LAW20019

Contractual Elements
Review Questions

1. What is an agreement? Is it important to know exactly when an agreement

was reached? Why?

2. What is an offer, and how can an offer be made?

3. Explain the distinctions between acceptance, rejection and revocation of an

offer.

4. In what circumstances can a promise to keep an offer open be enforced?

5. When will an offer lapse?

6. What is the difference between an offer and a request for information?

7. What is the difference between an offer and an invitation to treat?

8. At what point is the contract formed when a person buys goods in a

supermarket?
Reflections

1. If you pay for and download a song from iTunes, who makes the
offer and who accepts the offer?

2. When you go to the cinema, who makes the offer and who
accepts the offer?
Case Study Answer Format
Answer format for case study questions –ILAC/IRAC

Issue
Law/Rule
Application
Conclusion

Sample case study problem:

Steve makes an offer to buy Angela’s business.
Steve says to Angela, if I don’t hear from you within
seven (7) days, I’ll assume the business is mine.
Within the seven (7) days, Steve did not hear from
Angela. When he contacted her to arrange the
payment and transfer, Angela told him that she had
sold the business to someone else. Advise Steve.
Issue: Whether Steve has a binding contract with Angela. We need to examine
whether Angela had made a valid acceptance of Steve’s offer.

Law and Application

• Steve made an offer to Angela and this was communicated to her. –Carlill v
Carbolic Smoke Ball Co. However he stated that she did not need to
communicate her acceptance.

• An agreement is not complete until the offeree communicates their acceptance

to the offeror. – Powell v Lee
• An offeror cannot insist that a failure to respond is acceptance as silence does
not amount to an acceptance –Felthouse v Bindley

• In this case, Steve did state that if Angela did not respond, that would be taken
as an acceptance. This is not valid and binding upon Angela and thus she was
free to sell the business off to someone else.

Conclusion: Steve has no binding contract with Angela for the business.
Discussion 1 Contractual Elements
1. Has an offer materialised in the following interactions? If so, when did the
offer occur?

A says to X: I am thinking of selling my house. Are you interested?

• This is a statement merely trying to confirm interest of the other party – an
enquiry.
X says: I’ll give you $250,000 for it
• This can be an offer as it indicates certain term(price) and a willingness or
promise to be bound – Harvey v Facey; Carlill v Carbolic Smoke Ball Co

A says: Its not enough. I want $300,000.

• Counter-offer (Hyde v Wrench). Effect of counter-offer is to destroy original
offer.
X says: No, but I’ll go to $290,000 provided I can get possession within one
month.
• Further counter-offer
A says: Very well. I’ll sell on those terms.
• This is an acceptance of the final offer
2. True or False.

(a)An advertisement in a newspaper for the sale of a specific article

is an offer.
• [False] as per Grainger v Gough

(b)Goods displayed in a shop window are an offer to the public.

• [False]as per Fisher v Bell,
Pharmaceutical Society of Great Britian v Boots
Cash Chemist

(c)Products listed on website for sale are an invitation to treat.

• [True] as per Partridge v Crittenden
3. Has a contract been completed in the following conversation?

A says to B: What is your lowest price for Birdsville Barn?

B says: I would not take less than $500,000.

A says: I accept your offer of $500,000.

• The first statement is a mere enquiry of price.

• Second statement is a supply of information as to lowest price
possible – Harvey v Facey
• Third statement is trying to turn a statement of price into an offer
– definite promise on specific terms. Not an acceptance since
there was no offer made previously.
• Conclusion: No contract.
4. A offers $300 reward for the return of his lost wallet. B, with no
knowledge of the reward, finds the wallet, sees A’s address therein
and returns it to him. Can B claim the reward?
• There can be no acceptance if the offeree is unaware of the
existence of the offer – R v Clarke
Would your advice be different if B knew of the reward but:
(i) has forgotten about it when he returned the wallet;
• Can be argued that he was still aware of the offer
• Discuss knowledge and the act – is the act connected to the
knowledge? Was the offer in his mind when he returns the
wallet, if not, then he can’t claim the reward – R v Clarke

(ii) only returned it because a police officer saw him pick it up?
• The motive behind any acceptance does not affect the validity of
the acceptance
• Similar to R v Clarke
5.Craig advertised an electric comb in a magazine in the following terms:
"Great news for hair sufferers. Is your trouble grey hair? Greyban comb is the
answer! Use as directed, and in seven days, not a grey hair left! Money back
guarantee!”
Mervyn read this advertisement, and, since his hair was turning grey, he bought
a "Greyban" comb and used it as directed. It failed to stop his hair from going
grey.
Advise Mervyn whether he can recover the cost of the comb, giving reasons.
• Advertisements are normally invitation to treat –Grainger v Gough but there
can also be offers made to the world at large – Carlill v Carbolic Smoke Ball Co
• Mervyn can argue similar to Carlill v Carbolic Smoke Ball Co as the
advertisement was specific with a clearly defined means of acceptance.
• A counter-argument can be that this advertisement can be distinguishable
from the Carlill’s case as there was no money deposited to show intention to
be bound.
• Also the advertisement could be argued as mere puffery since it was quite
inconceivable that a comb can fix grey hair – Leonard v Pepsico.
6. Terry walks into a bookshop. Peter, the shopkeeper, asks whether he can help
him, but Terry says he just wants to browse through the books on the fiction
shelves. In fact, he is simply filling in time until he meets a friend. However, he
sees a book on gold mining, which interests him, takes it to the counter and says
he will buy it. Peter refuses to sell it to him.

a) Can Terry claim that, contractually, Peter must sell him the book?
• Goods on display are Invitation to treat –Pharmaceutical Society of Great
Britian v Boots Cash Chemist. Thus customer makes an offer which the seller is
free to accept or decline so Terry is incorrect.

b) Does it matter what reason Peter advances for refusing to sell, for example
that the price on the book is wrong, or he doesn't like Terry?
• No it does not matter. Right of acceptance does not come with need to provide
good reason for non-acceptance

c) What case or cases would you refer to when advising Terry?

• Pharmaceutical Society of Great Britain v Boots Cash Chemist/ Fisher v Bell
7. Geoff writes to David and says: "I hear that you are thinking of selling your
washing machine. If it is in good order and the price is right, I would like to buy
it. Please advise by return post".

David wrote back saying: "The washing machine is in good order and is cheap at
$300".

Geoff replied: "I accept your offer and will buy the machine for $300”.

Shortly after receiving this letter from Geoff, David receives from Dean, his
neighbour, an offer of $400 for the machine. Naturally, David wants to sell to
Dean.

Advise David whether he is free to sell to Dean.

Would your answer be different, and if so, why, if David’s letter to Geoff had
said: "The washing machine is in good order and is cheap at $300. Please advise
by return post whether you wish to have it".
Issue: Is there a binding contract between David and Geoff
Law and application:
• An offer is an expression of willingness to contract on specific terms. – Carlill v
Carbolic and Smoke Ball Co - David did not make an offer, merely statement
of price and condition of goods – similar to Harvey v Facey.
• Geoff has not made an acceptance as there is no offer to accept, so David can
sell to Dean.
• Revocation of offer has to take place before acceptance is complete. Byrne v
Van Tienhoven - Revocation is of no consequence to this answer as no
agreement exists.
Conclusion: David can sell to Dean.
• Part (b) – There is an offer in this situation as both elements present – definite
promise on specific terms. In this case, the offeror is requesting that an
acceptance by post. Postal rule will come into effect. The postal rule states
that an acceptance is valid and binding the moment it is posted and not when
it reaches. – Adams v Lindsell.
8. Albert signs a document in which he promises to sell his house to Joseph and he
agrees to keep the offer open for seven days. Two days later he receives a better
offer from Jack. He sends a message at once to Joseph withdrawing his offer.
Joseph refuses to accept the withdrawal claiming that Albert is bound by his
promise to allow him seven days in which to notify his acceptance. Advise Joseph.
Note: If the agreement is not binding, advise Joseph how he should protect
himself in the future.
Issue: Whether Joseph has a contractual right to insist on the house being sold to
him. This would require an examination of the rules relating to offers.
Law and application:
• If an offer has not been accepted or rejected, the offeror is entitled to revoke
their offer. An offeror is entitled to revoke their offer even if they have promised
to keep it open for a particular period –Byrne v Van Tienhoven
• The only exception to that would be if the offeree had provided consideration
for the offeror’s promise to keep the offer open – Goldsbrough Mort v Quinn.
• In this case, Joseph has not put in any deposit to keep the offer open, so he
does not have a right to insist the house be sold to him.
Conclusion: Albert is free to sell to someone else and Joseph cannot stop that
To protect himself in the future, he would be advised to put in a deposit to
hold the promisor to his promise to keep the offer open.