English Contract

“It is true there are difficulties with the offer and acceptance model but these problems are often experienced because of tension between the courts’ wish to give effect to the intention of the parties, their desire to achieve a just result on the facts of the case and the need to establish a clear rule which can be applied to to all such cases in the future”. MCKENDRICK

Do the advantages of using the offer and acceptance model in the analysis of the formation of a contract outweigh its disadvantages?

On one level, the problems of the offer and acceptance model seem to outweigh the benefits. These include issues surrounding certainty in protracted negotiations, complex rules over post and timings of acceptance, and the issue of fixed moments of agreement when contracts can be formed through conduct. However, I shall show that this view is merely superficial, and in fact the offer and acceptance model permits flexibility (Nolan), especially as no other alternative is better. In explaining the reasons for the problems with the offer and acceptance model, McKendrick suggests three causes, namely effectuating parties’ wishes, achieving a just result, and establishing a clear rule. He assumes, however, a base level of fault with the model which I believe is overly harsh; assuming the model is flawed, I shall discuss his rationales, and submit that the given quotation is broadly sound, but that despite the courts’ intentions, they often fail with regard to the third, or succeed to the detriment of the first two. Overall therefore, I shall show that the current model cannot be said to be more disadvantageous than advantageous.

1. Perceived problems

The biggest problem with the offer and acceptance model is that of identifying the moment at which the parties are truly ad idem when negotiations are protracted, often the case in business contracting. It can be hard to point to the moment of true acceptance, and therefore a consideration of parties’ overall intentions as the negotiations may be more appropriate. This opinion was given by Lord Denning in Gibson v Manchester City Council when he wrote that the court must “look at the...conduct of the parties and see therefrom whether the parties have come to an agreement on everything that is material”. This is very different to the the more regimented analysis of the offer and formation, although arguably is unnecessarily complex (see Lord Diplock below.) The issues are even further compounded when parties are negotiating on multiple issues, leading to the question whether there is a contract if some but not all issues are agreed upon? In construction letters of intent are often used to solve this, but I submit that in general parties must be agreed on all significant issues for a contract, although finding the moment of acceptance would still be difficult here.

In Manchester Diocesan Council v Comm. and Gen. Investments Buckley J. considered whether communication to a solicitor constituted acceptance, alongside whether this violated the terms by which such an acceptance was to be made. Cases such as this where determining when and how acceptances are communicated point to an underlying persistent problem in the model, namely that it does not adequately reflect the agreement of the parties, but rather focuses on technicalities.

It is not merely the moment of acceptance in long negotiations that causes problems; indeed, the nature of offers, particularly when compared with invitations to treat, are complex. At what stage in long negotiations can an “offer” truly be said to be made? Negotiations are themselves effectively series of counter offers; if the underlying basis of fairness in contract law is to prevent prejudicing one party who may rely on assurances of the other, on cases where P believes themselves to be accepting an offer when D deems it to be a counter offer, whilst D may succeed in court this cannot truly effectuate the principle if P has relied upon it already. McKendrick cites Clarke v Dunraven (“The Satanita”) as an (extreme) example of the model failing, when neither owner could be said to have offered or accepted anything to or from the other. Another good example of difficulty in identifying the offer comes in the purchase of train tickets; Peel observes multiple stages at which an offer could be made, whether by the train company in running services, or in the issuing of a ticket, or in the customer’s asking for a ticket? All seem logical, suggesting that in many transactions the model is too complex to be of any use.

The final problem could be said to be in the necessity of a vast number of rules surrounding communication of both offers and acceptance. Great debate has arisen from the asymmetry between what is required for a posted offer (actual communication) and a posted acceptance (giving it to the control of the Post Office being sufficient). Rulings on performance and part performance in unilateral contracts where conduct may suffice (see Errington v Errington) further point to a lack of clarity, often useful for commercial parties.

2. Justification of complexity in the model

Arguably, however, the criticisms, especially of the complex rules, are unfounded. For example, the justification for the discrepancy in the postal rule between offerors and offerees is based on the relative expectations of the parties. In Household Fire Insurance v Grant Thesiger LJ argued that the offeror had impliedly accepted posting of an acceptance to constitute its communication. Furthermore, the offeror may always explicitly make an offer on the grounds that an acceptance be communicated to them explicitly, as in Holwell Securities Ltd v Hughes. As such, the varied positions have

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