Business Law Presentation on Offer and Acceptance
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Transcript of Business Law Presentation on Offer and Acceptance
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Business Law Project
Offer and Acceptance
By Kelvin Koh Tong Weng (1.1)Tan Jing Ren (1.2)Lee Yan Gen (1.3)
Huang Zhongming (2.1)Philip Tai Khan Siong (2.2)Joash Goh Zhi Rong (2.3)
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Letter of Offer sent from “A” to “H” – Terms: RECEIVES Letter of Acceptance by 11am the next day
“H” posted Letter of Acceptance
“A” sold memorabilia to someone else
“A” wrote Letter of Revocation at 5pm
“A” receives Letter of Acceptance at 9am
“H” receives Letter of Revocation at 830am
Monday Tuesday
Qn 1.1Timeline of Events
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Qn 1.1 (a)
Advise Hannah on her legal rights, if any.
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Letter of Offer sent from “A” to “H” – Terms: RECEIVES Letter of Acceptance by 11am the next day
“H” posted Letter of Acceptance
“A” sold memorabilia to someone else
“A” wrote Letter of Revocation at 5pm
“A” receives Letter of Acceptance at 9am
“H” receives Letter of Revocation at 830am
Monday Tuesday
Issues (a)1. Which came first?
Acceptance or Revocation?
2. Does Postal Acceptance Rule Apply?
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Rules Applied
1. Postal Acceptance Rule: Acceptance by post takes place when the Letter of Acceptance is posted- Adams v Lindsell (1818)
2. Exception to PAR: The PAR cannot apply when there are express terms in the offer specifying that acceptance must reach the offeror – Holwell Securities Ltd v Hughes (1974)
3. Revocation: Revocation occurs when the offeree receives the communication - Byrne v Van Tienhoven (1880)
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Analysis and Application
Letter of Offer sent from “A” to “H” – Terms: “go ahead with sale at $100,000 if she RECEIVES Letter of Acceptance by 11am the next day”
Intention to EXCLUDE Postal Acceptance Rule- Letter of Acceptance only valid upon RECEIPT
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Applying the Exception to PAR rule: The PAR cannot apply when there are express terms in the offer specifying that acceptance must reach the offeror – Holwell Securities Ltd v Hughes (1974)
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Letter of Offer sent from “A” to “H” – Terms: RECEIVES Letter of Acceptance by 11am the next day
“H” posted Letter of Acceptance
“A” sold memorabilia to someone else
“A” wrote Letter of Revocation at 5pm
“A” receives Letter of Acceptance at 9am
“H” receives Letter of Revocation at 830am
Monday Tuesday
Qn 1.1Timeline of Events
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Analysis and Application
Letter of Offer sent from “A” to “H” – Terms: “go ahead with sale at $100,000 if she RECEIVES Letter of Acceptance by 11am the next day”
Intention to EXCLUDE Postal Acceptance Rule- Letter of Acceptance only valid upon RECEIPT
*Receipt of: LOR – 830am LOA – 900am
Offer REVOKED before accepted
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Conclusion
The letter of revocation came into effect BEFORE the letter of acceptance.
Thus, Hannah would not be in a strong legal position to sue Alyson for breach of contract.
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Qn 1.1 (b)
Would it make any difference to your answer if the letter from Alyson to Hannah withdrawing the offer had been received by the latter at 9.30am instead of 8.30am?
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Letter of Offer sent from “A” to “H” – Terms: RECEIVES Letter of Acceptance by 11am the next day
“H” posted Letter of Acceptance
“A” sold memorabilia to someone else
“A” wrote Letter of Revocation at 5pm
“A” receives Letter of Acceptance at 9am
“H” receives Letter of Revocation
at 930am
Monday Tuesday
Issues (b)1. What if the Letter
of Revocation is received 1 hour later?
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Rules Applied
1. Postal Acceptance Rule: Acceptance by post takes place when the Letter of Acceptance is posted- Adams v Lindsell (1818)
2. Exception to PAR: The PAR cannot apply when there are express terms in the offer specifying that acceptance must reach the offeror – Holwell Securities Ltd v Hughes (1974)
3. Revocation: Revocation occurs when the offeree receives the communication - Byrne v Van Tienhoven (1880)
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Analysis and Application
Contract comes into existence when “A” received Letter of Acceptance from “H” because….
*Receipt of: LOA – 900am(in effect) LOR – 930am (too late)
Offer was ACCEPTED before being revoked
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Conclusion (b)
The situation would be the exact opposite if the letter of revocation was received at 9.30am instead of 8.30am.
In that situation, the contract would have come into existence at 9am, and Hannah would be in a legal position to sue Alyson for breach of contract
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Letter of Offer sent from “Er” to “K” – Terms: $50,000 contract. Reply by post
“Ed” offered “Er” contract for $30,000
“Er” counter offered a contract of $40,000 that was accepted by “Ed” and in place
c. “K” posted Letter of Acceptance at 11am
Qn 1.2 Timeline of Events
a. Er” faxed to “K” to tell him offer of 1 Nov withdrawn
b. Fax received by “K” at 10.45am. Read at 5pm
1Nov 4 Nov 5 Nov 6 Nov
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Qn 1.2 (a)
Advise Erwin, Kevin and Edgar of their legal positions.
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Letter of Offer sent from “Er” to “K” – Terms: $50,000 contract. Reply by post
“Ed” offered “Er” contract for $30,000
“Er” counter offered a contract of $40,000 that was accepted by “Ed” and in place
1Nov 4 Nov 5 Nov 6 Nov
Issues (a) 1. “K” letter of acceptance or “Er” letter of revocation occurred first?
2. Was contract between “Er” and “Ed” valid?
c. “K” posted Letter of Acceptance at 11am
a. Er” faxed to “K” to tell him offer of 1 Nov withdrawn
b. Fax received by “K” at 10.45am. Read at 5pm
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Rules Applied – “Er” and “K”
1. Postal Acceptance Rule: Acceptance by post takes place when the Letter of Acceptance is posted- Adams v Lindsell (1818)
2. Revocation received but NOT read: Revocation by telex/fax occurs when the communication was received on the recipient’s machine. There is no need to be actually read by any person in the organization. – The Brimnes (1975)
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Analysis and Application- “Er” and “K”
Letter of Acceptance sent by POST from “K” to “Er” on 6th Nov @ 11am - Applying “Postal Acceptance Rule”, acceptance happens right after letter is posted
However, Letter of Revocation received by “K” at 1045am on fax machine
– This precedes the sending out of Letter of Acceptance. Applying the rule from the case “The Brimnes”, it doesn’t matter whether it is read or not.
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Letter of Offer sent from “Er” to “K” – Terms: $50,000 contract. Reply by post
“Ed” offered “Er” contract for $30,000
“Er” counter offered a contract of $40,000 that was accepted by “Ed” and in place
c. “K” posted Letter of Acceptance at 11am
Qn 1.2 Timeline of Events
a. Er” faxed to “K” to tell him offer of 1 Nov withdrawn (revoke)
b. Revocation Fax received by “K” at 10.45am. Read at 5pm
1Nov 4 Nov 5 Nov 6 Nov
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Analysis and Application- “Er” and “K”
Letter of Acceptance sent by POST from “K” to “Er” on 6th Nov @ 11am - Applying “Postal Acceptance Rule”, acceptance happens right after letter is posted
However, Letter of Revocation received by “K” at 1045am on fax machine
– This precedes the sending out of Letter of Acceptance. Applying the rule, it doesn’t matter whether it is read or not.
Thus, no contract for “K” to accept since Letter of Revocation is in effect
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Rules Applied – “Er” and “Ed”
1. Counter Offer: Acts as a rejection of 1st offer and stands as a new offer to be accepted by offeror- Hyde v Wrench (1840)
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Analysis and Application- “Er” and “Ed”
Offer
• $30,000 offer from “Ed” to “Er”
Counter Offer
• $40,000 counter offer from “Er” to “Ed”
Acceptance
• “Ed” accepts terms counter offered by “Er”
Thus, the contract between Erwin and Edgar valid and is binding
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Conclusion (a)
For the attempt at establishing a contract between Erwin and Kevin, since the letter of revocation from Erwin to Kevin comes into effect before the letter of acceptance from Kevin to Erwin, the contract is void, and the two parties are not contractually bound.
The contract between Erwin and Edgar is binding from the information given in the case.
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Qn 1.2 (b)
What would your answer be if 6 November was a non‐working weekend?
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Letter of Offer sent from “Er” to “K” – Terms: $50,000 contract. Reply by post
“Ed” offered “Er” contract for $30,000
“Er” counter offered a contract of $40,000 that was accepted by “Ed” and in place
c. “K” posted Letter of Acceptance at 11am
a. Er” faxed to “K” to tell him offer of 1 Nov withdrawn
b. Fax received by “K” at 10.45am. Read at 5pm
1Nov 4 Nov 5 Nov 6 Nov
1. Will the case be altered if 6 Nov is a non-working weekend?
Issues (b)
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Rules Applied
1. Communication outside working hours not considered instantaneous: - Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels GmbH (1983)2. Apply working hours to give business efficacy to contract:- The Moorcock (1889)
3. Postal Acceptance Rule: Acceptance by post takes place when the Letter of Acceptance is posted- Adams v Lindsell (1818)
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Analysis and Application- Non-Working Hours
Applying “Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels GmbH (1983)”
If it was a non-working weekend, communication would not be considered instantaneous
Apply working hours to GIVE business efficacy to the contract – The Moorcock (1889)
Revocation letter deemed received at start of following Monday instead of weekend
Therefore, when we apply the Postal Acceptance Rule, the Letter of Acceptance comes into effect on 6 Nov before the revocation was communicated and takes effect
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Conclusion (b)
Yes, the conclusion of the case will be different. If 6 November was a non-working weekend, the letter of revocation would be deemed to have been received after the letter of acceptance had been posted out, and Erwin and Kevin would be contractually bound.
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Qn 1.2 (c)
What is your opinion if Erwin had withdrawn the offer by e‐mail instead, which was sent at 10.45am but received at 11.15am?
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Letter of Offer sent from “Er” to “K” – Terms: $50,000 contract. Reply by post
“Ed” offered “Er” contract for $30,000
“Er” counter offered a contract of $40,000 that was accepted by “Ed” and in place
b. “K” posted Letter of Acceptance at 11am
a. “Er” faxed to “K” to tell him offer of 1 Nov withdrawn
c. Email sent by “Er” at 1045am and received by “K” at 1115am
1Nov 4 Nov 5 Nov 6 Nov
Issues (c)
1. Will the case be altered if revocation is sent by email at 1045am but received at 1115am?
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Rules Applied – “Er” and “K”
1. Postal Acceptance Rule: Acceptance by post takes place when the Letter of Acceptance is posted- Adams v Lindsell (1818)
2. Revocation received but NOT read: Revocation by telex/fax occurs when the communication was received on the recipient’s machine. There is no need to be actually read by any person in the organization. – The Brimnes (1975)
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Analysis and Application- “Er” and “K”
Letter of Acceptance sent by POST from “K” to “Er” on 6th Nov @ 11am - Applying “Postal Acceptance Rule”, acceptance happens right after letter is posted
However, Letter of Revocation received by “K” at 1115am on by email
Applying the rule from the case “The Brimnes”
– This is after the sending out of Letter of Acceptance. Letter of Revocation does not take effect but Letter of Acceptance does
Thus, “Er” and “K would be contractually bound
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Letter of Offer sent from “Er” to “K” – Terms: $50,000 contract. Reply by post
“Ed” offered “Er” contract for $30,000
“Er” counter offered a contract of $40,000 that was accepted by “Ed” and in place
b. “K” posted Letter of Acceptance at 11am
a. “Er” faxed to “K” to tell him offer of 1 Nov withdrawn
c. Email sent by “Er” at 1045am and received by “K” at 1115am
1Nov 4 Nov 5 Nov 6 Nov
Issues (c)
1. Will the case be altered if revocation is sent by email at 1045am but received at 1115am?
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Conclusion (c)
If the notice of revocation had been sent by email and had been received at 11.15am, the letter of acceptance would have been posted before the notice of revocation was received, and Erwin and Kevin would be contractually bound.
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a. Palin makes Nicki an offer
Qn 1.3 Timeline of Events
Monday
b. No reply by Thurs means no
Wednesday
Palin makes Glenda same offer, she accepts
Thursday
Nicki calls Palin up, but bag is gone
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Qn 1.3 (a)
Does Nicki have any right of action for breach of contract against Palin?
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Monday Wednesday Thursday
Issues (a)1. Is Palin obliged to keep offer open until Thurs?
a. Palin makes Nicki an offer
b. No reply by Thurs means No
Nicki calls Palin up, but bag is gone
Palin makes Glenda same offer, she accepts
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Rules Applied
1. Offeror’s promise unenforceable– Routledge v Grant (1828)*exception to be discussed later
2. Revocation needs to be communicated- Byrne v Van Tienhoven (1880)
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Analysis and Application- “Palin” and “Nicki”
Routledge v Grant
- Palin is not obliged
Palin may still retract the offer whenever she wishes to do so
However, Is the offer still open?
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Analysis and Application- “Palin” and “Nicki”
Byrne v Van Tienhoven
- Effective revocation needs to be properly communicated
Palin did NOT communicate any revocation notice
Therefore
Palin is contractually bound
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Conclusion (a)
- Non-communication of revocation- Offer still in existence
Nicki would be in a legal position to sue Palin for breach of contract
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Qn 1.3 (b)
What if Nicki told Palin instead that if she did not reply by Thursday, that means that she would be able and willing to buy the bag?
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Monday Wednesday Thursday
Issues (b)
2. Is silence a valid form of acceptance?
a. Palin makes Nicki an offer
b. No reply by Thurs means Yes
Palin makes Glenda same offer, she accepts
Nicki calls Palin up, but bag is gone
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RulesApplied
1. Silence generally does not constitute a mode of acceptance
Unless - offeree expressly states his wish for silence to be construed as acceptance
- Re Selectmove Ltd (1995)
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Analysis and Application- “Palin” and “Nicki”
Re Selectmove Ltd
If Nicki (offeree) indicates silence as willingness to buy…
Nicki will be requesting for acceptance by silence
Acceptance by silence is valid, since offeree made this request
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Analysis and Application- “Palin” and “Nicki”
However, from Byrne v Van Tienhoven
- Palin would still need to communicate revocation for it to be effective
Facts of the case unchanged, hence
Palin is still liable for breach of contract
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Conclusion (b)
- Nicki’s silence could be construed as acceptance
- However, facts of the case remain unchanged
Nicki would still be in a legal position to sue Palin.
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Qn 1.3 (c)
How can Nicki ensure that Palin will keep the offer open only to her up till the end of Thursday?
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Monday Wednesday Thursday
Issues (c)3. How may Nicki bind Palin to keeping offer open until Thurs?
a. Palin makes Nicki an offer
b. No reply by Thurs means No
Palin makes Glenda same offer, she accepts
Nicki calls Palin up, but bag is gone
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Rules Applied
1. Offeror’s promise unenforceable
Unless- Separate contract supported by consideration is in effect (option)– Mountford v Scott (1975)
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Analysis and Application- “Palin” and “Nicki”
Mountford v Scott
- If Nicki wanted the offer to be open only to her until Thursday, she would have had to provide consideration in return for Palin’s promise to keep the offer open exclusively to her until Thursday.
- Such consideration may be furnished by ‘buying an option’, e.g. making a token payment
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Conclusion (c)
If Nicki provided some form of consideration e.g. through buying a contract, Palin would be contractually obliged to keep offer open until Thurs
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“For the purposes of offers, the law distinguishes shop displays from certain advertisements. It is therefore essential that those who wish to contract over the Internet understand this difference.” (per Clive Gringras, “The Laws of the Internet”).
What in your view is this “difference” which the author is referring to and how would knowing such information impact upon the way owners of websites create their web advertisements?
You may wish to consider the factual scenario below to assist you in your answer: A web site that offers advertising space to vendors/sellers runs a promotion. The advertisement reads, “If you visit our website four times this month and do not buy anything from our vendors, we will credit S$10 to your bank account”. What is the effect of section 14 of the Electronic Transactions Act (2010) and does it change the current common law rules distinguishing ITT and offer in any way?
Qn 2.1
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“For the purposes of offers, the law distinguishes shop displays from certain advertisements. It is therefore essential that those who wish to contract over the Internet understand this difference.” (per Clive Gringras, “The Laws of the Internet”).
What in your view is this “difference” which the author is referring to and how would knowing such information impact upon the way owners of websites create their web advertisements?
You may wish to consider the factual scenario below to assist you in your answer: A web site that offers advertising space to vendors/sellers runs a promotion. The advertisement reads, “If you visit our website four times this month and do not buy anything from our vendors, we will credit S$10 to your bank account”. What is the effect of section 14 of the Electronic Transactions Act (2010) and does it change the current common law rules distinguishing ITT and offer in any way?
Qn 2.1
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What is the “difference” between shop displays from certain advertisements?
Invitation to Treat (ITT)
Offer
• Willingness of 1 party to enter into negotiations with the other
• No intention to be bound
• Clear terms of exchange• Intention to be bound• Binds offeror upon
acceptance
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What is the “difference” between shop displays from certain advertisements?
Invitation to Treat (ITT)
Offer
Shop Display and most advertisements:
E.g. Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953)
Goods on shelf (ITT) Brought to counter (offer to buy) Shop accepts $ and offer
Certain Advertisements:
E.g. Carlill v Carbolic Smoke Ball Company (1893)
Used smoke ball 3 times daily according to printed instructions clear and definitive terms
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What is the relevance and impact of these differences on web advertisements?
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Difference, Relevance and Impact
Normal Advertising v.s Web Advertisements
1. Either traditional advertising or display of goods in shop
Traditional advertising, display of goods and act of purchase can be combined in 1 web page
Difference between ITT, Offer, Acceptance not as distinct
Impact: Risk of buyer construing web advertisements as Offer Web merchants may inadvertently be bounded
Therefore, Web merchants should be careful with their use of language
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Email confirmation
Immediate and Automated Acceptance
What is the relevance of this?
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Difference, Relevance and Impact
Shop Setting v.s Web Advertisements2. Shop representative at counter can reject buyer’s offer
No “checkpoint”. No appropriate qualifiers
Acceptance is usually by automated email confirmation right after purchase
Impact: Risk of buyer construing web advertisements as Offer to sell unlimited quantity of goods when web merchants only have limited stock
Therefore, web merchants would need to specify qualifying conditions and “escape clauses”
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The advertisement reads, “If you visit our website four times this month and do not buy anything from our vendors, we will credit S$10 to your bank account”.
No instructions (Ambiguous)
Invitation to Treat
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Section 14 of the Electronic Transactions Act applies the common law position to the internet, establishing that internet advertisements and interactive online purchase systems are considered invitations to treat unless the language specifically indicates the intention of the party making the proposal to be bound once the proposal is accepted.
The purchaser would thus be the offeror, and the web merchant would be the offeree.
Affirms common law
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Using the services of a Search Engine (Google or Yahoo!) or open/public news portal (e.g. www.channelnewsasia.com) –
Who are the parties involved in the process and is there Offer and Acceptance?
If there is, what makes it appear (fact) and what legal reasoning (law) can you give that the use of such websites is contractual in nature or otherwise? Explain.
Qn 2.2
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Users Web Developers
Who are the parties involved?
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Issues
Does an offer exist?
What constitutes acceptance?
What kind of contract?
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What constitutes an offer?
Terms of exchange
Willingness to be boundBinds offeror upon acceptance
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Rules Applied:
Invitation to Treat (ITT)
Offer
• Willingness of 1 party to enter into negotiations with the other
• No intention to be bound
• Clear terms of exchange
• Intention to be bound
• Binds offeror upon acceptance
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To use: • You must first agree to the Terms.
• You may not use the Services if you do not accept the Terms.
• You can accept the terms by actually using the Services.
• In this case, you understand and agree that Google will treat your use of the Services as acceptance of the Terms from that point onwards.
• The terms of service form a legally binding agreement between the user and Google.
Analysis and Application
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Analysis and Application
The availability of usage of Search Engines and News Portals are Offers rather than ITTs due to certainty of terms.
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What constitutes an offer?
Terms of exchange
Willingness to be boundBinds offeror upon acceptance
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Acceptance
Must be final and unqualified
May take place through written or spoken words or actions
Acceptance must be communicated to the offeror
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To use: • You must first agree to the Terms.
• You may not use the Services if you do not accept the Terms.
• You can accept the terms by actually using the Services. (acceptance by conduct)
• In this case, you understand and agree that Google will treat your use of the Services as acceptance of the Terms from that point onwards.
• The terms of service form a legally binding agreement between the user and Google.
Analysis and Application
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Rules Applied:
Unilateral Contracts
Bilateral Contracts
Offeror makes a promise in return for an act to be performed by Offeree
Offeror makes a promise in return for a promise on the part of the Offeree
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Which is it?
Unilateral Contract
Bilateral Contract
Offeror makes a promise in return for an act to be performed by Offeree
Offeror makes a promise in return for a promise on the part of the Offeree
It is an exchange of the service providers’ promise to provide the said services in exchange for the user’s promise to abide by the terms and conditions outlined in the terms of service Both Offeree and Offeror enforces contract
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Conclusion
All elements of contractual offer in place:• In certain terms • Mode of acceptance is clearly
specified• Consideration in place• Intention to create legal relations is
clearly evident
Thus, a user would be obliged to abide by his contractual obligations laid out in the terms of service.
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Conclusion
Contract concluded is a bilateral contract, a promise in return for a promise
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break.
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a) What is your understanding of the “objective test” to contract law formation issues?
b) What is its relevance and why is it necessary to have such a test?
c) What is the role and function of the test?
d) Finally, in your opinion, is the “subjective test” more or less desirable a test? Use examples and give reasons for your answer.
Qn 2.3
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Qn 2.3
a) What is your understanding of the “objective test” to contract law formation issues?
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a) What is it?
Objective Test
The “objective test” is a standard…what a reasonable man would conclude from observation of the action the parties …whether agreement has taken place….
Qn 2.3
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Qn 2.3
b) What is its relevance and why is it necessary to have such a test?
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b) What is the relevance and necessity of the objective test?
Offer• Objective test takes into account actions
rather than intentions• Intention is considered irrelevant• Reasonable man perceives offer has been
made, then legal intent is considered• Establish consensus ad idem• Clarity for agreement
Qn 2.3
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b) What is the relevance and necessity of the objective test?
Smith v Hughes (1871)• Facts: Smith offered to sell oats to
Hughes, showing him a sample of green oats. Hughes accepted the offer. However, upon receiving the first batch of oats, Hughes claimed that he intended to buy old oats and not green oats.
• Hughes refused to pay for the rest of the green oats.
• Smith sued for breach of contract
Qn 2.3
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b) What is the relevance and necessity of the objective test?
Smith v Hughes (1871)• Defendant’s intention was to buy old oats• Because of mistake about the oats not
liable• Objective test used by court:• Intentions were ruled irrelevant• Conduct and words of parties in
forming the contract was considered instead
• Court ruled in favour of Smith• Establish clarity and a standard
Qn 2.3
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Qn 2.3
c) What is the role and function of the test?
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c) What is the role and function of the test?
Objective Test• Clarity through actions• For courts to recognize intentions of
parties through tangible means• Set determinable precedence• Certainty for contract law
• Credibility of legal system • stable framework for business
Qn 2.3
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d) Is the “subjective test” more or less desirable a test?
Qn 2.3
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d) Is the “subjective test” more or less desirable a test?
Objective Test Subjective TestConclusion by reasonable person observing actions taken by parties involved
Conclusion by intention and own judgment
Qn 2.3
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d) Is the “subjective test” more or less desirable a test?
Hyde v Wrench (1840)• Parties made multiple offers and counter
offers
Subjective test Objective test• Both had intention to
conclude contract• But did the intentions meet?• Unable to determine
consensus ad idem
• Based on actions of parties• Examine documents
exchanged• No consensus ad idem
occurred
Qn 2.3
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d) Is the “subjective test” more or less desirable a test?
Conclusion• Hyde v Wrench (1840)• Subjective test is less desirable compared
with objective test
• Less clarity• No consideration of tangible evidence
Qn 2.3
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end.
questions?