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Articles from the Silver Shemmings Ash Team on contractual matters, recent case law changes and items of interest in the construction and property world

Offer And Acceptance by Brandon Silver

July 12, 2018 | Silver Shemmings

Introduction

The formation of a contract is essential to any construction project. The contract will establish the agreement between all the parties involved and their respective legally enforceable obligations. The important question therefore to ask is whether there is a binding contract in place. There are indeed five key elements to forming a contract but this article will focus on the two main elements: offer and acceptance.

Offer

In reaching an agreement there needs to be an offer in place and then that offer needs to be accepted. Firstly this article will establish what an offer is, by distinguishing it to an invitation to treat. An invitation to treat is a mere expression of willingness to negotiate, but the person making the invitation does not intend to be bound as soon as it is accepted. On the contrary, when an offer exists there is an intention on the party making the offer to be bound by it as soon as it is accepted. The case of Carlill v Carbolic Smoke Ball Company, although not a construction case,  illustrates this distinction. In the case, a firm advertised that it’s drug would prevent people from catching the flu and that if they did not the buyer would receive £100. Carlill caught the flu and sue the firm. The courts objectively held that it was reasonable to conclude there was an offer in place because of the firm’s intention, exemplified by the reference in the advertisement of a £1,000 being deposited into a bank.

In a construction setting it is therefore important to distinguish between an offer and an invitation for tenders. The following example will highlight the importance of there being an offer in place in a construction project. A contractor submits a tender offering to build a playground for £30,000 and the owner agrees. Here there Is no offer and thus no legal obligations on either side as there are essential terms missing. There has been no mention of time frame, the dimensions of the playground or the materials to be used. It is therefore imperative to ensure that all parties’ intentions can be objectively assessed as intentions to be bound by their legal obligations. It therefore follows logically, as demonstrated in the case of Crowshaw v Pritchard and Renwick, that an estimate is not an offer.

Acceptance

Supposing that there is the existence of an offer, the next step to establish whether there is a construction contract in place, is whether there has been acceptance of that offer. To constitute acceptance, it must be communicated to the offeree either through words or conduct such as performing the construction works (silence or mere acquiescence is not regarded as acceptance),  and it must mirror the terms of the offer. Therefore, if a contractor offers to build a garage for £15,000 and the owner goes back and asks for £10,000 then this is a counter offer and a rejection of the first offer. There would be valid acceptance however if the counter offer is accepted.

KEY TAKEAWAYS

  • Offer and acceptance need to be present for the formation of a construction contract
  • To be regarded as an offer, the courts ascertain the objective intentions of the parties involved as an intention to be bound by their legal obligations
  • Acceptance must mirror the terms of the offer and communicated to the offeree
  • If the offeree proposes a counter offer, this makes the first offer irrelevant, but if the counter offer is accepted there is valid acceptance

Author Brandon Silver is …….

At Silver Shemmings Ash, we provide seminars and training alongside our core activities in contentious and non-contentious matters, the purpose if these is to facilitate a greater knowledge and understanding of construction and property law. There remains a considered lack of training in such areas for companies and one to which we look to address


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