Contract Law - O er and Acceptance
O er
Part I - Formation
Course Overview
- Formation
- Performance
- Regulation
- Enforcement
• Formation:
- The agreement (“o er and acceptance”)
- Consideration
- Intention to create legal relations
- Non-contractual promises (promissory estoppel)
What is a contract?
- A legally binding agreement created between two parties
- Creates ‘positive obligations’, the obligations in a contract are created by parties themselves
- Law which is ‘freely’ created by individuals but enforced judicially
- Freedom of contract to enter into any contract you wish to and you can determine the facts
Conundrum
- Carbolic Smoke Ball case
- Concerned an advertisement placed in Pall Mall Gazette in the 19th century:
• £100 paid to by the Carbolic Smoke Ball Co. to anybody who catches in uenza or a cold after
having used its “smoke ball” 3 times daily for 2 weeks
• £1000 had been deposited in the bank to “show our sincerity in the matter”
- Mrs Carlill used the ball 3 times daily for 2 months until catching the u
- She brought a claim to court for £100 owed from the Carbolic smoke ball company
- The company refused to pay the £100 owed
O er and acceptance
- In order for there to be a contract there must be an o er, in order for there to be an agreement
there must be an o er which is accepted
- This requires a “meeting of the minds”
- A problem is that nobody knows what the parties intended when the entered the contract
- The method the law uses to determine whether there was a ‘meeting of the minds’ is an
objective assessment - establishing the intention of the parties, did party A o er intend to make
a contractual o er and did party B intend to accept the o er
- Objectively assessed - looking into what the parties said and did to one another
• OT Africa Line Ltd v Vickers plc [1996] 1 Lloyd’s Rep 700 - concerned a mistake in price,
the o er stated a price of $150,000. The other parties solicitor replied which had a mistake by
putting £155,000 (pounds) rather than $150,000 (dollars) which is valued at a lot more money.
The court concluded that if you are taking an objective approach, a reasonable person would
conclude that the price be assessed objectively.
• Moran v University College Salford (No 2) The Times, 23rd Nov 1993 - The university
accidentally o ered an unconditional o er to Moran, they had intended to reject his
application. Moran had accepted this o er. The court determined that they had entered a
contract. An objective assessment says an o er has been made. “[T]he judicial task is not to
discover the actual intentions of each party; it is to decide what each was reasonably entitled
to conclude from the attitude of the other” – Gloag on Contract (1929)
What is an o er?
- “An intimation, by words or conduct, of a willingness to enter into a legally binding contract,
and which in its terms expressly or impliedly indicates that it is to become binding on the
o eror as soon as it has been accepted by an act, forbearance or return promise on the part
of the person to whom it was addressed.”
- Willingness to enter into a legally binding contract, often shortened to an intention to be bound.
- Capable of become binding as soon as it is accepted, you are able to accept straight away and
thereby agree
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, Contract Law - O er and Acceptance
Compare
- “Would you like to buy my car?” - this is not an o er, this is simply an invitation to treat
• If there is no intention to be bound upon acceptance such statements are known as invitations
to treat
- “Blue Ford Focus for sale, 1.8l, 20,000 miles, 2012 reg, £4000 cash or cheque only” - this is
also not an o er but could become an o er because it has the potential of willingness to enter
a legally binding contract, providing it is accepted
Distinguishing o ers and invitations to treat (1)
- Has the “o eror” (the person who has made the o er) made clear all that is needed for the
other to accept? - Have they said something that the o eree can simply say yes too and
agreeing.
• Harvey v Facey [1893] AC 552: concerned a sale of land, one party wanted to buy the land
and said to the other ‘what is the lowest price at which you would sell the land for’. The other
party stated their price. This was claimed to be an o er but the court determined that a
statement of “lowest price” is not an o er.
• Clifton v Palumbo [1944] 2 All ER 497: “I am prepared to o er you…my Lytham estate for
£600,000” – not an o er. This could be understood as an o er because it literally says ‘o er’
but the court determined that this was not an o er. There are two things going on here, simply
using the word ‘o er’ does not make something a contractual o er because o er is used in
everyday language without having meaning AND you don’t want people creating contracts
simply by using special words, instead the court wants people to look at things more rationally
and argue on the basis of what has been done.
• Owen v Tunison 131 Me 42, 158 A 926 (1932): An American case so not binding on the UK
courts. “It would not be possible for me to sell unless I was to receive $16,000 cash”. This is
not an o er as it is not rm/committed enough
Distinguishing o ers and invitations to treat (2)
- Does the language clearly show intention to be bound?
• Gibson v Manchester City Council [1979] 1 WLR 294; Storer v Manchester City Council
[1974] 3 All ER 824: two cases concerned the same facts, Gibson and Storer were council
tenants, at that time Manchester City Council was ran by conservatives and had a policy that
allowed tenants to buy their home. They both entered into negotiations to do this, they both
wanted to buy their homes. The council was initially open to negotiations but then there was a
local election and control of the council changed to labour and decided they no longer wanted
to sell council homes but said they would honour existing contracts. Gibson ended up being
refused his purchase and took it to court, Gibson failed to have his contract enforced and the
court held that he had no contract because the council had used vague language to him when
he made the bid to buy his home. A letter from the council had said ‘we may be prepared to
sell’ - this is not a contractual o er. However, Storer had succeeded because he had received
a letter from the council which said if he signed and returned the agreement I will send you an
agreement on behalf of the corporation. This is an o er because it shows a willingness to be
bound and an immediate acceptance. (“May be prepared to sell…” vs “If you sign the
agreement and return it to me I will send you the Agreement signed on behalf of the
corporation…”)
• Lefkowitz v Great Minneapolis Surplus Store 251 Minn. 188, 86 NW 3d 689 (1957): This
concerted a sale of fur coats from an outlet. A sign was outside the store - “Saturday 9 AM
Sharp/3 Brand New/Fur Coats/Worth $100/First Come/First Served/$1 Each”. Lefkowitz
turned up 9am sharp with $1, he was told by someone behind the counter that they were only
selling the fur coats to females and not men. Lefkowitz sued the Minneapolis Store arguing
that their sign was an o er and he had accepted it and that he should have been entitled to a
$1 fur coat. The court agreed that the language was very clear about the intentions to be
bound.
Distinguishing o ers and invitations to treat (3)
- Would it make commercial sense to construe the “o eror” as having made an o er? (Objective
assessment in operation, looking at it from a reasonable onlooker looking at what would make
commercial sense
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O er
Part I - Formation
Course Overview
- Formation
- Performance
- Regulation
- Enforcement
• Formation:
- The agreement (“o er and acceptance”)
- Consideration
- Intention to create legal relations
- Non-contractual promises (promissory estoppel)
What is a contract?
- A legally binding agreement created between two parties
- Creates ‘positive obligations’, the obligations in a contract are created by parties themselves
- Law which is ‘freely’ created by individuals but enforced judicially
- Freedom of contract to enter into any contract you wish to and you can determine the facts
Conundrum
- Carbolic Smoke Ball case
- Concerned an advertisement placed in Pall Mall Gazette in the 19th century:
• £100 paid to by the Carbolic Smoke Ball Co. to anybody who catches in uenza or a cold after
having used its “smoke ball” 3 times daily for 2 weeks
• £1000 had been deposited in the bank to “show our sincerity in the matter”
- Mrs Carlill used the ball 3 times daily for 2 months until catching the u
- She brought a claim to court for £100 owed from the Carbolic smoke ball company
- The company refused to pay the £100 owed
O er and acceptance
- In order for there to be a contract there must be an o er, in order for there to be an agreement
there must be an o er which is accepted
- This requires a “meeting of the minds”
- A problem is that nobody knows what the parties intended when the entered the contract
- The method the law uses to determine whether there was a ‘meeting of the minds’ is an
objective assessment - establishing the intention of the parties, did party A o er intend to make
a contractual o er and did party B intend to accept the o er
- Objectively assessed - looking into what the parties said and did to one another
• OT Africa Line Ltd v Vickers plc [1996] 1 Lloyd’s Rep 700 - concerned a mistake in price,
the o er stated a price of $150,000. The other parties solicitor replied which had a mistake by
putting £155,000 (pounds) rather than $150,000 (dollars) which is valued at a lot more money.
The court concluded that if you are taking an objective approach, a reasonable person would
conclude that the price be assessed objectively.
• Moran v University College Salford (No 2) The Times, 23rd Nov 1993 - The university
accidentally o ered an unconditional o er to Moran, they had intended to reject his
application. Moran had accepted this o er. The court determined that they had entered a
contract. An objective assessment says an o er has been made. “[T]he judicial task is not to
discover the actual intentions of each party; it is to decide what each was reasonably entitled
to conclude from the attitude of the other” – Gloag on Contract (1929)
What is an o er?
- “An intimation, by words or conduct, of a willingness to enter into a legally binding contract,
and which in its terms expressly or impliedly indicates that it is to become binding on the
o eror as soon as it has been accepted by an act, forbearance or return promise on the part
of the person to whom it was addressed.”
- Willingness to enter into a legally binding contract, often shortened to an intention to be bound.
- Capable of become binding as soon as it is accepted, you are able to accept straight away and
thereby agree
ffff ff ff ffff ffffff ffff ff ff ff fl fl ff
, Contract Law - O er and Acceptance
Compare
- “Would you like to buy my car?” - this is not an o er, this is simply an invitation to treat
• If there is no intention to be bound upon acceptance such statements are known as invitations
to treat
- “Blue Ford Focus for sale, 1.8l, 20,000 miles, 2012 reg, £4000 cash or cheque only” - this is
also not an o er but could become an o er because it has the potential of willingness to enter
a legally binding contract, providing it is accepted
Distinguishing o ers and invitations to treat (1)
- Has the “o eror” (the person who has made the o er) made clear all that is needed for the
other to accept? - Have they said something that the o eree can simply say yes too and
agreeing.
• Harvey v Facey [1893] AC 552: concerned a sale of land, one party wanted to buy the land
and said to the other ‘what is the lowest price at which you would sell the land for’. The other
party stated their price. This was claimed to be an o er but the court determined that a
statement of “lowest price” is not an o er.
• Clifton v Palumbo [1944] 2 All ER 497: “I am prepared to o er you…my Lytham estate for
£600,000” – not an o er. This could be understood as an o er because it literally says ‘o er’
but the court determined that this was not an o er. There are two things going on here, simply
using the word ‘o er’ does not make something a contractual o er because o er is used in
everyday language without having meaning AND you don’t want people creating contracts
simply by using special words, instead the court wants people to look at things more rationally
and argue on the basis of what has been done.
• Owen v Tunison 131 Me 42, 158 A 926 (1932): An American case so not binding on the UK
courts. “It would not be possible for me to sell unless I was to receive $16,000 cash”. This is
not an o er as it is not rm/committed enough
Distinguishing o ers and invitations to treat (2)
- Does the language clearly show intention to be bound?
• Gibson v Manchester City Council [1979] 1 WLR 294; Storer v Manchester City Council
[1974] 3 All ER 824: two cases concerned the same facts, Gibson and Storer were council
tenants, at that time Manchester City Council was ran by conservatives and had a policy that
allowed tenants to buy their home. They both entered into negotiations to do this, they both
wanted to buy their homes. The council was initially open to negotiations but then there was a
local election and control of the council changed to labour and decided they no longer wanted
to sell council homes but said they would honour existing contracts. Gibson ended up being
refused his purchase and took it to court, Gibson failed to have his contract enforced and the
court held that he had no contract because the council had used vague language to him when
he made the bid to buy his home. A letter from the council had said ‘we may be prepared to
sell’ - this is not a contractual o er. However, Storer had succeeded because he had received
a letter from the council which said if he signed and returned the agreement I will send you an
agreement on behalf of the corporation. This is an o er because it shows a willingness to be
bound and an immediate acceptance. (“May be prepared to sell…” vs “If you sign the
agreement and return it to me I will send you the Agreement signed on behalf of the
corporation…”)
• Lefkowitz v Great Minneapolis Surplus Store 251 Minn. 188, 86 NW 3d 689 (1957): This
concerted a sale of fur coats from an outlet. A sign was outside the store - “Saturday 9 AM
Sharp/3 Brand New/Fur Coats/Worth $100/First Come/First Served/$1 Each”. Lefkowitz
turned up 9am sharp with $1, he was told by someone behind the counter that they were only
selling the fur coats to females and not men. Lefkowitz sued the Minneapolis Store arguing
that their sign was an o er and he had accepted it and that he should have been entitled to a
$1 fur coat. The court agreed that the language was very clear about the intentions to be
bound.
Distinguishing o ers and invitations to treat (3)
- Would it make commercial sense to construe the “o eror” as having made an o er? (Objective
assessment in operation, looking at it from a reasonable onlooker looking at what would make
commercial sense
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