Revise Offer and acceptance for Cambridge 9084 (3.1.2)

A crucial first step in contract formation is identifying a valid offer. An offer is a clear, definite, and unequivocal statement of willingness to be bound by specific terms without further negotiation. The key test is one of intention: did the maker of the statement intend to be legally bound upon acceptance? This is contrasted with an invitation to treat (ITT), which is merely an invitation to others to make an offer. Classic examples of ITTs include goods displayed in a shop window (Fisher v Bell), advertisements (Partridge v Crittenden), and items in a self-service shop (Pharmaceutical Society of GB v Boots Cash Chemists). The same principle applies to auctions (where each bid is an offer, accepted by the fall of the hammer, as per Payne v Cave) and invitations to tender (where each tender submitted is an offer). However, there are exceptions. An auction advertised 'without reserve' becomes an offer to sell to the highest bidder (Barry v Davies), and an invitation to tender that commits to accepting the highest/lowest bid can be an offer (Harvela Investments Ltd v Royal Trust Co of Canada).

For an offer to be effective, it must be communicated to the offeree; a person cannot accept an offer they are unaware of (Taylor v Laird). Once communicated, an offer does not remain open indefinitely. It can be terminated in several ways: rejection by the offeree, a lapse of time (either a specified period or a 'reasonable' time, as in Ramsgate Victoria Hotel v Montefiore where an offer to buy shares lapsed after five months), the death of the offeror (if the contract is for personal services) or offeree, or the failure of a pre-condition. Most importantly, an offer can be terminated by revocation. The offeror can withdraw their offer at any time before it is accepted. However, this revocation must be effectively communicated to the offeree. As established in Byrne v Van Tienhoven, the revocation is only effective upon receipt, not upon posting.

Acceptance is the final and unqualified assent to all the terms of an offer. It must be a 'mirror image' of the offer. If the offeree attempts to vary the terms, this is not an acceptance but a counter-offer, which destroys the original offer (Hyde v Wrench). A mere request for further information, however, does not destroy the original offer (Stevenson, Jacques & Co v McLean). Generally, acceptance must be communicated to the offeror. This means the offeror must receive the acceptance. Silence cannot normally be imposed as a mode of acceptance (Felthouse v Bindley). The offeror can prescribe a specific mode of acceptance. If the offeror makes this mode mandatory (e.g., 'acceptance must be by email and email only'), then any other form of acceptance is invalid. If the prescribed mode is not mandatory, then any equally expeditious method will suffice (Manchester Diocesan Council for Education v Commercial & General Investments).

The general rule that acceptance must be received by the offeror has a major exception: the postal rule. Established in Adams v Lindsell, this rule states that where post is a reasonable and contemplated means of communication, acceptance is complete the moment the letter of acceptance is properly posted, even if it is delayed or never arrives. The rationale for the postal rule is to provide certainty for the offeree, who knows from the moment of posting that a contract is formed. However, the rule can be ousted if the offeror specifies that acceptance is only effective on receipt, or if it is unreasonable to use the post. For instantaneous methods like telephone, telex, and email, the rule from Entores v Miles Far East Corp and Brinkibon v Stahag Stahl applies: acceptance occurs when and where the communication is received by the offeror, not when it is sent. For emails, the 'receipt' rule applies, but what constitutes 'receipt' can be complex. The case of Thomas v BPE Solicitors suggests an email is received when it arrives on the recipient's server during normal office hours, even if unread.