Knowledge of the offer

A person cannot accept an offer that he does not know about. Thus, if a person offers a reward for the return of a lost watch and someone returns it without knowing about the offer, he cannot claim the reward. Motive for accepting is not important, as long as the person accepting knows about the offer. In Williams v Carwadine a person was held to be entitled to receive a reward, although that was not the reason why he provided the information requested.

Rejection of offers

Express rejection of an offer has the effect of terminating the offer. The offeree cannot subsequently accept the original offer. A counter-offer, where the offeree tries to change the terms of the offer, has the same effect.

In Hyde v Wrench Wrench offered to sell his farm for £1,000. Hyde offered £950, which Wrench rejected. Hyde then informed Wrench that he accepted theoriginal offer. It was held that there was no contract. Hyde’s  counter-offer had effectively ended the original offer and it was no longer open to him to accept it; Hyde was now making a new offer to buy for £1,000, which Wrench could accept or reject.

A counter-offer must not be confused with a request for information. Such a request does not end the offer, which can still be accepted after the new information has been elicited. See Stevenson v McLean where it was held that a request by the offeree as to the length of time that the offeror would give for payment did not terminate the original offer, which he was entitled to accept prior to revocation. The issue was considered and clarified in Society of Lloyds v Twinn discussed in 5.3.1, below.

ACCEPTANCE

Acceptance of the offer is necessary for the formation of a contract. Once the offeree has assented to the terms offered, a contract comes into effect. Both parties are bound: the offeror can no longer withdraw his offer and the offeree cannot withdraw his acceptance.

OFFER, ACCEPTANCE AND THE CLASSICAL MODEL OF CONTRACT

The foregoing has presented the legal principles relating to offer and acceptance in line with the ‘classical model’ of contract. As has been stated, underlying that model is the operation of the market in which individuals freely negotiate the terms on which they are to be bound. The offeror sets out terms to which he is willing to be bound and, if the offeree accepts those terms, then a contract is formed. If, however, the offeree alters the terms, then the parties reverse their roles: the former offeree now becomes the offeror and the former offeror becomes the offeree, able to accept or reject the new terms as he chooses. This process of role reversal continues until an agreement is reached or the parties decide that there are no grounds on which they can form an agreement. Thus, the classical model of contract insists that there must be a correspondence of offer and acceptance, and that any failure to match acceptance to offer will not result in a binding contract.