The first party to respond to Niceguys is Foxes. Their response forms an offer as it is clearly “an expression of willingness to contract on certain terms”, those terms being that he wishes “to order 2,000 at £1.50 each”. The problem with this response is that they then go on to say “If we do not hear from you by May 26th 1993 we shall assume you have accepted our offer”. In other words they wish Niceguys to accept their offer by silence. In unilateral contracts, such as advertisements, acceptance by silence is adequate. For instance in the case of Carlill v Carbolic Smoke Ball Company an offer was made to pay a sum of £100 to any-one who, whilst using ‘The Carbolic Smoke Ball according to the printed directions’, contracted influenza. Mrs Carlill contracted the disease whilst using the Smoke Balls and the court found that the Carbolic Smoke Ball Company was legally bound to pay Mrs Carlill the £100 as there had been a contract.
“The court thought that it clearly would not have been intended that every-one who bought a smoke ball in reliance on the company’s advertisement should be expected to tell the company of this.”
Therefore, in many unilateral contracts the need to communicate acceptance may be overlooked. However, the impending contact between Niceguys and Foxes is not a unilateral contract but is in fact a bilateral one. The leading authority on acceptance by slience with regards to bilateral contracts is Felthouse v Bindley. In this case, a nephew verbally agreed to sell his horse to his uncle, Paul Felthouse. There was a dispute of price which resulted in letters being sent and received. The final letter was sent by the uncle to his nephew, in the manner of a counter-offer, suggesting a new price for the horse. In this letter he said if he did not hear back from his nephew he would assume the horse was his. The horse was accidentally auctioned to a third party. The uncle went on to sue the auctioneer and the courts had to decide if there had ever been a binding agreement between the nephew and the uncle. The court found that there was no delivery or acceptance binding the nephew and the sale of the horse stood an open offer. In Niceguys, Foxes stated that if they did not hear from Niceguys by the 26 May 1993 they would assume their offer had been accepted. Likewise, Paul Felthouse said that if he head not heard back from his nephew he would assume that the horse was his. In both cases, no contracts were made as acceptance cannot be by silence, at least in bilateral contracts. If Niceguys wanted to accept Foxes offer, they would have to communicate their response. Doing nothing in this case is not a valid form of acceptance.
Rabbits and Owls are the next to respond. Both parties form valid offers as they clearly communicate “an expression of willingness to contract on certain terms”. Rabbits’ terms are that they wish “to order 3,000 but will pay only £1.25 each” and Owls’ terms are to “order 4,000 but will pay only £1.20 each”. At this point in time Niceguys could form a contract with either party simply by communicating an appropriate response. They are not bound to sell to the highest bidder as, according to the judgement in Spencer v Harding
“A statement inviting tenders for the supply of goods or for the execution of work is not normally an offer” and “The tenders themselves are the offers and there is no contract until one of them is accepted”
Rats make an offer in the form of a referential bid, we “Wish to order 3,000 at £1.10 or £0.10 each more than any other retailer, whichever is higher”. This offer is a nullity and not valid in the face of the law, Harvela Investments v Royal Trust of Canada.
Niceguys reaction to the abovementioned offers is to firstly, decline the offers from Rabbits and Rats. This means that they do not wish to have a contract at this point with either party. Rats and Niceguys do not and have never had a contract as once an offer had been turned down it cannot be restored. Rabbits, however, may still have a contract due to future events, and this issue will be explored at a later stage.
At their current stage, Niceguys would be advised to accept Owls’ offer as it is the highest offer they have received so far. In the rejection letters sent to Rats and Rabbits, Niceguys states that they wish to accept Owls’ offer, which would result in a legally binding contract pending clear communication of that acceptance. If Rats or Rabbits inform Owls that Niceguys has accepted their offer, then a contract would have been formed as acceptance of an offer can be made through a third party Powell v Lee. This may be an issue, but we do not know whether Rats or Rabbits have told Owls about it. On the notion that it is not an issue, there is no contract between Niceguys and Owls as yet.
Niceguys writes a letter to Owls accepting their offer, but before this letter is posted, they receive a fax of revocation from Owls. Niceguys would legally have made a contract with Owls if they had posted the letter before the fax from Owls revoking the offer came through. An offer may be revoked at anytime before acceptance but this must be communicated to the offeree, Bynre v van Tienhoven. As they received the fax before posting their acceptance, no contract was made as a contract is only concluded when the letter accepting the offer is posted, Adams v Lindsell.
In this case, revocation was communicated efficiently to the offeree, so legally, there was no a contract.
Upon receiving Owls letter, Niceguys immediately telephones Rabbits. This creates a series of issues. Firstly, they have already sent Rabbits a letter of revocation. The postal rule in Adams and Lindsell does not apply to the withdrawal of offers, so Niceguys may still have a chance to form an agreement. The decision in Bynre v van Tienhoven indicates that the withdrawal of an offer will not take effect until it is received. This decision implies that Niceguys have to communicate their acceptance before the letter of revocation arrives.
Secondly, the phone call was made outside of office hours. Niceguys left a message asking Rabbits to accept their offer. According to Lord Wilberforce in the case of Brinkibohn v Stahag Stahl
“messages may not reach, the designated recipient immediately: messages may be sent out of office hours, or at night, with the intention or assumption they will be read at a later time. …No universal rule can cover all such cases; they must be resolved by reference to the interests of the parties, by sound business practise and in some cases by judgement where the risks should lie.”
In this instance, a thunderstorm broke out, which meant there would be no certainty that the telephone message would be received. Niceguys were aware of this and took appropriate action by sending a fax. As the managing director of Rabbits received both the fax and the letter simultaneously, the issue of whether there is a contract between Rabbits and Niceguys would depend on which one he read first.
At this stage, Niceguys may have a contract with Rabbits, as long as the managing director reads the fax communicating their acceptance first. If this fails to be the case, and he reads the letter of revocation first, then it would be in Niceguys best interests to make a new offer to Rats, as their offer was the highest. Niceguys may also choose to make Rabbits a new offer. They could also communicate an interest in Foxes, as a response would result a contract.
Bibliography:
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Textbook on Contract, T Antony Downes, 4th edition, Blackstone Press Limited 1987
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Remedies for Torts and Breach of Contract, Andrew Burrows, 2nd edition, Butterworths 1994
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The Modern Law of Contract , Richard Stone, 5th edition, Cavendish Publishing Limited 2002
[1979] 1 All ER 972; [1979] 1 WLR 294
The Carbolic Smoke Ball Advert
[1986] 1 AC 207; [1985] 1 All ER 966
