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Rules of offer and acceptance. Rules of intention, legal capacity, specific contract terms, standard form contracts and exemption clauses. Free essay! Download now

Home > University > Business studies > Rules of offer and acceptance. Rules of intention, legal capacity, specific contract terms, standard form contracts and exemption clauses.

Rules of offer and acceptance. Rules of intention, legal capacity, specific contract terms, standard form contracts and exemption clauses.

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I have been asked to advise a client on considering contracting with a building company to build new head offices in the area. I will explain the rules of offer and acceptance. Rules of intention, legal capacity, specific contract terms, standard form contracts and exemption clauses.


An offer is a definite promise to be bound on specific terms. (BPP Common Law 1994)
The offer has to be specific in order to actually constitute an offer. For example in the case of Gunthing V Lynn 1831 the facts of the case were the offeror to pay a further sum for a horse if it was ‘lucky’. The offer was too vague so the judge said it was not specific enough to constitute an offer. It could constitute an offer if the offeror said that he/she would buy the horse if it wins the 2.30pm race at Oxford.

Invitation to treat
An invitation to treat is an indication that someone is prepared to receive offers with the view to forming a binding contract. It is not an offer in itself. (BPP Common Law 1994)
There are four types of an invitation to treat.
1. Auction sales
At an auction the bid itself is an offer and then the auctioneer can either accept or reject the offer. A good example of this is the case of Payne and Cave 1789, the defendant made the highest bid for the plaintiff's goods at an auction sale, but he withdrew his bid before the fall of the auctioneer's hammer. It was held that the defendant was not bound to purchase the goods. His bid amounted to an offer which he was entitled to withdraw at any time before the auctioneer signified acceptance by knocking down the hammer.
2. Advertisements
This is an attempt to induce offers and is therefore classified as an invitation to treat. A very good example of this is the case of Partridge V Crittenden 1968. Mr Partridge placed an advertisement for selling a protected species of bird in a magazine. Then RSPCA then brought a prosecution of the Birds Act 1953 but the case was quashed as Mr Partridge was not making an offer as it was the advertisement constituted an invitation to treat.
3. Exhibition of goods for sale
This is displaying goods in a shop such as Tesco etc. this constitutes inviting customers to make offers to purchases such items or invitation to treat. An example of this is the case of Fisher V Bell; a shopkeeper was prosecuted for offering for sale an offensive weapon by exhibiting a flick knife in his shop window. Displaying an item with a price in a shop window is an invitation to treat so he was inviting offers from potential buyers which the shopkeeper could either accept or reject the offer.
4. An invitation for tenders
A tender is an estimate submitted in response to a prior request. When a person tenders for a contract he is making an offer to the person who has advertised a contract as being available. An example would be if you wanted to borrow a loan you might obtain tenders from three different banks, you therefore receive three different offers and you then decide which one to accept.

An example of invitation to treat is if you see goods for sale in a shop window for far less then the usual retail price and go into the shop to make your purchase. The shopkeeper then tells you that she has made an error on the price; therefore there is no offer it’s merely an invitation to treat.

Offeror and offeree
An offeror is the negotiating because he controls the terms and conditions of the offer i.e. he controls the price and how long the offer stands.
An offeree is the person who is prepared to accept the offer.

Termination of an Offer
The way in which an offer can be terminated is if it is accepted, therefore creating an agreement. The diagram below shows how an offer can be terminated.

Death Rejection

Termination of offer

Failure of Revocation Lapse of time

(BPP Common Law 1)

An outright rejection can cancel an offer also a counter-offer terminates the original offer made. An example of this is the case of Hyde V Wrench 1840. Wrench offered to sell his farm for £1000. Hyde offered £950 (counter-offer) which Wrench rejected. A few days later Hyde said he would buy the farm for £1000. Wrench refused to sell and Hyde maintained that they had a contract. The counter-offer of £950 had rejected the original offer to sell of £100 so therefore the offer was rejected and there was no contract.

Lapse of time
An offer may be expressed to last for a certain period of time but if there is no express time limit set, it expires after a reasonable time. What is a reasonable time depends on the circumstances of the case. (BPP Common Law 1994) An example of this is the case of Ramsgate Victoria Hotel Company V Montefiore 1866. Montefiore applied to Ramsgate Victoria Hotel Company in June for shares and paid a deposit to the companies’ bank. At the end of November the company sent him a letter of acceptance of the allotment and requested payment of the balance due. Montefiore persevered that his offer had expired and could no longer be accepted. The offer was for a reasonable time only, so the offer had lapsed.

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