'the rules on acceptance and revocation of unilateral offers lack clarity. This means that when a dispute arises parties are unable to predict the outcome'. Critically evaluate the accuracy of this statement.

Ordinarily a unilateral offer is an offer that may be open to acceptance by more than one person and that acceptance may be demonstrated by the completion of certain criteria or conduct.

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Ordinarily a unilateral offer is an offer that may be open to acceptance by more than one person and that acceptance may be demonstrated by the completion of certain criteria or conduct. Perhaps one of the best ways of understanding the rules is to look at those situations where the courts have found that a unilateral offer exists.

 

The issue is no better illustrated than in the famous case of Carlill v Carbolic Smoke Ball Co (1893). The defendant company, Carbolic Smoke Ball Co. (D) manufactured and sold a product known as 'The Carbolic Smoke Ball'. The company placed advertisements in various newspapers. These advertisements stated that:

 

"£100 reward will be paid by the Carbolic Smoke Ball Company to any person who after having used the ball three times daily for two weeks according to the printed directions supplied with such ball contracts the increasing epidemic influenza, colds, or any diseases caused by taking cold. The ball will last a family several months, and can be refilled at a cost of 5s"

 

After seeing the advertisement a Mrs Carlill, the claimant, purchased a ball and used it as directed but despite this Mrs Carlill contracted influenza and made a claim for the reward. The defendant company refused to pay and Carlill sued for damages arising from breach of contract. Judgement for £100 was entered for the claimant but the company appealed.

 

On appeal the court held that it was possible for the person making the offer to elect to not require notice of acceptance and that performance was sufficient acceptance if this was what was required in an advertisement. Ordinarily the rule is that there can be no contract unless the acceptance is communicated but in Carlill the court indicated that performance can amount to acceptance. As part of its' considerations the court considered whether there was a promise or whether the advertisement was a mere 'puff'. The court were persuaded by the fact that the company had deposited funds with its bank to meet claims for rewards so as to enable them to treat the reward as being capable of acceptance as part of a contract.

 

Another situation which merits special consideration is where a party has made it clear that they will consider tenders, provided that they have been submitted in accordance with the tender constraints and within the set time limits. The Court of Appeal has indicated that, bearing in mind the additional work that the tendering company may have to do to comply with the requirements of the organisation requesting the tenders, a collateral contract is said to exist to the effect that the organisation will look at the bid.

 

In Blackpool & Fylde Aero Club v Blackpool Borough Council (1990) Council staff failed to open a post box which contained a tender that had been submitted by the club within the deadline and proceeded to grant a license to another company. The club sued the Council and obtained a judgement in their favour for the loss of opportunity. The Council appealed but failed to persuade the Court of Appeal to set aside the earlier judgement. The situation can arise where the party making the offer has clearly indicated that it will accept the highest non referential bid. A referential bid seeks to gain respectability by appearing to outbid its competitors by a stipulation such as '£300,000 or £50,000 in excess of any other offer......'.

 

The former House of Lords has declared that referential bids are invalid and therefore are incapable of amounting to acceptance. Harvela Investments Ltd v. Royal Trust of Canada (CI) Ltd (1986).

 

Finally, special regard needs to be given to protection schemes which are likely to have a big impact on consumers such as ABTA as part of the package holiday industry. It should be accepted that announcements that an operator is ABTA protected is likely to be taken as part of the contract on the basis that the tour operator is expecting to enter into legal relations (Bowerman v ABTA (1995)).

 

We must turn now to the question of what is needed in terms of acceptance of a unilateral offer. Certain rules have become established.

 

First, it might be necessary for the person accepting the offer to be able to demonstrate knowledge of the offer (Fitch v Snedaker 1868) and indeed to act upon it. In R v Clarke (1927) the claimant claimed a reward but the question arose as to whether he acted out of reasons of self preservation (he himself was under investigation for murder) or whether he acted on the offer of a reward.

 

Ordinarily acceptance, and this includes conduct that equals acceptance, must begin before revocation of the offer. An offer that has been revoked cannot be accepted. The effect of revocation is to put an end to the offer so as to make it incapable of acceptance.

 

Finally, in cases where the offeror has indicated that acceptance can be by performance of the required conduct, acceptance of the offer need not be communicated to the offeror and the required conduct will be enough as in Carlill v Carbolic Smoke Ball Co.

 

Turning to the matter of revocation and what amounts to effective revocation,certain rules have become established. It is necessary to show that revocation must be communicated before the action or performance required for acceptance begins. This has been clearly illustrated by the rulings in such cases as Errington v Wood (1951).

 

In Errington v Wood a father in order to help his son and daughter-in-law buy a house to live in,purchased a house through a building society. He did this by paying 33% of the price the remaining 67% was to be raised by a mortgage. Shortly after paying a few instalments, he promised the couple the ownership of the house,if they agreed to pay the remaining instalments.

 

The arrangement worked well until the father died bequeathing his entire estate to his wife (widow). The couple later separated and the son started living with his widowed mother, but the wife (daughter-in-law) still occupied the house and continued paying the instalments. The widow brought an action for return of the house according to the will of her late husband. The trial judge dismissed the claim and the case reached the Court of Appeal. The appeal failed as the Court took the view that a unilateral offer had been made and accepted by the payment of the instalments and that the offer could not be revoked so long as the payments were made.

 

There may be occasions when there may be doubt about the extent of knowledge of the unilateral offer. How many persons may have seen it? In such circumstances can revocation be effective?

 

The best approach seems to be to make the revocation as prominent as the offer. In Shuey v USA (1875) where an offer has in effect been made in such a way as to be to the whole world, the offer can be revoked by taking reasonable steps but this must be done before acceptance.

 

See also Dahlia Ltd v Four Millbank Nominees (1978). No doubt there may be arguments about what might be reasonable but the principle is clear and there are clear rules on revocation which need to be taken into account.

 

Do the rules on acceptance and revocation of unilateral offers lack clarity? Is there an issue about certainty so as to make predictability an issue?

 

If we return to the case of Carlill it might be interesting to see what we are able to learn from the reasoning behind the decision of the court. There were arguments to the effect that the advertisement was a mere 'puff' meaning that the wording was obviously not to be taken literally or seriously as it was common place for companies to make extravagant claims or assertions about their goods or services and that this was part of the world of marketing and promotions. The court dismissed these arguments but not for just a single reason but for several which taken together seemed to support the view that the company had put forward what we know in contract law to be an offer capable of acceptance.

 

The court found that the advertisement was worded so as to create the 'appearance' of an offer. Why had the company placed funds with a bank if it were not to meet potential claims? This again suggested that the advert was to be taken seriously. The courts were conscious that they were dealing with the commercial operations of an organisation intending to profit from its operations. If it was the case that the advert had been intended to bring in additional business from the 'ploy' used, would it be fair to enable the company to use such a device but not give legal effect to any subsequent claims? Apparently not. All these reasons appear to support the stance taken by the court over the issue of acceptance and all appear to be supportable in the sense of being balanced and fair. The legal world is not inundated with claims before the courts that such rules are manifestly unfair.

 

The question may be asked whether the situations identified by the courts are too artificial and unsupportable. On closer examination the cases appear to identify very real situations where one of the parties might quite reasonably be expected to legal protection. Take the case of Blackpool and Fylde Aero Club for example. There seem to be very good reasons why the courts should recognise the special nature of the relationship of the parties involved. In the case of the organisation inviting bids such as local authorities and public bodies there may be issues of propriety and value for money involved which make it important that tendering rules and conditions are followed to protect those concerned as well as members of the public.

 

On the other hand the tendering companies may have had to go through measures and steps which they would not otherwise do if they were pricing for a contract in the private sector. Such measures may have resulted in additional time and money. Such companies might be unwilling to put themselves forward if they thought that the procedures had no legal value. The decision in the Blackpool case seems to be about fairness and recognising that a contractual situation should arise based upon the general rules of offer and acceptance. There is no general issue of uncertainty because most organisations participating in tendering procedures would soon realise the legal nature of them. There is certainty as well as a sense of fairness for the parties.

 

Are the rules on revocation workable or are they too vague? In so far as there is any doubt it could be said that the commercial organisations who stand to gain from unilateral offers seem prepared to take them. Such companies would, after all, have access to legal advisers and are able to weigh up the advantages and disadvantages, including risks of such enterprises. What is the alternative? To declare that unilateral offers are unlawful in some way would stifle commercial enterprise and that would be alien to our law. The rules of revocation are not so onerous to the makers of such unilateral offers either, otherwise they would not engage in putting them forward. It could be argued that the courts are striving to recognise the need for commercial activity but at the same time the need for reasonable rules on revocation.

 

There may be concerns about the fairness of the need for a notice of revocation in the case of offers made effectively to the whole world, or at least extremely large populations, and that such a notice should be as prominent as the original offer.

 

There may be situations when an individual has commenced on the required conduct for acceptance without knowing about the notice of revocation. This could lead to injustice and some no doubt will argue that it would, on the basis that some offerees would be precluded because of the issue of the prominent notice which came to their knowledge. Some might purport to accept the unilateral offer not knowing anything about the revocation. They may change their position by relying upon the offer and at least incur costs. At present, provided the notice was sufficiently prominent, they would not be able to claim in contract as the offer will have been brought to an end. There may be issues of fairness here but the courts and Parliament may feel that there is no pressing and urgent need for reform.

 

There are situations when the person purporting to accept the offer needs knowledge of the offer. The reasoning behind this is that the party is said to be applying themselves to a legally binding situation which has obligations and liabilities. It goes to the root of our understanding of the nature of a contract and why it is enforceable. If one were to hold that acceptance can be made just because an offer has been made, but not necessarily made known, it would undermine the whole basis of our approach and understanding to the need for rules on acceptance. Quite apart from any other issue it may make the identification of the true party alleging acceptance problematical. How would the law recognise third parties acting in such a capacity as a friend or family relative? Such potential problems may be minimised in the case of consumer matters but there will be many times when an offer and acceptance needs to give rise to the full terms and conditions of the contract.

 

 

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