Offer And Acceptance Notes - Contract Law

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1. An Offer
2. An Acceptance
3. An intention to create legal relations
4. And a consideration.

The offer and the acceptance form the agreement and the intention to create legal relations and the consideration define whether it’s a binding contract in court. If any of these elements are missing, then it cannot be a valid contract.

What is an offer?

• An offer is a statement of terms by which the offeror is willing to be bound if someone should accept the terms.
• This puts the offeror on risk - once the offer is unequivocally accepted this shall become a binding (bilateral) contract.
• An offer can be made to one person or the world at large (as inCarlill).

In other words, the court is trying to find a willingness from a party (e.g. a communication in writing or orally) to contract on specific terms. Contractual obligations = voluntarily undertaken.

Chen-Wishart defined an offer as "a manifestation (whether orally, in writing, or by conduct) by the offeror of a willingness to be bound by the terms proposed to the offeree (the addressee), as soon as the offeree signifies acceptance of the terms".

So it is an expression ofwillingnessto be bound onstated termsifacceptedby the other party.

An offer can be expressed (either in writing or orally) or impliede.g. see the case ofDatec Electronic Holdings Ltd v United Parcels Service Ltd [2007].

The courts use an objective test to ascertain whether an offer/contract has been made- Questions of objective intention of parties: What would a reasonable and honest person in the position of the offeree have thought that they were agreeing to in these circumstances?

Justification for this= certainty in commercial transactions + desire to avoid the evidential difficulties. Lord Steyn: ‘’The commercial advantage of the English approach is that it promotes certainty and predictability in the resolution of contract disputes…it is not unfair.’’

The court doesnotalways use the same type of objectivity.

Types of objectivity (as argued by Howarth):

Promisor objectivity: the intention of a reasonablepromisor.

Promissee objectivity: the intention of a reasonablepromisee.

Detached objectivity: the 3rd party view of a situation.

For example, inSmith v Hughes (1871), there was a contractual dispute about the type of oats contracted for. Promisee objectivity was used by the court: what would the reasonable person, receiving the promise, intended to have agreed to?

Vorster criticised Howarth’s approach because there is little distinction between promisor and promisee. In a bilateral contract, each party is both a promisor and a promisee eg. Scriven Bros v Hindley. Howarth himself= advocate of detached objectivity.

• Also = makes the contract ambiguous.

This could be counter-argued by stating that the main essence is to look at it from claimant/ defendant perspectives.

‘If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms’- Smith v Hughes (1871) LR 6 QB 597 (CA), Lord Blackburn (607).

Only the person to who the offer was made to can accept that offer (Lambert v Lewis [1982]).

OFFER HAS TO BE COMMUNICATED

For there to be avalid offer there needs to be a communication of promise from the offeror to the offeree.

See, for example,Forman & Co. Proprietary. Ltd v Ship Liddesdale [1900].

In order to be valid, offer must be communicated to the offeree, no party can be bound by an offer of which they were unaware=Taylor v Laird.

However, see the exception to this inGibbons v Proctor (1891).

Invitation to treat (ITT)

• An ITT is an expression of willingness to receive offers. An ITT has no legal importance - it simply precedes an offer.
• An advertisement of goods for sale/goods in a shop window are normally construed as an ITT because this protects sellers of goods from being bound to supply limitless amounts of products.
• This was established inBoots v Pharmaceutical Society of GreatBritainwhere it was held that in self-service shops (a new type of shop at the time) goods on the shelf are an ITT, not an offer.
• Similarly, inFisher v Bell, the shop keeper was not liable for 'offering to sale' an offensive weapon (a flick knife in this instance) because goods in the window constitute an ITT.
• InHarvey v Faceyit was established that a statement of the lowest cash price acceptable for goods is an ITT, not an offer. There was therefore not a contract in this case.
• The same principle is applied to goods in a catalogue/ price lists as was held inGrainger and Sons v Gough.
• Gibson v Manchester City Council [1979]: council wrote saying that it ‘may be prepared to sell’. Tenant completed application form but court this was an offer to buy in response to the council’s initial letter which was an ITT.

Even if the word “offer” is used the court may still say it’s an invitation to treat because the word is not used in its legal sense (Spencer v Harding), so the customer is generally regarded as making the offer when they present goods at the cash desk (and the trader can accept or reject).

Unilateral contracts

• However, an advertisement for a reward is in fact an offer to enter into a unilateral contract if the specified conduct is completed (Williams v Cawardine).
• Equally, an offer of a unilateral contract shall not be construed as an ITT or 'mere puff' if the company does something which implies intention to be bound. As was the case inCarlill v Carbolic Smoke Ball Companywhere the offer of 100 for contracting flu whilst using the smoke ball was binding because 1) a unilateral.