Contract | Formation
Offer: Termination
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Introduction
There are a number of situations when an offer may be terminated or a party purports to do so. An offer may be terminated by: revocation or withdrawal of the offer by the offeror, rejection by the offeree, lapse of time or occurrence of conditions.
Revocation
The general rule is that an offer may be withdrawn any time prior to acceptance but once it has been accepted it becomes irrevocable.
Routledge v Grant (1828) 4 Bing 653
Facts:
The defendant offered to buy the plaintiff's house for a specific price with a definite answer to be given within six weeks
.
Issue:
Was the defendant bound to keep the offer open for the six weeks or could he withdraw the offer at any time if it had not been accepted.
Held:
The court found that the defendant was not bound to keep the offer open.
Best CJ: .. if six weeks are given on one side to accept an offer, the other has six weeks to put an end to it. One party cannot be bound without the other...
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Consideration
A promise to keep an offer open for a specified time is usually not binding, so long as the offer has not been accepted. However, exceptions may apply if consideration is given for the offer.
Mountford v Scott [1975] 1 All ER 198
Facts:
The plaintiff paid £1 for the option to buy the defendant's house for £10000, within six months.
The defendant attempted to revoke the offer before the end of the six months.
Issue:
Could the defendant revoke the offer?
Held:
The court found that the offer was irrevocable within the six month period . The plaintiff had given consideration (paying nominal £1) for the offeror's promise to keep the offer open for six months.
Communication
The revocation of an offer must be communicated by the offeror to the offeree.
Byrne & Co. v Van Tienhoven & Co. (1880) 5 CPD 344
Facts:
On 1 October, the defendants, based in the UK, posted a letter to New York offering to sell the plaintiffs 1000 boxes of tinplates.
On 11 October, the plaintiffs received the letter and immediately accepted by telegram.
On 8 October, the defendants, wrote a letter to revoke their offer, which the plaintiffs eventually received on 20 October.
Issue:
When was the offer revoked?
Held:
The court found that there was a binding contract, as revocation only takes effect on communication. The offer was still valid on 11 October when the plaintiffs accepted by telegram. The acceptance occurred nine days before the revocation was communicated (received by the plaintiff).
There are some exceptions where communication is effective without the offeree necessarily realising the offer has been revoked: if notice of withdrawal is sent to the offeree's last known address (if he has moved without telling the offeror) or if the offeree receives notification but decides not to read it.
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Public offers
Communicating revocation of offers made to the public at large may be more difficult. The question of whether the communication is sufficient to constitute a withdrawal arises.
Shuey v United States (1875) 92 US 73
Facts:
An American case which not binding in the UK.
On 25 April 1865, the defendant published a proclamation of a reward in exchange for information leading to the arrest of the assassin of President Lincoln.
On 24 November 1865, a notice was published revoking the offer.
In April 1866, the claimant provided information, not knowing that the offer had been revoked.
Issue:
Was the 24 November notice sufficint to revoke the offer?
Held:
There had been a revocation of the offer and therefore no binding contract existed.
Strong J:
It is not to be doubted that the offer was revocable at any time before it was accepted, and before any thing had been done in reliance upon it. There was no contract until its terms were complied with. Like any other offer of a contract, it might, therefore, be withdrawn before rights had accrued under it; and it was withdrawn through the same channel in which it was made. The same notoriety was given to the revocation that was given to the offer; and the findings of fact do not show that any information was given by the claimant, or that he did any thing to entitle him to the reward offered, until five months after the offer had been withdrawn...
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Business hours
If a revocation is sent during normal office hours the question of when it is effective arises. If it is sent instantaneously, for example by email, whether it is communicated once it has been received or actually read by the recipient.
The determination depends on the reasonable expectations of the sender.
The Brimnes [1975] QB 929
Facts:
The defendants hired a ship from the plaintiff.
The plaintiff sent a message by Telex, withdrawing the ship from service, during normal office hours, on 2 April. The defendants did not read the telex until 3 April.
Issue:
When did the withdrawal occur?
Held:
As the notice of withdrawal had been sent during ordinary business hours it could be regarded as being communicated. Therefore, an effective revocation had occurred.
Megaw LJ:
I think the principle which is relevant is this: if a notice arrives at the address of the person to be notified, at such a time and by such a means of communication that it would in the normal course of business come to the attention of that person on its arrival, that person cannot rely on some failure of himself or his servants to act in a normal businesslike manner in respect of taking cognisance of the communication, so as to postpone the effective time of the notice until some later time when it in fact came to his attention...
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Third party
The offeree must decide whether the source is reliable, it seems to be an objective determination: whether a reasonable man would regard the informant reliable.
Dickinson v Dodds (1876) 2 Ch D 463
Facts:
On 10 June, the defendant offered to sell a house to the plaintiff. The defendant stated:
this offer remains open until 9.00am on 12 June
.The plaintiff decided to accept on 11 June but did not communicate his acceptance to the defendant immediately.
Later on 11 June, the plaintiff was informed by a third party that the defendant had sold the property to another person. The third party was known to the plaintiff and he knew that he could rely upon his statement.
The plaintiff then purported to accept the offer. The defendant replied that it was too late and that the property had already been sold.
Issue:
Can an offer be revoked through a third party?
Held:
The revocation may be communicated by a reliable third party.
James LJ: .
. in this case, beyond all question, the plaintiff 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...
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Unilateral contracts
The issue of revocation of unilateral contracts depends on when the promise is deemed to have been accepted.
Professor Treitel gives the example of an offer of £100 if you walk from London to York. Do you accept this offer when you first start the walk or when you actually arrive at York? ( Law of Contract).
There is much debate whether partial performance of a unilateral contract is sufficient to prevent revocation. It has been argued that if the offeror could withdraw the offer before completion it would be unfair. Using Treital's example, a revocation of the offer when the other party was only 3 miles from York seems unjust.
McGovney, an American scholar, suggested that there are two separate offers in the offeror's statement in a unilateral contract: an express offer to pay on the performance of the act and also an implied offer not to revoke if the offeree begins the task within a reasonable time. Therefore, commencement of the performance of the task is both acceptance and consideration for of the implied offer (27 Harvard Law Review 644).
Case law suggests that an offer for a unilateral contract cannot be revoked once the offeree has commenced performance.
Errington v Errington and Woods [1952] 1 KB 290
Facts:
A Father bought a house for his son and daughter in law. He stated that he would transfer the title to them once they had completely repaid the mortgage, by paying in weekly instalments.
The father died before they completely paid off the mortgage. His widow then sued for the house.
Issue:
Could the offer be revoked?
Held:
A unilateral contract existed because the father made an offer without requiring a promise in return. The couple had commenced repayment in instalments. The father's promise was irrevocable as long as the couple continued to pay the mortgage instalments.
Denning LJ: .. the father expressly promised the couple that the property should belong to them as soon as the mortgage was paid, and impliedly promised that so long as they paid the instalments to the building society they should be allowed to remain in possession...
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Rejection
Acceptance must be to the exact terms of an offer for a contract to be binding. If a response to an offer suggests different terms it is known as a counter offer
, not acceptance.
A counter offer is an implied rejection of the original offer. The original offer cannot be revived by the offeree and accepted.
Hyde v Wrench [1840] EWHC Ch J90
Facts:
The defendant offered to sell his farm to the plaintiff for £1200, the plaintiff declined.
On 6 June, the defendant wrote to the plaintiff's agent offering to sell the farm for £1000, stating that it was his final offer.
On 8 June, the plaintiff wrote to the defendant offering £950. On 27 June, the defendant refused to accept.
On 29 June, the plaintiff agreed to buy the farm for £1000, the defendant refused.
Issue:
Could the plaintiff accept a previous offer?
Held:
Lord Langdale: I think there exists no valid binding contract between the parties for the purchase of the property. The defendant offered to sell it for £1000, and if that had been at once unconditionally accepted, there would undoubtedly have been a perfect binding contract; instead of that, the plaintiff made an offer of his own, to purchase the property for £950, and he thereby rejected the offer previously made by the defendant. I think that it was not afterwards competent for him to revive the proposal of the defendant, by tendering an acceptance of it; and that, therefore, there exists no obligation of any sort between the parties...
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A query over payment method, not the price, does not constitute a counter offer and there is no implied rejection of the offer. The offeror's response may determine whether the offeror decides to accept the offer.
Stevenson, Jacques & Co. v McLean (1880) 5 QBD 346
Facts:
The defendant offered to sell the plaintiff iron for 40s, net cash, open till Monday
.
On Monday morning, the plaintiff sent a telegram: Please wire whether you would accept forty for delivery over two months, or if not, longest limit you would give
.
The defendant did not respond to the telegram. The defendant sold to another party and did not inform the plaintiff.
On Monday afternoon, the plaintiff sent a telegram stating he accepted the offer.
Issue:
Had the palintiff rejected the offer, meaning that there was binding agreement?
Held:
The plaintiff was making a mere query
. Therefore, the offer was still valid and could be accepted.
Lush J: It is not 'I offer forty for delivery over two months' which would have likened the case to Hyde v. Wrench... Here there is no counter proposal... There is nothing specific by way of offer or rejection...
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Lapse of time
An offer may lapse after time.
Routledge v Grant (1828) 4 Bing 653
Held:
If there is an express condition that the offer is only available for six weeks, this period the offer lapses.
An offer without an express time limit will lapse after a reasonable time.
Quenerduaine v Cole (1883) 32 WR 185
Facts:
The defendant made an offer by telegram which the plaintiff purported to accept by letter.
Issue:
Was it reasonable to respond by letter when the offer was made by telegram?
Held:
The court found that an offer which was made by telegram (instantaneous), implied that an equally quick acceptance was required.
Ramsgate Victoria Hotel Ltd v Monte Fiori (1866) LR 1 Ex 109
Facts:
The plaintiff purported to accept the defendant's offer to sell shares five months after the offer was made.
Issue:
Was the acceptance too late?
Held:
The court found that a five month delay had made the offer ineffective.
Failure to meet a condition
An offer can be conditional and if a condition is not met, the offer cannot be accepted.
A condition may be express or implied.
Financings Ltd v Stimson [1962] 3 All ER 386
Facts:
The case involved the purchase of a second hand car on hire purchase terms.
Issue:
Can conditions be implied?
Held:
Dovovan LJ: Who would offer to purchase a car on terms that if it were severely damaged before the offer was accepted, he, the offeror, would pay the bill?... There must be an implied term that, until acceptance, the goods would remain in substantially the same state as at the date of the offer...
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