Introduction
This assignment will analyse a contractual dispute between Lina and Mika concerning the sale of a commercial food trailer. The central question is whether a legally binding contract was formed between the parties. To answer this, it is necessary to apply the principles of the English law of contract formation, specifically focusing on the rules governing offer, acceptance, counter-offer, and revocation. The analysis is divided into two parts. The first part will determine whether Mika’s communication on Tuesday constituted a valid acceptance of Lina’s offer. The second part will assess whether Lina was legally entitled to revoke her offer before the stated deadline of Friday and if her revocation was effective.
Issue 1: Whether Mika’s communication on Tuesday amounted to valid acceptance of Lina’s offer.
To determine if a contract was formed, we must first establish if there was a valid offer and a corresponding valid acceptance. This section will analyse the communications between Lina and Mika to conclude whether Mika’s message on Tuesday legally constituted acceptance.
The Legal Rules on Offer and Acceptance
A contract is formed when an offer is made by one party and is accepted by the other. An offer is a clear expression of willingness to contract on specified terms, made with the intention that it is to become binding upon acceptance (Trevitel, 2020). This must be distinguished from an invitation to treat, which is an invitation to others to make offers. Advertisements are generally considered invitations to treat, as seen in Partridge v Crittenden [1968] 1 WLR 1204, to avoid the advertiser being bound by more contracts than they can fulfil. However, an advertisement can amount to a unilateral offer if it contains a clear promise, specifies the act(s) required for acceptance, and shows an intention to be bound. The classic authority for this is Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, where the company’s deposit of £1,000 in a bank demonstrated a serious intention to be bound by their promise.
If an offer is made, it can be terminated by a counter-offer. A counter-offer occurs when the offeree responds with different terms. This has the effect of destroying the original offer, meaning it can no longer be accepted. The case of Hyde v Wrench (1840) 49 ER 132 is the leading authority for this principle. In contrast, a mere request for further information does not destroy the original offer, as shown in Stevenson, Jacques & Co v McLean (1880) 5 QBD 346.
For acceptance to be valid, it must be an unconditional agreement to all the terms of the offer, a "mirror image" of the offer. If the offeror prescribes a specific method of acceptance, the offeree must generally comply with that method for acceptance to be effective. Finally, acceptance must be communicated to the offeror (Entores v Miles Far East Corp [1955] 2 QB 327).
Application to the Facts
Lina’s Facebook post stated: “Island Bites Catering is selling our commercial food trailer for $45,000. First person to confirm acceptance and pay a $2,000 deposit gets the trailer. Offer open until Friday.” While advertisements are typically invitations to treat, this post has the characteristics of a unilateral offer, similar to Carlill. The language is clear and specific: a price of $45,000, and a precise mode of acceptance ("confirm acceptance and pay a $2,000 deposit"). The phrase "First person to…" indicates that Lina intends to be bound to the first individual who performs these specified acts. Therefore, it is strongly arguable that Lina’s post was a unilateral offer to the world.
On Monday, Mika responded, “I will pay $40,000 for the trailer.” This was not an acceptance, as it did not match the terms of Lina's offer. By proposing a different price, Mika made a counter-offer. In line with the principle in Hyde v Wrench, this counter-offer terminated Lina's original unilateral offer, at least in relation to Mika. Mika could no longer accept the original offer.
Lina then replied, “I cannot accept $40,000. The price is $45,000.” This communication can be interpreted in two ways: either as a simple rejection of the counter-offer, or as a fresh offer to Mika on the original terms. Given that it was a direct response to Mika specifying the price, it is most likely a new, bilateral offer made to Mika personally.
On Tuesday morning, Mika sent the message: “Okay, I accept your $45,000 price. I will pay the deposit tomorrow.” This is Mika's purported acceptance. However, Lina’s offer (both the original unilateral offer and the new bilateral offer) required two things for acceptance: confirmation of acceptance and payment of the $2,000 deposit. Mika’s message only confirmed the price; it did not include the payment. Instead, he made a promise to pay the next day. This is not the "mirror image" of the offer. By stating he would pay tomorrow, he was not accepting the offer on its own terms but was attempting to introduce a new term (payment at a later time). This means his purported acceptance was not unconditional. Lina’s offer required payment of the deposit as a condition of acceptance itself, not merely as a term of performance after a contract had been formed. Because Mika failed to perform one of the two required acts for acceptance, no valid acceptance took place on Tuesday.
Conclusion on Issue 1
Mika’s communication on Tuesday did not amount to a valid acceptance of Lina’s offer. His earlier counter-offer had terminated the original offer. Lina's subsequent message constituted a new offer to him. Mika’s response to this new offer was not a valid acceptance because it was not an unconditional acceptance of the terms. The offer required payment of the deposit as part of the act of acceptance, and Mika’s promise to pay later meant he failed to comply with this prescribed mode. Therefore, no contract was formed on Tuesday.
Issue 2: Whether Lina was entitled to revoke her offer before Friday and, if so, whether her attempted revocation was effective before a contract was formed.
This section will examine Lina's promise to keep the offer open until Friday and the legal effect of her attempt to withdraw the offer on Wednesday.
The Legal Rules on Revocation of an Offer
The general rule of revocation is that an offeror is free to withdraw their offer at any time before it has been validly accepted (Payne v Cave (1789) 3 TR 148). This is true even if the offeror has stated that the offer will remain open for a specific period. Such a promise to keep an offer open is not legally binding unless the offeree has provided consideration for it, thereby creating a separate contract known as an 'option contract' (Routledge v Grant (1828) 130 ER 920). Without consideration, the promise is a ‘bare promise’ (nudum pactum) and is unenforceable.
For a revocation to be effective, it must be communicated to the offeree. The revocation is only effective upon receipt by the offeree, not upon sending (Byrne & Co v Van Tienhoven & Co (1880) 5 CPD 344). Communication of revocation does not have to come from the offeror directly; it can be communicated by a reliable third party (Dickinson v Dodds (1876) 2 Ch D 463).
A special rule applies to the revocation of unilateral offers. Once the offeree has started to perform the act of acceptance, it may not be possible for the offeror to revoke the offer (Errington v Errington & Woods [1952] 1 KB 290). However, what constitutes the commencement of performance can be a difficult question.
Application to the Facts
Lina’s offer stated it was "open until Friday." However, Mika did not provide any consideration (such as a payment) for this promise to keep the offer open. It was a bare promise. Following the principle in Routledge v Grant, Lina was not legally bound to keep the offer open until Friday and was entitled to revoke it at any time before it was validly accepted.
As established in the analysis of Issue 1, Mika had not validly accepted the offer by Tuesday. His attempted acceptance was defective because he had not paid the deposit. Therefore, on Wednesday morning, the offer was still open and capable of being accepted, but it was also capable of being revoked.
On Wednesday, Lina messaged Mika directly, stating, “I have decided to sell the trailer to someone else. My earlier offer is withdrawn.” This is a clear and unambiguous communication of revocation from the offeror herself. Mika received this message. At that point, the offer was effectively revoked.
Mika’s response, “You cannot withdraw it because you said the offer was open until Friday,” is legally incorrect. As discussed, the promise to keep the offer open was not supported by consideration and was therefore not binding. His further claim that "I accepted on Tuesday" is also incorrect, as his acceptance was not valid.
Mika’s subsequent act of depositing $2,000 into Lina’s bank account occurred after he had received the notice of revocation. Acceptance cannot occur after an offer has been terminated. Since Lina’s revocation was communicated to Mika before he completed the acts required for acceptance (i.e., before he paid the deposit), his later payment was ineffective.
Even if we were to treat Lina’s initial post as a unilateral offer that was still open to Mika on Wednesday (which is unlikely given the counter-offer), the revocation would still be effective. The rule in Errington v Errington prevents revocation once performance has begun. Here, the required performance was to "confirm acceptance and pay a $2,000 deposit". On Tuesday, Mika had only confirmed acceptance and promised to pay. This is arguably not the commencement of performance of the required act; it is merely a statement of intent. The crucial act of payment had not been started. Therefore, Lina would still be entitled to revoke the offer before Mika had paid the deposit.
Conclusion on Issue 2
Lina was entitled to revoke her offer before Friday. Her promise to keep the offer open was not supported by consideration from Mika and was therefore not legally binding. Her revocation on Wednesday was communicated directly to Mika and was received by him before any valid acceptance had taken place. As the offer was effectively revoked, Mika’s subsequent attempt to accept by paying the deposit was too late. Consequently, the revocation was effective, and no contract was formed between Lina and Mika.
References
McKendrick, E. (2020) Contract Law: Text, Cases, and Materials. 9th edn. Oxford University Press.
Poole, J. (2021) Textbook on Contract Law. 15th edn. Oxford University Press.
Trevitel, G. (2020) The Law of Contract. 15th edn. Sweet & Maxwell.
Byrne & Co v Van Tienhoven & Co (1880) 5 CPD 344.
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256.
Dickinson v Dodds (1876) 2 Ch D 463.
Entores v Miles Far East Corp [1955] 2 QB 327.
Errington v Errington & Woods [1952] 1 KB 290.
Hyde v Wrench (1840) 49 ER 132.
Partridge v Crittenden [1968] 1 WLR 1204.
Payne v Cave (1789) 3 TR 148.
Routledge v Grant (1828) 130 ER 920.
Stevenson, Jacques & Co v McLean (1880) 5 QBD 346.
