Essay: Contract law scenario (offer, acceptance, revocation)

The scenario raises the question of whether Sarah Jane has entered into a valid contract with Robert, whether she rightly revoked the offer following a further offer from another party and whether as a result of the circumstances outlined Robert has a claim for damages against Sarah Jane.
An offer is defined (Trietel) as an expression of willingness to contract on specified terms , made with the intention that it is to become binding as soon as it is accepted by the person to who it is addressed.
Terms must not be ambiguous as stated above, should the offeror not make clear as to the terms of the offer then this will be viewed as an invitation to treat , rather than a contractual offer.
Acceptance can be further tested by way of either unconditional acceptance of the terms laid out by the offeror or by way of a counter offer which requires acceptance by the other party before a valid contract can be formed.
Furthermore an offeror, under the doctrine of freedom of contract, has the right to revoke the offer in some cases and we will during the following presentation review whether Sarah Jane lawfully revoked the offer made to Robert .
We can see in the scenario that the offer presented by Sarah Jane makes clear her intention to sell the diamond ring for a figure in the region of £5,000.00.
Over the years the courts have held certain situations constitute invitations to treat rather than formal offers; for example, shop window display (Pim v Minister for Industry & Commerce), goods in a self service shop ( Pharmaceutical Society of Great Britain v Boots Cash Chemists) auction houses (Payne v Cave and Harris v Nickerson) and applications for tenders (Harvela v Royal Trust Company of Canada)
As heard in the case of Fisher V Bell [1961] 1 QB 394 a shopkeeper displayed a flick knife in his window. He was subsequently prosecuted under The Offence Weapons Act 1959 which prohibits the ‘offering for sale’ of various weapons including flick knives. The Prosecution failed as the court held that the shopkeepers display was in fact not a formal offer but an ‘invitation to treat’.
As the advertisement Sarah Jane places in the magazine does not specify the precise terms of the sale by asking for ‘or nearest offer’ her offer can be generally termed an ‘invitation to treat’. As a result of this Sarah Jane is merely inviting readers of the advertisement to make a counter offer for her product until such time both parties can agree terms.
From the scenario we can see that Robert responded to the terms of the invitation to treat by Sarah Jane by way of a counter offer of £4,500 which is then again counter offered, with imposed conditions by Sarah Jane for £4,750. Each counter offer presented represents new terms and as such varies the preceding offer which destroys the original offer, rendering it incapable of acceptance. Sarah Jane places conditions on her final offer requesting that acceptance should be received by no later than 5pm the following day. (Stevenson v McLean )
Later that day James also contacts Sarah Jane and makes an offer of £4,900, however Sarah Jane was out of office and the offer was left on her office voicemail to which on her return she calls James back to accept the offer, leaving a voicemail to do so. She follows this up with a letter to James accepting the offer at 3pm and then leaves the office for the day .
Robert, subject to the terms of the original offer, calls Sarah Jane back to accept the terms of the offer she originally made therefore complying with the conditional precedent of the terms .
We can see that whilst there have been two offers made, the issue at hand is which of the two have been formally accepted in the correct manner .
Acceptance is a final and unqualified expression of assent to the terms of the offer .
As Sarah Jane has provided Robert till 5pm to formally accept the terms of the contract, Robert strongly believes that Sarah Jane is bound by the terms of her original offer and this forms the basis of his claim for damages .
As Sarah Jane believes she has revoked the offer she has made, which she is entitled to do under the freedom of contract , the issue is whether she revoked the offer in a legal manner and whether her letter posted at 3pm formally revokes the offer which was also accepted by way of voicemail by Robert at the same time.
In Routledge v Grant (1828) 4 Bing 653 we can see that Grant offered his house for sale on the understanding that the offer would remain open for six weeks only, which he then proceeded to take off the market prior to the expiration of the six weeks. The court held that his actions were legitimate because at the time of revocation there had been no formal acceptance .
In turn the general rule is that for acceptance to be valid it must be communicated to the offeror .
What lies in question is whether Roberts voicemail of acceptance can be held as formal acceptance, and whether Sarah Janes revocation can be held as legal revocation .
As silence cannot amount to acceptance we must review whether Roberts voicemail at 3pm was communicated clearly to the offeror (Sarah Jane).
In Entores v Miles Far East Corporation [1955] 2 QB 327 Lord Denning explained the principle of communication as follows;
…..If he wishes to make a contract, he must wait until the aircraft is gone, then shout back his acceptance so that I can hear what he says. Not until I have his answer am I bound….
The use of telephone does in fact meet the instantaneous manor required, and it was communicated during office hours, however as Sarah Jane was not available and Robert subsequently left a voicemail we look towards Brinkibon Ltd v Stahag Stahl [1983] AC 34 in which the circumstances held in the House of Lords that the acceptance could only be effective and the contract formed once the office was re-opened.
As Sarah Jane did not stipulate the manner in which Robert should accept her offer then acceptance can generally be in any form as long as it is communicated to the offeror . As heard above Roberts voicemail does not constitute acceptance of the offer as he would be aware immediately that his acceptance was not successful, contrary to the postal rule. Consequentially no contract was formed by way of his voicemail .
Had Robert posted his acceptance, in a similar manner in which Sarah Jane had accepted James offer then we would be able to apply the postal rule however he chose not to use this method and this become a moot point .
Whilst in the previous slide we have identified that no formal contract was formed on the basis of Roberts acceptance, we must look further to the potential of Sarah Janes actions in revoking the offer made to Robert.
As previously noted, an offeror has a right to revoke an offer prior to acceptance Routledge v Grant. However in order for the withdrawal must again be communicated to the offeree and within revocation this is critical so as not to unfairly treat them. Byrne v van Tienhoven .
As Sarah Jane posted her letter prior to the acceptance by Robert she has exercised her right to revoke her original offer as she had at this stage not clearly received formal acceptance from him however as Robert had yet to receive the notice of revocation the revocation would not be deemed valid.
Her following letter to James accepting the offer, using the postal rule application, where if acceptance is posted acceptance is complete the moment the letter is placed in the box, constituted a formal acceptance and as a result a contract was formed with James.
This was first set out in the case of Adams v Lindsell whereby it was held that acceptance by post, as long as the letter was properly stamped and addressed as extended in London and Northern Rock Bank, ex parte Jones [1900 ] 1 Ch 220, was effective from time of posting to counteract any possible injustices that could be caused by delays in the postal service.
The fact that Sarah Jane implied a contract formation with Robert by way of keeping the offer open is immaterial as Robert did not support his intention to contract by way of consideration, as a result Sarah Jane was entitled to revoke her offer which she subsequently did, however in terms of this scenario this would be disregarded as Robert had not received the notice of revocation from Sarah Jane or as per the general rule “brought to the mind of”.
So whilst legally Sarah Jane had not formally revoked the offer, Robert had yet to accept, and therefore bind Sarah Jane in contract.
Had Robert communicated his acceptance by way of post, or Sarah Jane had in fact answered the telephone rather than Roberts acceptance being received by way of voicemail in her absence, then the contract would have been formed and Robert would have been entitled to damages .