CONTRACT

LAW
 OFFER
The Essentials Of A Valid Contract

One party to the contract must make an offer;

The other party must accept that offer;
Both parties must contribute something of value to
the contract (consideration);
Both parties must intend, by their agreement, to
enter into a legal relationship;
Both parties must be legally capable of entering
into a contract;
Both parties must genuinely consent to the
agreement;
The purpose of the contract must not be illegal;
In a very few cases, the contract must be in a
particular form.
 MAKING AN OFFER

 An offer is made when one party indicates that he

is willing to be bound by the terms of his offer once
the other party accepts those terms.

 Put into English, this means that I must make you

an offer (i.e. ‘I offer to sell you my pen) and I must
indicate in some way that, once you have accepted
my offer, I will be obliged to do what I have
promised to do.
 An invitation to treat is not an offer
 If Alan suggests to Brenda that she makes him
an offer for a car, that is an invitation to treat –
no matter what it is called by the parties. If
Brenda makes an offer Alan may accept or reject
it. The following are always invitations to treat
and not offers:
 Articles for sale on display in a shop window or
shelf in a store (even if accompanied by such
slogans as “Amazing offer!” or “Offer for sale”):
Fisher v Bell (1961);
Pharmaceutical Society of GB v Boots (1953)
 Advertisements of items for sale in newspapers,
magazines, catalogues, or on the Internet:
Partridge v Crittenden (1968)
 Auction sales:
Payne v Cave (1789)
 But posters offering a reward are offers; they
are written documents open to anyone who does
what the reward says:
 EXAMPLES OF INVITATIONS TO
TREAT
 Mere statements of price:

Mere statements of price are not usually seen as being offers.

Clifton v Palumbo [1944]

Gibson v Manchester City Council [1979]

 TYPES OF OFFERS
 An offer can be made in writing, orally or even by
conduct.

 An offer may be ‘unilateral’ or ‘bilateral’.

‘UNILATERAL’ CONTRACTS
A unilateral contract is formed where only one party makes a
promise in return for the other doing something (i.e. ‘if you mow
my lawn then I’ll pay you £20’).

 Carlill v Carbolic Smoke Ball Co Ltd [1893].

 Fisher v Bell 1961

 ‘BILATERAL’
CONTRACTS
 A bilateral contract is formed where the parties
exchange promises (i.e. ‘I will build your extension
in exchange for your promise to pay me £10,000’).

Bilateral contract?
 MAKING AN OFFER
Four elements must be present
1) The person making the offer must intend to be bound by
its terms once it is accepted.

confirmed that in assessing whether these conditions have been met, the courts
will take an objective approach. Therefore, the courts will consider how the
conduct of the offeror would appear to an objective party, which requires an
application of the ‘reasonable man’ standard. Therefore, the question to ask is:

‘On examination of the offeror’s conduct as a whole, would the reasonable person
consider the offeror to have expressed a willingness to contract on specified terms
with the intention that it is to be binding once accepted?’
 MAKING AN OFFER
2) The terms of the offer must be certain:

What is meant by this is that there must be no doubt as to the

terms of the offer. If there is doubt, then the person accepting
the offer cannot be sure what they were agreeing to and there
can be no contract.

(Guthing v Lynn (1831)

Nicolene Ltd v Simmonds [1953]

Scammell & Nephew Ltd v Ouston [1941].

 OFFER

This can be seen in Butler Machine Tool Co. Ltd v ExCell- O Corporation (1977), where Lord
Denning said:

" I have much sympathy with the judge's approach to this case. In many of these cases our
traditional analysis of offer, counter-offer, rejection, acceptance and so
forth is out of date. This was observed by Lord Wilberforce in New Zealand Shipping
Co. Ltd v AM Satterthwaite (1975). The better way is to look at all the
documents passing
between the parties and glean from them, or from the conduct of the
parties, they have reached agreement on all material points, even though
there may be differences between the forms and conditions printed on the
back of them.
Applying Brogden v Metropolitan Railway Co. (1877)] it will be found that in
most cases when there is a 'battle of forms' there is a contract as soon as
the last of the forms is sent and received without objection being taken to
Lord Denningjudgment
it. Therefore, is suggesting thatentered
was the subjective viewbuyers.
for the of the contract
" terms that the
parties to the contract have is replaced by an objective view that the parties must have
agreed, as is the case with implied terms in a contract.
 MAKING AN OFFER
3) The offer must be communicated to the person to whom it
is made:

What is meant by this is that the person to whom the offer is

made must actually know about the offer.

The reasoning behind this is simple: how can a person accept

something of which they are not even aware?

Taylor v Laird [1856]

 MAKING AN OFFER
4) The offer may be made to an individual or to a
group of people, or even to the world in general:

Making an offer to another individual is fairly straightforward.

Can you make an offer to the world?

Carlill v Carbolic Smoke Ball Co Ltd [1893]

 MAKING AN OFFER
There must be certainty There must be communication

OFFER

Must be made with an intention to be Can be made to one person, a

binding once accepted group, or to the whole world.
 WHEN IS AN OFFER NOT AN
OFFER?
When it is an ‘invitation to treat’.

An invitation to treat is seen as one party merely

asking the other party to make him and offer or to
open negotiations with him.
Invitation to treat + Offer + Acceptance = Agreement

If an invitation to treat is not followed by an offer,

there can be no agreement:

Invitation to treat + Acceptance = No Agreement

 ENDING AN OFFER
 If an offer is not accepted, it will not continue indefinitely.

 An offer may end when one of the following happens:

- The person making the offer withdraws it (revocation);

- The person to whom the offer is made rejects it;

- The offer has remained open for too long (lapse of time);

- The offer is accepted.

ENDING AN OFFER - REVOCATION
 According to Payne v Cave [1789], the person making the offer can
withdraw it at any time up until the moment of acceptance.

 If the person making the offer decides to withdraw it, he must inform the
person to whom the offer has been made. Until the person to whom the offer
has been made knows of the revocation, he is free to accept the offer.

Dickinson v Dodds [1876]

Byrne v Van Tienhoven [1880]

 Can a unilateral offer be withdrawn by revocation?

Errington v Errington [1952]

 ENDING AN OFFER -
REJECTION
 There are two ways in which the person to whom the offer is made can
reject it:
i. By rejecting the offer outright; or
ii. By making a ‘counter-offer.

 A counter-offer occurs where the person to whom the offer is made replies
by making an offer of their own. This will have the effect of terminating the
original offer.

Example:

I offer to sell you my pen for £1 million.

You reply by saying ‘Tell you what, if you’ll accept £3.50, I’ll take it.’

Hyde v Wrench [1840]

 THE BATTLE OF THE
 FORMS
This usually occurs in business, where each company has its own ‘standard terms’ that it uses
when negotiating contracts.
 If company A makes and offer using its standard terms and company B replies using its own
standard terms, then effectively company B has rejected company A’s offer and has made an
offer of its own.

Example:
Company A makes an offer on its standard terms;
Company B replies using its standard terms (rejection and counter-offer);
Company A replies using its standard terms (rejection of company B’s offer and counter offer);
Company B replies using its standard terms (rejection of company A’s second offer and
counter-offer).

WHO WINS?!

 According to Butler Machine Tool Co v Ex-Cell-O Corp (England) Ltd [1979], the last company
to send its terms ‘wins’ the battle and the contract then proceeds using those terms.
 THE BATTLE OF THE
FORMS
 According to Butler Machine Tool Co v Ex-Cell-O Corp
(England) Ltd [1979], the last company to send its terms ‘wins’
the battle and the contract then proceeds using those terms.
 ENDING AN OFFER – LAPSE OF
TIME
 Obviously, if an offer is open for a specified period of time, it will end once that
period of time has expired.

Example:
I offer to sell you the college and state that you have until 9 am tomorrow
morning to let me know of your answer.

If I hear nothing by 9.01 am, then I can assume that the offer has expired
because the time I allowed you to make a decision has come to an end.

 If no time period is specified in the offer, it will remain open for a ‘reasonable
time’. It will be up to the court to decide what is reasonable in each case.

Ramsgate Victoria Hotel v Montefiore [1866]