CHAPTER 4
At the end of the sixth sentence in 4.1 insert the following:
It can be noted that, in ascertaining whether a contract has been made during the course of negotiations, be they in writing or oral, a court will look at the whole course of those negotiations: Hussey v Horne-Payne (1878) 4 App Cas 311 at 316; Global Asset Capital, Inc v Aabar Block SARL [2017] EWCA Civ 37 at [29]-[31]. However, once it is established that a contract has been entered into, any further negotiations between the parties cannot alter or end the contract unless agreed to by all the parties to it: Perry v Suffields [1916] 2 Ch 187 at 192.
At the end of 4.1 add the following:
The requirement of objectivity was, after ‘a brief but almost inconsequential flirtation with subjective approaches in the mid-nineteenth century’,[1] famously stated by Blackburn J in Smith v Hughes (1871) LR 6 QB 597 at 607, as follows:
I apprehend that if one of the parties intends to make a contract on one set of terms, and the other intends to make a contract on another set of terms, or, as it is sometimes expressed, if the parties are not ad idem, there is no contract, unless the circumstances are such as to preclude one of the parties from denying that he has agreed to the terms of the other … If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.
At the end of 4.3 add the following:
For an agreement to arise pursuant to the process of offer and acceptance, the ‘offer and acceptance must precisely correspond’ and ‘any departure by the acceptance from the terms of the offer results in the purported acceptance being ineffective: Redowood Pty Ltd v Mongoose Pty Ltd [2005] NSWCA 32 at [66].
At the end of 4.5 add the following:
Thus, as was pointed out by McPherson JA in Hyatt Australia Ltd v LTCB Australia Ltd [1996] 1 Qd R 260 at 264,
The words ‘offer’ and ‘acceptance’ are, however, simply useful labels designating successive bilateral promises which, taken together, give rise to an enforceable agreement. The practice of analysing contracts into offer and acceptance is simply one of convenience, and, provided in the end their terms precisely correspond, it is in law immaterial which of the two promises comes first. Indeed, in the case of forming a contract the sequence may often be reversed, as when the acceptance is conditional, and so becomes a counter-offer itself capable of acceptance by a further promise on the other side.
At the end of 4.12 add the following:
In relation to whether there is an offer or invitation to treat, in Mealey v Power [2015] NSWSC 1678 at [1], Pembroke J said:
The … question [in this case] is whether, in the context of communications between [the parties], a statement by one [party] should be properly characterised as an offer, or whether that communication, when properly characterised in its context, was more in the nature of an invitation seeking to elicit a higher offer from the other party. The legal principles are well-established. In determining a question as to whether an agreement has come into existence, the Court seeks to ascertain the objective intention of the parties, being: The intention that a reasonable person with knowledge of the words and actions of the parties communicated to each other and the knowledge that the parties have of the surrounding circumstances would conclude that the parties have concerning the subject matter of the alleged contract.
At the end of 4.12 add the following:
In Re Webster (1975) 132 CLR 270, Barwick CJ said:
There is a radical distinction drawn in the law of contracts between the mere quotation of a price and an offer to sell and deliver. If a person merely inquires of a man what price he is either selling or willing to sell a commodity and the inquisitor is informed of that price, this quotation may not, and in general will not, constitute an offer which is capable of acceptance so as to form a binding contract upon the person making the quotation to sell and deliver, or upon the inquisitor to accept what is delivered. The quotation will be no more than an offer to treat. This will be so, even if the inquisitor treated the quotation as an offer and purported to accept it.
In 4.57 delete the first sentence and replace with the following:
In relation to situations not involving options or equitable estoppel, the revocation of an offer must be communicated to the offeree (Financings Ltd v Stimson [1962] 3 All ER 386; CF Asset Finance Ltd v Okonji [2014] EWCA Civ 870 at [17]) or to an agent authorised by the offeree to receive such a communication: IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205 at [2].
Delete 4.72 and replace with the following:
4.72 The death of the offeror before the acceptance of the offer will result in the lapse of the offer if the offeree is aware of the death: Fong v Cilli (1968) 11 FLR 495 at 498. Whether an offer will lapse in circumstances where the offeree does not know of the offeror’s death will ‘depend upon the type of contract involved and the intention of the offeror assessed objectively’: Smith v Wood [2014] VSC 646 at [20]. Thus, if the offer related to the performance of personal services, the death of the offeror would presumably terminate the offer. However, if the contract could be performed by the deceased offeror’s legal personal representative, it could be that the offer can be accepted notwithstanding the offeror’s death. An example of such a case would be an offer to sell land.
Delete 4.76 and replace with the following:
For an offer to be accepted, the offeree’s acceptance must have been in reliance on, and in response to, the offer: R v Clarke (1927) 40 CLR 227 at 231. This means that the offeree must have had knowledge of the offer. Knowledge of the offer gives rise to a presumption that an acceptance of the offer was in reliance upon the offer. However, this presumption can be rebutted by evidence to the contrary, as occurred in R v Clarke.
The principle here emerged from nineteenth century cases in England dealing with offers of rewards in relation to criminal offences. English courts were keen to allow claimants who satisfied the terms of the reward offer to claim the reward. In this respect, Lobban observes as follows:
In the absence of an organized police force and with no system of public prosecution, this was a vital form of crime detection in early nineteenth-century England. Court were keen for rewards to be paid where appropriate, since it encouraged the discovery of crimes … [C]ourts were not generally interested in asking whether the claimant had accepted an offer. Nor did the courts look at the motives of the claimant, but rather asked whether the requested action had been performed: Michael Lobban, ‘Contracts’ in Sir John Baker (Gen Ed), The Oxford History of the Laws of England, Volume XII, 1820-1914, Private Law, Oxford University Press, Oxford, 2010, p 349.
Lobban then concludes that ‘English courts throughout the century remained content to give rewards to those who supplied the information in ignorance of the offer’: Michael Lobban, ‘Contracts’ in Sir John Baker (Gen Ed), The Oxford History of the Laws of England, Volume XII, 1820-1914, Private Law, Oxford University Press, Oxford, 2010, p 351.
At the end of the first sentence in 4.85 insert the following:
Whether there has been an acceptance in such cases is not always an easy matter to determine. In this respect, in Quadling v Robinson (1976) 137 CLR 192 at 201, Gibbs J said:
[It] is not always easy to determine whether the purported exercise of an option should be understood as attempting to vary the terms of the option or as intending to accept its terms without modification, notwithstanding that they have been misdescribed, or notwithstanding that the grantee of the option may have indicated that he intends to perform the contract in a manner for which the terms of the option do not provide … It must of course depend upon the proper construction of the document by which the grantee purports to exercise an option whether it amounts to an absolute and unqualified acceptance of the rights and liabilities conditionally created by the option.
At the end of 4.85 add the following:
It is not sufficient that the conduct is merely consistent with the alleged contract - there needs to be a positive indication that the conduct is evidence of the contract alleged: Industrial Rollformers Pty Ltd v Ingersoll-Rand Australia Ltd [2001] NSWCA 111 at [142]; Kriketos v Livschitz [2009] NSWCA 96 at [117]-[120]. Thus, in CMA Assets Pty Ltd Formerly Known as CMA Contracting Pty Ltd v John Holland Pty Ltd (No 6) [2015] WASC 217 at [695], Allanson J said:
A contract will only be inferred ‘if it can be stated with some confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding’: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at 525 The conduct relied on must point to the existence of the particular contract in the terms alleged in the proceedings.
At the end of 4.86 add the following:
In relation to the decision in this case, in Laidlaw Hillier Hewitt Elsley Pty Ltd at [5], Macfarlan JA said:
The decision of the House of Lords in Brogden v Metropolitan Railway Co establishes that the conduct of parties may give rise to a contract. It was made clear however that the character and circumstances of the conduct must indicate unambiguously that the parties intended to contract. For example the Lord Chancellor [at 678] said about the conduct in question in that case that ‘no explanation can be given of it unless it refers to the contract in question’ and, [680], that the conduct was ‘referable in my mind only to the contract’. Lord Hatherley spoke in similar terms about the conduct: ‘It does establish a course of action on the part of the Plaintiffs of such a character as necessarily to lead to the inference on the part of the Defendants that the agreement had been accepted on the part of the Plaintiffs, and was to be acted upon by them; and they did act upon it accordingly’. Likewise, Lord Selborne [at 689] said that ‘it appears to me that every single circumstance points quite unequivocally to this agreement’.
At the end of 4.90 add the following:
In any litigation on the issue of whether there is a contract by conduct, evidence of post-contractual conduct is admissible: see 12.67. For such conduct ‘to amount to implied acceptance of an offer it must be of such a character as necessarily to lead to the inference on the part of one party that the agreement had been accepted on the part of the other and was to be acted upon by them’: Eccles v Koolan Iron Ore Pty Ltd (No 3) [2013] WASC 418 at [76].
In 4.94 delete the first sentence and replace with the following:
As a general rule an acceptance is only effective once it has been communicated to the offeror (Tinn v Hoffman & Co (1873) 29 LT 271 at 278), or to the offer’s agent, that is, a person who has the authority of the offeror to accept communication of the acceptance as agent on behalf of the offeror: David Walker v Salomon Smith Barney Securities Pty Limited [2003] FCA 1099 at [167].
At the end of 4.103 add the following:
In relation to the justification for the postal acceptance rule, in Household Fire & Accident Insurance Company (Limited) v Grant (1879) LR 4 Ex D 216 at 223, Thesiger LJ said that the rule ‘may in some cases lead to inconvenience and hardship’, but he thought that ‘such there must be at times in every view of the law’ and he was not prepared to concede that the rule would ‘lead to any great or general inconvenience or hardship’. His Lordship, at 223-4, noted that an offeror can always specify that actual communication is required or ‘[i]f he trusts to the post he trusts to a means of communication which, as a rule, does not fail, and if no answer to his offer is received by him, and the matter is of importance to him, he can make inquiries of the person to whom his offer was addressed’. Finally, as a prelude to his conclusion that the ‘balance of conveniences and inconveniences’ favoured a postal acceptance rule, Thesiger LJ, at 224, said:
On the other hand, if the contract is not finally concluded, except in the event of the acceptance actually reaching the offeror, the door would be opened to the perpetration of much fraud, and, putting aside this consideration, considerable delay in commercial transactions, in which despatch is, as a rule, of the greatest consequence, would be occasioned; for the acceptor would never be entirely safe in acting upon his acceptance until he had received notice that his letter of acceptance had reached its destination.
In Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34 at 41, Lord Wilberforce said:
The rationale for it … has … been well explained. Mellish LJ in [Harris’ Case] ascribed it to the extraordinary and mischievous consequences which would follow if it were held that an offer might be revoked at any time until the letter accepting it had been actually received: and its foundation in convenience was restated by Thesiger LJ in Household Fire and Carriage Accident Insurance Co Ltd v Grant …
Lord Brandon of Oakbrook, at 48, said:
The reason for the exception [to the general rule requiring actual communication] is commercial expediency … That reason of commercial expediency applies to cases where there is bound to be a substantial interval between the time when the acceptance is sent and the time when it is received. In such cases the exception to the general rule is more convenient, and makes on the whole for greater fairness, than the general rule itself would do.