Definition
- An offer must be made to someone - it may be made to any number of people, even the whole world:
Carlill v Carbolic Smoke Ball Co (1893).
Principle: A contract is a legally binding agreement containing:
1. an offer;
2. an acceptance;
3. a consideration;
4. an intention to create legal relations.
Facts: The makers of the Carbolic smoke Ball advertised a £100 reward for any person who having used the carbolic smoke ball nevertheless suffered form influenza. The had deposited a £1,000 with their bankers on the strength of the offer. Mrs Carlill used the product and caught influenza and claimed the £100.
Held: She was successful. The advertisement was an offer even though it was to the whole world. The offer was unilateral which meant that the acceptance of the offer was by the performance and Mrs Carlill did not have to inform the Co in advance. The consideration was the use of the product and the catching of influenza. The intention was shown in the deposit.
- The person who makes the offer (the offeror) must be ready to undertake certain identifiable obligations.
- The person who receives the offer (the offeree) must be able to accept of reject it.
Invitation to treat
Offers must be distinguished from invitations to treat which are merely preliminary negotiation. An offer begins a process which if accepted could be legally binding. Invitations to treat are never binding even if the are "accepted".
Offers and invitations to treat cannot adequately be distinguished by definitions alone and therefore cases are used to illustrate the difference between them.
Tenders
- An advertisement for a tender is an invitation to treat.
- A tender for specific goods or services is an offer and when the person requesting the tender accepts, it is a biding acceptance.
- If the tender for a request is not specific but requests a price for the supply of goods over a period of time to be delivered as and when ordered then the tender is known as a standing offer and the initial acceptance of the tender is not a legally binding one. The legally biding acceptance is not made until the first order. The supplier is then obliged to honour the obligations under the contract and supply the goods under the terms of the tender. Each order is an acceptance of the standing offer and is a mini contract. However a standing offer may be withdrawn at any time either before the first order or after any subsequent order and before the next order is received. The standing offer stands until it is withdrawn.
Display of Goods
- A display of goods in a shop window is an invitation to treat not an offer.
- The customer makes an offer to the shopkeeper who may accept of reject:
Fisher v Bell (1961).
Facts: An ejector knife was displayed in shop window. The shop keeper was charged with the crime of offering for sale.
Held: he was acquitted since the display was an invitation to treat and the charge had to be specific.
- A display of goods in a self service shelf is an invitation to treat not an offer.
- The customer makes the offer to the cashier who may accept of reject:
The Pharmaceutical Society of Great Britain v Boots (1952).
Facts: Certain drugs could only be sold under the supervision of a pharmacist who in the self service store was at the cash desk. The question was whether the sale took place at the shelf with the display being an offer and the customer accepting by taking the product off the shelf or at the cash desk with the customer making the offer which the pharmacist could accept or reject.
Held: the sale was at the cash desk and therefore there was no contravention of the drugs law.
Advertisements
- These are usually invitations to treat.
- The offer is made by answering the advertisement and is accepted or rejected by the advertiser:
Partridge v Crittenden (1968).
Facts: It is an offence to offer for sale wild birds. T saw an advertisement put in by P for a wild bird in "Cage and Aviary Birds". T sent for the bird and was sent one. P was charged with the offence of offering for sale a wild bird.
Held: He was acquitted as the advertisement was only an invitation to treat and the charge has to be precise.
- An advertisement may be an offer if it is very clear as in Carlill v Carbolic Smoke Ball Co (1893)
Auctions
- An auctioneer's request for bids is an invitation to treat - Payne v Cave.
- The offer is made in the form of a bid which the auctioneer may accept or reject - British Car Auctions v Wright.
- An advertisement for an auction is an invitation to treat - Harris v Nickerson. However it has been held that if the auction is advertised as being without reserve i.e. top the highest bidder whatever the bid then this will make the auctioneer's request for bids similar to an offer in that the auctioneer will be bound to accept the highest bid if the auction is held. Although it appears that there is no compulsion to hold the auction and no legal obligations will be broken if it is not held - Warlow v Harrison (1859).
Negotiations for the Sale of Land
- Offers for the sale of land must be very clear before they will be treated as such as must the acceptance. Land is treated in quite a different manner than goods and the buying and selling of land is treated as a special area of law known as "Conveyancing". Contracts for the sale of land must be in writing under the Law of Property Miscellaneous Provisions Act 1989 see "Formalities". Case law requires clear evidence of intentions:
Harvey v Facey (1893).
Facts: "Will you sell us bumper Hall Pen? Telegraph lowest cash price". "Lowest cash price ...£900." "We agree to buy..."
Held: This was not a contract merely an inquiry as to price.
Clifton v Palumbo (1944).
Facts: "I am prepared to offer you my Lytham estate for £600,000 ... and a reasonable and sufficient time shall be granted for the examination of all the data and details for the preparatio of the Schedule of Completion".
Held: this was not sufficiently clear to be an offer.
- The binding effect of an offer in relation to land may be suspended by the use of the words "subject to contract". This means that the agreement will have no legal effect until there is a formal contract in writing - Chillingworth v Esche(1924). The words "provisional Agreement" do not appear to have the same effect - Branco v Cabarro (1947). Although the phrase subject to contract is applied mainly to contracts for land it would have the same effect in relation to other types of contract as well.
Termination of an Offer
Revocation
- An offer may be revoked at any time before acceptance even if a time limit is specified - Routledge v Grant
- The revocation must be communicated:
Byrne v Van Tienhoven (1880).
Principle: The revocation must be communicated - The communication of a revocation is effective from the time it is received (not from the time it is sent compare acceptance by post).
Facts: On Oct 1st D posted letter to P in New York offering to sell tinplate for £1,000. On Oct 8th they posted a letter revoking the offer. On Oct 11th P received offer letter and telegraphed acceptance which was received the same day (11th). The letter of revocation was not received until Oct 20th.
Held: The letter of revocation was ineffective.
If the offeree knows of the revocation before he or she accepts then it is effective provided it was communicated by a reliable source:
Dickinson v Dodds (1876).
Facts: Dodds offered to sell his house to Dickinson for £800 with offer open until June 12th. On Thursday June 11th Dodds sold the house to Allan. That same evening Berry told Dickinson the house was sold. On 12th Dickinson accepted.
Held: the offer had been revoked by the sle to Allan and Dickinson had heard about the revocation before he communicated acceptance.
The communication of a revocation is effective from the time it is received (not from the time it is sent compare acceptance by post) by the offeree.
- Where an offer is to be accepted by performance of the contract i.e. a unilateral contract, it cannot be revoked if the offeree has already begun to perform but the offeror need not perform his or her part of the contract until the performance is complete.
Counter Offer/Refusal
- An offer must be accepted as it stands. Any alteration by the offeree when he or she purports to accept will be treated as a counter offer. A counter offer acts as a refusal of the original offer and creates a new offer which the original offeror may accept or reject:
Hyde v Wrench (1840).
Facts: W offered to sell his farm for £1,000. H counter offered £950. W refused the counter offer. H then said he would buy the farm for £1,000. W refused.
Held: W was entitled to refuse as the offer of £950 was a rejection of the original offer and the statement that H would buy the farm for £1,000 was a fresh offer. Which W could then reject.
Jones v Daniel (1894).
Facts: D offered to buy J's property for £1,450. J wrote accepting but adding terms to the contract not previously discussed.
Held: The addition of the terms amounted to a counter offer.
Stevenson v Maclean (1880).
Principle: Asking for further information prior to acceptance is not treated as a counter offer.
Facts: D offered to sell iron to P for cash. P asked if they could have 4 months credit.
Held: The request for credit was not a counter offer.
Lapse of Time
- If an offer is open for a fixed time then it cannot be accepted after that time.
- If not time is stated then the offer lapses after a reasonable time. What is a reasonable time depends on the circumstances e.g. the subject matter:
Ramsgate Vicotria Hotel v Montefiore (1866).
Facts: An offer for shares was made and was accepted 6 months later.
Held: The offer had lapsed during the period of 6 months.
Failure of a Condition Subject to Which the Offer was Made
- When goods are purchased it is an implied condition that they will remain in the same condition or state. If the goods do not remain in the same state then the condition is broken and the buyer may refuse the goods (see also terms of a contract and misrepresentation):
Financings v Stimpson (1962)
Facts: C offered to buy a car on hire purchase from P but before the offer was accepted the car was stolen and found later badly damaged. P not knowing this purported to accept.
Held: P could not be held to the acceptance of the offer as the goods were not in substantially the same condition as when the offer was made.
- An offer may be made on condition the goods reach a certain standard, if the goods do not reach that standard then the offer will be automatically withdrawn.
Death
Death of the offeror before acceptance:
- If the performance of the contract is independent of the offeror then the acceptance is effective unless revoked before hand:
Bradbury v Morgan (1862).
Facts: A said he would guarantee certain debts of B. A died and later the creditors required the guarantee to be honoured as B had failed to pay the debts.
Held: A's estate was liable as the offer to honour the debts had not been withdrawn and was independent of A.
- If the performance is personal to the offeror then the offer is automatically terminated.
Death of the offeree before acceptance:
- Presumably the offer would cease to be effective since there would be no one to accept.
- For death of the offeror or offeree after acceptance see "Frustration".
Acceptance
Certainty
A vague term of a contract may spoil it because it is not certain what the acceptor is actually accepting:
Scammell v Ouston (1941).
Facts: O agreed to buy a van from S on hire purchase. However the terms of the agreement were not settled.
Held: the agreement was not binding until the terms were agreed also as hire purchase terms are very wide.
An acceptor must know about the offer to be able t accept. A person who accepts an offer by chance such as returning a lost dog without realising that there was a reward will not be able to enforce it.
Offers may be accepted in writing, orally or by conduct:
Brogden v Metropolitan Rly Co (1877).
Facts: B had sold coal to M for many years. Wicshing to regularise the arrangement M sent B a contract upon which he wrote approved and filed it. Two years later a dispute arose and M wanted it settled by arbitration in accordance with the agreement.
Held: The agreement had been accepted by B by conduct.
Unilateral Contracts
These are where an offeror dos not require to be notified that the acceptor is accepting the offer. The acceptor accepts by performing the contract such as with a reward - Carlill v Carbolic Smoke Ball Co (1893);
R v Clarke (1927).
Principle: An acceptor must have the offer in mind when accepting.
Facts: A financial reward was given for information leading to the arrest and conviction of a murderer. C gave the information but did not have the reward in mind but merely wanted to clear his own name.
Held: He could not claim the financial reward.
Williams v Carwardine
Principle: The reasons for accepting the offer are irrelevant as long as the acceptor has it in mind.
Facts: P gave information leading to the arrest and conviction of a murderer out of remorse for the victim but knew about the reward when she gave the information.
Held: She could claim the reward because she had it in mind.
Communication of Acceptance
Silence
To specify that silence is acceptance will not in fact be construed as acceptance unless the offeree wishes it to be. The reason for this is that the offeror is in the commanding position and may specify how acceptance is to be communicated in response to his or her offer. If he or she could effectively specify that the offeree's silence would be acceptance then the offeree may found him or her bound by an offer because he or she did not have time or opportunity to reject it. Note the Unsolicited Goods and Services Act 1971 as amended in 1975) states that a person may treat goods he or she receives without having requested them as a gift if the sender fails to reclaim them within 6 months. See also Felthouse v Bindley (1862).
Facts: P offered to buy the horse of his nephew, John, for £30.15s saying if he heard no more he would assume th horse was his. John said no more to P. Later he employed B to sell his farm stock and B inadvertently sold the horse as well although John had told him not to.
Held: There was no acceptance by John.
Waiver
The offeror may waive the need to inform him or her of acceptance. The most common examples are unilateral contracts.
Where the offeror Stipulates the Method of Acceptance
The offeror may, when it is made, state that a particular method of communication must be used to accept the offer, in which case that method must be used. The general rule is that acceptance is not complete until it is received by the offeror. The exception to this is waiver and acceptance by post. Note that where acceptance in writing is specified this does not necessarily mean acceptance by post. The courts will look at the intentions of the parties in the event of a dispute.
Where no method of Acceptance is Stipulated
If no method of communication of acceptance is mentioned then any reasonable method may be used. This will usually depend on the method of communication the offer e.g. oral offers will be accepted orally. If the offer indicates some urgency it may be that telephone acceptance may e considered the most reasonable and letter unreasonable.
Acceptance by Post
The general rule that acceptance is not effective until it is communicated to the offeror does not apply to acceptance by post. When acceptance by post is stipulated or reasonable it is effectively communicated when a correctly addressed letter is put into the post box or handed to a person who is authorised to collect mail, even if the letter is never received by the offeror.
- Acceptance by post must be stipulated or reasonable, acceptance in writing does not necessarily mean by post - Henthorn v Fraser (1892); Holwell Securities v Hughes (1974).
Facts: an offer stated that the acceptance must be made in writing. A letter was posted but did not arrive.
Held: There was no acceptance.
- The letter must be correctly addressed.
- The letter must be put into the post box or the hands of someone authorised to collect not deliver mail - Re London and Northern Bank ex Parte Jones (1900).
- The rule applies even if the letter is lost - Household Fire Insurance v Grant (1879).
Reasons for the rule are said to be:
- reliability of the post when the rule was first made:
Adams v Lindsell (1818).
Facts: D offered to buy shares. The Co accepted but the letter of acceptance never reached D.
Held: D was liable to pay for the shares as the offer was accepted as soon as the letter was put in the post.
- the ease of proving posting but the difficulty of proving delivery (recorded delivery now);
- the point of acceptance had to be somewhere and the point of posting seemed as good as anywhere.
Telegrams are similar to letters and an acceptance is effective form the time the message is handed to the post office official authorised to deal with telegrams - Cowan v O'Connor (1888).
Telex and Facsimile (Fax) are seen as being printed telephone messages. Therefore the general rule apples and an acceptance is made when received and read by the offeror - Entores v Miles Far East Corporation (1955).
Consideration
Definition
A valuable consideration may consist either in some right interest profit or benefit accruing to one party or some observance detriment loss of responsibility given suffered or undertaken by the other - Curries v Misa.
Consideration is in two lots with each party suffering both a benefit and a detriment each giving and receiving and thereby creating the agreement.
Most consideration begins as a promise for a promise. At that stage the consideration is said to be executory. As each party performs his or her part of the consideration it is said to be executed. Sometimes there may be a considerable time between the promise and the performance as in the sale of land in other cases the promise and performance may for both parties be simultaneous as in the sale and purchase of goods in a supermarket.
Unilateral contracts are unusual in that instead of both the offer and the acceptance being promises and executory, the promise of the offer is executory consideration but the performance of the acceptance is executed.
Consideration Must Move From the Promisee
This means that only a party to the contract who has given consideration can enforce the contract.
Rules of Consideration
Provided consideration is real and genuine then it need not be adequate. i.e. as long as there is some consideration then the courts will not inquire as to whether the bargain is "fair". However although consideration may be small it must not be a sham ( £1 for a Rolls Royce is a valid bargain if the parties agree):
White v Bluett (1853).
A son's promise not to bore his father was not consideration.
Bainbridge v Firmstone (1838).
Facts: A agreed to reassemble some boilers in return for the right to weigh them.
Held: The reassembly was good consideration.
Chappel v Nestle (1960).
Facts: Chocolate manufacturers sold records for 1s 6d and 3 chocolate wrappers.
Held: The wrappers were part of the consideration.
There are two examples in particular where what appears to be consideration is considered not to amount to consideration and is said to be insufficient.
Acts which a party is already under a duty to carry out
If a person is bound to perform a legal duty then on the grounds of public policy he or she cannot use that duty as consideration. However if a person exceeds his or her public duty then the activity that is in excess may be used as consideration:
Glasbrook Bros v Glamorgan County Council (1925).
Facts: During a miner's strike the police considered a mobile patrol of the mine was satisfactory. The owner's agreed to pay the Police an additional sum for a static guard. When asked to pay they refused saying the police were obliged to protect the mine in any event.
Held: The owner's had to pay. The Police were going beyond their duty.
If a person is under a contractual duty to carry out certain consideration for another person that consideration cannot be used again as consideration for another contract with that other person:
Stilk v Myrick (1809).
Facts: A sailor claimed additional wages which he had been promised for working a ship when two crew had deserted.
Held: He was unsuccessful. He was only fulfilling his existing contract the loss of two crew did not amount to additional work outside the original contract.
Hartley v Ponsonby (1857).
Facts: A sailor claimed additional wages which he had been promised for working a ship when half the crew had deserted or died.
Held: He could claim because he was working beyond his original contract.
Part Payment of a Debt
Consideration for a debt is unusual in that unlike the consideration in relation to other contracts it has a specific value since it is currency (i.e. £5 = £5 but one pen may or may not = another pen unless the parties agree even though they may appear identical). This gives rise to the principle in Pinnel's Case (1602) that party payment of a debt on the due date will not discharge the whole debt. The principle was approved in Foakes v Beer (1884) where it was held that even if a creditor accepted party payment he or she could still sue for the outstanding amount. However if a debtor with the creditor's agreement part pays the debt but also gives something else to make up the short fall or pays the debt entirely by a different mode then the debt will be satisfied.
An exception to the principle that part payment of a debt was developed in the case of Central London Property Trust v High Trees House Ltd (1947). In this case a landlord made a representation to a tenant promising that he would not charge the tenant the whole rent even though it was due. The tenant acted upon this representation. Later the landlord tried to claim the unpaid rent and claimed the principle in Pinnel's Case. The court held that usually the principle would be effective but in the particular circumstances it was felt that it would not be fair. Therefore the court applied equity and stopped the landlord from going back on his promise. This was called the doctrine of equitable promissory estoppel.
The doctrine has been used not only to stop a party to a contract for a loan going back on a promise not to demand the full amount of debt but it has also been used to prevent a party to a contract suing another party to the contract when that other party has failed to comply with the contract having been promised that he or she would not be sued:
Brikom Investments v Carr (1979).
Facts: A lease contained a clause that tenants had to contribute to the repair of the roof. To encourage tenants to sign a new lease at a time when the roof needed repairing the landlord's promised they would not enforce this term when the roof was next repaired.
Held: the landlord's could be kept to this promise.
However to claim the protection of the doctrine a party to the contract has to show:
1. that he or she was promised by the other party to the contract that he or she would not be sued if certain parts of the contract were not complied with even though he or she was obliged to perform the contract and had not given any consideration in return for the promise;
2. the party who made the promise will only be prevented from going back on the promise if:
- it would be inequitable (unfair) to allow him or her to do so;
- the party to whom the promise was made relied upon the promise.
3. the party to whom the promise was made can only use the promise as a defence when he or she is being sued;
4. the party who made the promise will only be prevented form suing for as long as is equitable (fair). This may be forever or in some cases it may just be for a particular part of the contractual period see the High Trees Case and Brikom Investments v Carr.
Past Consideration
An agreement must be one transaction. Consideration is performed after agreement is reached and as a result of that agreement. If some act is performed before an agreement that cannot form the subject matter of a contract since it is in the past in relation to the agreement. Such actions are seen as being gratuitous:
Re McArdle (1951).
Facts: M had made a number of improvements to his mother's home and the other children said after the work was completed that they would pay a contribution. This was never received. M tried to enforce their promise.
Held: He was unsuccessful the work had already been carried out when the promise was made and the work was therefore past consideration.
An exception to this principle is where an agreement is reached although only the consideration by one party is referred to with no mention of the other giving consideration. If after the one party has executed his consideration the other promises consideration then such promise may be enforced:
Lampleigh v Braithwait (1615).
Facts: B asked L to obtain a pardon for him. L did so and B promised to pay L £100.
Held: The promise could be enforced because B had asked L to do the work.
Now since the case of Re Casey's Patents (1892) it would appear that there must be some assumption that both parties will give consideration although the consideration to be given by one party has not been mentioned, note professional fees.
Re Casey's Patents (1892)
Facts: S was employed as a patent manager. C offered to pay S by giving him a third share in the patent.
Held: This was good consideration. S was to be paid and if he agreed this was enforceable.
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