Agreement
A contract is formed when there is an agreement, contractual intention and
consideration. For parties to reach an agreement, one party must make an offer
which is then accepted by the other party.
Offer
Definition: An expression of willingness to contract on certain terms, made with the
intention that it shall become binding as soon as it is accepted by the person to
whom it is addressed.
Offer and Invitations to Treat
An invitation to treat is a statement inviting negotiation (e.g., I am thinking of selling
my car, would you be interested in buying it at the price of £7,000?).
Goods on display:
• Goods on display are an invitation to treat. If they were regarded as offer, the
customer would have accepted the offer the moment he took the goods off the
shelf.
• Pharmaceutical Society of Great Britain v Boots Cash Chemists:
o The offer to buy and the acceptance takes place at the point of payment,
it is at that point that a binding contract is concluded.
Advertisement:
• Generally regarded as invitation to treat.
• Partridge v Crittenden [1968]:
o Defendant was charged with ‘offering for sale’ a live wild bird, contrary
to the Protection of Birds Act 1954, after publishing the sale in an
advertisement.
o The court held the defendant not guilty as the advertisement was only
an invitation to treat.
Advertisement of a reward:
• This is treated as offer. There is an intention to be bound as soon as the
information is given.
• Carlill v Carbolic Smoke Ball Co [1893]:
o A manufacturer released an advertisement for a Carbolic Smoke Ball
stating that a reward of £100 would be paid to anyone who contracted
the flu after using the ball 3 times a day for 2 weeks.
o Carlill sued after getting the flu despite using the appliance.
, o She accepted the unilateral offer when she purchased the smoke ball
and performed the specified act (i.e., completed the prescribed course).
o The court found the advertisement had been sincere, that it did not
matter that it was addressed to the world (comparable to an offer of
reward) and that the wording of the advertisement waived the need to
communicate acceptance.
Unilateral Contracts
• A promise for an act.
• The promisor is only bound to perform if the person to whom the promise is made
performs the specified act.
• The general view is that unilateral contracts carry no obligations until the
specified act is completed (i.e., acceptance occurs only when performance is
completed.
• However, some authorities suggest that partial performance of a unilateral
contract is sufficient to prevent revocation by the offeror.
Case Examples:
• Harvard Law Review (McGovney, 27 Harvard Law Review 644:
o In addition to the express offer, with unilateral contracts there is also an
implied promise not to revoke if the specified act is started within
a reasonable time
o The acceptance and consideration for the implied promise is the
commencement of the act.
• Errington v Errington and Woods [1952]:
o A father bought a house and allowed his son and daughter in law to
live in it, promising that if they paid the mortgage instalments, he would
transfer the house to them. When the father died, his widow sought
possession of the house.
o This is an example of a unilateral contract as the couple did not promise
to repay the mortgage, they simply did so.
o The court held that the father’s promise was irrevocable, if the
couple continued to pay the instalments.
Bilateral Contracts
Where one party makes a promise in return for a promise from the other party. E.g.,
I promise to sell you my car for £7,000 if you agree to buy it for £7,000.
Auctions
• The auctioneer asking for bids is an invitation to treat. The bids are the offers.
,• The auctioneer offers a unilateral contract with the bidder to promise to
accept the highest bid.
• According to the Sale of Goods Act 1979, s.57(2), a sale by auction is
complete on the fall of the auctioneer’s hammer i.e., acceptance.
• If the auctioneer accepts a bid, a bilateral contract of sale is formed
between the bidder and the owner of the goods
Reserve Price:
• The lowest price that the auctioneer would accept for the lot.
• If the bidding does not reach the reserve price, the property will be withdrawn.
• Barry v Davies t/a Heathcote Ball & Co) [2000] →
o Example of without reserve. Auctioneer must accept the highest
price. Unilateral contract as there is a promise to accept the
highest bid.
o Barry was informed that the auction would be without reserve.
o Auctioneer refused to accept his bid and withdrew the goods from sale
(despite Barry’s bid being the highest). Barry sued the auctioneer for
breach of contract.
o It would be useless to sue the owner because the auctioneer did not
accept his bid so there was no contract of sale with the owner.
Tenders
• If a company is outsourcing functions (from outside contractors), often will invite
a number of contractors to submit written tenders for the job.
• General rule is that invitations to tender are invitations to treat.
Exception:
• Blackpool and Fylde Aero Club v Blackpool Borough Council [1990]:
o The council had impliedly offered to consider all tenders which
were submitted on time and in the correct form.
o The Club had accepted this offer by submitting a tender.
o An invitation to tender can imply a unilateral contract to consider all
timely bids.
o The council was in breach of an unilateral contract to consider any
conforming tenders and was liable to the Aero Club for loss of
opportunity.
Acceptance
Acceptance has been defined as an unqualified expression to assent to the
terms of an offer.
, The offeree must know of the offer to accept the offer. There cannot be assent
without knowledge of the offer; and ignorance of the offer is the same thing whether
it is due to never hearing of it or forgetting it after hearing (Australian case of R v
Clarke).
Communication of Acceptance
General rule: Acceptance must be communicated by the offeree or their authorised
agent (may be words or conduct) (Entores Ltd v Miles Far East Corp).
An offeror can waive the need for communication of acceptance in certain
situations.:
• For unilateral contract, the performance of the act can amount to acceptance.
E.g., in carbolic, using the smoke ball in the prescribed manner was the act of
acceptance, the company waived the need for communication.
Silence
General rule: An offeror cannot bind the other party to a contract by silence per se.
This is to protect unwilling offeree.
• However, if coupled with conduct that clearly signifies acceptance when view
objectively, the silence could amount to acceptance.
• Case example: In Felthouse v Bindley, an uncle offered to buy his nephew’s
horse. He provided an offer for £30.15 and stated that if he did not hear from his
nephew, the horse is considered his. The nephew did not respond so the court
held that there was no contract between the uncle and nephew.
Electronic Communication
A telexed acceptance is effective when it would be reasonable to expect the recipient
to have read it, even if it is not read until a later time (e.g., email sent during business
hour.
The Postal Rule
Subject to certain limitations, a letter of acceptance, which is posted, is complete when
posted even if the letter is lost in the post. For the postal rule to apply, these
conditions must be satisfied:
a) It was reasonable in all the circumstances to use the post.
b) The letter was properly addressed, stamped and posted.
c) The postal rule had not been excluded by the offeror.
a. E.g., offeror stipulated or otherwise implied that they needed to be
notified in writing or told of any acceptance. In this case, acceptance
would only be reasonable if, and when received.
A contract is formed when there is an agreement, contractual intention and
consideration. For parties to reach an agreement, one party must make an offer
which is then accepted by the other party.
Offer
Definition: An expression of willingness to contract on certain terms, made with the
intention that it shall become binding as soon as it is accepted by the person to
whom it is addressed.
Offer and Invitations to Treat
An invitation to treat is a statement inviting negotiation (e.g., I am thinking of selling
my car, would you be interested in buying it at the price of £7,000?).
Goods on display:
• Goods on display are an invitation to treat. If they were regarded as offer, the
customer would have accepted the offer the moment he took the goods off the
shelf.
• Pharmaceutical Society of Great Britain v Boots Cash Chemists:
o The offer to buy and the acceptance takes place at the point of payment,
it is at that point that a binding contract is concluded.
Advertisement:
• Generally regarded as invitation to treat.
• Partridge v Crittenden [1968]:
o Defendant was charged with ‘offering for sale’ a live wild bird, contrary
to the Protection of Birds Act 1954, after publishing the sale in an
advertisement.
o The court held the defendant not guilty as the advertisement was only
an invitation to treat.
Advertisement of a reward:
• This is treated as offer. There is an intention to be bound as soon as the
information is given.
• Carlill v Carbolic Smoke Ball Co [1893]:
o A manufacturer released an advertisement for a Carbolic Smoke Ball
stating that a reward of £100 would be paid to anyone who contracted
the flu after using the ball 3 times a day for 2 weeks.
o Carlill sued after getting the flu despite using the appliance.
, o She accepted the unilateral offer when she purchased the smoke ball
and performed the specified act (i.e., completed the prescribed course).
o The court found the advertisement had been sincere, that it did not
matter that it was addressed to the world (comparable to an offer of
reward) and that the wording of the advertisement waived the need to
communicate acceptance.
Unilateral Contracts
• A promise for an act.
• The promisor is only bound to perform if the person to whom the promise is made
performs the specified act.
• The general view is that unilateral contracts carry no obligations until the
specified act is completed (i.e., acceptance occurs only when performance is
completed.
• However, some authorities suggest that partial performance of a unilateral
contract is sufficient to prevent revocation by the offeror.
Case Examples:
• Harvard Law Review (McGovney, 27 Harvard Law Review 644:
o In addition to the express offer, with unilateral contracts there is also an
implied promise not to revoke if the specified act is started within
a reasonable time
o The acceptance and consideration for the implied promise is the
commencement of the act.
• Errington v Errington and Woods [1952]:
o A father bought a house and allowed his son and daughter in law to
live in it, promising that if they paid the mortgage instalments, he would
transfer the house to them. When the father died, his widow sought
possession of the house.
o This is an example of a unilateral contract as the couple did not promise
to repay the mortgage, they simply did so.
o The court held that the father’s promise was irrevocable, if the
couple continued to pay the instalments.
Bilateral Contracts
Where one party makes a promise in return for a promise from the other party. E.g.,
I promise to sell you my car for £7,000 if you agree to buy it for £7,000.
Auctions
• The auctioneer asking for bids is an invitation to treat. The bids are the offers.
,• The auctioneer offers a unilateral contract with the bidder to promise to
accept the highest bid.
• According to the Sale of Goods Act 1979, s.57(2), a sale by auction is
complete on the fall of the auctioneer’s hammer i.e., acceptance.
• If the auctioneer accepts a bid, a bilateral contract of sale is formed
between the bidder and the owner of the goods
Reserve Price:
• The lowest price that the auctioneer would accept for the lot.
• If the bidding does not reach the reserve price, the property will be withdrawn.
• Barry v Davies t/a Heathcote Ball & Co) [2000] →
o Example of without reserve. Auctioneer must accept the highest
price. Unilateral contract as there is a promise to accept the
highest bid.
o Barry was informed that the auction would be without reserve.
o Auctioneer refused to accept his bid and withdrew the goods from sale
(despite Barry’s bid being the highest). Barry sued the auctioneer for
breach of contract.
o It would be useless to sue the owner because the auctioneer did not
accept his bid so there was no contract of sale with the owner.
Tenders
• If a company is outsourcing functions (from outside contractors), often will invite
a number of contractors to submit written tenders for the job.
• General rule is that invitations to tender are invitations to treat.
Exception:
• Blackpool and Fylde Aero Club v Blackpool Borough Council [1990]:
o The council had impliedly offered to consider all tenders which
were submitted on time and in the correct form.
o The Club had accepted this offer by submitting a tender.
o An invitation to tender can imply a unilateral contract to consider all
timely bids.
o The council was in breach of an unilateral contract to consider any
conforming tenders and was liable to the Aero Club for loss of
opportunity.
Acceptance
Acceptance has been defined as an unqualified expression to assent to the
terms of an offer.
, The offeree must know of the offer to accept the offer. There cannot be assent
without knowledge of the offer; and ignorance of the offer is the same thing whether
it is due to never hearing of it or forgetting it after hearing (Australian case of R v
Clarke).
Communication of Acceptance
General rule: Acceptance must be communicated by the offeree or their authorised
agent (may be words or conduct) (Entores Ltd v Miles Far East Corp).
An offeror can waive the need for communication of acceptance in certain
situations.:
• For unilateral contract, the performance of the act can amount to acceptance.
E.g., in carbolic, using the smoke ball in the prescribed manner was the act of
acceptance, the company waived the need for communication.
Silence
General rule: An offeror cannot bind the other party to a contract by silence per se.
This is to protect unwilling offeree.
• However, if coupled with conduct that clearly signifies acceptance when view
objectively, the silence could amount to acceptance.
• Case example: In Felthouse v Bindley, an uncle offered to buy his nephew’s
horse. He provided an offer for £30.15 and stated that if he did not hear from his
nephew, the horse is considered his. The nephew did not respond so the court
held that there was no contract between the uncle and nephew.
Electronic Communication
A telexed acceptance is effective when it would be reasonable to expect the recipient
to have read it, even if it is not read until a later time (e.g., email sent during business
hour.
The Postal Rule
Subject to certain limitations, a letter of acceptance, which is posted, is complete when
posted even if the letter is lost in the post. For the postal rule to apply, these
conditions must be satisfied:
a) It was reasonable in all the circumstances to use the post.
b) The letter was properly addressed, stamped and posted.
c) The postal rule had not been excluded by the offeror.
a. E.g., offeror stipulated or otherwise implied that they needed to be
notified in writing or told of any acceptance. In this case, acceptance
would only be reasonable if, and when received.
