Introduction and Offers
What is contract?
Contract is an agreement giving rise to obligations which are
enforced or recognised by law (Treitel The Law of Contract)
Binding Contract requires
1. Offer
2. Acceptance
3. Intention to create legal relations
4. Consideration
Offer + Acceptance = Agreement
Consideration + Intention = whether agreement is binding in court
Consensus ad idem
Meeting of minds, when two parties to an agreement (contract) both
have the same understanding of the terms of the agreement.
Smith v Hughes farmer agrees to see oats to race-horse owner,
defendant checks sample of oats before he buys them first
delivery is of new (green) oats, but D can only feed old (yellow) oats
to race horses, D refuses to pay farmer sues for breach of contract
Contract is for oats new or old??
Contract depends on sample
How do you decide if contract is made?
Objective Test what Reasonable Person would have decided (not
the parties) Subjective Test what the parties themselves thought
Types of Contract
Bilateral Contract/Agreement both parties make promise to each
other to do something
Unilateral Contract/Agreement promise made by one party in
return for an act by the other party
OFFER AND ACCEPTANCE
Central Issues
1. When deciding whether or not a contract has been concluded,
courts generally look for an offer made by one party that has
been accepted by the other this approach has been criticized
as being too rigid and out of step with commercial practice
2. An offer is a statement of a willingness to enter into a contract
on the terms put forward. It is generally contrasted with an
invitation to treat, which is an invitation to enter into
negotiations on the terms proposed.
3. An acceptance is a final and unqualified expression of assent
to the terms of an offer. This is difficult to define, especially in
context of the battle of forms.
4. An offer can be terminated by revocation, rejection, lapse of
time, occurrence of a stipulated event, and possibly, death.
Areas of Uncertainty
1. Whether or not a contract has been entered into
2. Precise point of time at which the contract was concluded
3. Precise terms of contract (Does vague terms prevent
existence of contract? What if there is agreement on major
issues but disagreement on minor issues?)
Offer
An offer is an expression of willingness to contract on specified
terms, made with the intention that it is to be binding as soon as it
is accepted by the person to whom it is addressed. Chitty on
Contracts
Firm commitment by one party that they wish to enter into legally
binding arrangements with another party intention is judged by
objective test
Last word on the subject
Invitation to treat: What looks like an offer may be an invitation to
negotiate person who makes statement has no intention of being
bound into formal legal arrangements
Gibson v Manchester City Council
Facts: Defendant prepared a brochure explaining how tenants could
buy council houses, sent to Gibson, tenant, who filled in a form
saying hes interested, council treasurer writes back saying council
may be prepared to sell him the house, including a price, saying
Gibson should make a formal application to Council, Council
eventually sends Gibson form w price blank as he wanted to know if
council intended to repair tarmac paths in vicinity of house. He was
told that current price took into account present condition of the
property. He then asked the council to carry on with the purchase as
originally stated. Council was then changed and selling of council
houses was stopped. Plaintiff alleged that the council was obliged to
sell him the house as the contract had already been concluded.
Held: HOL says the letter from the treasurer is an invitation to treat
and not an offer letter said it may be prepared to sell and invited
plaintiff to make a formal application and not to accept the offer no contract betw Gibson and Council [Overturned COA, which held
that there was a binding contract as parties have agreed on all
essential issues]
Principle: An offer is a statement that objectively indicates that the
offeror is prepared to contract on specified terms
Criticism: Focused unduly on precise construction of documentation
that passed between parties, failed to pay sufficient attention to
their conduct (in particular, the fact that the plaintiff had done much
work in repairing/improving the premises and that the council had at
one point put the house on a list of pending sales) impossible to
conclude that improvements had been carried out on the basis
council had committed itself to sell the property. Plaintiff could not
place reliance on the fact that unknown to him, council had put
house on list of pending sales.
Storer v Manchester City Council
Facts: Council writes to Storer and agrees to sell the house,
agreement is legally binding instructions to Storer to fill in
agreement and send to Council, before clerk can countersign,
council changes hands and refuses to sell to Storer
Held: Storer is found to have a binding contract Storer has the risk
of property responsible for any damage incurred to property
sufficient agreement between parties that Storer has that right
(Storer had started insuring it, gotten mortgage etc)
Advertisements
In the case of bilateral contracts, an advertisement constitutes an
invitation to negotiate and not an offer
- Protect party placing the advertisement from incurring a
liability in contract to every person willing to purchase the
goods at stipulated price
o Alternative: advertisement treated as offer, while
stocks last clause used
- Consequence: party who responds to advertisement and
wants to purchase at advertised price cannot compel
advertiser to sell him goods at the stated price
Partridge v Crittenden
Facts: Advert for wild birds placed in magazine offence under Birds
Act 1954
Held: Invitation to treat, not an offer
Principle: Advertisements are normally invitations to treat bc it is
clear the advertiser does not intend to be bound
Grainger & Son v Gough
Facts: Price-list distributed by a merchant among persons likely to
give orders
Held: Lord Herschell: The transmission of a price list does not
amount to an offer to supply an unlimited quantity of the wine
described at the price named, so that as soon as an order is given
there is a binding contract to supply that quantity. If it were so, the
merchant might find himself involved in any number of contractual
obligations to supply wine of a particular description which he would
be unable to carry out, his stock of wine being necessarily limited.
In the case of unilateral contracts, advertisements are offers and not
invitations to treat
- In unilateral contracts, only one party is under obligation to
another
- Performance of the act specified in the offer constitutes
acceptance, and need not be communicated to the offeror
Carlill v Carbolic Smoke Ball
Facts: CSB is used according to instructions, users wont get flu; CSB
will pay $100 to whoever uses it and gets flu. Plaintiff, relying on
this advertisement, purchased and used produce as directed, but
subsequently caught influenza. Carlill sues CSB for breach of
contract D argues that there is no contract, not possible to enter
contract w world at large (not commercially viable)
Held: COA disagreed w D - Not a contract w world at large, offer to
world at large that ripens into an agreement when someone
undertakes the act prescribed recognizes unilateral contracts exist
where one party makes offer to world at large and another party
acts
Principle: An offer can be made to the world at large and can be
accepted by anybody who performs the necessary actions. Where
there is a unilateral offer acceptance occurs when the offeree fully
performs the required act.
N.B. Defendants argued that there was no consideration.
Consideration requires the existence of a bargain between parties
both parties must have contributed something towards the
agreement. CA consideration on 2 grounds: benefit defendants
gained due to use of smoke ball as a result of advertisement,
detriment to Carlill by using smoke ball
N.B.2. Introduced doctrine of intention to create legal relations
advertisement was not mere puff and was intended to be
understood by the public as an offer which was to be acted upon
language of advertisement sign of sincerity
N.B.3. Question arises of when Carlill completes acceptance
Bowen LJ held that it was when she completed the course (rather
than when she began it). Performance of condition is sufficient
acceptance without the notification of it person who makes an
offer in an advertisement of that kind impliedly indicates he does
not require notification of acceptance
Bowerman v Association of British Travel Agents
Facts: Plaintiffs booked a holiday with a tour operator, which later
became insolvent. A notice displayed on the premises stated where
holidays have not yet commenced at time of insolvency, ABTA
arranges for you to be reimbursed. CA heard issue of whether or
not notice sufficed to create a direct contractual relationship.
Held: Contract was found by a majority. Waite LJ central issue is
whether the ordinary member of the public would regard it as
intending to create legal relations.
Lefcowitz v Great Minneapolis Surplus Stores
Facts: D placed the following advertisement in a newspaper:
Saturday 9 A.M. Sharp 3 Brand New Fur Coats Worth to $100.00.
First Come First Served $1 Each. P was the first person to come into
the store but D refused to sell it to him as they stated there was an
implied clause that the offer was only open to women.
Held: The judgment states that the test of whether a binding
obligation may originate in advertisements addressed to the general
public is whether some performance was promised in positive terms
in return for something requested. It was also held that the wording
of the advertisement was clear, definite, explicit and left nothing
open for negotiation the advertisement was found to be an offer
and the Plaintiff accepted it by following the specified instructions
and being the first person to come into the store as specified.
N.B. Implied clause (only sale to women) was not mentioned in
advertisement. While an advertisement has the right to modify the
offer before acceptance, he does not have the right, after
acceptance, to impose new/arbitrary conditions not contained in the
published offer.
Displays
General rule: display of goods is an invitation to negotiate and not
an offer
Fisher v Bell
Facts: display of flick-knife in shop window, seller prosecuted for
selling offensive weapon
Held: display is not an offer, but invitation to treat seller is not
offering to sell anything quite impossible to say that an exhibition
of goods in a shop window is itself an offer for sale.
Pharmaceutical Society of GB v Boots
Facts: Boots displayed medicines on their shelves, which under
statute must be sold under the supervision of a registered
pharmacist. Pharmacist can refuse to allow purchase at cash desk.
Held: CA held that contract of sale occurred at cash desk, not when
the customer took the medicine off the shelf and placed in basket,
so statutory requirement was satisfied display was only invitation
to treat (place considerable emphasis that once an article has been
placed in the receptacle the customer is bound, without paying, to
buy it and not to substitute the article for one found later)
Principle: Display of goods for sale is ITT, offer to buy is made by
customer presenting goods to cashier
Chwee Kin Keong v Digilandmall.com Pte Ltd [Singapore]
Facts: Question of whether an advertisement on a website is an
invitation to treat or an offer
Held: In principle, website ad is no different from a billboard outside
a shop or an advertisement in a newspaper. However, the potential
response is very different internet integrates into a single screen
traditional advertising, catalogues, shop displays/windows and
physical shopping. Ultimately, language of the advertisement
determines whether advertisement is construed as invitation to
treat or unilateral contract.
N.B. Potential range of liability could make judges reluctant to
conclude online advertisements are offers. Solution of implying a
term into an advertisement that offer is while stocks last is rejected
by Rajah JC bailing out an Internet merchant from a bad bargain
though it can be seen as giving effect to the intention of parties,
as could not intend to sell a limitless number of goods, though in
some cases (supply of information) this supply is potentially
limitless. Solution to place onus on seller to insert appropriate
protective clause to shield self from huge exposure to liability has
both the means to do so and knowledge relating to the availability
of any product that is being marketed
Timetables and Vending Machines
Denton v Great Northern Railway
Facts: Claimant arrives expecting train advertised in timetable, train
does not arrive, claimant sues for breach of contract
Held: advertised times are offers
Wilkie v London Passenger Transport Board: Denton equivalent for
buses
Auctions
With Reserve: Auctioneer invites bids for sale (invitation to
negotiate), offer is made by member of public that places a bid,
acceptance not immediate auctioneer asks for further bids,
without which, bid is accepted on the fall of the hammer (British Car
Auctions v Wright)
N.B. It has been argued that an auctioneer cannot withdraw a lot
once the reserve price has been reached (similar to auction without
reserve), unless owner has reserved right to bid for the lot in
question
Without Reserve: auction is guaranteed to take place, no
minimum price, will go to the highest bidder (auctioneer makes an
offer to sell the goods, offer is accepted by the person who makes
the highest bid at the auction)
Warlow v Harrison
Facts: Auction of a horse without reserve, auctioneer allows owner of
horse to bid on it, claimant refused to bid anymore upon finding out
claimant asserts he shld be able to buy at lowest bid bona fide
purchaser
Held: if auction is w/o reserve, neither auctioneer or seller can bid
on goods auctioneer makes an offer to sell the goods, offer is
accepted by the person making the highest bid - sold to highest
bona fide purchaser irrespective of the price
Barry v Davies
Facts: Auctioneer withdrew two engine analysers from an auction
without reserve because he considered the bids were too low,
engines were sold to an third party. Claimant brought an action
against auctioneer for breach of contract.
Held: CA held that there was a collateral agreement that the
auctioneer would sell to the highest bidder (whether or not this is
the market value) auctioneer liable to pay damages to the highest
bidder, amounting to the difference between the highest bid and the
market price
Principle: at auction w/o reserve, auctioneer is bound to sell to
highest bidder
N.B. Consideration: Detriment to the bidder, since his bad can be
accepted unless and until it is withdrawn, and benefit to the
auctioneer, as bidding is driven up, also attendance t the sale is
likely to be increased if it is known there is no reserve
Tenders
Invitation to tender (please send us your bid) is an invitation to
treat/negotiate, not an offer (Spencer v Harding)
*Only common law regarding tenders is discussed, but statutes have
arised to regulate the tendering process, particularly in the context
of public bodies e.g. s3(1) of the Local Government Act 1999
*Implications for both parties, i.e. bidder cannot withdraw bid after
contract has been formed (The Queen in Right of Ontario v Ron
Engineering & Construction Eastern Ltd)
Harvela v Royal Trust of Canada
Facts: Defendant invited Harvela and a 3rd party to make offer for
purchase of shares and undertook to accept the highest offer.
Plaintiff offered $2175000 while 3rd party offered $2100000 or
$101,000 in excess of any other offer. Defendant accepted 3 rd
partys bid. Plaintiff sought injunction.
Held: HL held that 3rd partys bid was a referential bid and not a
valid offer. Invitation had created a fixed bidding sale (name
highest price). (**other issues with referential bidding sale? E.g.
more than one referential bid)
RTCs letter wld have been invitation to treat but letter included
sentence we bind ourselves to accept highest bid transformed
letter into unilateral offer, accepted by submission of highest valid
bid
Principle: invitation to submit tenders may amount to an offer where
it is clear that seller intends to sell to highest bidder
Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council
Facts: Appellant council invited tenders for a concession to operate
pleasure flights form local airport. Invitation stated that council did
not bind themselves to bind all or any part of any tender, and that
tenders received late would not be considered. A tender was
delivered on time but was not checked until after the deadline.
Another bid had already been accepted by then. CA held that the
council was contractually obliged to consider the clubs tender and
was liable for damages on breach of that obligation.
Held: Council excluding a duty to accept any tender was held to be
insufficient to exclude the duty to consider tenders made.
N.B. A bona fide decision to exclude a party from the bidding
process (possibly bc of conflict of interest) does not constitute a
breach of duty to consider tenders submitted on time. (Fairclough
Building Ltd v Borough Council of Port Talbot)
N.B.2. Does not include duty to act judicially. No need for tendered
to give hearing to bidders. (Pratt Contractors Ltd v Transit NZ)
Offers must be communicated to the other party
Unilateral offers must be communicated to world at large
Offer commitment to be bound, not invitation to treat
Need to be accepted
Final and unqualified expression of consent to be bound definite
