Offer, Acceptance & Difficulty

This essay explores the barriers that crop up while applying the definitions of offer, acceptance, and meeting of minds to instances of contract formation. The foundational rules of contract law were influenced by Robert Joseph Pothier’s “will theory” (meeting of minds). This theory did not consider communication as a necessary instrument for a contract to formulate; it was based on a concurrence of wills for a contract to arise. However, a more comprehensive approach was provided by the Scottish law [Dunmore v. Alexander[1] and Dunlop v. Higgins[2]], paving the way for the sections of the Indian Contract Act, 1872(ICA). The ICA places numerous restrictions upon the freedom to contract[3] and focuses on traditional terms instead of the concept of reasonable threshold. A reasonable threshold is required for any further action when there is no doubt and the contract is said to be valid or void.

An offer must be unconditional and made with an intention to be bound as well as obtain the acceptance of the other party. The courts and scholars have treated acceptance against the offeror as a binding agreement. They think “the only way one can be bound in contract law is to be bound in an agreement”.[4] This definition has raised a plethora of difficulties while applying these laws to cases. One example being the Pharmaceutical Society of Great Britain v. Boots Cash Chemists.[5] The Chemists sold listed drugs displayed on shelves. The contentious issue was on the “point of sale”- when the customer selected the product from the shelves or when he paid for it. The Court of Appeal held that the contract was completed on payment under the supervision of the pharmacist. The most reasonable threshold here would be to assume the contract is completed when the payment is accepted by the seller. Also, the analysis is strengthened by the fact that the buyer is free to return any item on shelf before payment has been made.

A second contradiction to this definition arose with the case of Leonard v. Pepsico.[6] Pepsico awarded customers “pepsipoints” on buying Pepsi, using which they could buy merchandise (mentioned in a catalogue). An advertisement showcased that 7 million points could earn a harrier jet, for which the plaintiff asked. However, Pepsico and the court decided in Pepsico’s favour. Going by the traditional definition, there was a valid offer and open to acceptance. However, applying the reasonable threshold the advertisement was a mere jest and no reasonable person would take this as an offer. Further, Pepsico’s catalogue did not hold the jet as merchandise offered.

In the case of Carlill v. Carbolic Smoke Ball Co.[7], the Carbolic Smoke Ball advertised stating that its product would prevent influenza and if not, the user would be given 100£. Ms. Carlill bought a Carbolic Smoke Ball and caught the flu. Further, her suit for the recovery of money was successful. The question that arises is why was the decision different from the Pepsico case and against the traditional definitions. Firstly, the advertisement was a unilateral offer open to the world and Carbolic was serious regarding the offer as it had deposited money in readiness to pay. Secondly, the reasonable threshold test too proved that the offer had a valid consideration and any individual would consider it.

Acceptance is the final expression of assent to the exact terms of the contract. However, real-life circumstances pose a challenge to this seemingly simple definition. Further, the issues of acceptance and revocation are being treated as analytically distinct, enabling them to argue that the dispatch of acceptance concludes the contract and that it remains open for the acceptor to revoke acceptance even after dispatch (the same has been done in Pollock and Mulla).[8]

These loopholes became obvious in cases like Harvey v. Facey [9] where the court’s decision was quite contradictory to the definition. Further, considering practicality, stating the lowest price of a property would draw various proposals and the seller cannot be saddled to everyone in a contract. Another aspect is- if stating the lowest price becomes a binding agreement then there would remain absolutely no space for negotiations. This is also when “tacit knowledge” comes to play, as these situations cannot be grasped in terms of measure but have to be seen through the lenses of reasonability (sensibility).

Even in the case of Pro C.D v Zeidenberg [10], the defendant bought a CD-ROM database with license restrictions, where the terms were inside the packaging rather than outside. Zeidenberg ignored it and resold the information. The question arose whether the terms of the license were a part of the contract and keeping the goods meant acceptance of the terms. The buyer was anyways offered an opportunity to inspect goods and reject them if the review does not suit his needs (Uniform Commercial Code). This happens in the present-day technological era when website owners stipulate their privacy policies before letting us accept.

Such instances dealing with real-life situations pose a practical challenge to the legal and old-age definitions of offer and acceptance. These definitions need to be coupled with rationality and reasonability to arrive at conclusions.

References:

[1]Countess of Dunmore v Alexander [1830] 9 S. 190.

[2]Dunlop v Higgins [1848] 1 H.L.C. 381.

[3]Gautam BHATIA, ‘Horizontal Discrimination And Article 15(2) Of The Indian Constitution: A Transformative Approach’ (2016) 11 Asian Journal of Comparative Law.

[4]Shivprasad Swaminathan, ‘The Will Theorist’S Mailbox: Misunderstanding The Moment Of Contract           Formation In The Indian Contract Act, 1872’ (2016) 39 Statute Law Review.

[5]Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB 401.

[6]Leonard v. Pepsico, Inc. [1999] 88 F.

[7]Carlill v. Carbolic Smoke Ball Co. [1893] 1 QB 256.

[8]Shivprasad Swaminathan, ‘The Will Theorist’S Mailbox: Misunderstanding The Moment Of Contract Formation In The Indian Contract Act, 1872’ (2016) 39 Statute Law Review.

[9]Harvey v Facey [1893] AC 552 Privy Council

[10]Pro C.D v. Zeidenberg [1996] 86 F.3d 1447.