Offer and Acceptance

Evans submits two reasons why the offeree should not be bound by the initial acceptance. The first is that, like the offeree wishing to rely and act on a contract after dispatching an acceptance, the offeror will want to rely on a communicated rejection so as to be able to contract with another party. The current position of the law allows for the capricious or speculative offeree to accept by post, communicate a rejection by a faster means (which will be ineffective, but the offeror will be unaware of this if the offeree does not inform them of the acceptance), then, for whatever reason, decide they do wish to contract and rely on their initial acceptance to hold the offeror legally bound. This necessitates the awkward implication that an offeror on receipt of a rejection will be required to wait to ascertain whether this ostensible rejection is genuine; whether an acceptance had been dispatched before the communicated rejection. It is submitted he should be entitled to rely on the communication first received.

The second reason is that the offeror is aware until he receives a communication that he may or may not have a contract and so must be prepared for either eventuality; he cannot act until he knows what the position is and so gains nothing from the rule that the acceptance is binding on dispatch. Thus allowing the offeree to change their mind in this way imposes no hardship on the offeror.

It is noteworthy that the same conclusion, allowing an acceptance to be cancelled by a subsequent rejection coming to the attention of the recipient before or at the same time as the original acceptance, is drawn in the Contract Code drawn up on behalf of Law Commission (paragraphs 14. (b) and 20. (3)), the UN Convention on Contracts for the International Sale of Goods (Vienna Convention) (Article 22) and the Principles of European Contract Law (Articles 2.203 and Article 2.205). The courts are, of course, not bound to follow these codes as they are not part of English law but the weight of opinion could prove persuasive.

If the suggested rule were accepted by the courts Sarah’s initial acceptance would only have had the effect of making Jenny’s offer firm, with the consequence that the subsequent communication of rejection prior to receipt of the acceptance would be effective and that, therefore, there would be no contract formed between the two.

It is acknowledged that the courts are unlikely to be persuaded. The postal rule has become so well entrenched in contract law, with courts taking the position on numerous occasions that it was better to qualify the rule than tear it up and start over, that any action in this regard would almost certainly be viewed as needing to come from Parliament rather than the courts.

(b)  Alan owns a mountain bike, which he decides to sell.  He advertises the bike for sale on the notice board of the local mountain bike club. The notice states “Mountain bike to be sold to the highest offer. All bids, sealed and in writing, to reach me before 5pm on Friday.”  By Thursday, Alan has received 50 sealed written bids and Bob has made the highest offer, of £500. On Friday morning, Alan receives a letter from Colin which also contains a bid for £500, but since Alan does not think he will get any more than the full value, he throws Colin’s unopened letter into the bin. David calls at Alan’s house and offers to buy the bike for £600.   Alan accepts and sells the mountain bike to David. Advise Alan.

The general rule established in Spencer v Harding is that an invitation to tender is an invitation to treat, such that an offer is made by a person submitting their tender, acceptance occurring if the person inviting tenders accepts one of the offers. In an appropriate case, however, an invitation to tender may be an offer. In Harvela v. Royal Trust it was held that contrary to the general position a person inviting tenders can, by the express words used, make a binding offer. In that case the vendors had said “we bind ourselves to accept [the highest] offer”. This rule would thus apply to the scenario here where Alan has stated the bike is to be sold to the highest offer. Putting the complication of Colin’s bid put to one side (for now), Alan would be contractually bound to sell the bike to Bob since he has made the highest bid that conforms to the terms specified. Alan would, therefore, be in breach of contract by selling the bike to David.

However, Colin’s bid changes this. First let us consider its effect as between Alan and Colin. It was held in Blackpool & Fylde Aero Club Ltd. v. Blackpool BC that the council in inviting tenders had made a unilateral offer to consider all submitted tenders; accepted by a tenderer submitting a bid. If this case applies to this scenario, by throwing Colin’s unopened letter into the bin, Alan is in breach of this contract to consider the bid. Given that if considered Colin’s bid would not have been the highest, however, and thus would not have led to a contract forming, Alan’s breach of his duty to consider is difficult to translate into damages. In any event, assessment of loss of a chance seems somewhat speculative. In principle, any reliance loss could be claimed so long as Alan could not prove it would have been a bad bargain. Colin could claim for costs incurred in submitting the bid, but this is likely to be minimal.

It is not clear, though, after Blackpool what circumstances will lead courts to imply an offer to consider all tenders submitted. The Court of Appeal noted four factors. The first, where an invitation to tender is directed to a small number of interested parties. Second, where the duty to consider is alleged to be consistent with the intentions of the parties. Third, where the invitation prescribes a clear, orderly and familiar procedure. Fourth, where there is an absolute deadline. None of these factors were held to be conclusive. It is posited that other factors came into consideration; such as the fact that the defendants were a local authority and so owed a fiduciary duty to the taxpayer to consider bids; and that the claimants were the existing holders of the concession and so had a legitimate expectation of consideration. In our scenario the first reason would not apply as Alan’s invitation was to the world at large, this alone is unlikely to be significant enough to distinguish the case. The second would apply – to fulfill the offer to sell to the highest bid clearly all bids would have to be considered. The third and fourth factors would also apply. As it is, that would most likely be viewed by the courts as sufficient to imply a duty to consider on Alan, but the two other factors of consequence suggested above could be found significant enough to distinguish this scenario. This is made even less likely though by the case of Pratt Contractors Ltd v Transit New Zealand in which it was held that the preliminary contract in inviting tenders implied a duty to act fairly and in good faith on the party issuing the invitation to tender. This latter duty meant they were required to express views honestly and to treat all tenderers equally; something Alan clearly has not done. Alan is almost certainly then in breach of his contract to consider Colin’s bid.

The more intriguing aspect of Colin’s bid, though, is that it means Alan was never contractually bound to sell the bike to anyone; the terms of the invitation to tender stated that it would be sold to the highest bid, and both Bob and Colin bid £500 – there was no highest bid. Therefore, there being no successful acceptance the offer made by Alan lapsed at 5pm on Friday and he was perfectly entitled to sell the bike to David.

This can be analysed into the offer and acceptance model as follows: Alan made an offer to sell to the highest bidder and since there was no highest complying bid there was no acceptance of the offer such that a contract formed. Many invitations to tender will specify that in the case of joint highest bids there will be a method for choosing between them, for example, the earliest of the bids will prevail. However, where there is no such express provision made it is suggested that an invitation to tender stating that the inviter will be bound to sell to the highest bid should be viewed as an offer where there is a single highest bid, but as an invitation to treat where there are joint highest bids. This necessity of this is best illustrated by a scenario similar to the one in the question but where there was no David. Here, the inviter would have joint highest bids, neither forming a contract as they would not meet the requirement of being the highest bid. To complete a contract he would need to contact one and offer to sell at the price tendered which could then, of course, be accepted or rejected by the tenderer. Thus complexity would be added to the process and the purpose of the tender would be frustrated as the tenderer could decide that he was no longer interested and reject the offer or use the situation to attempt to negotiate the price down from what he had previously been willing to be bound to pay. This would be solved by allowing the invitation to tender to be viewed as an invitation to treat; the inviter would then simply be able to choose to accept one of the joint highest bids.

(c) Graham offered Ross £2,000 if he would walk from London to York. When Ross was approximately 80 miles from York, Graham told Ross he was withdrawing his offer, whereupon Ross abandoned the walk. Ross is now claiming the £2,000. Graham is refusing to pay because he maintains that Ross's feet were so badly blistered that he would not have been able to complete the walk. Advise Ross.

Here, Graham has made a unilateral contract promising to pay Ross £2000 if he walks from London to York but has tried to withdraw the offer after Ross has already walked most of the way. The decisive factors are when the offer can be withdrawn and when it is accepted. The general rule adopted by English law was described by Goff LJ in Daulia v. Four Millbank Nominees Ltd. He stated that the offeror was entitled to full performance subject to one qualification – there was an implied obligation on the part of the offeror not to prevent the condition becoming satisfied and that this arises as soon as the offeree starts to perform the necessary act. The willingness of the courts to imply an obligation not to prevent the condition becoming satisfied can be seen in Errington v. Errington. The Court of Appeal held that the father’s promise to the couple that the house would be theirs upon completion of paying off the mortgage was a unilateral contract which could not be revoked once the couple had embarked upon performance provided that they did not leave performance “incomplete and unperformed”. In our scenario Ross has left the walk incomplete and unperformed but only because of Graham’s purported withdrawal of his offer. This is likely to be considered sufficient to constitute preventing the condition from becoming satisfied since it caused Ross to abandon the walk. A difficulty with the law as stated in the dictum of Goff LJ and by the position of Lord Denning in Errington is that it is not entirely clear what the correct legal analysis of the situation is; is there an acceptance of an offer of a unilateral contract (so that the unilateral contract is concluded) by starting performance? This would necessitate the consideration for the promise be starting rather than completing performance, which may be thought unrealistic. It may, therefore, be preferable to say, as Burrows suggests, that there is a subsidiary unilateral contract whereby the offeror promises not to revoke the offer of the main unilateral contract once the offeree has started to perform. If that were the case then in our scenario Graham has broken this subsidiary unilateral contract rather than the principal contract. The significance of this is purely for analytical purposes; in either case in our scenario Ross has lost his chance to earn the £2000 (since the purported withdrawal of the offer caused him to abandon the walk).

In terms of assessing damages for the breach of contract, quantification of the loss of a chance is necessarily speculative and depends upon the value of the expected benefit  and the likelihood of the claimant actually getting it: “the more the contingencies, the lower the value of the chance” (Hall v Meyrick). The rigour with which the quantification issue is approached also varies. In Chaplin v Hicks the court seemed to proceed on the claimant’s statistical chance of winning (she was awarded 25% of her possible winnings when she was denied the chance to be one of the last 50 competing for 12 places in a chorus line) whereas in BCCI v Ali (No 2), Lightman J refused to recognise any real or measurable loss of a chance of employment in the absence of specific evidence showing the breach of contract had caused the claimant actual rather than hypothetical loss. Thus the distinction between causation and measure of loss can be slippery.

Thus calculating the extent of damages Ross is entitled to would require an assessment of his likelihood of finishing the walk. Here, the blistering on Ross’s feet would be relevant. If it truly was so bad that, as Graham alleges, it would have been impossible for him to finish the walk then he is likely to be entitled only to his costs in walking as far as he had. If there were no blistering at all and he would almost certainly have finished the walk then damages would be close to, if not the full amount. If it is unclear, then an assessment would need to be made of his chances of finishing and damages awarded would likely be awarded in the same proportion of the full amount as that chance.

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