1. Agreement between the Parties
PART 4 Chapter 14
Agreement between the Parties

2. Chapter objectives
On completion of this chapter, you should be able to:
explain why it is important to establish whether the parties have reached an agreement explain what an agreement is in a traditional sense
explain what other techniques the courts use to discover whether the parties have reached an agreement where the traditional approach cannot be applied
list and explain the rules relating to offer

3. Chapter objectives
On completion of this chapter, you should be able to:
distinguish between an offer and an invitation to treat
explain the ways in which an offer may be terminated
list and explain the rules relating to acceptance
explain the operation of the postal rule
explain what amounts to instantaneous communication and describe what rules apply

4. Agreement
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5. Agreement Step 2: Is there agreement between the parties?
Generally characterised by an ‘offer’ by one party and an ‘acceptance’ by another.
Important in determining the time, place and contents of the agreement.
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6. Agreement
As ‘offer-acceptance’ approach does not always work, the Courts have taken a ‘global approach’ by examining the acts and conduct of the parties.
- Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988)
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7. Agreement Agreement arising by conduct
Agreement may be established by implication arising from conduct of the parties:
- Clarke v Earl of Dunraven and Mount-Earl [1897]

8. Rules relating to offer
Rules as to offers
There must be:
an intention or willingness to be bound;
a firm promise; and
communication of the offer
(in writing, orally or by conduct)
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9. Rules relating to offer
Statements that are not offers
An offer must be distinguished from an invitation to treat:
This is an offer to consider offers and cannot create an agreement if there is a purported acceptance.
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10. Rules relating to offer
Invitation to treat
Can include:
auctions;
advertisements;
catalogues / Internet;
price lists;
goods in shop windows and shelves.
Look at intention of the parties.
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11. Rules relating to offer
Auctions
With a ‘reserve price’:
the auctioneer calling for bids is not making an offer but is asking for offers from prospective purchasers.
With no ‘reserve price’:
the auctioneer becomes the offeror and must sell the goods to the highest bidder.
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12. Rules relating to offer
Tenders
Tenders are not normally offers unless the tender states its exact needs, as distinct from what it may only require.
Requests for Information
A request for information is not a firm promise and so is not an offer. Nor does it destroy the offer as it is only an attempt to elicit information.
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13. Rules relating to offer
Notice of the offer
The offer must be communicated to the offeree/s.
The offer may be directed to
one person,
a group of people, or
the world at large - Carlill v Carbolic Smoke Ball Co. (1893)
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14. Rules relating to offer
Options
To keep an offer open for a specified time (an option), it must be supported by consideration.
- Goldsborough Mort & Co Ltd v Quinn (1910)
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15. Rules relating to offer
Terms in the Offer
Any terms contained in the offer must be brought to the notice of the offeree.
Any and all conditions must be strictly followed.
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16. Termination of offer
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17. Termination of offer Revocation (Withdrawal)
To be effective, withdrawal by the offeror must be brought to the notice of the offeree before acceptance, although the offeree can learn of the withdrawal directly or indirectly:
- Dickinson v Dodds (1876) same as - Byrne & Co v Leon Van Tienhoven & Co (1880)
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18. Termination of offer Rejection or Counter-Offer
Refusal by the offeree or a counter- offer by the offeree will terminate the offer:
- Hyde v Wrench (1840)
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19. Termination of offer Lapse of Time Non-acceptance within:
a reasonable time
a stipulated time
or death of either party before acceptance - Carter v Hyde (1923)
will terminate the offer.
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20. Termination of offer Lapse by failure of a condition
If the offer is subject to a condition and the condition is not fulfilled, the offer will lapse.
If there is a condition precedent, it must be satisfied before the agreement can ripen into a contract.
A condition subsequent can cause the contract to terminate.

21. Termination of offer Lapse by failure of a condition
Condition Precedent - is one where the agreement does not become a contract until the happening of a specific event. For example, if a ‘subject to finance’ clause is not fulfilled, the offer will lapse.
Condition subsequent clause causes a contract to terminate at an occurrence of a particular event stated by the parties.

22. Rules relating to acceptance
Acceptance be made in reliance of the offer
The offeree must intend to accept the offer.
- R v Clarke (1927)
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23. Rules relating to acceptance
Acceptance must be strictly in accordance with the terms of the offer
If the offeror specifies a method of acceptance it must be followed:
- Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1954)
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24. Rules relating to acceptance
Acceptance must be communicated
Acceptance must be communicated to the offeror, either by words or by conduct.
Mental acceptance, unless communication has been waived by the offeror, is insufficient.
- Felthouse v Bindley (1862)
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25. Rules relating to acceptance
Who can make an acceptance?
Acceptance must be conveyed by someone with authority.
- Powell v Lee (1908)
Cross-Offers
Cross-offers do not give rise to an agreement.
- Tinn v Hoffman & Co (1873)
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26. Rules relating to acceptance
Acceptance must be absolute and unconditional
Acceptance must be absolute and unqualified or it may amount to a counter-offer.
- Masters v Cameron (1954)
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27. Rules relating to acceptance
The postal rule
Where the parties contemplate the use of the post as a medium of exchange of promises, the rules as to the time of acceptance change as follows:
An offer by letter is not effective until received by the offeree.
Acceptance is effective as soon as it is posted. - Adams v Lindsell (1818)
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28. Rules relating to acceptance
The postal rule
If revocation of the offer is to be effective, it must be received by the offeree before they post their letter of acceptance.
- Byrne & Co v Leon Van Tienhoven & Co [1880]
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29. Rules relating to acceptance
Instantaneous communications
Where the communication of acceptance is instantaneous, the contract is effective when the acceptance is received.
- Entores Ltd v Miles Far East Corp (1955)
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30. Rules relating to acceptance
Instantaneous communications
In cases of agreements communicated by means of telephone, fax or , the contract is formed when and where the offeror hears or receives the offeree’s acceptance.
The Electronic Transaction Act 1999 (Cth) provides guidance on times for receipt and dispatch.
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