Similarly, the statement by Astonia PLC that the ‘best offer received…. Will secure the machine,’ is an undertaking to sell to the highest bidder as in the case of Harvela Investments Ltd v. Royal Trust of Canada 1985, and therefore Astonia PLC have become the offerors as opposed to an inviting tenders as in Spencer v Harding 1870, and being the offeree. The offer is a unilateral contract, with the condition of the offer being the submission of the highest tender, which will be accepted by one the local companies through the highest tender submitted. This in turn would be followed by a bilateral contract to sell the widget machine to that particular company.
In order to establish with which of the companies Astonia PLC may have a binding agreement with it is important to examine each of the tenders submitted. Trimex PLC sent a fax that stipulated a tender of £5000, if the machine is a 5XL. As we have already established above the offer was made by Astonia PLC, to which acceptance must be unconditional, the acceptance must accept the terms of the offer, otherwise it would amount to a rejection of the original offer and be a counter offer as was held in the case of Hyde v. Wrench 1840, where a defendant offered to sell his farm to the plaintiff’s for £1000, which the plaintiff responded to by offering to buy it for £950, which the defendant’s rejected and the plaintiff tried to acquire the farm for the original offer of £1000. The court held that the plaintiff’s had rejected the defendants offer when they made their own counter offer. As such it could be said that Trimex PLC made a counter offer with their £5000 tender, which rejected Astonia’s offer.
This leaves the bid of £3000, which due to a transmission error has been communicated, as £300 to Astonia PLC. This raises an issue as to who is responsible for the transmission error? It would depend on why the error occurred and whether Trimex became aware of the error? In the case of Henkel v. Pape 1870, it was held a mistake by a telegraph clerk were to be considered the actions of the sender as the telegraph clerk was the agent of the sender. If we consider the transmission error to be the actions of Trimex, their submitted tender, even though a mistake would be of £300. the only tender submitted by Trimex would be the £300, as the tender for £5000 was conditional and effectively rejected Astonia’s offer.
The submission by Optimus PLC of £2500 or £100 more than the best offer under £3500, raises the issue as to whether a tenderer can make a ‘referential’ bid and whether such a bid be valid? By offering to pay £100 in excess of the best offer up to £3500 Optimus PLC are making what has become known as a referential bid, that is a bid which aims to ‘top up’ the best tender by a specified amount. The House of Lords, in the case of Harvela Investments Ltd v. Royal Trust of Canada 1985 (facts stated above), challenged the validity of such a bid, House of Lords held that they did not consider referential bids valid in such transaction. Lord Diplock in trying to justify the House of Lords decision gave the analysis that the purpose of sale by bidding was to provoke the best price from tenderors irrespective of what other tenderors would be prepared to pay, and stated referential bids worked against this. He went on to say that such bids would cause practical problems too, he stated if only some parties who were invited to make a tender made referential bids, then those parties who did not would not have a valid opportunity to have their bids considered. While if all invitations to tender resulted in every person making a referential bid it would be impossible to determine which offers had been made.
Therefore we can invalidate the referential bid made by Optimus PLC and allow the offer of £2500 for the widget machine to be considered as the offer made by the company. It may also be worthy to note that Optimus posted their letter of tender. If the letter were to become the acceptance through submission of the highest tender, the acceptance letter is effective from when it is posted and not when the letter is received by the offeror who in this case would be Astonia PLC. This rule known as the Post Box rule and was established in the case of Adams v Lindsell 1818, and upheld in the case of Household Insurance Limited v. Grant1879, where the Court of Appeal held as soon as the letter of acceptance was posted it was a binding contract, even if the letter is lost or delayed.
Mintex PLC sent an offer of £3500 by telex, which was received by the telex machine of Astonia PLC at 6 p.m. on the 9th of September, but was not read until 10.30 a.m. on 10th of September, after the deadline for the submission of tenders had lapsed.
This raises the issue whether instantaneous communication of acceptance is effective when it is received by the offeror or when it is read by the offeror?
The case of Entores v. Miles Far East Corporation 1955, held that postal rules, which would mean that acceptance was effective when it is sent, did not apply to any form of instantaneous communications as using such modes of communication meant the sender would usually be aware that the offeror has received the acceptance immediately. The court took the decision that such communications of acceptance would be effective when they were received by the offeror. This principle was again upheld in the case of Brinkibon Ltd v. Stahag Stahl 1983.
It still remains unclear as to when the acceptance is effectively communicated, when the machine receives the acceptence or when it is read? In The Brimmes 1975, it was held by the Court of Appeal that in the case of notice of withdrawal for the use of a ship by telex during business hours, withdrawal was effective when it was received on the telex machine, and that it was not necessary for the notice to have actually been read by a person. The case also stated where communication was outside of business hours it could be expected that the communication was effective with the recommencement of normal business hours. Although the case was to do with the revocation of the use of a ship it has been suggested the same rules would apply to communication of acceptance. If the analogy of The Brimmes 1975 case is used to then the tender submitted by Mintex would have become effective at 6 p.m. on the
9th of September, if this was normal business hours for Astonia, if not the tender would have become effective at the start of business the next day.
This would also be consistent with the Electronic Commerce Directive that states:
‘Member states shall ensure that their legal systems allow contracts to be concluded by electronic means. …. In particular ensure legal requirements applicable to the contract process neither creates an obstacles for the use of electronic contracts nor the result in such contracts be deprived of legal effectiveness on the account their being made by electronic means.’
Furthermore it would be consistent with the Fault Suggestion put forward by Denning LJ, with regards to the use of instantaneous communications in the case of Entores v. Far East Miles Corporation 1955. He suggested that an acceptance was only valid where it was generally communicated to the offeror, and that if that acceptance was not communicated to the offeror and he was culpable for the lack of communication he would be bound by the acceptance. Astonia’s failure to read any telex messages could amount to them being culpable for lack of communication of the tender. The tender of £3500 submitted by Mintex would become the binding acceptance, as it would be the highest tender submitted.
It would be advisable to Astonia, to consider the tenders submitted by Trimex PLC as not binding as the tender for £5000 was conditional and therefore has the effect of rejecting Astonia’s offer to accept the highest tender as held in the case of Hyde v. Wrench 1840, the submission of £300 tender is not binding as it is not the highest submitted tender, even though this was a mistake the responsibility to communicate acceptance correctly, falls on the person making the acceptance (Henkel v. Pape 1870).
It would also be advisable to Astonia that no binding agreement exists between Astonia and Optimus as the referential bid was invalid, as held in the case of Harvela Investments, this leaves a tender of £2500, which again is not binding as it was not acceptance through submission of the highest bid.
It would be advisable to Astonia PLC that an agreement exists between themselves and Mintex PLC, as the invitation to tender would be considered an offer, as they have undertaken to sell the widget machine to the highest bid which is a unilateral contract which has been accepted by Mintex through submission of the highest tender. If we consider the submission of the tender by Mintex PLC in respect of The Brimmes 1975, the acceptance or tender would have been submitted at 6 p.m. on the 9th September, irrespective of whether it had been read by Astonia PLC, the Fault Suggestion by Denning LJ, would mean that Astonia would be culpable for the lack of communication of the tender, and the acceptance through submission of the highest bid would be binding.
