Offer and Acceptance

Business and Personal Law

What is Offer and Acceptance?

Offer and acceptance are elements required for the creation of a legally binding contract: the expression of an offer to contract on certain terms by one person (the offeror) to another person (the offeree) and an recognition by the offeree of its acceptance of those terms. The other elements traditionally required for a legally binding contract are consideration and an intention to create legal relations.

Smith v Hughes

Smith v Hughes (1871) is a famous contract law case. In it, Blackburn J set out his classic statement of the objective interpretation of people's conduct when entering into a contract. Rejecting that one should merely look to what people subjectively intended, he said,

"If, whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms."

Held: both actions failed. The action based on misrepresentation failed as you cannot have silence as a misrepresentation. The defendant had not mislead the claimant to believe they were old oats. The action based on mistake failed as the mistake was not as to the fundamental terms of the contract but only a mistake as to quality.

Hyde v Wrench

Wrench (D) offered to sell his estate to Hyde for 1200 pounds and Hyde (P) declined. Wrench then made a final offer to sell the farm for 1000 pounds. Hyde in turn offered to purchase the property for 950 pounds and Wrench replied that he would consider the offer and give an answer within approximately two weeks.

Wrench ultimately rejected the offer and the plaintiff immediately replied that he accepted Wrench’s earlier offer to sell the real estate for 1000 pounds. Wrench refused and Hyde sued for breach of contract and sought specific performance, contending that Wench’s offer had not been withdrawn prior to acceptance.

Held: The court ruled a counter offer negates the original offer.