Legal principles in refusing to pay advertised reward for return of lost item if it was returned without knowledge of the ad
<p>Say person X lost his valuable item and advertised a reward for the return of it. Person Y, who knew X personally, found the item before reading the ad, and returned it to X, who just thanked Y for that.</p>

<p>Later Y read the ad and demanded the reward. X refused.</p>

<p>Contract Law teaches us that it was perfectly legal for X to refuse as there was no contract. <strong>Which legal principles apply here?</strong></p>

<p>P.S. It was a question in a test, to which I answered that the principle was <em>past consideration</em> as Y returned the item before reading the ad and so without expecting any reward. However, the tutor did not give any credit for my answer and explained that "<em>X never agreed to pay Y anything. To accept an offer, you must be aware of it.</em>".</p>

<p>The formation of a contract occurs at the point where an offer is made and accepted by a person to whom it was made. The acceptance <strong>must</strong> be in reliance of the offer - if you don’t know the offer has been made you <strong>cannot</strong> accept it because you lack the intent to create a legal obligation.</p>

<p>The reward for the lost dog is the textbook example. A real example is <a href="http://netk.net.au/Contract/RvClarke.asp" rel="nofollow noreferrer">R v Clarke (1927) 40 CLR 227</a> in the High Court of Australia.</p>

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