Sindy Mawaddah (1310532056)

Intro

Contractual agreement has traditionally been analysed in terms of offer and acceptance.
One party, the offeror, makes an offer which once accepted by another party, the offeree,
creates a binding contract. Key concepts that you need to familiarise yourself with in
relation to offer and acceptance include the distinction between an offer and an invitation
to treat - you need to be able to identify specific examples of where an offer or an invitation
to treat exists. Also it is important to know the difference between bilateral and unilateral
contracts. The case of Carlill v Carbolic Smoke ball co. is the leading case in both these areas
so it worth concentrating your efforts in obtaining a good understanding of this case.

Offer

In order to amount to an offer it must be shown that the offeror had the intention to be
bound:

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Court of Appeal

A Newspaper advert placed by the defendant stated:-
£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts
the influenza after having used the ball three times daily for two weeks according to the
printed directions supplied with each ball...
£1000 is deposited with the Alliance Bank, shewing our sincerity in the matter."
Mrs Carlill purchased some smoke balls and used them according to the directions and
caught flu. She sought to claim the stated £100 reward.
The defendant raised the following arguments to demonstrate the advertisement was a
mere invitation to treat rather than an offer: 
1. The advert was a sales puff and lacked intent to be an offer.
2. It is not possible to make an offer to the world.
3. There was no notification of acceptance.
4. The wording was too vague to constitute an offer since there was no stated time limit as
to catching the flu.
5. There was no consideration provided since the 'offer' did not specify that the user of the
balls must have purchased them. 

Held:
The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert
constituted an offer of a unilateral contract which she had accepted by performing the
conditions stated in the offer. The court rejected all the arguments put forward by the
defendants for the following reasons:
1. The statement referring to the deposit of £1,000 demonstrated intent and therefore it was
not a mere sales puff.
2. It is quite possible to make an offer to the world.
3. In unilateral contracts there is no requirement that the offeree communicates an intention
to accept, since acceptance is through full performance.
4. Whilst there may be some ambiguity in the wording this was capable of being resolved by
applying a reasonable time limit or confining it to only those who caught flu whilst still using
the balls.
5. The defendants would have value in people using the balls even if they had not been
purchased by them directly.

Invitation to treat

An offer needs to be distinguished from an invitation to treat. Whereas an offer will lead to
a binding contract on acceptance, an invitation to treat can not be accepted it is merely an
invitation for offers.
 
Goods on display in shops

Goods on display in shops are generally not offers but an invitation to treat. The customer
makes an offer to purchase the goods. The trader will decide whether to accept the offer:

Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401 Court of Appeal

Boots introduced the then new self service system into their shops whereby customers would
pick up goods from the shelf put them in their basket and then take them to the cash till to
pay. The Pharmaceutical Society of Great Britain brought an action to determine the legality
of the system with regard to the sale of pharmaceutical products which were required by
law to be sold in the presence of a pharmacist. The court thus needed to determine where
the contract came into existence.

Held:
Goods on the shelf constitute an invitation to treat not an offer. A customer takes the goods
to the till and makes an offer to purchase. The shop assistant then chooses whether to
accept the offer. The contract is therefore concluded at the till in the presence of a
pharmacist.

Advertisements

Advertisements are also generally invitations to treat:

Partridge v Crittenden (1968) 2 All ER 421

The defendant placed an advert in a classified section of a magazine offering some bramble
finches for sale. S.6 of the Protection of Birds Act 1954 made it an offence to offer such birds
for sale. He was charged and convicted of the offence and appealed against his conviction.
Held:
The defendant's conviction was quashed. The advert was an invitation to treat not an offer.
The literal rule of statutory interpretation was applied.

However, in some instances an advert can amount to an offer:

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Court of Appeal

A Newspaper advert placed by the defendant stated:-
£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts
the influenza after having used the ball three times daily for two weeks according to the
printed directions supplied with each ball...
£1000 is deposited with the Alliance Bank, shewing our sincerity in the matter."
Mrs Carlill purchased some smoke balls and used them according to the directions and
caught flu. She sought to claim the stated £100 reward.
The defendant raised the following arguments to demonstrate the advertisement was a
mere invitation to treat rather than an offer: 
1. The advert was a sales puff and lacked intent to be an offer.
2. It is not possible to make an offer to the world.
3. There was no notification of acceptance.
4. The wording was too vague to constitute an offer since there was no stated time limit as
to catching the flu.
5. There was no consideration provided since the 'offer' did not specify that the user of the
balls must have purchased them. 

Held:
The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert
constituted an offer of a unilateral contract which she had accepted by performing the
conditions stated in the offer. The court rejected all the arguments put forward by the
defendants for the following reasons:
1. The statement referring to the deposit of £1,000 demonstrated intent and therefore it was
not a mere sales puff.
2. It is quite possible to make an offer to the world.
3. In unilateral contracts there is no requirement that the offeree communicates an intention
to accept, since acceptance is through full performance.
4. Whilst there may be some ambiguity in the wording this was capable of being resolved by
applying a reasonable time limit or confining it to only those who caught flu whilst still using
the balls.
5. The defendants would have value in people using the balls even if they had not been
purchased by them directly.
Contract by Tender

The request for tenders represents an invitation to treat and each tender submitted
amounts to an offer unless the request specifies that it will accept the lowest or highest
tender or other condition. If the request contains such a condition this will amount to an
offer of a unilateral contract where acceptance takes place on performing the condition:

Spencer v Harding Law Rep. 5 C. P. 561

The defendants advertised a sale by tender of the stock in trade belonging Eilbeck & co. The
advertisement specified where the goods could be viewed, the time of opening for tenders
and that the goods must be paid for in cash. No reserve was stated. The claimant submitted
the highest tender but the defendant refused to sell to him.

Held:
Unless the advertisement specifies that the highest tender would be accepted there was no
obligation to sell to the person submitting the highest tender. The advert amounted to an
invitation to treat, the tender was an offer, the defendant could choose whether to accept
the offer or not.

Auctions

Where an auction takes place with reserve, each bid is an offer which is then accepted by
the auctioneer. Where the auction takes place without reserve, the auctioneer makes a
unilateral offer which is accepted by the placing of the highest bid:

Heathcote Ball v Barry [2000] EWCA Civ 235

The claimant had submitted the highest (and only) bids at an auction stated to be without
reserve. The items were two Alan Smart engine analysers which were worth £14,000. The
claimant had submitted bids of £200 each. The auctioneer refused to sell them at that price.
The claimant brought an action for breach of contract claiming damages of £27,600.

Held:
The claimant was entitled to damages. Where an auction takes place without reserve the
auctioneer makes a unilateral offer which is accepted by submitting the highest bid. There
was thus a binding contract and the claimant entitled to damages covering the loss of
bargain.

Machines

The machine represents the offer, the acceptance is inserting the money:

Thornton v Shoe Lane Parking [1971] 2 WLR 585 Court of Appeal

The claimant was injured in a car park partly due to the defendant's negligence. The
claimant was given a ticket on entering the car park after putting money into a machine. The
ticket stated the contract of parking was subject to terms and conditions which were
displayed on the inside of the car park. One of the terms excluded liability for personal
injuries arising through negligence. The question for the court was whether the term was
incorporated into the contract ie had the defendant brought it to the attention of the
claimant before or at the time the contract was made. This question depended upon where
the offer and acceptance took place in relation to the machine.

Held:
The machine itself constituted the offer. The acceptance was by putting the money into the
machine. The ticket was dispensed after the acceptance took place and therefore the clause
was not incorporated into the contract.

Termination of offers
  
An offer may be terminated by:

1. Death of offeror or offeree

2. Lapse of time

An offer will terminate after a reasonable lapse of time. What amounts to a reasonable

period will depend on the circumstances.

Ramsgate Victoria Hotel v Montefoire (1866) LR 1 Ex 109

The defendant offered to purchase shares in the claimant company at a certain price. Six
months later the claimant accepted this offer by which time the value of the shares had
fallen. The defendant had not withdrawn the offer but refused to go through with the sale.
The claimant brought an action for specific performance of the contract.

Held: 
The offer was no longer open as due to the nature of the subject matter of the contract the
offer lapsed after a reasonable period of time. Therefore there was no contract and the
claimant's action for specific performance was unsuccessful.

Revocation

An offeror may revoke an offer at any time before acceptance takes place:
 
Dickinson v Dodds (1876) 2 Ch D 463
The defendant offered to sell his house to the claimant and promised to keep the offer open
until Friday. On the Thursday the defendant accepted an offer from a third party to purchase
the house. The defendant then asked a friend to tell the claimant that the offer was
withdrawn. On hearing the news, the claimant went round to the claimant's house first thing
Friday morning purporting to accept the offer. He then brought an action seeking specific
performance of the contract.

Held:
The offer had been effectively revoked. Therefore no contract existed between the parties.
There was no obligation to keep the offer open until Friday since the claimant had provided
no consideration in exchange for the promise. 

The offeror is free to withdraw the offer at any time before acceptance takes place unless a
deposit has been paid.

Dahlia v Four Millbank Nominees [1978] Ch 231 Court of Appeal

The claimant wished to purchase some property from the defendant. The terms had been
agreed but no written contract had been completed. The defendant promised the claimant
that if he arranged for a bankers draft for the deposit to be delivered to the defendant
before 10.00 am on the 22nd December he would complete the written contract. The
claimant duly complied with the request but the defendant refused to complete. The
claimant brought an action stating that unilateral contract existed and the defendant was
thus bound by that contract to complete the written contract for the sale of the property.

Held: A unilateral contract did exist.

Goff LJ stated obiter on the issue of revocation of a unilateral offer:-
"Whilst I think the true view of a unilateral contract must in general be that the offeror is
entitled to require full performance of the condition which he has imposed and short of that
he is not bound, that must be subject to one important qualification, which stems from the
fact that there must be an implied obligation on the part of the offeror not to prevent the
condition becoming satisfied, which obligation it seems to me must arise as soon as the
offeree starts to perform. Until then the offeror can revoke the whole thing, but once the
offeree has embarked on performance it is too late for the offeror to revoke his offer."

Counter offer

A counter offer is where an offeree responds to an offer by making an offer on different

terms. This has the affect of destroying the original offer so that it is no longer open for the
offeree to accept.

Hyde v Wrench (1840) 49 ER 132 Chancery Division (Decided by Lord Langdale MR)

The defendant offered to sell a farm to the claimant for £1,000. The claimant in reply offered
£950 which the defendant refused. The claimant then sought to accept the original offer of
£1,000. The defendant refused to sell to the claimant and the claimant brought an action for
specific performance.
Held:
There was no contract. Where a counter offer is made this destroys the original offer so that
it is no longer open to the offeree to accept.

Acceptance

Once valid acceptance takes place a binding contract is formed. It is therefore important to

know what constitutes a valid acceptance in order to establish if the parties are bound by
the agreement. There are three main rules relating to acceptance:

1. The acceptance must be communicated to the offeree.

2. The terms of the acceptance must exactly match the terms of the offer.
3. The agreement must be certain.

Communication

The general rule is that the offeror must receive the acceptance before it is effective:

Entorres v Miles Far East [1955] 2 QB 327 Court of Appeal

The claimant sent a telex message from England offering to purchase 100 tons of Cathodes
from the defendants in Holland. The defendant sent back a telex from Holland to the London
office accepting that offer. The question for the court was at what point the contract came
into existence. If the acceptance was effective from the time the telex was sent the contract
was made in Holland and Dutch law would apply. If the acceptance took place when the
telex was received in London then the contract would be governed by English law.

Held:
To amount to an effective acceptance the acceptance needed to be communicated to the
offeree. Therefore the contract was made in England.
 
Silence will not amount to acceptance:

Felthouse v Bindley [1862] EWHC CP J35 Court of Common Pleas

A nephew discussed buying a horse from his uncle. He offered to purchase the horse and said
if I don't hear from you by the weekend I will consider him mine. The horse was then sold by
mistake at auction. The auctioneer had been asked not to sell the horse but had forgotten.
The uncle commenced proceedings against the auctioneer for conversion. The action
depended upon whether a valid contract existed between the nephew and the uncle.

Held:
There was no contract. You cannot have silence as acceptance.

Acceptance can be through conduct:

Brogden v Metropolitan Railway (1877) 2 App. Cas. 666

The claimants were the suppliers of coal to the defendant railway company. They had been
dealing for some years on an informal basis with no written contract. The parties agreed
that it would be wise to have a formal contract written. The defendant drew up a draft
contract and sent it to the claimant. The claimant made some minor amendments and filled
in some blanks and sent it back to the defendant. The defendant then simply filed the
document and never communicated their acceptance to the contract. Throughout this
period the claimants continued to supply the coal. Subsequently a dispute arose and it was
questioned whether in fact the written agreement was valid.

Held:
The written contract was valid despite no communication of the acceptance. The acceptance
took place by performing the contract without any objection as to the terms.

The postal rule

Where it is agreed that the parties will use the post as a means of communication the postal
rule will apply. The postal rule states that where a letter is properly addressed and stamped
the acceptance takes place when the letter is placed in the post box:

Adams v Lindsell (1818) 106 ER 250

The defendant wrote to the claimant offering to sell them some wool and asking for a reply
'in the course of post'. The letter was delayed in the post. On receiving the letter the
claimant posted a letter of acceptance the same day. However, due to the delay the
defendant's had assumed the claimant was not interested in the wool and sold it on to a
third party. The claimant sued for breach of contract.

Held:
There was a valid contract which came in to existence the moment the letter of acceptance
was placed in the post box.

This case established the postal rule. This applies where post is the agreed form of
communication between the parties and the letter of acceptance is correctly addressed and
carries the right postage stamp. The acceptance then becomes effective when the letter is
posted.

It is relatively easy for the parties to exclude the postal rule:

Holwell Securities v Hughes [1974] 1 WLR 155

Dr Hughes granted Holwell Securities an option to purchase his house for £45,000. The
option was to be exercisable 'by notice in writing' within 6 months. Five days before the
expiry, Holwell posted a letter exercising the option. This letter was never received by
Hughes. Holwell sought to enforce the option relying on the postal rule stating the
acceptance took place before the expiry of the option.

Held: 
By requiring 'notice in writing', Dr Hughes had specified that he had to actually receive the
communication and had therefore excluded the postal rule.
The terms of the acceptance must exactly match the terms of the offer.

If the terms differ this will amount to a counter offer and no contract will exist:

Hyde v Wrench (1840) 49 ER 132 Chancery Division (Decided by Lord Langdale MR)

The defendant offered to sell a farm to the claimant for £1,000. The claimant in reply offered
£950 which the defendant refused. The claimant then sought to accept the original offer of
£1,000. The defendant refused to sell to the claimant and the claimant brought an action for
specific performance.

Held:

There was no contract. Where a counter offer is made this destroys the original offer so that
it is no longer open to the offeree to accept.
The agreement must be certain

When viewed objectively it must be possible to determine exactly what the parties have
agreed to. Compare the following two cases:

Scammell and Nephew v Ouston [1941] AC 251 House of Lords

The parties entered an agreement whereby Scammell were to supply a van for £286 on HP
terms over 2 years and Ouston was to trade in his old van for £100. There was then some
disagreement and Scammel refused to supply the van.

Held:
There was no certainty as to the terms of the agreement. Whilst there was agreement on
the price there was nothing in relation to the HP terms stating whether it would be weekly or
monthly instalments or how much the instalments would be.