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LAW OF CONTRACT

LPAB – Winter 2017

Week 2

Alex Kuklik

Lecture 2Formation of contract

• The Fact of Agreement: Acceptance

– Acceptance generally

− Text: Radan & Gooley, Chapter 4 (paras 4.74-4.121)

− R v Clarke (1927) 40 CLR 227 (R&G(C)[4.9])

− *Household Fire & Carriage Accident Insurance Co v Grant (1879) LR 4 Ex D 216 (R&G(C)[4.10])

− *Brinkibon v Stahag Stahl [1983] 2 AC 34 (R&G(C)[4.11])

− *Bressan v Squires [1974] 2 NSWLR 460 (R&G(C)[4.12])

– Alternatives to Offer & Acceptance

− Butler Machine Tool Co v Ex-Cell-O Corporation [1979] 1 All ER 965 (R&G(C)[4.13])

– Termination of Offers

− Stevenson, Jacques and Co v McLean (1880) 5 QBD 346 (R&G(C)[4.6])

− Dickinson v Dodds (1876) 2 Ch D 463 (R&G(C)[4.7])

− *Mobil Oil v Lyndell Nominees (1998) 153 ALR 198 (R&G(C)[4.8])

Lecture 2Formation of contract

• Certainty and Completeness

− Text: Radan & Gooley, Chapter 5

− Booker Industries v Wilson Parking (Qld) (1982) 149 CLR 600 (R&G(C)[5.2])

− Whitlock v Brew (1968) 118 CLR 445 (R&G(C)[5.3])

− Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1

− United Group Rail Services Limited v Rail Corporation New South Wales

[2009] NSWCA 177 (R&G(C)[5.4])

− Masters v Cameron (1954) 91 CLR 353 (R&G(C)[5.25)

− Meehan v Jones (1982) 149 CLR 571

AcceptanceAims and Objectives

At the end of this lecture students should understand the rules of acceptance, the duration of offers and the concepts of certainty and completeness.

Acceptance

Acceptance generally

– R&G, Chapter 4 (paras 4.74-4.121)

• If an offer has been made and it has not been terminated, an agreement will come into effect if the offer is accepted.

• Acceptance is usually express, but can be implied.

• Acceptance must be unequivocal.

• The acceptance brings about: consensus ad idem – a meeting of the minds

Acceptance

Acceptance must be unequivocal

• The requirement that it be unequivocal means that in accepting the offer, there if nothing left to be negotiated.

• This is a matter of interpreting the language used by the parties.

Acceptance

Acceptance must rely upon the offer.

• The offeree must have knowledge of the offer for this to occur.

• This can be rebutted with evidence to the contrary.

Acceptance


R v Clarke (1927) 40 CLR 227 (R&G(C) [4.9])

– WA Government offered reward of £1000 (about £54,552 now or $116,584) for information leading to arrest and conviction of killers. Clarke provided the information (and had knowledge of the offer). He gave testimony at their trial that when he proffered the information, he had no intention of claiming the reward. Later he asked for the money.

– Majority of the HCT said NO. When he gave the information, he did not do so with the offer in mind, even though he was performing the required act. He had this in his mind later. Therefore providing the reward was not a proper acceptance.

Acceptance


R v Clarke (1927) 40 CLR 227 (R&G(C) [4.9])

– Isaacs J:

• The information was not given in exchange for the offer. For consensus to exist acceptance is essential as offer, even when the same act is sufficient for acceptance and performance. Must act on the offer.

• He was doing it exclusively to clear himself of the charge.

– Higgins J:

• He did not intend to accept the offer. He did not mentally assent to the offer. Therefore consensus of mind did not occur until afterhe gave the information.

Acceptance


R v Clarke (1927) 40 CLR 227 (R&G(C) [4.9])

– Starke J:

• If he performs the condition, but does not act upon faith or in reliance of the offer, he does not accept the offer (including if he forgets the offer).

• As a matter of proof, any person, knowing of the offer, who performs the condition, is prima facie taken to accept the offer.

• But this can be rebutted: It is an inference of fact that can be excluded by evidence (as here, where he explicitly disavows reliance).

Acceptance


R v Clarke (1927) 40 CLR 227 (R&G(C) [4.9])

– Starke J:

• Took a different view on facts: Here the inference is not displaced because he did know of the offer and provide the information, and nowhere in the evidence is it said that he did not act upon faith of or in reliance of the offer (and this was not put directly to him).

• The evidence suggested that Clarke acted on the offer, but had not addressed his mind to whether he would claim the reward or not.

• But ultimately the inference of fact was for the trial judge to determine.

Acceptance


R v Clarke (1927) 40 CLR 227 (R&G(C) [4.9])

– Some commentators argue that acceptance should be valid even without reliance: R&G(C) p 70.

– Or that the concept of reliance is very weak and the claimant has to clearly deny that he/she relied on the offer for the inference to be rebutted: R&G [4.78].

– Cf: UK – the position has been held to be ‘open’:

• *Eastern Shipping Company Ltd v Far East Chartering Ltd [2011] EWCA 1372 (Comm), [47].

Acceptance

Acceptance must correspond with the offer.

• If an acceptance alters or adds to the terms of the offer in any way, it is not an acceptance. It is a counter-offer which has the effect of rejecting the original offer.

– *Turner Kempson & Co Pty Ltd v Camm [1922] VLR 498 (R&G [4.79])

• Camm sent a letter to Turner, accepting an offer from Turner to sell him a quantity of raspberry pulp, but adding that he wanted it delivered ‘in 3 lots of 5 tonnes each, approximately 10 days between each delivery.’

• The Court held this to be a counter-offer and not an acceptance.

Acceptance

Acceptance must correspond with the offer.

Exceptions

• However, if the additional clauses clearly do not affect the acceptance, with the offer, suggestion or request of additional terms, then the contract will be formed.

• That is, the ‘acceptance’ can be an acceptance on the terms as offered and proffering additional terms that the original offeror can accept if she wishes.

– *Dunlop Higgins (1848) 9 ER 805 (R&G [4.80])

• Accepted offer, and requested delivery on a certain date. It was held that the acceptance was valid because it did not depend on the offeror accepting the proposed delivery date – it was a request that the delivery rake place on a certain date.

AcceptanceAcceptance must correspond with the offer.

Exceptions

• If there is a deviation from the offered terms but it is solely in favour of the offeree, it may still be a valid acceptance.

• If acceptance does not coincide exactly with the offer due to some error or mis-description by the offeree when acceptance is made, this does not necessarily invalidate the acceptance.

– *Carter v Hyde (1923) 33 CLR 115

• Offer: Sell you the hotel including furniture at time of offer. Acceptance: Sell me the hotel including furniture at time of acceptance. Court held this not to be a counter-offer but merely an error in the acceptance. Therefore acceptance was valid.

• But CF: *Redowood Pty Ltd v Mongoose Pty Ltd [2005] NSWCA 32

Acceptance

Communication of Acceptance

– The acceptance of an offer must be communicated to an offeror. Acceptance is only effective once communicated.

• *Tim Hoffman & Co (1873) 29 LT 271, 278

– *Powell v Lee (1908) 99 LT 284

• School management committee accepted Powell’s application for headmaster’s job, but did not officially communicate this to him. He was told informally by a committee member. Job went elsewhere. He sued for breach. It was held that there had been no authorised communication of the acceptance.

• The requirement for communication for the benefit of the offeror.

AcceptanceCommunication of Acceptance

• Most acceptances are by means of some express statement made by the offeree.

• Generally, silence cannot amount to acceptance.

• An offeror cannot stipulate that no response to the offer will be treated as an acceptance. i.e. “If I don’t hear from you in 48 hours, I will take that as acceptance of the terms..”

– *Felthouse v Brindley (1862) 142 ER 1037

• There are exceptions to this:

– Equitable estoppel (dealt with in week 4).

– Where conduct of the offeree amounts to an implication that he or she has accepted the offer• *Empirnall Holdings v Malcolm Paull Partners (1988) 14 NSWLR 523

AcceptanceCommunication of Acceptance

• In some circumstances where there has been an offer, acceptance can be inferred from conduct of the offeree that is consistent with the offer.

– “Pif it is clear that the offeree did the act in question with the intention of accepting the offer.”

• *Day v Morris Associates v Voyce [2003] EWCA Civ 189.

– “Pwhether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted.”

• *Empirnall Holdings v Malcolm Paull Partners (1988) 14 NSWLR 523

•

Acceptance

Communication of Acceptance

• Communication of the acceptance can be dispensed with

– As it is for the benefit of the offeror, she is at liberty to dispense with this requirement. Such a dispensation can be explicit or implied.

• Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 (R&G(C)[4.2])

– Offers that lead to unilateral contracts usually involve an implied dispensation (by the offeror) of the requirement to communicate acceptance.

• *Kuzmanovski v NSW Lotteries Corporation (2010) 270 ALR 65

– A ‘scratchie’ which said, ‘Prize payable on presentation’, was an offer which could be accepted on presentation.

Acceptance

Postal acceptance rule

*Household Fire & Carriage Accident Insurance Co v Grant (1879) LR 4 Ex D 216 (R&G(C) [4.10])

– Grant applied for shares, a number were allotted to him, and notice was sent by post, but never arrived. Three years later the company was liquidated and unpaid amount on the allotted shares was claimed by liquidator. Grant said that he never got the allotment and therefore the acceptance never reached him – No agreement.

– Majority held that acceptance was complete when allotment was posted. Failure to arrive was irrelevant.

AcceptancePostal acceptance rule

*Household Fire & Carriage Accident Insurance Co v Grant (1879) LR 4 Ex D 216 (R&G(C) [4.10])

– Thessiger LJ

• Post office is agent of both parties and so acceptance complete when posted. The acceptor has done an extraneous act, which clenched the matter.

– Bramwell LJ (diss)

• Equal hardship to offeror if not received, so why should posting be binding? No different to delivery by hand (which, if it fails = no acceptance), so why different in principle by post?

– Idea that postal service is agent of both parties later rejected in *Henthorn v Fraser [1892] 2 Ch 27, 35-36.

Acceptance


*Henthorn v Fraser [1892] 2 Ch 27, 35-36.

– “Where the circumstances are such that it must have been in the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is completed as soon as it is posted.” (R&G [4.98])

• It has been held that sending by telegram is analogous to postage and therefore the rule applies to telegrams.

– *Cowan v O’Connor (1888) 20 QBD 640.

Acceptance


• However, Courts have restricted the further operation of the rule:

*Bressan v Squires [1974] 2 NSWLR 460 (R&G(C) [4.12])

– Squires granted an option to purchase a property. Could be exercised ‘by notice in writing addressed to [Squires] at any time on or before 20 December 1972 and received by Squires on 21 December 1973.’

– Held that the postal acceptance rule was excluded.

– Bowen CJ in Eq

− Adopted Henthorn v Fraser formulation.

Acceptance


*Bressan v Squires [1974] 2 NSWLR 460 (R&G(C) [4.12])

− Given that based on notions of expediency and convenience, it does not apply where its application would produce manifest inconvenience or absurdity, particularly for options for the purchase of land.

− The clause simply described the notice and did not stipulate that it should be exercised by being addressed in the sense of sent or posted on or before 20th December 1972. What was required was actual notice before 20th December 1972.

Acceptance


*Brinkibon v Stahag Stahl [1983] 2 AC 34

– Negotiations over steel purchase. Communications were by telex. Acceptance taken to have occured when return telex was received.

– Lord Willberforce

• Telex is to be likened to other forms of instantaneous communication and therefore offer is accepted when the telex is received and is taken to occur where the telex was received (this was important here to determine which jurisdiction applied, UK or Austria).

Acceptance


*Brinkibon v Stahag Stahl [1983] 2 AC 34

– Lord Fraser Tullybelton

• Telex directly from acceptor‘s office to offeror‘s office is to be treated as instantaneous communication.

• Not unreasonable to treat it as delivered when it arrived at the offeror‘s telex machine (even if not read).

• Therefore instantaneous communications such as telex and telephone are to be treated as being accepted when received (if telephone – the moment when it is heard)


• But if the telex is sent after hours?

– *Schelde Delta Shipping BV v Astarte Shipping Ltd (The Pamela)

[1995] 2 Lloyd‘s Rep 249, 252

• Deemed to have been received by offeree at the start of the next business day.

– The rule does apply to indirect use of telex (using Chief Telegraph Office): *Leach Nominees v Walter Right Pty Ltd [1986] WAR 244.

• Offer was made by private telex to offeree‘s agent by way of public telex system and the offerer must have known that an answer would be by way of a public telex operated by a third party. So acceptance made when dictated.


• Rule does not apply to facsimile transmission:

– *Egis Consulting Australia Pty Ltd v First Dynasty Mines Ltd [2001] WASC 22 at [9] – [10].

• Rule does not apply to email:

– *Olivaylle Pty Ltd v Flottweg GMBH & KGAA (No 4) (2009) 255 ALR

632 at 642 (See further the legislative approach)

– Carter says that the poition in relation to email is unclear.

• Contract Law in Australia, Carter [6th ed] [3-38]

• What about DX, courier or interactive website?

Acceptance


• Principles:

– Only applies if it is reasonable, contemplated or authorised that acceptance be by letter or telegram.

• *Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd

(1957) 98 CLR 93

– “Pcannot be justified unless it is inferred that the offeror contemplated and intended that his offer might be accepted by the doing of that act.” Contentious negotiations regarding dispute between the clients of two solicitors. Held not to apply.


• Principles:

– Letter or telegram must be properly posted:

• Proper address

• Postage properly paid

• And actually left with post office

– Receipt is irrelevant

• *Household Fire & Carriage Accident Insurance Co v Grant (1879) LR 4 Ex D 216 (R&G(C) [4.10])

– The offeror can exclude the operation of the rule at the time that the offer is made.

• *Bressan v Squires [1974] 2 NSWLR 460 (R&G(C) [4.12])


*Electronic Transactions Act 2000 (NSW)

• The Act applies unless the parties agree otherwise.


*Electronic Transactions Act 2000 (NSW), s 13:

(1) For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication, the time of dispatch of the electronic communication is:

(a) the time when the electronic communication leaves an information system under the control of the originator or of the party who sent it on behalf of the originator, or

(b) if the electronic communication has not left an information system under the control of the originator or of the party who sent it on behalf of the originator-the time when the electronic communication is received by the addressee.

Note : Paragraph (b) would apply to a case where the parties exchange electronic communications through the same information system.

(2) Subsection (1) applies even though the place where the information system supporting an electronic address is located may be different from the place where the electronic communication is taken to have been dispatched under section 13B.


*Electronic Transactions Act 2000 (NSW), s 13A:

(1) For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication:

(a) the time of receipt of the electronic communication is the time when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee, or

(b) the time of receipt of the electronic communication at another electronic address of the addressee is the time when both:

(i) the electronic communication has become capable of being retrieved by the addressee at that address, and

(ii) the addressee has become aware that the electronic communication has been sent to that address.

(2) For the purposes of subsection (1), unless otherwise agreed between the originator and the addressee of the electronic communication, it is to be assumed that the electronic communication is capable of being retrieved by the addressee when it reaches the addressee’s electronic address.

(3) Subsection (1) applies even though the place where the information system supporting an electronic address is located may be different from the place where the electronic communication is taken to have been received under section 13B.


*Electronic Transactions Act 2000 (NSW), s 13B:

(1) For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication:

(a) the electronic communication is taken to have been dispatched at the place where the originator has its place of business, and

(b) (b) the electronic communication is taken to have been received at the place where the addressee has its place of business.

(2) For the purposes of the application of subsection (1) to an electronic communication:

(a) a party’s place of business is assumed to be the location indicated by that party, unless another party demonstrates that the party making the indication does not have a place of business at that location, and

(b) if a party has not indicated a place of business and has only one place of business, it is to be assumed that that place is the party’s place of business, and


*Electronic Transactions Act 2000 (NSW), s 13B:

(c) if a party has not indicated a place of business and has more than one place of business, the place of business is that which has the closest relationship to the underlying transaction, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the transaction, and

(d) if a party has not indicated a place of business and has more than one place of business, but paragraph (c) does not apply-it is to be assumed that the party’s principal place of business is the party’s only place of business, and

(e) if a party is a natural person and does not have a place of business-it is to be assumed that the party’s place of business is the place of the party’s habitual residence.

(3) A location is not a place of business merely because that is:

(a) where equipment and technology supporting an information system used by a party are located, or

(b) where the information system may be accessed by other parties.

(4) The sole fact that a party makes use of a domain name or electronic mail address connected to a specific country does not create a presumption that its place of business is located in that country.



• In relation to the applicability to contracts – see ss 14A – 14E

• In relation to compliance with the need for writing or signature – see ss 7 -9



14B Invitation to treat regarding contracts

(1) A proposal to form a contract made through one or more electronic communications that:

(a) is not addressed to one or more specific parties, and

(b) is generally accessible to parties making use of information systems,

is to be considered as an invitation to make offers, unless it clearly indicates the intention of the party making the proposal to be bound in case of acceptance.

(2) Subsection (1) extends to proposals that make use of interactive applications for the placement of orders through information systems.

Alternatives to Offer and Acceptance• R&G [4.109]

• Tradditional rule of offer/acceptance does not work well in all situations – neither sufficient or necessary in all cases: e.g. travel on mass transit, exchange of contracts to sell land, brokers acting for both parties.

– *Brambles Holdings Pty Ltd v Bathurst City Council (2001) 53 NSWLR 153, 176, per Heydon J.

• Although it doesn‘t work well in some cases, no reason for wholesale abandonement.

– *Magill v Magill (2006) 226 CLR 551, 617, per Heydon J.

Alternatives to Offer and Acceptance• R&G [4.109]

• One area where simple offer and acceptance does not work well is in ‘Battle of the forms‘ cases...

– A offers to buy goods from B on A‘s terms

– B offers to sell those goods only on B‘s terms

• What is the result?

– The Court will examine the conduct of the parties and try to objective interpret the documents

– The result could be:

• Contract on A‘s terms

• Contract on B‘s terms

• Contract on terms implied by law – but not A or B‘s terms

• Contact blending A and B‘s terms

• No contract

Alternatives to Offer and AcceptanceBattle of forms

Butler Machine Tool Co v Ex-Cell-O Corp (England) Ltd [1979] 1 All ER 965. (R&G(C) [4.13])

• Butler sent offer for purchase of machine on standard agreement which included price escalation clause, which allowed a price increase in certain circumstances. Ex-Cell-O placed order at the set price stating that subject to its standard terms (which did not include price escalation). There was a tear off strip to confirm the order and sign acceptance. Butler did this, but noted that acknowledgment was in accordance with its standard offer. Ex-Butler built the machine and claimed price in accordance with price escalation clause.

• Did the agreement include the escalation clause?


Butler Machine Tool Co v Ex-Cell-O Corp (England) Ltd [1979] 1 All ER 965. (R&G(C) [4.13]) (R&G [4.112])

Denning MR

• Adopting traditional analysis:

– Butler made offer to Ex-Cell-O with terms and conditions on the back

– Ex-Cell-O sent an acceptance, but with such changes to the terms that it was in reality a rejection and counter-offer

– Butler accepted the counter-offer (the reference to the original quote referred only to price and the identity of the machine)

• Held – Ex-Cell-O’s terms were a counter-offer which was accepted when Butler returned the signed strip. Butler’s notation on the strip was a reference to price and identity of the machine only and did not amount to a re-affirmation of the terms and conditions of the original offer. Therefore it was not a counter-offer. But the Court discussed the problem arising in these cases.



• Often traditional analysis will be out-of-date. The better way is to look at all of the documents and glean from them or the conduct of the parties, whether they have reached agreement on all material points even though there are differences in the forms and conditions on them.

• Using this guide, the agreement is usually formed when the last form is sent. But on what terms? Which form or which part of a form is included in the agreement.

• Battle may be won by last shot, first shot or may depend upon circumstances. The terms and conditions of both parties are construed together.



Steyn LJ

Each party insists on contracting only on his standard conditions. In the mean time the work starts. Payments are made. Often it is a fiction to identify an offer and acceptance. Yet reasons tells us that neither party should be able to withdraw unilaterally from the transaction. The reasonable expectations of the parties' albeit that they are still in disagreement about minor details of the transaction, often demand that the court must recognise that a contract has come into existence. The greater the evidence of reliance, and the further along the road towards implementation the transaction is, the greater the prospect that the court will find a contract made and do its best, in accordance with the reasonable expectation of the parties, to spell out the terms of the contract.

• (1997) 113 Law Quarterly Review 433


*Goodman Fielder Consumer Foods Ltd v Cospack International Pty Ltd

[2004] NSWSC 704, [46] – [53] (R&G [4.114 - 120])

– 3 Approaches:

• ‘Last shot doctrine’ – each document is a counter-offer, so if any contract is formed (by conduct rather than by express acceptance), it is on the terms of the final document.

• ‘Higher Status Doctrine’ – forms with the higher status wins. It is the status of the document itself.

• ‘Synthesis approach’ – Agreement established without reference to offer and acceptance. In all the circumstances, can an agreement be inferred? Has mutual assent been manifested?

Termination of Offer

Rejection

• An offer once rejected, is terminated

– Stevenson, Jacques & Co v McLean (1880) 5 QBD 346 (R&G(C) [4.6])

– Offeror need not formally revoke it after rejection. It is dead. A subsequent attempt to accept is in effect a counter-offer.


Revocation

• An offer can be revoked at any time before it is accepted

– *Routledge v Grant (1828) 130 ER 920, 924 (R&G [4.54])

• Unless it is an option (which is a contract by which the option holder is entitled to enter into a contract with the grantor of the option, on a specified date, or within a period, by exercising the option):

– An option is either (depending on the circumstances – the Court split here):

• a conditional agreement (which becomes unconditional upon exercise); or

• an irrevocable offer (this is more popular theory in Australia)

– *Goldsborough Mort & Co Ltd v Quinn (1910) 10 CLR 674.

Termination of OfferRevocation

Stevenson, Jacques & Co v McLean (1880) 5 QBD 346 (R&G(C) [4.6])

– McLean offered to sell iron for a set price C.O.D. Stevenson asked for credit. McLean took this as rejection; sold it somewhere else. But Stevenson accepted prior to formal notification of rejection. Sued, arguing that there was a contract.

• “Please wire whether you would accept forty for delivery over two months, or if not, the longest limit you would give.”

– Here, asking for credit was not a rejection, but merely an inquiry as to whether terms would be offered. (C.F. Hyde v Wrench). Court said that this is how McLean should have taken it.

– Looked at the form of the telegram and the circumstances of the sale in the current turbulent market.

Termination of OfferWithdrawal

• If an offer is open for a fixed period of time, it can be withdrawn at any time prior to that, but until it is withdrawn, the offer is open (until the stipulated time runs out).

– This is because the promise to keep the offer open is unenforceable: the offeree has given no consideration for such a promise.

• Dickinson v Dodds (1876) 2 Ch D 463 (R&G(C) [4.7])

• A withdrawal is only valid when it is received by the offeror. Postal rule does not apply here.


Withdrawal

Dickinson v Dodds (1876) 2 Ch D 463 (R&G(C) [4.7])

• Dodds offered to sell land, but before Dickinson accepted, Dodds sold it elsewhere. Dodds did not tell Dickinson, but Dickinson was made aware by his agent, Berry. Dickinson subsequently tried to accept the offer.

• Communication by Berry that the property was sold was enough to terminate the offer. Could not be accepted.

James LJ:

• Does not have to be an express withdrawal. If offeree knows that the

offer has been withdrawn, there cannot be consensus.


Dickinson v Dodds (1876) 2 Ch D 463 (R&G(C) [4.7])

Mellish LJ:

• If offeree received notice in some way, cannot validly accept the offer. If does not know, can accept. The communication does not have to come from the offeror, but it does have to get to the offeree.

• Does this make it hard for the offeree? How good is her information?

• Withdrawal of offer takes place when the offeree receives the communication (cf: Postal acceptance rule)


• If the offeree cannot hear the communication or the phone goes dead –withdrawal not received and no withdrawal.

– *Entores v Miles Far East Corporation [1955] QB 327

• If a message is sent to offeree to withdraw, communication takes place when, in all the circumstances, a reasonable offeree would have accessed the message.

• So of telex sent, withdrawal is taken to have occurs when the telex was received irrespective of when it was read, because it was the offerees responsibility to read it.

– *Brinkibon v Stahag Stahl [1983] 2 AC 34

• But conduct of the the offeror could displace the rule – dialled wrong number and left message?


• Withdrawal of offers to the world:

– If publication of the revocation is as broad and given the same notoriety as the offer, then it does not matter that the offeree did not see it.

• *Shuey v United States 92 US 73 (1875)

• Carter says that this is likely to be followed in Australia.

– Contract Law in Australia, Carter [6th ed] [3-46]

Termination of OfferWithdrawal after commencement of performance

• What if it is an offer to the world and the offeree has begun to perform but has not fully completed when it is revoked?

– *Mobil Oil v Lyndell Nominees (1998) 153 ALR 198, at 222-228 (R&G(C) [4.8]) ??

• There is little authority on this, because it is rare. This is because it is usually hard to see how a unilateral contract can be performed prior to complete performance – there is no acceptance until performance is complete.

• However it could occasionally cause hardship to the offeree.


• It has been argued that an offer in a unilateral contract contains a subsidiary promise that the offer will not be revoked once the performance has commenced. This appears to be supported in:

– Abbott v Lance (1860) Legge 1283.

• But there were complicated facts and the promise not to revoke in that case was express. (i.e. if I revoke before you accept the offer (within the time), I will give you £100)

– Can such a promise be implied is this is not express?

• In the US if you have not commenced performing, but are only making preparations to perform, the offer can be revoked.

• ButP.


*Mobil Oil v Lyndell Nominees (1998) 153 ALR 198, at 222-228 (R&G(C) [4.8])

• Franchisees of Mobile said it had offered benefits (free tenure) if reached sales targets over a number of years. The franchises started selling, but Mobile withdrew the offer before the time was up. Franchisees alleged that the offer could not be revoked because there had been part-performance.

Held

• The Court held that no offer was made. But nevertheless looked at the issue of revocation of offers after performance had begun.

• The trial judge reviewed the authorities and held that an offer that can be accepted by performance cannot withdraw the offer once performance has begun.



• The Full Court held that there is no universal principle that cannot revoke after performance has commenced. It varies from unilateral contract to another.

• A fortiori if the performer has reaped a benefit (therefore no injustice).



• In some cases it may be appropriate to find that the offeree has entered into an implied ancillary contract not to revoke, or that the offer is estopped from falsifying an assumption, engendered by it

• However that is not always the case. And in some cases the offeror can legitimately withdraw the offer. In particular, where what the offeree has done, is of benefit to the offeree.

• Factors that affect the issue: p 64.

• Here, Mobil could revoke offer. It was not unjust as they both got a benefit from the part performance.



• The respective positions of offeror and offeree vary greatly from the case of one unilateral contract to another. The following factors illustrate:

i. The offeror may or may not know that the offeree has commenced performance;

ii. The offeree may or may not have an understanding that the offeror is at liberty to revoke and that any incomplete performance of the act of acceptance by the offeree will be at his or her risk;

iii. The notion of ‘commencement of performance of the act of performance’ can be problematic and lead to injustice to the offeror – here can performance of 90% in year one be commencement of performance of six years of 90% performance?



iv. The act called for by the offer may be detrimental to the offeree, or of some benefit to the offeree as well as to the offeror, as in the present case;

v. Although the offeree is not obliged to perform, or to continue performing, the act of acceptance and is at liberty to cease performing at any time, ex hypothesi, the offeror remains bound, perhaps over a lengthy period as in the present case, to keep its offer open for completion of the act of acceptance, without knowing whether the offeree will choose to complete or not to complete that act;

vi. The circumstances of the particular case may or may not, by reference to conventional criteria, suggest that the parties intended that the offeror should not be at liberty to revoke once the offeree had performed the act of acceptance to some extent.



• The Court held that there cannot be one simple rule:

– E.g. What if X makes a unilateral offer to the world to provide certain information, and A, B and C start looking for that information. If A finds it first and provides it to X, should you be able to say that X then cannot revoke the offer in relation to B and C?

• Reviewed Abbot v Lance (said it was awkward - inconsistent and short), and said that in that case, the £100 was just agreed compensation for the plaintiff’s time and trouble



• Therefore - no general proposition that you cannot revoke such an offer.

• Even if you can argue that there is an implied promise not to revoke (consideration for which is the commencement of performance), it would not follow that the purported revocation was ineffective. It would be effective, but may give rise to damages for a breach of agreement.

• In Forbes v Australian Yachting Federation (1996) 131 FLR 241, SantowJ echoed this and suggested that there may be an estoppel action available to the offeree.

law of contract - sydney.edu.ausydney.edu.au/lec/subjects/contracts/winter 2017/contracts...

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