Business Law: Offer, Acceptance, Revocation, and Negligence

Running Head: BUSINESS LAW
Business Law
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Author Note

1BUSINESS LAW
Question 1
Issue
 The question which needs to be addressed with respect to the scenario between Jack and
Ann is whether there has been a legally binding contract formulated between them.
 The issue is to be addressed based on relevant legal authorities.
 The provisions of offer, acceptance and revocation are to be specifically addressed.
Rule
The formation of a valid contract at law requires a legal offer and acceptance. Offer and
acceptance requires compliance with legal guidelines to be considered as valid.
An offer with respect to the law of contract is a statement or expression which is made by one of
the potential parties to the contract who is referred here as the offeror. The offeror initiates the
process of the formation of a contract. An offer consists of words which making up terms which
would be binding on the other party referred to here as the offeree if such offer is accepted. An
offer would only be considered as valid at law if it is complete and a reasonable person would be
induced by it to get into a contract. The offer in order to be valid also requires intention of
offeror to legally bind the offeree to its terms. Such intention is derived in an objective manner as
stated by the landmark case of Smith v Hughes (1871) LR 6 QB 597. An offer can be made in
person or through post but not in form of an advertisement as it would be considered as an
invitation to treat which had been done in the case of Pharmaceutical Society of Great Britain v
Boots Cash Chemists [1953] 1 QB 401.

2BUSINESS LAW
The offer is only valid till the time provided by it. Once the time period stipulated by the offer is
over it cannot be accepted and is said to have elapsed by time.
An acceptance is the latter stage of an offer. Once the offer has been made the offeror waits for
the offeree to accept the offer for the purpose of contract formation. As soon as the offer is
accepted it results in the formation of a valid contract. There are three primary requirements for
an acceptance to be valid.
1. The acceptance has to be communicated to the offeror
2. The acceptance has to be unequivocal (the terms of the offer cannot be altered by the
acceptance)
3. There must be free consent on the party making the acceptance (No duress, undue
influence, misrepresentation or mistake)
The communication of the acceptance is of utmost necessity for the formation of a valid contract
unless it is an unilateral offer as found in the case of Carlill v Carbolic Smoke Ball co [1893] 1
QB 256. In the case of Entorres v Miles Far East [1955] 2 QB 327 it was provided by the court
that the acceptance has to be made by the offeree in the same way as asked by the offer. Where
there is no express way of making an acceptance any reasonable mode can be used by the
offeree. The offeree can make an acceptance by pose unless it is not expressly prohibited by the
offer. Where the acceptance has been made by post the “postal rule” of acceptance is applied.
This rule had been provided via the landmark case of Adams v Lindsell (1818) 106 ER 250. It
has been stated by the judge that acceptance through post would be deemed to be completed
when the post is made and it does not actually require to reach the offeror. The postal rule will be
valid if the post has been correctly addressed.

3BUSINESS LAW
The acceptance has to be “Unequivocal”. This signifies that the acceptance cannot have any
alterations in regards to the original content of the offer. The original content of the offer if
altered it is not a valid acceptance and is considered to be a counter offer as ruled by the ratio of
the landmark case Hyde v Wrench (1840) 49 ER 132. The court in this case further provided a
clarification that the initial offer made by the offeor would be considered to have been rejected
once a counter offer is made. The rejection of the offer makes it unavailable to be accepted again
and it comes to an end. Counter offer however needs to be distinguished from mere inquires as
they do not bring an offer to an end.
Revocation of a valid offer is possible on the part of the offeror. This is a process through which
the offeror signifies that they do not want to carry on with the offer and bring it to an end. It has
been provided through the case of Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344
that revocation in order to be valid needs communication to the offeree prior to the acceptance
being made by them. The offer will not be considered to have been revoked as soon as the
revocation has been sent via post like the postal rule of acceptance. The case clarified that the
offer will only be successfully revoked once it has reached the offeree.
Application of law
A letter had been provided by Ann to Jack in 1st march in which she stated that she has the
intention of selling him his car at a price of $12000. Firstly it is t be determined that this letter is
considered to be a valid offer not. An offer would be valid at law it is complete and has the
intention of binding the offeree in an objective manner. In the present situation the offer is valid
as it has description of the product, price and time. The offer was valid till the date of 7th March
and as per the above discussed rules if the offer is not accepted before time it will elapse.