Agreement

Offer
The offer must be communicated by the offeror or an authorised agent of offeror to offeree: Henthorn v
Fraser
However, it is not necessary for an offer to be made to a specific person or a class or group of people. An
offer can be made to "all the world", in which case the offeree is regarded as a member of the general
public: Carlill v Carbolic Smoke Ball
When an offer is made, the term of the proposed contract must be communicated to the offeree: Thornton
v Shoe Lane Parking
However, an offer can be made in general terms, leaving the precise terms of the contract to be settled
later: Master v Cameron
The fact that the word 'offer' is used is not itself conclusive: B Seppelt & Sons Ltd v Commissioner for
Main Roads
An offer must be distinguished from "an invitation to treat", which can be described as any part of the
negotiation process that invites further bargaining, rather than acceptance: Pharmaceutical Society v
Boots Cash Chemist
Acceptance
Communication of acceptance is generally required: Felhouse v Bindley, EXCEPTIONS are:
• Where an offeree with a reasonable opportunity to reject the offer of goods or services takes the
benefit of them under circumstances which indicate that they were to be paid for in accordance with
the offer: Empirnall Holdings v Machon Paull Partners
• Offer may dispense with the need of communication or acceptance takes the form of performance.
Carlill v Carbolic Smoke Ball Co.
• Postal acceptance rule: Bressan v Squires
• The rule only applies when the parties contemplated that acceptance would be communicated by
the post: Henthorn v Fraser
Acceptance must correspondent with the offer, any departure from the offer will amount to a 'counter-offer':
Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (Eng) Ltd
Acceptance must be in reliance on the offer. This means that all the time of acceptance, the offeree must
know of the existence of the offer and the acceptance must be based on the offer made: R v Clarke
Durance of an Offer
Offer may be revoked before acceptance. The revocation does not necessarily by given by the offeror
himself, and can be implied from words or conduct: Dickinson v Dodds
• However, if the promisee paid a consideration to keep the offer open or if the promise to keep it open
has made by deed, the offeror will not be able to withdraw the offer: Goldsbrough Mort & Co Ltd v
Quinn
In terms of unilateral offer, no universal rule can be stated about whether an offer can be withdrawn after
the offerees commenced the performance. In some situations, if the performance of the offer itself benefits
the offerees, the revocation may be effective though the offeror may be liable in damages: Mobil Oil
Australia Ltd v Lyndel Nominees Pty Ltd (1998)
A mere inquiry is not a rejection to the offer: Stevenson, Jaques & Co v McLean
Counter-offer kills the offer: Butler Machines Tool Co. Ltd v Ex-Cell-O Corporation
Uncertainty and Incompleteness
Generally, courts will try to, as far as possible to give effect to contract between the parties: Council of the
Upper Hunter County District v Australian Chilling & Freezing Co Ltd

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 • Where the agreement has partly performed or has previous record, courts will be reluctant to hold it
void for uncertainty: Hillas v Acros
A contract is void if the term is uncertain and not severable: Whitlock v Brew
An agreement to negotiate in the future on some fundamental matter is too vague to be enforced: Coal
Cliff Collieries Pty Ltd v Sijehama Pty Ltd
• However, an agreement to negotiate, if made in good faith, maybe enforceable depending on its terms
and construction: United Group Rail Services Ltd v Rail Corporation
Whether a contract containing a “subject to contract” term is enforceable depends on the intention of the
parties. This kind of contracts is usually classified into three categories and the test is an objective test:
Masters v Cameron.
“Subject to finance” term usually will not make a contract void: Meehan v Jones
Consideration
Consideration must be referable to the promise and must be part of the bargain: Australian Woolen Mills v
Commonwealth
Consideration must move from the promisee (but not necessarily to the promisor): Coulls v Bagot's
Executor and Trustee Co Ltd
Consideration must be of some value, i.e. sufficient, but not necessarily to be (commercially) adequate or
something of great value: Chappell & Co Ltd v Nestle & Co Ltd; Thomas v Thomas
Past consideration is not good consideration: Roscorla v Thomas; except for the remuneration rendered
by the past service as requested by the defendant: Re Casey's Patents
Consideration cannot be illusory: Placer Developments Ltd v Cth; Meehan v Jones
Performance of existing duty is not good consideration: Stilk v Myrick; however, a promise to perform an
existing obligation can constitute good constitute good consideration where there are practical benefits to
the promisee: Williams v Roffey Bros & Nicholls (Contractors) Ltd; and promise to perform the existing
duty to a third party may be good consideration if it is a benefit to the promisor: Ward v Byham
Payment of a lesser sum on the day in satisfaction of a greater, is not good consideration: Foakes v Beer
Forbearance to sue or to compromise is a good consideration: Wigan v Edwards
Promissory Estoppel
Estoppel now can be used as a ‘sword’ rather than merely a ‘shield’: W. v G.
Silence may amounts to a representation which lead to the operation of promissory estoppel: Waltons
Stores (Interstate) Ltd v Maher
Elements of promissory estoppel: Waltons Stores (Interstate) Ltd v Maher
However, promissory estoppel is not allowed when there is a clear contradiction to the intention of the
parties: Austotel v Franklins
Intention to create legal relations
Intention to create legal relations is an essential element of a contract. Intention is ascertained by an
objective test: Ermogenous v Greek Orthodox Community of SA
The presumption of no intention applies in domestic contexts involving family members or friends: Cohen v
Cohen; Balfour v Balfour; Jones v Padavatton
• However, the presumption may be rebuttable, and the burden of proof lies on the party who alleges
there was a contract: Ermogenous v Greek Orthodox Community of South Australia
In commercial context, the general presumption is that commercial transaction attracts intention to create
legal relations: Esso Petroleum Ltd v Commissioners of Customs & Excise; Chappell & Co Ltd v Nestle &
Co Ltd
• However, an honourable clause may make the agreement unenforceable in law: Rose & Frank Co. v
JR Crompton & Bros Ltd
• In terms of letter of comfort, it should be construed objectively to check the parties’ intention: Banque
Brussels Lambert SA v Australian National Industries Ltd
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 In government scheme, where a government agreement involves the administrative or political activities,
the courts are very reluctant to find intention: Australian Wollen Mills v Commonwealth

Agreement General

The law of contract will enforce obligations where there has been agreement between the parties. Absent
of agreement, there is no contract
The courts are looking for consensus ad idem --- a meeting of the minds between the two parties.
The traditional analysis is to ask: has there been an offer made by one party to be bound by terms of a
contract which is accepted by another?
Besides offer and acceptance, the necessary elements of an enforceable contract are
• an intention to create binding legal relations
• consideration
Correct analysis of the agreement is essential to determine:
• when the contract was entered into
• a breach of obligations will often depend on when the obligation needed to be performed
• where the contract is formed
• to determine the jurisdiction and relevant applicable law
• what the terms of the contract are
• both express and implied

Offer

Offer is the indication by one person to another of his or her willingness to enter into a contract with that
person on certain terms.

The offer must indicate a willingness by the offeror to be bound without further negotiation as to the
terms of the proposed contract.
An offer can be made by words and/or conducts. The existence of an offer is ascertained by asking
whether a reasonable third party would conclude an offer has been made. This objective test takes into
account:
• The express conduct or words used by the parties rather than their subjective intentions.
• Whether the terms are sufficiently complete so that acceptance is enough to constitute a contract.

Offer vs invitation to treat

• Advertisement
• Displays of goods in shops
• A reply to the invitation may possibly be an offer or merely an indication of willingness to negotiate.
1.Whether the offer comes into being?
The display of the goods is an offer or Pharmaceutical Society v Boots Cash Chemist [1953]
merely an invitation to treat?
1. Goods displayed on the shelf of the The display of goods in a shop does not amount to an offer by the shopkeeper to sell, accordingly, the mere fact that a customer
self-serviced store. picks up a commodity from the displayed shelves does not amount to an acceptance of an offer to sell. It is an offer by the
2. Customer picked up goods, however, the customer to buy and there is no sale effected until the buyer's offer to buy is accepted by the acceptance of the price.
purchase may be rejected by the
authorised pharmacist.

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 Although the display of goods for sale will not normally be regarded as constituting an offer for sale, the
display of an automatic vending machine apparently constitute an offer which is accepted by those
Defendant failed to prove sufficient customers who insert their money into the machine.
notice had been given to the plaintiff. Thorn v Shoe Lane Parking Ltd (1971)
(the sentence was not incorporated)
1. The plaintiff parked his car in an • In a self-serving ticket case, the offer is made when the proprietor of the machine holds it out as being ready to receive the
automatic car park owned by the money.The acceptance takes place when the customer puts his money into the slot.
defendant. • The terms of the offer are contained in the notice placed on or near the machine stating what is offered for the money. The
2. A notice headed with the price listed and a
sentence “All cars parked at owner’s risk”. customer is bound by those terms as long as they are sufficiently brought to his notice beforehand, but no otherwise. He is not
3. The tickets were sold by the self-service bound by the terms printed on the ticket if they differ from the notice, because the ticket comes too late.
machine.
4. The plaintiff was severely injured when he
• Unless a course of dealing is proved between the parties, the notice must be given prior to or contemporaneously with entry
returned to collect his car by an accident. into the contract.

Government policy vs offer

1. Commonwealth announced a Australian Wollen Mills v Commonwealth (1954)
“subsidy” plan to reimburse Intention to be bound
manufacturer on local wool purchasing
before 30 June 1948.
The presence of a request does not however in itself establish a contract. In order to establish a contract, it should made to
2. AWM purchased large quantities of wool appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of
and before the subsidiary plan ended, its the act, and that the act was really done in consideration of a potential promise inherent in the statement or announcement.
stock pile exceeded the government’s
prescribed limitation.
3. The company was required to repay the Consideration to the offer:
subsidy paid on that excess. • A contract only exists if the unilateral statement is really offered as condition for doing the act, and that the act was really
4. Held, no contract, the subsidiary plan was
not an offer. done in consideration of a potential promise inherent in the statement. In this case, no promise was made by the
Commonwealth.
• Commonwealth never induced Mills to buy the wool, only that if they bought domestic wool, a subsidy would be paid. This
amounts to a gift subject to a conditional precedent.
• Since there was no offer, Mills could not have accepted, and its acts could not count as consideration for the alleged promise
to pay the money.

Offer vs Puff
Puff consists of all those statements which, while made to induce contracts, are so clearly far-fetched or
exaggerated that no reasonable person would believe them to be binding statement of fact on which they
should rely.
Consequently, such statement, although they may induce a contract, are not binding on the party making
them and do not give the other party any grounds on which to seek a remedy.

Puff cf a valid offer; offer to the world at Offer to the world at large
large; dispense with the notice of Carlill v Carbolic Smoke Ball [1893]
acceptance.
1. The vendor made an advertisement • The contract is made with that limited portion of the public who come forward and perform the condition on the faith of the
saying $100 reward would be paid to advertisement.
any person who contacted influenza after • The person who makes the offer may dispense with notice to himself if he thinks it desirable to do so, and if the person
taking the ball three times daily for two
weeks. making the offer, expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without
2. A further representation that “$1000 is communicating acceptance of it to him, performance of the condition is a sufficient acceptance without notification.
deposited with the Alliance Bank”.
3. The plaintiff took the medicine according
• Inconvenience sustained by one party at the request of the other is enough to create a consideration.
to the prescription and caught influenza.
4. The plaintiff was entitled to recovery. Auctions
AGC (Advances) Ltd v McWhirter
In case of auction, it is considered that an auctioneer who puts something up for sale is not offering but inviting bids for the
goods.Thus the bids constitute an offer, and a contract is formed when the auctioneer accepts the bid at the fall of the hammer.

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The difficult arises in relation to auctions without reserve prices. Current authority suggests they are the
same as auctions with reserve prices (AGC (Advances) Ltd v McWhirter), however, the leading UK case
suggests the opposite (Barry v Davies).
Tenders
A tender is a bid made in writing offering a price for the sale or purchase of goods and/or services.
• Each tender has made an offer, which the offeree may then accept or reject, and the offeree is under no
obligation to accept any tender.
• Requests for tenders are generally regarded as an invitation to treat. However, requests for tenders which
contains a promise that the highest bid will be accepted may be offers.

Application for shares or debentures

Generally, a person applying, in response to a prospectus, for the issue of shares or debentures in a
company is regarded as making an offer, which the company must accept before any contract arises.

Cross-offer
Cross-offers occur when two parties forward offers to one another at the same time and in the same or
substantially the same term.
In such cases, there are two offers but no acceptance; hence, there is no contract.
If one party subsequently decides not to deal, the other cannot do anything about it.

Counter-offer
A counter offer occurs when an offeree indicates a willingness to deal on terms slightly different from those
of the original offer, although still in respect of the same or substantially the same subject matter.
It is a rejection of the original offer and a substitution of a new offer for it.

Offeree's response to an offer:

• accept the offer in its terms;
• reject the offer;
• make a counter-offer;
• ask for further information or clarification before making a final decision;
• A mere inquiry is not an acceptance, but neither is it a rejection. It has an entirely neutral effect on the
offer, and when the offeror replies, the offeree still has the option of accepting or rejecting.
• do nothing at all

Acceptance

An acceptance is a final and unqualified assent to the terms of the offer, made in the manner specified or
indicated by the offeror. It can occur orally, in writing, or, occasionally, it may be implied from the offeree's
conduct.
Acceptance is unconditional.
An offer can only be accepted by person to whom the offer is made.
Acceptance must be made within the stipulated time, or in the event of no stipulated time, within
reasonable time.
Acceptance cannot be withdrawn unilaterally without the offeror’s consent.
Unless there is a clear intention, acceptance does not have retrospective effect to a date before the date
of acceptance.

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 Acceptance can be inferred.

Postal acceptance rule

• The acceptance is effective immediately a properly pre-paid and addressed letter is posted.
• The rule only applies when the parties contemplated that acceptance would be communicated by the post:
Henthorn v Fraser
• The postal acceptance rule protects the acceptor not just against the risk of delay in the acceptance
being transmitted but also against the risk of it being lost and never reaching the offeror.
• Where the postal rule applies, contract is believed as having been made in the place where the
acceptance was posted; whereas in other cases the contract is made at the place where acceptance is
1. Plaintiff granted Defendant for $2 an
option to purchase property for communicated to the offeror.
$65,000. • The postal acceptance rule does not apply to revocation, which means an acceptance will be effective
2. Clause 1 of the option stated that "this
option may be exercised by you by notice on posting even though before that time the offeror has sent a letter revoking the offer.
in writing addressed to me at any time on
or before 20 December 1972."
3. The notice to exercise the option was Bresssan v Squires [1974]
posted (registered post) 18 December and Was the decisive date that of posting or of receipt? The general rule requires actual communication, but there is an exception for
received 21 December. notices sent by post in which the posting is taken as communication. The matter is important for it will determine not only the
4. The parties disputed whether it had been
validly exercised. time of completion, but also the place of completion. The rule is as stated by Lord Herschell in Henthorn v Fraser (1892) -
1. The plaintiff offered to buy the horse "where circumstances are such that it is within the ordinary contemplation of the parties that according to ordinary usage the
of his nephew and said “if I hear no
more about you I would consider the horse
post might be used, then the acceptance is effective as soon as it is posted". The parties need not contemplate that posting
mine”. would conclude the contract - that would make the requirement too restrictive.
2. The nephew did not reply to this offer and
later the horse was sold by an auctioneer
by mistake. Communication of Acceptance
3. The plaintiff sued the auctioneer in Generally, an offer cannot be accepted by silence, unless the offeror waive the right to be notified of
conversion.
1. Empirnall hired Machon to draw acceptance.
plans and which was duly done. Felhouse v Bindley (1862)
2. Machon asked for progress payment and
execution of contracts. • The offer given by the plaintiff was still an open offer.
3. Machon was told to submit the progress • In terms of an offer, if there is no bargain to pass the property to the offeree, the offeree has no right to complain of the sale.
claim but was informed that “Mr Jury” (a • Silence does not constitute acceptance.
director and major sharehold of Empirnall)
“does not sign the contract”.
4. Machon continue to do the work. Empirnall Holdings v Machon Paull Partners (1988)
However, acceptance inferred from
conduct. Generally speaking, silence does not constitute acceptance. However, where an offeree with a reasonable opportunity to reject
1. In response to the inquiry, the vendor the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in
(Butler) quoted a price for the
mentioned machine, including a price
accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms.
variation clause in accordance with an
increase in the cost and so forth. Correspondence with offer --- the battle of forms
2. The quotation was replied with an order,
which was stated to be subject to certain "The set submitted last": each set, as it is submitted, constitutes a counter-offer. Each therefore destroys
terms and conditions, however, materially the offer contained in the previous set and substitutes its own terms as the new offer. When acceptance
different from those put forward by the
vendor, and in particular, no provision in finally occurs, it must be on the terms contained in the last offer.
relation to the variation clause.
3. The vendor accepted the order and asked
for the increase of the cost Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (Eng) Ltd [1979]
Held, • When the acceptance of an offer contains terms having very material difference in them from the terms put forward by the
the petitioner had not given the
information in relation upon or with an offeror, which means they could not be reconciled in any way, the acceptance amounts to a counter-offer.
intention to accept the offer. • When there is a "battle of forms", there is a contract as soon as the last of the forms is sent and received without objection
therefore, contract between him and the
government had been concluded.
be taken to it.
1. Reward was offered for the
information in relation to the Acceptance must in response to the offer
murderer of two police officers.
2. Clarke gave the information which helped R v Clarke (1927)
the conviction of the criminals.
3. However, Clarke did so not in reliance upon
the offer but solely to clear himself of a
charge made against him. 6
4. He had made no claim to the reward until
his conviction was dismissed. He alleged he
just forgot the reward when he provided
the information.
Unless a person performs the conditions of the offer, acting upon its faith or in reliance on it, he does not accept the offer and
the offeror is not bound to him.