CONTRACT LAW I: FORMATION AND VITIATION
FORMATION OF A CONTRACT
Definition of a “contract:”
o Treitel defines a contract as:
An agreement,
Giving rise to legal obligations,
Which are enforced or recognised by law.
Offer / Invitation to Treat:
o “To amount to an offer, the offeror must make a clear, unequivocal statement
that he will regard himself as legally bound to perform his promise if the other
party accepts his offer.”
Distinguish offers from invitation to treat1:
It will not always be easy to tell the difference, as the cases show.
INTENTION IS KEY
Key Cases:
o Gibson v. Manchester City Council [1979] 1 All ER 972
“may be prepared to sell” not an offer says HOL
The language must be clear
o Storer v. Manchester City Council [1974] 1 WLR 1403 CA
What if it’s not an offer, what is it?
o Invitation to Treat
Good on display in a shop generally treated as invitations to treat
o Pharmaceutical Society of Great Britain v. Boots [19639 1
QB 401
Self-service shop – who makes the offer?
Where is the contract concluded? revocation is key
o Fisher v. Bell [1960] 3 All ER 731 sale of flick knife:
display was not an “offer”
Advertisements generally treated as invitations to treat and not offers
o Partridge v. Crittenden (1968), [1969] 1 WLR 1204 (QB)
Key Cases:
A display is not always an invitation to treat:
o Thornton v. Shoe Cane Parking (1970), [1971] 2 QB 163
(CA)
o Commissioners for Her Majesty’s Revenue and Customs v.
Debenham’s Retail Plc [2005] EWCA Civ. 892
o Warwickshire County Council v. Johnson [1993] 1 All ER
299
1
Steps in the pre-contractual process; negotiating process
1
, o Supply of Information
A statement may simply be a statement of information.
This is neither an offer nor an invitation to treat.
Key Cases:
Harvey v. Facey (1893), [1893] AC 552
Clifton v. Palumbo (1944), [1944] 2 All ER 497 (CA)
Pitt v. PHH Asset Management [1993] 4 All ER 961
o Statement of Intention
Parties sometimes communicate2 that they intend to do something.
Harris v. Nickerson (1873) LR 8 QB 286
Unilateral & Bilateral Contracts:
o Bilateral contracts are those in which there is an outstanding obligation on
either side.
o Unilateral contracts are those in which only one party is obligated from the
outset3.
Carlill v. Carbolic Smoke Ball Co. [1893] 1 QB 256
Bowerman v. ABTA (1993), 145 NLJR 1815
Soulsbury v. Soulsbury [2007] EWCA Civ. 969
Termination of the Offer:
o Unless and until acceptance occurs, there is no agreement and either party may
withdraw from negotiations.
o Acceptance must occur in order for a binding contract to be reached.
o Offers terminate in many ways, but as long as they are open, they are not
binding:
Revocation:
An offer which is not accepted is non-binding.
o Payne v. Cave (1789) 3 TR 148
Where the offer is open for a specified period of time, it can still
be withdrawn.
o Offord v. Davies (1862) 12 CB (NS) 748; 142 ER 1336
The revocation must be communicated to the offeree, although
not necessarily by the offeror.
One cannot accept an offer that is known to be revoked.
o Dickinson v. Dodds (1876) 2 Ch. D 463
2
The communication is not intended to be binding thus there is no offer.
3
Means “start, the originating point”.
2
, If an offeree purports4 to accept an offer in ignorance of the
purported revocation, the revocation is not good and there is a
binding contract.
o Byrne v. Van Tienhoven (1880) 5 DPD 344 (Common Pleas)
1: offer letter posted by Def to PI in New York
2: before PI replied Def posts letter revoking the
offer
3: PI telegraphs and posts letter of acceptance
before receipt of 2.
Held: contract made – Def’s purported withdrawal
ineffective because not communicated before PI
had accepted.
Offer of unilateral contract is revoked once offeree has begun act
of acceptance.
o But up to what point?
Lukor (Eastbourne) Ltd. v. Cooper (1940), [1941] AC
1808 (HC) when complete performance has
occurred
Errington v. Errington [1952] 1 ALL ER 149 (CA)
once performance commenced
Daulia Ltd. v Four Millbank Nominees [1978] 2 All
ER 577, [1978] 2 WLR 621 (CA) (per incuriam)
revocation: possible until full performance subject
to implied obligation on offeror not to prevent
performance.
Rejection:
The offer may be rejected by the offeree, expressly or by
counteroffer.
o Hyde v. Wrench (1849) 3 Beav. 334, 49 ER 132 (Rolls Court)
o Society of Lloyd’s v. Twinn [2000] EWHC Admin 308
If a condition in the offer is not fulfilled, the offer terminated.
o Financings, Ltd. v. Stimson (1962), [1962] 3 All Er 386 (CA)
Lapse and Death:
The offer may lapse for want of acceptance.
o Ramsgate Victoria Hotel Co. v. Montefiore (1866) LR 1 Ex
109
o Manchester Diocesan Council for Education v. Commercial
and General Investments (1970), [1969] 3 All ER 1593 (CH
D)
If the offeror dies, the offer may lapse.
o Bradbury v. Morgan (1862) 158 ER 877 (Ex)
o Dickinson v. Dodds (1876) 2 Ch. D 463
4
Purport: to profess or claim to do something.
3
, 4
FORMATION OF A CONTRACT
Definition of a “contract:”
o Treitel defines a contract as:
An agreement,
Giving rise to legal obligations,
Which are enforced or recognised by law.
Offer / Invitation to Treat:
o “To amount to an offer, the offeror must make a clear, unequivocal statement
that he will regard himself as legally bound to perform his promise if the other
party accepts his offer.”
Distinguish offers from invitation to treat1:
It will not always be easy to tell the difference, as the cases show.
INTENTION IS KEY
Key Cases:
o Gibson v. Manchester City Council [1979] 1 All ER 972
“may be prepared to sell” not an offer says HOL
The language must be clear
o Storer v. Manchester City Council [1974] 1 WLR 1403 CA
What if it’s not an offer, what is it?
o Invitation to Treat
Good on display in a shop generally treated as invitations to treat
o Pharmaceutical Society of Great Britain v. Boots [19639 1
QB 401
Self-service shop – who makes the offer?
Where is the contract concluded? revocation is key
o Fisher v. Bell [1960] 3 All ER 731 sale of flick knife:
display was not an “offer”
Advertisements generally treated as invitations to treat and not offers
o Partridge v. Crittenden (1968), [1969] 1 WLR 1204 (QB)
Key Cases:
A display is not always an invitation to treat:
o Thornton v. Shoe Cane Parking (1970), [1971] 2 QB 163
(CA)
o Commissioners for Her Majesty’s Revenue and Customs v.
Debenham’s Retail Plc [2005] EWCA Civ. 892
o Warwickshire County Council v. Johnson [1993] 1 All ER
299
1
Steps in the pre-contractual process; negotiating process
1
, o Supply of Information
A statement may simply be a statement of information.
This is neither an offer nor an invitation to treat.
Key Cases:
Harvey v. Facey (1893), [1893] AC 552
Clifton v. Palumbo (1944), [1944] 2 All ER 497 (CA)
Pitt v. PHH Asset Management [1993] 4 All ER 961
o Statement of Intention
Parties sometimes communicate2 that they intend to do something.
Harris v. Nickerson (1873) LR 8 QB 286
Unilateral & Bilateral Contracts:
o Bilateral contracts are those in which there is an outstanding obligation on
either side.
o Unilateral contracts are those in which only one party is obligated from the
outset3.
Carlill v. Carbolic Smoke Ball Co. [1893] 1 QB 256
Bowerman v. ABTA (1993), 145 NLJR 1815
Soulsbury v. Soulsbury [2007] EWCA Civ. 969
Termination of the Offer:
o Unless and until acceptance occurs, there is no agreement and either party may
withdraw from negotiations.
o Acceptance must occur in order for a binding contract to be reached.
o Offers terminate in many ways, but as long as they are open, they are not
binding:
Revocation:
An offer which is not accepted is non-binding.
o Payne v. Cave (1789) 3 TR 148
Where the offer is open for a specified period of time, it can still
be withdrawn.
o Offord v. Davies (1862) 12 CB (NS) 748; 142 ER 1336
The revocation must be communicated to the offeree, although
not necessarily by the offeror.
One cannot accept an offer that is known to be revoked.
o Dickinson v. Dodds (1876) 2 Ch. D 463
2
The communication is not intended to be binding thus there is no offer.
3
Means “start, the originating point”.
2
, If an offeree purports4 to accept an offer in ignorance of the
purported revocation, the revocation is not good and there is a
binding contract.
o Byrne v. Van Tienhoven (1880) 5 DPD 344 (Common Pleas)
1: offer letter posted by Def to PI in New York
2: before PI replied Def posts letter revoking the
offer
3: PI telegraphs and posts letter of acceptance
before receipt of 2.
Held: contract made – Def’s purported withdrawal
ineffective because not communicated before PI
had accepted.
Offer of unilateral contract is revoked once offeree has begun act
of acceptance.
o But up to what point?
Lukor (Eastbourne) Ltd. v. Cooper (1940), [1941] AC
1808 (HC) when complete performance has
occurred
Errington v. Errington [1952] 1 ALL ER 149 (CA)
once performance commenced
Daulia Ltd. v Four Millbank Nominees [1978] 2 All
ER 577, [1978] 2 WLR 621 (CA) (per incuriam)
revocation: possible until full performance subject
to implied obligation on offeror not to prevent
performance.
Rejection:
The offer may be rejected by the offeree, expressly or by
counteroffer.
o Hyde v. Wrench (1849) 3 Beav. 334, 49 ER 132 (Rolls Court)
o Society of Lloyd’s v. Twinn [2000] EWHC Admin 308
If a condition in the offer is not fulfilled, the offer terminated.
o Financings, Ltd. v. Stimson (1962), [1962] 3 All Er 386 (CA)
Lapse and Death:
The offer may lapse for want of acceptance.
o Ramsgate Victoria Hotel Co. v. Montefiore (1866) LR 1 Ex
109
o Manchester Diocesan Council for Education v. Commercial
and General Investments (1970), [1969] 3 All ER 1593 (CH
D)
If the offeror dies, the offer may lapse.
o Bradbury v. Morgan (1862) 158 ER 877 (Ex)
o Dickinson v. Dodds (1876) 2 Ch. D 463
4
Purport: to profess or claim to do something.
3
, 4
