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2.1.3 Offer - Hands on Example

The following scenario aims to test your knowledge of what constitutes an offer and the effect on the potential contract. The answers can be found at the bottom of the page. Try to think about the relevant principles, cases and the outcomes of the scenario.

There is also a full written answer to the questions at the end of this section, which would be how you may approach a question such as this in an exam. Don’t be discouraged if you can’t identify the issues at first – applying the law is very different than learning about it! Referring back to the notes for this section should be able to help you. This section should help you see how questions regarding offers will be structured. Think about everything this section has taught you, and remember not all of the content you have learnt will be included in this question.

The sensible approach to a problem question regarding an offer is:

  • Can I identify any of the presumptions (If you can identify a presumption, you won’t need to consider the objective test to decide whether the conduct constitutes an offer, simple!)
  • If there is no presumption, is there an objective intention to create contractual relations
  • Has there been a revocation of the offer?

After completion of this section, you may wish to create your own scenario with similar issues, or issues that have not been included in this question, which will help you further with your understanding.

Scenario

Roger is a successful businessman who has just moved to London, he has an unfurnished apartment which needs renovating and furnishing. Roger decides to travel into town and make some purchases for his house.

  1. Roger goes into a hardware store and spots a chainsaw for £20, he desperately needs to get rid of some trees in his garden so he considers purchasing it. After a quick check online, he is surprised to find that in fact, the chainsaw is worth £250. He rushes to the till in order to make his purchase but the cashier explains that the price was a misprint, and it should have been £280. Roger explains to the cashier that they must sell it to him for £20, otherwise it is false advertising, but the cashier still refuses to sell the chainsaw.

Can Roger insist on the sale for £20?

  1. Roger leaves the store and attempts to ring his friend to vent his frustration, but he realises that he has lost his phone and thinks he probably dropped it whilst rushing to the cash desk with the chainsaw. Roger searches high and low in the store but can’t find it. He is about to give up when he notices a notice board for buying and selling. He quickly grabs some paper from the cashier and puts up two different adverts
  1. Lost phone! iPhone 12, if anybody can return it to me I will reward them £50.
  2. Looking for a chainsaw, will not pay any more than £150.

Subsequently, days later, Glen, a young boy, returns his phone to him and demands the £5,000 reward. Roger laughs and gives him £5 instead. Roger is also ed by Joe who says he has a chainsaw he will sell to him for £149

What type of contract did Roger form when he put the advert for his lost phone up, and can the young boy enforce this contract against him?

What presumption does advert b fall under? The chainsaw seller is demanding Roger buy the chainsaw for £149, does he have to buy it?

  1. Roger’s business isn’t doing too brilliantly, and he can’t afford brand new furniture for his house. He sets off to the auction house on a Monday morning. Unbelievably, he is the only person at the auction hall. The first auction is for a sofa, and the bidding is started at £1. Roger bids £1 and wins the bid. Following, the auctioneer says “this sofa is worth £1,000, I can’t take a bid for £1!” and tells him to leave.

Can Roger make the auctioneer give him the sofa?

  1. The following year, Roger’s business is back on track, and he has now completed the renovation of his house. In celebration, he is hosting various charity events. At one of his events, he announces he has posted online a challenge for charity, if somebody can swim the channel between England and France in under 12 hours, he will donate £500,000 to a charity of their choice. After six months, Roger’s friend, Alex, asks Roger if he is still offering the £500,000 reward, Roger tells him he isn’t. The following week, it comes to Roger’s attention that an Olympic swimmer, Ryan, has taken up his challenge and is already half-way across the channel in under 4 hours. Roger’s investments have taken a huge dive and he no longer has the £500,000, so before Ryan completes the challenge, Roger quickly posts online that the £500,000 reward has been revoked.

Was Roger’s revocations of the offer valid, if not, is there any other way the offer may have been revoked?

Answers

The legal issue here is whether or not the display of the chainsaw was an offer, and by picking up the goods, did Roger accept the offer and form a binding contract? Essentially, does the cashier have the negotiation power to refuse the sale?

The case of Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB 401 applies – the display of goods in an invitation to treat. This means that Roger makes the offer when he brings the chainsaw to the desk, and the cashier has every right to refuse the sale.

Outcome: Roger cannot purchase the chainsaw for £20.

The advertisement for the return of Roger’s lost phone constitutes a unilateral contract – anybody who finds Roger’s phone can accept the offer. The offer is clear and fits the criteria laid out in Carlill v Carbolic Smoke Ball Co Ltd [1893] 1 QB 256, therefore, Glen will be able to enforce the £50 reward payment.

Advert b falls under the ‘tender’ presumption. Roger does not have to buy the chainsaw for £149 from Joe, as a tender is a mere invitation to treat.

This outcome will be dependent on the type of auction. If the auction is without reserve, Roger is entitled to the sofa, and if the auctioneer refuses to give him the sofa, he would be entitled to damages of £999 (Market value minus the bid - £1,000 minus £1).

If the auction was with reserve, and the reserve was more than £1, the auctioneer would not have breached a contract by declining the bid.

This offer from Roger amounts to a unilateral contract, to revoke the contract, Roger must take reasonable steps to communicate the revocation.

Roger telling Alex the offer was revoked would not be reasonable steps, as he has only informed one person. As per Shuey v USA (1875) 92 US 73, the offer should be revoked in a similar fashion that it was offered, in this case, the offer was made online.

Therefore, when Roger revokes the offer online, this will suffice, but, as Ryan, an offeree, has begun performance, he cannot revoke the offer at this time (Dahlia v Four Millbank Nominees [1978] Ch 231).

Roger may suggest that the offer has been revoked due to a lapse of time. Roger must argue that six months is a long enough period to automatically revoke the offer.

Full model answer

This scenario involves various contractual issues pertaining to whether or not there has been an offer made. An offer can be defined as an unequivocal display of contractual intent (Storer v Manchester City Council). This requires an objective assessment using a ‘reasonable man’ test, and does not take into consideration any subjective intentions of the parties.

The chainsaw

The first legal issue in this scenario is whether or not Roger can purchase the chainsaw for £20, this is a question of whether or not there has been a contract formed when Roger picks up the chainsaw. In order for a contract to be formed, there must first be offer and acceptance. Roger may attempt to assert that the display of the chainsaw priced at £20 amounted to an offer, and by taking the chainsaw to the till he had accepted that offer, therefore forming a binding contract which would mean the cashier was unable to refuse the sale.

Legal precedent has developed ‘presumptions’ of what will amount to an offer, and instead of applying the test from Storer v Manchester City Council these presumptions can be followed. The case of Pharmaceutical Society of Great Britain v Boots Cash Chemists asserts that a display of goods, such as the chainsaw, does not amount to an offer, instead it will be considered an invitation to treat. This is distinct from an offer as it essentially invites others to make an offer or negotiate with the party (Gibson v Manchester City Council).

Therefore, when Roger takes the chainsaw to the till, he has not accepted an offer, he is responding to an invitation to treat. This means taking the chainsaw to the till amounts to an offer from Roger, meaning the cashier then has the discretion of whether to accept that offer or not. Following, it is clear that the cashier may refuse the sale, and Roger cannot enforce the sale for £20.

Reward poster

The next legal issue is whether Roger must give the Glen, who returned his iPhone, £50 as stipulated in his reward poster. The case of Partridge v Crittenden rules that the presumption is that advertisements would amount to an invitation to treat, unless the offer is for a unilateral contract with clear intention to create legal relations as per Storer v Manchester City County Council.

Roger’s poster would amount to a unilateral contract, as there is only an obligation on one party – Roger must pay the £50 reward if somebody returns his phone, but there is no obligation on anybody to find the phone. A unilateral contract will be for the performance of an act, acceptance takes place on performance of the act, and there is no requirement to communicate an intention to perform the act, the performance alone is sufficient as acceptance.

Applying the subjective reasonable man test to Roger’s poster, it is clear there is an intention to create legal relations, as the £50 reward is a reasonable amount for the return of an expensive possession. If the reward had been, for example, £5,000, the courts would rule that the reasonable man would not consider Roger’s advert to express an unequivocal intention to create legal relations, as £5,000 is an absurd amount and probably more than the cost of the actual phone – it would be seen as a marketing device, or a ‘mere puff’ as suggested in Carlill v Carbolic Smoke Ball Co Ltd.

Therefore, as there is an offer, it is clear that when the boy returns Roger’s phone, he has performed the requisite act that constitutes acceptance, meaning a binding contract had been formed and Roger would have to pay the whole £50 as promised in his reward poster.

Tender for chainsaw

The next legal issue is whether Roger must buy the £149 chainsaw in light of his poster which states he is looking to buy a chainsaw for any price below £150. This poster amounts to a tender, which is where an individual seeks specific goods or services, advertising their requirement for them. Roger is seeking the purchase of a chainsaw, therefore this amounts to a tender.

A tender has a presumption that it will be an invitation to treat, as parties will then the owner of the tender to negotiate/offer their goods/services. Therefore, when Roger is ed by Joe, this amounts to an offer, meaning Roger can decline the offer, and is subsequently not bound to buy the chainsaw for £149.

The sofa

The legal issue with the sofa is whether there has been offer and acceptance between Roger and the auctioneer which would result in a binding contract. A definitive decision cannot be made on the facts given, as it is not clear whether the auction is with reserve or without reserve. Following, both scenarios will be considered and explained.

If the auction is without reserve, the case of Barry v Davies is precedent that the presumption is that each bid is an offer, and that acceptance occurs when the auctioneer ends the bidding. This suggests that the auctioneer may refuse bids, but as there is a collateral contract between the auctioneer and the bidders to accept the highest bid, any refusal of a highest bid would amount to a breach of contract. Therefore, the auctioneer cannot decline Roger’s bid, and must allow Roger to buy the sofa for £1.

If the auctioneer refuses to allow Roger to take the sofa, he will be awarded damages which amount to the difference between the market value of the sofa and his bid. The market value of the sofa is £1,000; therefore, the damages will amount to £999.

If the auction is with reserve, an auctioneer is only obliged to accept any bids which are above the minimum reserve price. Therefore, if the reserve price is higher than £1, the auctioneer can legally prevent Roger from purchasing the Sofa.

The reward for swimming the channel

The legal issue here is whether Roger’s offer would amount to an offer, and if so, can Roger revoke the offer so to not be required to pay the reward to Ryan.

For identical reasoning as the reward poster regarding the return of the phone, the promise of a £500,000 donation for somebody to swim the channel in under 12 hours will amount to a unilateral contract. Whether or not it would amount to an offer is dependent on whether the requisite intention is clear from the view of the objective reasonable person.

Roger may attempt to argue his original offer was in fact not an offer, as no reasonable person would objectively consider it to be an intention to create legal relations, as the challenge was absurd and practically an impossibility. Evidently, this argument would fail as it is in fact a clear possibility if Ryan is able to complete half of the swim in under 4 hours. This may also involve a consideration of past successful swims/attempts at swimming the channel – has anybody been close to beating 12 hours or actually beat it? This argument is tenuous at best given the facts and would likely fail.

In the same vein as above, he may argue the reasonable person would not identify an intention to create legal relations due to the extremely high reward of £500,000. This would depend on the public’s perception of Roger, if it was known he was extremely wealthy and charitable the reasonable person would consider his offer to have clear intent. The fact he was hosting various charitable events would give weight to this suggestion, if he had donated similar amounts previous this would also support this assertion. However, if his wealth was unknown to the public, the reasonable person would likely consider such an offer to be some kind of joke, meaning it would lack the required objective intention.

If the courts find that the required intention is clear, and the advertisement is considered an offer, the legal issue here is whether Roger has successfully revoked the offer in order to prevent him having to pay the £500,000.

Roger’s first attempt at revocation comes when he tells his friend, Alex, that the offer is revoked. Reasonable steps must be taken to revoke a unilateral contract, which Shuey v USA suggests would involve a revocation in a similar fashion to the way in which the offer was made. In this case, the offer was posted online, meaning an online post would amount to revocation. It is clear that privately telling Alex would not constitute ‘reasonable steps’, meaning the revocation is ineffective at this point.

However, Roger does at a later point post his revocation online. Unfortunately, as per Dahlia v Four Millbank Nominees, a unilateral offer cannot be revoked once an offeree has begun performance. At this point, Ryan has already started on performance, as he is half way across the channel, meaning this revocation is ineffective, and once Ryan completes performance, Roger will be bound to pay the £500,000.

Roger may attempt to argue that the offer has been automatically revoked due to a lapse of time. The time required is a ‘reasonable time’. In the case of Ramsgate Victoria Hotel v Montefiore 6 months was held to be a reasonable time, but this was due to the subject matter of the contract being shares, which had volatile prices and it would be unfair to leave such an offer open. In Roger’s case, the difficulty of swimming the channel would not fluctuate and could not be considered ‘volatile’, meaning it is likely the courts would rule in favour of Ryan, that the offer had not been revoked due to a lapse of time. The only argument Roger may assert is that the difficulty of swimming the channel is volatile dependent on the time of year – perhaps the offer was made in the winter and it is considerably easier to swim the channel six months later, in the summer, therefore, the lapse of time to the summer would revoke the offer. However, this is not clear from the facts, but is one potential argument Roger may use.

Conclusions

Concluding: Roger would not be able to buy the chainsaw for £20; he must give the £50 reward to Glen; he would not have to purchase a chainsaw from Joe; the outcome of the sofa is dependent on whether the auction was with or without reserve; Roger would probably be bound to pay the £500,000 to Ryan if he completes the swim in under twelve hours, but his strongest potential counter-argument being with regards to the £500,00 being an extremely high reward and no objective reasonable person would take the offer seriously, although this is dependent on his previous conduct and public perception.


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