Offer and Acceptance

• Pages: 7-25

CHAPTER 2

OFFER AND ACCEPTANCE

The fi rst requirement of a binding contract is that the parties should have reached

agreement (a ‘ consensus ad idem ’). Normally, an agreement is made when one party

(the ‘offeror’) makes an offer to another (the ‘offeree’) which the offeree accepts. For

example, if R says to E in the presence of witnesses: ‘Will you buy my Suzuki car reg

no XF 2244 for $10,000?’, and E replies, ‘Yes, I will’, a contract comes into being. In such

a simple example, there is no diffi culty in identifying the offer and the acceptance, but

where the alleged agreement is preceded by protracted negotiations conducted in

lengthy correspondence, it may be diffi cult to discover a precise offer and acceptance.

In such a case, it would be necessary for the court to scrutinise the correspondence

carefully in order to decide whether or not there was a concluded agreement.

1

THE OFFER

An offer has been described as ‘an expression of willingness to contract on certain

terms made with the intention (actual or apparent) that it shall become binding as

soon as it is accepted by the person to whom it is addressed’.

2

An offer may be made to a particular individual or corporation, or to the world

at large. In the above example, the offer to sell a Suzuki car was clearly addressed to

an individual person, E, whereas an instance of an offer addressed to the world at

large is the well- known case of Carlill v Carbolic Smoke Ball Co, 3 where the defendants

offered by advertisement to pay £100 to any person who, having used their ‘smoke

ball’ in the prescribed manner, nevertheless caught infl uenza.

An offer may be made by express words (as in the above two examples), or it

may be implied from conduct; for example, where a bus travels along a certain route

there is an implied offer on the part of the bus company to carry passengers at the

published fares, and a contract is formed when a passenger boards the bus.

4

Supply of information

An offer must be distinguished from a mere supply of information, which is inca-

pable of being ‘accepted’ so as to ripen into a contract. The classic example is Harvey

v Facey , 5 a Jamaican case which eventually reached the Privy Council. In this case,

1 Perry v Suffi elds Ltd [1916] 2 Ch 187; A Mahabir and Sons Ltd v Caroni (1975) Ltd (2002) High Court,

Trinidad and Tobago, No S781 of 1997, unreported, per Tam J [Carilaw TT 2002 HC 35]. Speedy

Service Liquors Ltd v Airports Authority of Trinidad and Tobago (2002) High Court, Trinidad and

Tobago, Nos 586 and 936 of 1984, unreported [Carilaw TT 2002 HC 105] is an example of offer and

acceptance arising from an exchange of letters between the parties.

2 Treitel, Law of Contract , 12th edn (London: Sweet and Maxwell, 2007), para 2-002.

3 [1893] 1 QB 256

4 Wilkie v London Passenger Transport Board [1947] 1 All ER 258.

5 [1893] AC 552.

8 Commonwealth Caribbean Contract Law

the respondent was travelling on a train between Kingston and Porus when he

received a telegram from the appellant in the following terms: ‘Will you sell us

Bumper Hall Pen? Telegraph lowest cash price.’ The respondent replied by

telegram: ‘Lowest price for Bumper Hall Pen £900.’ The appellant replied: ‘We agree

to buy Bumper Hall Pen for £900 asked by you. Please send us your title deeds.’

Bumper Hall Pen was a plot of land, and the appellant claimed that a contract of sale

had been created by the exchange of telegrams. The Privy Council rejected the appel-

lant’s claim, reasoning that the fi rst telegram had asked two questions, (i) whether

the respondent was willing to sell, and (ii) as to the lowest price, and that the words

‘Telegraph lowest cash price’ referred only to the second question. Accordingly, the

respondent’s telegram in reply was not making an offer but merely supplying infor-

mation, and the third telegram constituted an offer by the appellant (notwithstanding

that the appellant had called it an ‘acceptance’) which had not been accepted by the

respondent. Lord Morris said:

6

The third telegram . . . treats the answer of LM Facey stating his lowest price as an

unconditional offer to sell to [the appellants] at the price named. Their Lordships cannot

treat the telegram from LM Facey stating his lowest price as binding him in any respect,

except to the extent it does by its terms, viz, the lowest price. Everything else is left open,

and the reply telegram from the appellants cannot be treated as an acceptance of an offer

to sell to them; it is an offer that required to be accepted by LM Facey. The contract could

only be completed if LM Facey had accepted the appellants’ last telegram.

Another example where the court found that there was no offer to sell but rather a

preliminary statement as to price is Clifton v Palumbo . 7 In this case, in which the

parties were negotiating the sale of an extensive area of land, C wrote to P: ‘I am

prepared to offer you or your nominee my Lytham estate for £600,000. I also agree

that a reasonable and suffi cient time shall be granted to you for the examination and

consideration of all the data and details necessary for the preparation of the Schedule

of Completion.’ It was held that these words did not amount to a defi nite offer to

sell but, especially in view of the large size of the estate, were to be interpreted as an

intimation of the price at which C was prepared to consider selling. Lord

Greene said:

8

There is nothing in the world to prevent an owner of an estate of this kind contracting to

sell it to a purchaser, who is prepared to spend so large a sum of money, on terms

written out on half a sheet of notepaper of the most informal description and even, if he

likes, on unfavourable conditions. But I think it legitimate, in approaching construction

of a document of this kind, containing phrases and expressions of doubtful signifi cance,

to bear in mind that the probability of parties entering into so large a transaction, and

binding themselves to a contract of this description couched in such terms, is remote. If

they have done it, they have done it, however unwise and however unbusinesslike it

may be. The question is, have they done it?

Harvey v Facey and Clifton v Palumbo were followed by the Jamaican Court of Appeal

in Barnett Ltd v Olasemo , 9 where, following discussions between the parties regarding

6 At 554.

7 [1944] 2 All ER 497.

8 At 499.

9 (1995) 32 JLR 284.