B’s words and subsequent departure that the negotiations were at an end. As such, S would have no liability to B: there would be no contract between them.

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