Keenan and Riches’BUSINESS LAW

Chapter 7Introduction to the law of contract

Sometimes it is difficult to decide whether the offeree

is making a counter-offer or simply asking for more

information about the offer. A request for more infor-

mation will not reject the offer.

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Cliftonv Palumbo(1944)

In the course of negotiations for the sale of a large estate,

the claimant wrote to the defendant: ‘I am prepared to

offer my Lytham estate for £600,000. I also agree that

sufficient time shall be given to you to complete a sched-

ule of completion.’ The Court of Appeal held that these

words did not amount to a firm offer to sell, but rather a

preliminary statement as to price.

Gibsonv Manchester City Council(1979)

In 1970 the Council adopted a policy of selling its council

houses to tenants. The City Treasurer wrote to Mr Gibson

in February 1971 stating that the council ‘may be pre-

pared to sell’ the freehold of his house to him at a discount

price. The letter invited Mr Gibson to make a formal

application which he duly did. In May 1971 control of the

council passed from the Conservatives to Labour and the

policy of selling council houses was reversed. Only legally

binding transactions were allowed to proceed. The coun-

cil did not proceed with Mr Gibson’s application. The

House of Lords held that the City Treasurer’s letter was

an invitation to treat and not an offer to sell. Mr Gibson’s

application was the offer and, as this had not been ac-

cepted by the council, a binding contract had not been

formed.

Hydev Wrench(1840)

Wrench offered to sell his farm to Hyde for £1,000. Hyde

replied with a ‘counter-offer’ of £950, which was refused.

Hyde then said that he was prepared to meet the original

offer of £1,000. It was held that no contract had been

formed. The ‘counter-offer’ of £950 had the effect of

rejecting Wrench’s original offer.

Termination of the offer

An offer can end in a number of ways:

1 By acceptance. An offer which has been accepted
constitutes a contract. That offer is no longer available
for acceptance.

2 By rejection.An offer is rejected if:

■the offeree notifies the offeror that he does not wish
to accept the offer;
■the offeree attempts to accept subject to certain
conditions;
■the offeree makes a counter-offer.

Stevensonv McLean(1880)

The defendant offered to sell a quantity of iron to the

claimants for cash. The claimants asked whether they

could have credit terms. When no reply to their enquiry

was forthcoming, the claimants accepted the terms of

the original offer. Meanwhile, the defendant had sold the

iron elsewhere. It was held that the enquiry was a request

for more information, not a rejection of the offer. The

defendant was liable for breach of contract.

3 By revocation before acceptance.An offer may be

revoked (withdrawn) at any time before acceptance but

it will only be effective when the offeree learns about it.

Byrnev Van Tienhoven(1880)

The defendants posted a letter in Cardiff on 1 October

to the claimants in New York, offering to sell them 1,000

boxes of tinplates. On 8 October the defendants posted

a letter withdrawing the offer, which was received by the

claimants on 20 October. However, on 11 October the

claimants telegraphed their acceptance which they con-

firmed by letter posted on 15 October. It was held that a

revocation takes effect only when communicated to the

offeree. The contract in this case came into existence

when the defendants’ offer was accepted by the claimants

on 11 October. The letter of revocation was ineffective

as it was received after the acceptance was complete.

Dickinsonv Dodds(1876)

The defendant, on Wednesday, offered to sell some prop-

erty to the claimant, the offer to be left open until 9 am,

Friday. On Thursday, the claimant heard from a Mr Berry

that the defendant had sold the property to someone

else. Nevertheless, the claimant wrote a letter of accept-

ance which was handed to the defendant at 7 am on

the Friday morning. The Court of Appeal held that as the

claimant had heard about the revocation from Berry,

who was a reliable source, the offer was no longer avail-

able for acceptance. No contract had been formed.

It is not necessary that the offeror himself should tell

the offeree that the offer has been revoked; the informa-

tion may be conveyed by a reliable third party.