Contract Law: Principles of Offer and Acceptance

This article discusses the principles of offer and acceptance in contract law. It explains the elements required to form a contract, such as intention, agreement, and consideration. The article also discusses the postal rule and provides an application of the principles to a case study.

Running Head: CONTRACT LAW
Contract Law
Name of student:
Name of the university:
Author note:

1
CONTRACT LAW
Issue
The issues which have been indentified in relation to the given case study are as follows
1. Is there a valid contract formed between Monica and Earley Furniture Sdn Bhd based on
the principles of offer and acceptance and if yes when
2. Is there a valid contract formed between Monica and Table for two Sdn Bhd based on the
principles of offer and acceptance and if yes when
Rule
The law of contracts in primarily governed by the application of cases laws or common
law along with a few specific statues (McKendrick 2014)
This is a branch of civil law as it is related to a dispute between two or more parties and
the essence of this law is compensation rather than punishment. A single or collective promises
which are eligible to be enforced by law . it includes those agreements which the parties gave
mutually entered with one another. Only if a contract has been signed it does not become
enforceable unless the court analyzes the objective intention of the parties to the contract
(Knapp, Crystal and Prince 2016).
Thus in order to form a contract a complete consensus in relation to the terms of the contract
has to be present between the parties. In addition the parties to the contract must also have an
intention of binding each other to the terms of the contract. A contractual promise has to be
provided support through a consideration which is something which has a value to it. In an
apparent simple contract there are three elements which have to be analyzed in order to identify
its validity (Poole 2016). These include

2
CONTRACT LAW
1. Intention
2. Agreement (Offer and Acceptance)
3. Consideration
Intention
Intention is the element which is one of the primary to contract formation and is
integrated to avoid accidental contracting. As set out through the case Carlill v Carbolic Smoke
Ball Co [1893] 1 QB 401 an objective test is applied by the court in relation to intention of the
party. Here the courts consider the inferences which can be derived from the conduct or words of
the contractual parties, which goes as far as a contract is likely to be inferred via the actions of
the parties along with or without their express words (Ayres and Schwartz 2014).
In commercial agreements as stated through the case of Banque Brussels Lambert SA v
Australian National Industries Ltd (1989) 21 NSWLR 502 a presumption is made that there is
intention to legally bound by the terms of contract. However if proper evidence is provided the
presumptions can be rebutted as stated in the case of Edwards v Skywards (1964) 1 WLR 349
(p.380).
An objective test for the purpose of identifying intention can also be deployed through
the help of a reasonable person approach as it had been done in Carlill v Carbolic Smoke Ball
Company. In this case the inducement of a reasonable person to enter the contract based on the
circumstances and wordings of the offer was enough to derive the presence of intention on the
offeror’s part.

3
CONTRACT LAW
The element of agreement in relation to a contract is at times described as “meeting of mind”.
There are basically two propositions in relation to this firstly there is no agreement in case the
promise is too ambiguous for being imposed and where there is no intention between the parties
to get into the contract. When an agreement is concluded the parties must communicate the
agreement to the other parties signifying their intention of legally binding them to the contract.
However a clear or unambiguous declaration is not required in the situation. However what is
required in this case is that there are at least two parties along with a offer and free acceptance.
Offer
An offer is a proposal which when accepted by the other party gives rise to an agreement.
It signifies the intention of the party to establish a legally binding agreement on the terms of the
offer. However all proposals cannot be treated as an offer a stated through the case of
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB
401 p340. There is a discrepancy between an offer and an invitation to treat. An offer also has to
be distinguished from a mere puff. An invitation to a treat is done for the purpose of ‘start the
ball rolling’. It is a declaration made by a party that it is willing to accept offers. For instances as
provide in the case of Carter v Hyde (1923) 33 CLR 115 p352, Advertising in Newspapers,
price lists, Catalogues , and circulars, Calling for bids at auctions, The display of goods, and
calling for tenders constitute an invitation to treat having no legal consequences.
Thus an offer has to be brought before the attention of the other party. It has to be
differentiated from an invitation. It can be made to any person. It has to be communicated to the
other party. It has no contractual force before it is accepted. Unless there is a binding promise it

4
CONTRACT LAW
can be revoked any time before it is accepted as per Goldsbrough Mort & Co Ltd v Quinn (1910)
10 CLR 674.
Acceptance
Only the person who has been made the offer has the right to accept it as stated by the
case of Entores v Miles far east Corp. [1995] 2 QB 327 p360. An acceptance also must be
Unequivocal. This means that it must be unqualified and complete, it as to be certain and clear
and also in reliance to the offer as per R v Clarke (1927) 40 CLR 227 p360. In addition an
acceptance has to be communicated; it can take place in an implied or expressed manner.
However as per Felthouse v Bindley (1862) 142 ER 1037 silence is not acceptance. In
acceptance has to be retrospective and a incomplete acceptance or counter offer ends the original
offer.
Postal rule
This rule has been initiated as an exception with respect to the requirement of a actual
communication. The rule had been introduced through the landmark case of Adams v Linsdell
(1818) 1 B & Ald 681. In this case the primary ruling of the court was that the acceptance
becomes effective at the very time the letter of such acceptance is sent. In the given situation
revocation cannot be done once acceptance letter is posted.
Application
Firstly in order to determine the first issue the circumstances of Monica and Earley
Furniture Sdn Bhd have to be analyzed. It has been provided as per the facts of the case study
that Monica is the administrator of a secretarial business and she wants to purchase new furniture

5
CONTRACT LAW
for her office. In relation to her needs she has asked Earley Furniture Sdn Bhd to provide a
quotation in relation to furnitures for the purpose of meeting her needs. The step of asking a
quotation by Monica has no legal effect. This is because this step is merely an invitation to an
offer as discussed in the case of Boots Cash Chemists. A quotation or catalogue is generally
considered as an invitation to an offer unless they are complete in nature. In reply to the
invitation to an offer on 3rd may Earley Furniture Sdn Bhd provided Monic a quotation along
with an order form. This step would also be considered as an offer as it was in response to an
invitation to offer made by Monica. As discussed above an offer has no legal effect until it is
accepted by the other party. In the given situation Monica had completed the offer form and sent
it to Earley Furniture Sdn Bhd by post. This step taken by Monica will be considered as a valid
acceptance. This is because the acceptance is unequivocal and has been communicated to the
other party via the provisions of the postal rule. As per the postal rule the acceptance becomes
effective at the very time the letter of such acceptance is sent. In the given situation revocation
cannot be done once acceptance letter is posted. Thus in the given situation the acceptance of
Monica is also effective. In addition as the process of acceptance is completed it cannot be
revoked any further according to the above discussed rule. There is a contract which has been
formed between Earley Furniture Sdn Bhd and Monica which has been formed between them as
soon as the letter has been posted by Monica.
In relation to the second issue the circumstances of Monica and Table for Two Sdn Bhd
have to be analyzed in order to determine whether a valid contract has been formed between
them or not. Monica had came across an advertisement in a local news paper which have been
provided by Table for Two Sdn Bhd and stated 'Complete office equipment solution to suit the
small business at a fixed unbeatable price of RM5000'. This advertisement was evidently an

6
CONTRACT LAW
invitation to offer according to the principles of the Boots Cash Chemists case and therefore has
no legal significance. She had been told by Table for Two Sdn Bhd that she needs to pay
RM5750 and delivery will take place in 3 months. She threatened to sue RM5750 based on the
discrepancy which was present between the invitation to an offer and an offer in terms of price
and time of delivery. She had been provided with apology letter which constituted a valid offer
as per the case of Carter v Hyde as it was complete in nature. In addition as this was a
commercial transaction the element of intention in this situation is deemed to be present as per
the Banque Brussels Lambert SA case. As Monica found out that this was a good offer she
decided to accept it. Thus in the given situation where there was a valid offer which has been
made by Table for Two Sdn Bhd and which have been accepted as per the rules of acceptance by
Monica there is a proper agreement between the parties. In addition the agreement also has a
consideration as well as the element of intention as it is a commercial agreement. This in the
given situation all elements of a simple contract have been satisfied between the parties.
Therefore it can be stated that there is a valid contract between the Monica and Table for Two
Sdn Bhd when she accepted the fresh offer made by them.
However it is now evident that as Monica has already formed a contract with Earley
Furniture Sdn Bhd she will be in a problem is she accepts the contract with Table for Two Sdn
Bhd. In this situation Monica has sent a fax to Earley Furniture Sdn Bhd that she does not want
to carry out with their contractual deal. However it has to be noted in the given situation through
the application of the Postal rule that a contract is formed between the parties as soon as the letter
for signifying the acceptance has been posted and is not in the control of the offeree. In addition
it is also evident through the above discussed rules that as soon as the contract is formed the offer
cannot be revoked. In the present situation the fax sent by Monica will also not be able to revoke

7
CONTRACT LAW
the contract which has been already formed between Monica and Earley Furniture Sdn Bhd as
the contract has already been formed.
Conclusion
There is a contract which has been formed between Earley Furniture Sdn Bhd and
Monica which has been formed between them as soon as the letter has been posted by Monica.
This can be stated evidently through the imposition of the postal rule and the rule of offer and
acceptance. In addition in the given situation all elements of a simple contract have been satisfied
between the parties. Therefore it can be stated that there is a valid contract between the Monica
and Table for Two Sdn Bhd if she accepts the fresh offer made by them. Moreover in the present
situation the fax sent by Monica will also not be able to revoke the contract which has been
already formed between Monica and Earley Furniture Sdn Bhd as the contract has already been
formed.

8
CONTRACT LAW
References
Adams v Linsdell (1818) 1 B & Ald 681
Ayres, I. and Schwartz, A., 2014. The no-reading problem in consumer contract law. Stan. L.
Rev., 66, p.545.
Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 401
Carter v Hyde (1923) 33 CLR 115 p352
Edwards v Skywards (1964) 1 WLR 349 (p.380).
Entores v Miles far east Corp. [1995] 2 QB 327 p360
Felthouse v Bindley (1862) 142 ER 1037
Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674.
Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401 p340
Hunter, H., 2017. Modern Law of Contracts.
Knapp, C.L., Crystal, N.M. and Prince, H.G., 2016. Problems in Contract Law: cases and
materials. Wolters Kluwer Law & Business.
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
Poole, J., 2016. Textbook on contract law. Oxford University Press.
R v Clarke (1927) 40 CLR 227 p3