Distinction between an acceptance and a counter-offer
When the offeree receives the offer, if they agree to all the terms they accept the offer. The acceptance will result in a binding contract.
What is the legal consequence if the offeree adds a new term, as in Brogden when Brogden inserted the name of an arbitrator? The offeree is then said to reject the offeror’s offer and make a counter-offer. If the counter-offer is accepted by the original offeror (as in Brogden), a contract will come into existence. If, however, the original offeror rejects the counter-offer there will be no contract.
In Hyde v Wrench (1840) 3 Beav 334 the defendant offered to sell his farm to the claimant for £1,000. The claimant agreed to buy the farm but was willing to pay only £950. The defendant refused to sell his farm for £950. The claimant then agreed to pay the original asking price. Unfortunately for the claimant, he could not succeed in his claim against the defendant, as he had made a counter-offer when he changed the price to £950. The legal effect of a counter-offer is that it destroys the original offer. This meant that when later he purported to ‘accept’ the original offer, that offer was no longer in existence.
Consider the facts in Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1 WLR 401. The seller offered to sell a machine tool to the buyer for £75,535, the tool to be delivered in 10 months. The offer was on the seller’s standard terms and contained a price variation clause. The buyer placed an order using the buyer’s standard 19 terms, which did not contain a price variation clause. There was a tear-off slip on the order form which the buyer sent the seller. The tear-off slip contained the words: ‘We accept your order on the Terms and Conditions stated thereon’. The seller signed the tear-off slip and returned it to the buyer. The issue was whether the price variation clause was a term of the contract. The Court of Appeal (Civil Division) held that this clause was not a term. The buyer’s order was not an acceptance but a counter-offer. The seller had accepted the buyer’s counter-offer by signing and returning the tear-off slip. So in ‘battle of the forms’ cases the contract is on the terms of the person who fires the last shot. The majority of the Court of Appeal resorted to the traditional approach of offer, counter-offer and acceptance. However, Lord Denning, although reaching the same conclusion, used a non-traditional approach of looking at the negotiations as a whole and trying to determine whether the parties had reached agreement on all the material terms.
In Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA Civ 1209 the Court of Appeal preferred the traditional offer and acceptance approach in deciding a ‘battle of the forms’ case. Longmore LJ was of the opinion that the traditional offer and acceptance analysis should be adopted, unless the documents and conduct of the parties indicate that the common intention of the parties was for some other terms to prevail. The advantage of the traditional approach is certainty, which is important for commercial transactions.