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Formation of contract — SQE1 Contract question

A worked single-best-answer question on formation of contract, with why each wrong option is wrong — the way SQE1 traps candidates.

Formation of contract

On 1 March Harlow Ltd emailed Pinewood Supplies Ltd offering to sell 500 oak panels for £20,000 and stating that the offer would remain open until 10 March. On 3 March Pinewood replied: 'We accept, but at £18,000 delivered.' Harlow did not respond. On 5 March Pinewood emailed again: 'Please ignore our last email. We accept your offer at £20,000.' On 6 March Harlow told Pinewood it would not supply the panels because it had found another buyer at a higher price.

Which of the following best describes whether a contract was formed between Harlow and Pinewood?

  1. AA contract was formed on 5 March, because Harlow had stated that its offer would remain open until 10 March.
  2. BNo contract was formed, because Pinewood's email of 3 March was a counter-offer which rejected Harlow's offer, leaving nothing capable of acceptance on 5 March.
  3. CA contract was formed on 3 March for £18,000, because Harlow did not object to Pinewood's revised terms.
  4. DA contract was formed on 5 March, because the email of 3 March was only a request for information about the price.
  5. ENo contract was formed, because Harlow's sale to another buyer automatically revoked its offer even before Pinewood was told.
Show answer and reasoning
B is the best answer. A purported acceptance that varies the terms is a counter-offer. It operates as a rejection of the original offer, which cannot afterwards be revived by a later attempt to accept it (Hyde v Wrench). Pinewood's 5 March email was at most a fresh offer, which Harlow did not accept.

Rule: A counter-offer rejects and destroys the original offer, so the offeree cannot later accept that original offer.

  • A A promise to keep an offer open is not binding without consideration, and in any event the offer was destroyed by the counter-offer. (wrong rule)
  • C Silence by the offeree of a counter-offer cannot amount to acceptance (Felthouse v Bindley). (wrong rule)
  • D The 3 March email proposed a new price and so was a counter-offer, not a mere enquiry of the Stevenson v McLean type. (right rule, wrong facts)
  • E Revocation must be communicated to the offeree; the reason there is no contract is the earlier counter-offer. (wrong rule)

Source: Hyde v Wrench (1840) 3 Beav 334; Stevenson, Jacques & Co v McLean (1880) 5 QBD 346

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