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Mobil Oil Australia v Wellcome International
Mobil Oil v Lyndel Nominees

[1998] FCA 205; (1998) 81 FCR 475

Overview

Mobil represented to dealers that any dealer who performed at a set level for six years would be given a franchise for a further nine years at no cost. Mobil subsequently discontinued the scheme and a number of dealers alleged (amongst other things) breach of contract.

Court held that in a unilateral agreement the act of acceptance is also the consideration and act of performance and there is no 'universal proposition that an offeror is not at liberty to revoke the offer once the offeree 'commences' or 'embarks upon' performance of the sought act of acceptance …'. As a consequence, unless there is some ancillary promise not to withdraw the offer once performance has commenced, the offer may be revoked at any time.

 

Facts

Mobil represented to dealers that any dealer who performed at a set level for six years would be given a franchise for a further nine years at no cost. Mobil subsequently discontinued the scheme and a number of dealers alleged (amongst other things) breach of contract.

 

Judgment (the Court)

In a unilateral agreement the act of acceptance is also the consideration and act of performance. 

In this case Mobil’s revocation of its scheme made it impossible for the dealers to complete the act of acceptance. 

The trial judge held that once an offer was made, requiring performance as the act of acceptance, the offeror could not revoke the offer once the offeree has embarked upon acceptance. The Court noted that the trial judge had considered the weight of authority supported the proposition that:

" ... a person who makes an offer susceptible of acceptance by performance of an act, may not revoke that offer after the offeree has embarked upon performance of the act".

The Full Court disagreed. Although in some cases there may be an ‘implied ancillary unilateral contract’ in which the ‘offeror promises not to revoke once the offeree’ commences performance, that is not the same as saying that the original offer cannot be revoked - and there is no ‘universal proposition that an offeror is not at liberty to revoke the offer once the offeree ‘commences’ or ‘embarks upon’ performance of the sought act of acceptance …'

Their Honours also dismissed suggestions that it was necessarily unjust for the offeror to be able to revoke the offer once performance had commenced:

(a) The respective positions of offeror and offeree vary greatly from the case of one unilateral contract to another. The following factors illustrate:

(i) The offeror may or may not know that the offeree has commenced performance;

(ii) The offeree may or may not have an understanding that the offeror is at liberty to revoke and that any incomplete performance of the act of acceptance by the offeree will be at his or her risk;

(iii) The notion of "commencement of performance of the act of acceptance" or "embarking upon the act of acceptance" is problematical and can lead to a result which is unjust to the offeror. By reference to the facts of the present case, could it be suggested that attainment of ninety per cent in the first year or even perfect operation of a service station for a day, a week or a month, albeit by reference to the offer, represents a commencement of attainment of ninety per cent in all six years so as immediately to bind Mobil not to revoke?

(iv) The act called for by the offer may be detrimental to the offeree, or of some benefit to the offeree as well as to the offeror, as in the present case;

(v) Although the offeree is not obliged to perform, or to continue performing, the act of acceptance and is at liberty to cease performing at any time, ex hypothesi, the offeror remains bound, perhaps over a lengthy period as in the present case, to keep its offer open for completion of the act of acceptance, without knowing whether the offeree will choose to complete or not to complete that act;

(vi) The circumstances of the particular case may or may not, by reference to conventional criteria, suggest that the parties intended that the offeror should not be at liberty to revoke once the offeree had performed the act of acceptance to some extent. We do not accept that it is universally unjust that an offeror be at liberty to revoke once the offeree has "commenced" or "embarked upon" performance of an act which is both the sought act of acceptance of the offer and the sought executed consideration for the promise.

(b) A juristic basis which has been suggested to support the general proposition is that of an implied ancillary unilateral contract by which the offeror promises not to revoke once the offeree commences the act of acceptance of the principal offer. But even if such an ancillary contract should be implied in all cases, it is one thing to say that there is a contractually binding promise not to revoke and another thing to say that a purported revocation will be ineffective. The normal remedy for a revocation in breach of the ancillary contract would be an award of damages, the amount of which would be assessed, no doubt, by reference to the prospect that the act of acceptance would have been completed, and, by the same act, the offered promise duly "paid for". No doubt it might be possible for the offeree to seek specific relief in the form of an injunction restraining the offeror from revoking the offer and from preventing the offeree from providing the executed consideration.....

(c) It seems that the general undifferentiated proposition could produce unintended and unjust results. Assume that X made a public offer of payment for the collection and supply of information of a kind described in the offer; that A, B and C embark upon collecting the information; and that A supplies it to X. According to the general proposition, X is bound not to revoke the offer made to B and C, notwithstanding the inutility of their subsequently supplying to X the information that A has already provided. It may be replied that the terms of the offer would include an implied qualification. But this very response bespeaks the inadequacy of a universal rule.

Their Honours therefore did not accept a universal proposition that revocation is not permitted once performance has commenced:

... we do not accept that there is a universal proposition that an offeror is not at liberty to revoke the offer once the offeree "commences" or "embarks upon" performance of the sought act of acceptance (being also the sought executed consideration for the offered promise). If and to the extent that any of the authorities to which we have referred say otherwise, we would respectfully disagree. In any event, even if it be assumed that an offeror has impliedly promised not to revoke in consideration of a commencement of performance of the act of acceptance, it would not follow that a purported revocation would be ineffective. On the contrary, in the absence of specific relief in respect of that promise, the offeror's revocation would be effective, although leaving the offeror liable in damages.

It should not be thought that the absence of a universal rule is unjust. In the circumstances of a particular case, it may be appropriate to find that the offeror has entered into an implied ancillary contract not to revoke, or that the offeror is estopped from falsifying an assumption, engendered by it, that the offeree will not be deprived of the chance of completing the act of acceptance.

We see no basis in the particular facts of the present case for concluding that Mobil should be taken to have offered to all those franchisees who would but commence or embark upon performing the prescribed act of acceptance of its principal offer (of a promise of nine-for-six), an ancillary promise not to revoke that offer. ...