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Most contracts are bilateral. This means that each party takes on
an obligation, usually by promising the other something – for
example, Ann promises to sell something
and Ben to buy it. (Although contracts where there are mutual
obligations are always called bilateral, there may in fact be more
than two parties to such a contract.)
By contrast, a unilateral contract arises where only one party
assumes an obligation under the contract. Examples might be
promising to give your mother £50 if she gives up smoking for a
year, or to pay a £100 reward to anyone who finds your lost
purse, or, as the court suggested in Great Northern Railway Co v
Witham (1873), to pay someone £100 to walk from London to
York.
What makes these situations unilateral contracts is that only one
party has assumed an obligation
– you are obliged to pay your mother if she gives up smoking, but
she has not promised in turn to give up smoking. Similarly, you
are obliged to pay the reward to anyone who finds your purse,
but nobody need actually have undertaken to do so.
A common example of a unilateral contract is that between
estate agents and people trying to sell their houses – the seller
promises to pay a specified percentage of the house price to the
estate agent if the house is sold, but the estate agent is not
required to promise in return to sell the house, or even to try to
do so.
.1 Character of an offer
An offer has been described as an unconditional statement of a
person’s intention to be bound by the terms of the offer made
and thus the intention to contract with the other person.
Hence an offer is an expression of willingness to be bound by
certain terms.
The person making an offer is called the offeror, and the person
to whom the offer is made is called the offeree
Treitel – Definition of offer
‘an expression of willingness to contract on certain terms, made
with the intention that it shall become binding as soon as it is
accepted by the person to whom it is addressed’.
f) Lots at an auction
The rule in fact derives from auctions. The lot is the invitation to
make a bid. Bidding is an offer to buy, and the acceptance is the
fall of the auctioneer’s hammer at which point the contract is
formed. The contract is formed between the highest bidder and
the owner of the goods. The auctioneer is merely acting on behalf
of the owner of the goods.The consequence of this is that there is
an absolute entitlement to withdraw any lot prior to the fall of
the auctioneer’s hammer. This is no more than an example of the
rule that an offer can be withdrawn any time prior to acceptance
Key case: Harris v Nickerson (1873) LR 8 QB 286
The claimant attended an auction hoping to buy some furniture
that was advertised in the auction catalogue. The auctioneer
withdrew the items from sale and the claimant
sued unsuccessfully for the cost of travel and lodgings.
The court held that the presence of the goods in the catalogue
was no more than an invitation to treat, and that there was no
contract since this could only be formed on the fall of the
auctioneer’s hammer.
Key case: British Car Auctions v Wright (1972)
A prosecution for offering to sell an unroadworthy vehicle failed.
At the auction there was no offer to sell, only an invitation to bid.
Automated machines
posed an interesting question for the court in Thornton v Shoe
Lane Parking [1971] 2 QB 163. The court ruled that the
operation of an automatic machine is considered an offer. The
reasoning behind this was mainly based on the inability of the
machine to negotiate with the customer and they cannot reject a
customer.
2.4 Acceptance
2.4.1 The role of acceptance in agreement
1 A contract is not formed until an offer is accepted.
2 An agreement occurs when a ‘valid’ acceptance follows a ‘valid’
offer, and the contract is formed immediately on acceptance.
3 It is vital to establish that the response to the offer is in fact an
acceptance and is properly communicated to the offeror.
4 However, not all negotiations are easily identifiable as offer
and acceptance,
particularly negotiations in a commercial context.
7 This may not result if the parties are not interested in ancillary
terms
and have overlooked the discrepancy in terms (Brogden v
Metropolitan
Railway Co (1877)).
Key case: Brogden v Metropolitan Railway Co (1877) 2 App Cas
666
The parties had a long-standing informal arrangement for
supply of coal. They then decided to make it formal and a draft
contract was sent to Brogden by the Railway
Company. Brogden inserted the name of an arbitrator into a
section left blank for that purpose, signed it and returned it. The
Railway Company secretary signed it without looking at it.
Brogden continued to supply coal and was paid for deliveries.
After some conflict over other matters Brogden tried to avoid his
obligations, arguing that there was no contract because of a
counter offer by the Railway Company, which then sued. The
court accepted that technically the insertion of the arbitrator’s
name was a counter offer, but held that this had no real effect as
coal was still supplied and paid for. The parties had accepted the
counter offer as part of the agreement and the contract was
valid.
Postal rule
7 In one situation the acceptance takes place before the offeror
receives notification of it – this is the ‘postal rule’.
a) Where use of the post is the normal, anticipated method
of acceptance, the acceptance is valid and the contract
formed when the letter is posted, not when it is received
by the offeror (Adams v Lindsell (1818)).
Key case: Adams v Lindsell
The postal rule was laid down in Adams v Lindsell (1818). On 2
September 1817, the defendants wrote to the claimants, who
processed wool, offering to sell them a quantity of sheep fleeces,
and stating that they required an answer ‘in course of post’.
Unfortunately, the defendants did not address the letter
correctly, and as a result it did not reach the claimants until the
evening of 5 September. The claimants posted their acceptance
the same evening, and it reached the defendants on 9 September.
It appeared that if the original letter had been correctly
addressed, the defendants could have expected a reply ‘in course
of post’ by 7 September. That date came and went, and they had
heard nothing from the claimants, so on 8 September they sold
the wool to a third party. The issue in the case was whether a
contract had been made before the sale to the third party on 8
September. The court held that a contract was concluded as soon
as the acceptance was posted, so that the defendants were bound
from the evening of 5 September, and had therefore breached the
contract by selling the wool to the third party. (Under current
law there would have been a contract even without the postal
rule, because the revocation of the offer could only take effect if
it was communicated to the offeree – selling the wool to a third
party without notifying the claimants would not amount to
revocation. However, in 1818 the rules on revocation were not
fully developed, so the court may well have considered that the
sale was sufficient to revoke
the offer, which was why an effective acceptance would have to
take place before 8 September.)
Legal Principle: An acceptance by post takes effect when it is
posted, rather than when it is communicated.
Revision Acceptance
• What rules do you think courts should adopt for
communication by fax or email?
• What reasons have been given by the courts for the postal
acceptance rule?
• In what circumstances will the postal acceptance rules not
operate?
• When, if ever, can an offeror waive the need for
communication?