Composition Of An AgreementAn agreement is:• generally characterised by an ‘OFFER’ by one party and an ‘ACCEPTANCE’ by another
Has An Offer Been Made?• Facts:• Smith owns an organic farm.• Jones wants to buy Smith’s farm.• Jones emails Smith asking: “Will you sell me your farm? Let me know your lowest price.”• Smith emails back saying: “The lowest price for my farm is $350,000.”• Jones then responds by saying: “I agree to buy your farm for the sum of $350,000 asked by you.”
What Are The Legal Issues? ISSUE:• Did one party (the offeror) make an offer?• Did the other party (the offeree) accept that offer?
Case:1 Heathcote Ball v Barry  EWCA Civ 235 (Auctions)• The claimant had submitted the highest (and only) bids at an auction stated to be without reserve. The items were two Alan Smart engine analysers which were worth £14,000. The claimant had submitted bids of £200 each. The auctioneer refused to sell them at that price. The claimant brought an action for breach of contract claiming damages of £27,600.
Judgement• The claimant was entitled to damages. Where an auction takes place without reserve the auctioneer makes a unilateral offer which is accepted by submitting the highest bid. There was thus a binding contract and the claimant entitled to damages covering the loss of bargain.
Case:2Thornton v Shoe Lane Parking  2 WLR 585 Court of Appeal (Machines)• The claimant was injured in a car park partly due to the defendants negligence. The claimant was given a ticket on entering the car park after putting money into a machine. The ticket stated the contract of parking was subject to terms and conditions which were displayed on the inside of the car park. One of the terms excluded liability for personal injuries arising through negligence. The question for the court was whether the term was incorporated into the contract ie had the defendant brought it to the attention of the claimant before or at the time the contract was made. This question depended upon where the offer and acceptance took place in relation to the machine.
Judgement• The machine itself constituted the offer. The acceptance was by putting the money into the machine. The ticket was dispensed after the acceptance took place and therefore the clause was not incorporated into the contract.
Case:3 Entorres v Miles Far East  2 QB 327 Court of Appeal• The claimant sent a telex message from England offering to purchase 100 tons of Cathodes from the defendants in Holland. The defendant sent back a telex from Holland to the London office accepting that offer. The question for the court was at what point the contract came into existence. If the acceptance was effective from the time the telex was sent the contract was made in Holland and Dutch law would apply. If the acceptance took place when the telex was received in London then the contract would be governed by English law.
Judgement• To amount to an effective acceptance the acceptance needed to be communicated to the offeree. Therefore the contract was made in England.
Case:4 Butler Machine Tool v Ex-Cell-O Corporation  1 WLR 401 Court of Appeal• Ex-Cell-O wished to purchase a machine from Butler. Butler sent out a quotation of £75,535 along with a copy of their standard terms of sale. The terms included a price variation clause and a term that the sellers terms would prevail over any terms submitted by a purchaser. The machine would be delivered in 10 months. Ex-Cell-O put in an order for the machine at the stated price and sent a set of their terms which did not include the price variation clause.
Contd…• The order contained an acknowledgement slip which required a signature by Butler and was to be returned to Ex-Cell-O. This slip stated that the contract would be subject to the terms stated overleaf. Butler duly signed the slip and returned it. The machines were then delivered and Butler sought to enforce the price variation clause and demanded an extra £2,893. Ex-Cell-O refused to pay.
Judgement• The offer to sell the machine on terms provided by Butler was destroyed by the counter offer made by Ex-Cell-O. Therefore the price variation clause was not part of the contract. The contract was concluded on Ex-Cell-Os terms since Butler signed the acknowledgement slip accepting those terms. Where there is a battle of the forms whereby each party submits their own terms the last shot rule applies whereby a contract is concluded on the terms submitted by the party who is the last to communicate those terms before performance of the contract commences.
Case :5 Holwell Securities v Hughes  1 WLR 155• Dr Hughes granted Holwell Securities an option to purchase his house for £45,000. The option was to be exercisable by notice in writing within 6 months. Five days before the expiry, Holwell posted a letter exercising the option. This letter was never received by Hughes. Holwell sought to enforce the option relying on the postal rule stating the acceptance took place before the expiry of the option.
Judgement• By requiring notice in writing, Dr Hughes had specified that he had to actually receive the communication and had therefore excluded the postal rule.
Case:6Pharmaceutical Society of Great Britain v/s Boots Cash Chemists (Southern) Ltd • Boots Cash Chemists had just a new method for its customers to buy certain medicines. The company would let shoppers pick drugs off the shelves in the chemist and then pay for them at the till. Before then, all medicines had to be gotten behind a counter and an assistant had to get what was requested. The Pharmaceutical Society of Great Britain objected and argued that under the Pharmacy and Poisons Act 1933, that was an unlawful practice.
Contd..Under s 18(1), a pharmacist needed to supervise at the point where "the sale is effected" when the product was one listed on the 1933 Acts schedule of poisons. The Society argued that displays of goods were an "offer" and when a shopper selected and put the drugs into their shopping basket, that was an "acceptance". Therefore because no pharmacist had supervised the transaction at this point, Boots was in breach of the Act. Boots argued that the sale was affected only at the till.
Judgement• Both the Queens Bench Division of the High Court and the Court of Appeal sided with Boots. They held that the display of goods was not an offer. Rather, by placing the goods into the basket, it was the customer that made the offer to buy the goods. This offer could be either accepted or rejected by the pharmacist at the cash desk. The moment of the completion of contract was at the cash desk, in the presence of the supervising pharmacist. Therefore, there was no violation of the Act.
Case:7 Sudbrook Trading Estate v Eggleton  AC AC 444 House of Lords• A lease gave the tenant an option to purchase the freehold of the property at a price to be agreed by two surveyors one appointed by the tenant and one appointed by the landlord. The tenant sought to exercise the option but the landlord refused to appoint a surveyor. The landlord claimed that the clause was too vague to be enforceable as it did not specify a price.
Judgement• The clause was not too vague to be enforceable as it put in place a mechanism to ascertain the price.• The agreement must be certain.
Case:8 Carlill v Carbolic Smoke Ball Company• The Carbolic Smoke Ball Company made a product called the "smoke ball". It claimed to be a cure for influenza and a number of other diseases, in the context of the 1889-1890 flu pandemic (estimated to have killed 1 million people). The smoke ball was a rubber ball with a tube attached. It was filled with carbolic acid (or phenol). The tube would be inserted into a users nose and squeezed at the bottom to release the vapours. The nose would run, ostensibly flushing out viral infections.
Contd..• The Company published advertisements in the Pall Mall Gazette and other newspapers on November 13, 1891, claiming that it would pay £100 to anyone who got sick with influenza after using its product according to the instructions set out in the advertisement.• £100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks, according to the printed directions supplied with each ball.
Facts• Mrs Louisa Elizabeth Carlill saw the advertisement, bought one of the balls and used it three times daily for nearly two months until she contracted the flu on 17 January 1892. She claimed £100 from the Carbolic Smoke Ball Company. They ignored two letters from her husband, a solicitor. On a third request for her reward, they replied with an anonymous letter that if it is used properly the company had complete confidence in the smoke balls efficacy, but "to protect themselves against all fraudulent claims" they would need her to come to their office to use the ball each day and be checked by the secretary. Mrs Carlill brought a claim to court. The barristers representing her argued that the advertisement and her reliance on it was a contract between her and the company, and so they ought to pay. The company argued it was not a serious contract.
Judgement• The Carbolic Smoke Ball Company, despite being represented by HH Asquith, lost its argument at the Queens Bench. It appealed straight away. The Court of Appeal unanimously rejected the companys arguments and held that there was a fully binding contract for £100 with Mrs Carlill. Among the reasons given by the three judges were:• (1) That the advert was a unilateral offer to all the world• (2) That satisfying conditions for using the smoke ball constituted acceptance of the offer• (3) That purchasing or merely using the smoke ball constituted good consideration, because it was a distinct detriment incurred at the behest of the company and, furthermore, more people buying smoke balls by relying on the advert was a clear benefit to Carbolic• (4) That the companys claim that £1000 was deposited at the Alliance Bank showed the serious intention to be legally bound.
Case:9 Hyde v Wrench• Wrench offered to sell his farm in Luddenham to Hyde for £1200, an offer which Hyde declined. On 6 June 1840 Wrench wrote to Hydes agent offering to sell the farm for £1000, stating that it was the final offer and that he would not alter from it.•  Hyde offered £950 in his letter by 8 June, and after examining the offer Wrench refused to accept, and informed Hyde of this on 27 June.•  On the 29th Hyde agreed to buy the farm for £1000 without any additional agreement from Wrench, and after Wrench refused to sell the farm to him he sued for breach of contract.
Judgement• Under the circumstances stated in this bill, I think there exists no valid binding contract between the parties for the purchase of this property. The defendant offered to sell it for £1000, and if that had been at once unconditionally accepted there would undoubtedly have been a perfect binding contract; instead of that, the plaintiff made an offer of his own, to purchase the property for £950, and he thereby rejected the offer previously made by the defendant. I think that it was not afterwards competent for him to revive the proposal of the defendant, by tendering an acceptance of it; and that, therefore, there exists no obligation of any sort between the parties.