CONTRACT FORMATION
AGREEMENT - OFFER & ACCEPTANCE
Types of contracts
Bilateral contract
- Two parties to the contract
- Both parties exchange a promise or set of promises for each to do something in the future
- Both A and B’s promises are executory (i.e. to be performed at some point after the contract is formed)
Unilateral Contract
- Two parties to the contract
- A promise made in return for performance
- At time contract formed, A’s obligation/promise is executory and B’s obligation has been executed (i.e.
already performed).
- Carlill v Carbolic Smoke Ball; Mobil Oil v Wellcome
OFFER
Definition:
- “An offer may be described as the indication by one person to another of his or her willingness to enter into a
contract with that other person on certain terms” - Carter, Peden & Tolhurst, Contract Law in Australia (6th
ed, 2013) [3-07]
- “A proposal only amounts to an offer if the person making it indicates that an acceptance is invited and will
conclude the agreement between the parties” - Paterson, Robertson and Duke – Principles of Contract Law,
5th ed, 2016 (referring to Restatement of Contracts (2d) (US))
- In Brambles, Heydon JA suggested in obiter that an offer must take the form of a proposal for consideration
which gives the offeree an opportunity to choose between acceptance and rejection.
Parties
- Offeror: person who makes the offer
- Offeree: person to whom the offer is made (i.e. who may accept or reject the offer)
Objective test:
- “An offer is an objective manifestation of willingness to be bound by certain terms, upon the acceptance of
those terms by the relevant party” - Gibson v MCC, per Denning LJ
What elements distinguish an offer?
- The language must be sufficiently certain and promissory - Gibson v MCC
- Must be distinct from a mere puff - Carlill (deposit of 1,000 pounds - acted on their offer)
● A puff is a statement which is so far-fetched that no reasonable person would believe it
- Must be distinct from an invitation to treat - Boots
Gibson v Manchester Council (1979 HL)
- No reason here to depart from conventional approach of construing the documents to identify a clear offer and
acceptance
Carlill v Catholic Smoke Ball (1893 UK CA)
- Acceptance occurs by performance - acceptance need not be notified before performance.
Crown v Clarke
- Acceptance must be in response to the offer
Unilateral contracts
Ticket cases
- General rule is that ticket is an offer which the passenger can accept or reject after he or she has had
reasonable opportunity to accept or reject - MacRobertson, per Stephen J