Contract Law - Offer and Acceptance Practice Question #1

INTRODUCTION

We will explore a contract law problem question designed to challenge your understanding of the key legal principles of offer and acceptance in contract law. Before delving into the model answer, I encourage you to attempt the question independently using the IRAC style. This exercise will not only help you apply your knowledge but also enhance your critical thinking skills. After you have formulated your response, you can compare your analysis with the model answer provided, which will serve as a guide to refine your understanding and approach to similar legal issues in the future.

QUESTION

Sophie sees an online advertisement from TechWorld stating:"Brand new laptops for £500 – limited stock!".

Sophie emails TechWorld saying:"I accept your offer to buy one laptop for £500."

TechWorld replies, stating that the:"Price now £650 due to demand."

Later that day, Sophie emails again stating:"Okay, I still agree to buy at £650."

Before TechWorld reads this email, they sell all remaining laptops to another customer.

Sophie wants to know whether she has a binding agreement with TechWorld.

ANSWER

Issue 1 - Offer vs Invitation to Treat

The first issue is whether the advertisement constitutes a legally binding offer capable of acceptance or whether it is merely an invitation to treat.

Rule

Advertisements are generally considered invitations to treat, not offers (Partridge v Crittenden [1968]). This means that they invite customers to make offers rather than being binding promises. Lord Parker CJ stated that "[t]he transmission of such a price-list does not amount to an offer to supply an unlimited quantity... If it were so, the merchant might find himself involved in any number of contractual obligations to supply wine of a particular description which he would be quite unable to carry out".

Application

What Sophie sees is an advertisement. Applying Partridge v Crittenden [1968], this means that it is likely to be an invitation to treat and not an offer. The fact that the advert states there is only “limited stock” bolsters this argument, since it suggests uncertainty and a lack of intention to be bound to supply to everyone. TechWorld would otherwise be required to supply computers to everyone, which would be impossible to do.

Consequently, Sophie’s email stating she “accepts” is actually an offer to buy at £500 and not an acceptance of an offer.

Conclusion

The advertisement is an invitation to treat. No contract is formed at this stage.

Issue 2 - Counter-Offers

The second issue is whether TechWorld’s response creates a binding contract.

Rule

A counter-offer rejects the original offer and introduces new terms (Hyde v Wrench). In this case, when Mr Hyde countered with an offer of £950, he cancelled the original £1,000 offer and could not back track and accept. This is also known as the 'mirror image' rule.

Application

TechWorld’s reply stating that the "price now £650” alters the price offered by Sophie. Consequently, this constitutes a counter-offer and 'destroys' Sophie’s offer to buy at £500. TechWorld have effectively made a new offer to sell the computers for £650.

Conclusion

No contract exists at this stage; Sophie’s original offer has been destroyed and therefore terminated.

Issue 3 - Acceptance

The third issue is whether Sophie’s agreement to pay £650 creates a binding contract.

Rule

Acceptance must be communicated to be effective; a contract is formed only when acceptance is received by the offeror for instant communications such as email. This means acceptance is effective when it reaches the offeror’s inbox rather than the date of sending (David Baxter Edward Thomas and Peter Sandford Gander v BPE Solicitors [2010]). In terms of revocation of an offer, it must be communicated to be effective (Dickinson v Dodds [1876]).

Application

Sophie’s email agreeing to £650 constitutes an acceptance of TechWorld’s counter-offer. Since acceptance via email typically takes effect when received (and not necessarily read), there is an argument that acceptance may already be effective. In addition, TechWorld had not communicated any revocation of the offer prior to that acceptance, and so it was still open to Sophie to accept.

Conclusion

It is likely that a contract was formed because TechWorld had 'received' the acceptance of the offer (even though they hadn't read it). In addition, TechWorld simply selling the goods to someone else unlikely satisfied the requirement for the revocation of the offer to be communicated.

Overall Conclusion

There is likely to be a contract between Sophie and TechWorld for the sale of the computers for £650. Sophie can therefore enforce the promise against TechWorld.