"An offer is an expression of willingness to contract on specified terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed."
How to determine offer and invitation to treat? It depends
on the intention of the parties. For there to be a valid offer, the offeror
must reveal his or her intention to contract with the offeree, allowing no room
for negotiation. An offer contains final and conclusive terms, thus a
discussion on the term of the contract is an invitation to treat.
- In Gibson v Manchester City Council (1979), the question posted to the House of Lords was whether the Council’s letter constituted a valid offer. In the Council’s letter, it was mentioned that, '... refer to your request for details of the cost of buying your Council house. The Corporation may be prepared to sell the house to you at the purchase price of £2,180…” The House of Lords held that the council’s letter was not an offer. The words “may be prepared to sell” were not strong enough to constitute an offer. A valid contract only exists when there is a clear offer mirrored by a clear acceptance. In other words, a valid offer shall express the offeror’s intention to create a legally binding contract, and a contract would thereby be concluded if the offeree replied ‘yes’.
- In Storer v Manchester City Council (1974), the Council sent the plaintiff a document titled ‘Agreement of Sale’ and a letter which stated, “If you will sign the Agreement and return it, I will send you the Agreement signed on behalf of the council in exchange.” Plaintiff signed and returned the ‘Agreement of Sale’. Subsequently the Labour party took control of the council and did not return a signed copy and refused to sell the property. Plaintiff sued for breach of contract. The Court of Appeal found that there was a binding contract. The council had sent the plaintiff a clean and certain communication, that they intended would, be binding upon his acceptance. All the plaintiff had to do to bind himself to the later was sign the document and return it.
Invitation to treat & Mere inquiry for more information
A mere inquiry for more information, for example asking for
the best price, is an invitation to treat.
- In Harvey v Facey (1893), Harvey sent a Telegram to Facey which stated, "Will you sell us Bumper Hall Pen? Telegraph lowest cash price-answer paid." Facey replied by telegram, "Lowest price for Bumper Hall Pen £900." Harvey then replied, "We agree to buy Bumper Hall Pen for the sum of nine hundred pounds asked by you. Please send us your title deed in order that we may get early possession." The Privy Council held that that there was no contract concluded between the parties. Facey had not directly answered the first question as to whether they would sell and the lowest price stated was merely responding to a request for information not an offer.
Even though the term “offer” has been used, it is not
necessarily that it is a valid offer. As I mentioned above, an offer shall
reveal the offeror’s intention to create a legally binding contract, and a valid
contract would thereby be concluded if the offeree replied ‘yes’.
- In Clifton v Palumbo (1944), the plaintiff and the defendant were negotiating for the sale of an estate. The plaintiff wrote to the defendant, “I… am prepared to offer you… my Lytham estate for £600,000… I also agree that a reasonable and sufficient time shall be granted to you for the examination and consideration of all the data and detail necessary to you for the preparation of the Schedule of Completion.” The Court of Appeal held that this statement is not an offer. Contract involving real property should not containing ‘phrase and expressions of doubtful significance’, the words “I am prepared to offer” showed that the plaintiff has no certainty of intention, despite the expression “offer” has been used by the marker of the statement.
- In Bigg v Boyd Gibbins (1971), the defendant wrote to the plaintiff, “I offer £20,000 to buy your house.” The plaintiff replied, “Your offer of £20,000 would appear to be least a little optimistic. For a quick sale, I would accept £26,000.” The defendant accepted. Subsequently the defendant regretted his decision and did not want to sell his house anymore. It was held that there was a binding contract formed. The word “for a quick sale” indicates urgency to conclude the contract. It could be safety inferred that the defendant had intended to be legally bound once it is accepted and does not want to negotiate any longer.
Battle of the forms – The ‘last shot’ doctrine
In some cases the parties will attempt to contract on
(differing) standard forms. In such instance, there will be ‘battle of forms’
with offers and counter-offers passing to and fro. In theory the party who has
the ‘last shot’ will wins the ‘battle of forms’: Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd (1977)
In Tekdata
Interconnections Ltd v Amphenol Ltd (2009), the Court of Appeal considered
the question of whether there could be circumstances in which a traditional
offer and acceptance analysis could be displaced by reference to the conduct of
the parties over a long-term relationship. The court rejected the question and
confirmed that the ‘last shot’ prevailed unless there was a clear course of
dealing between the parties. The parties who which to maintain long term
relationship should take great care to negotiate whose terms are to apply to a
given commercial transaction. This reason was of both desirable and necessary in
order to promote effective commercial relationships.
Display of Goods
A display of goods in the shop is an invitation to treat. An
offer is made when the customer takes the goods to the cashier. The cashier
then accepts the offer.
- In Pharmaceutical Society of Great Britain v Boots Cash Chemist (1953), Boots Cash Chemists had just instituted a new method for its customers to buy certain medicines. The company would let shoppers pick drugs off the shelves in the chemist and then pay for them at the till. Before then, all medicines were stored behind a counter and an assistant had to get what was requested. The Pharmaceutical Society of Great Britain objected and argued that under the Pharmacy and Poisons Act 1933, that was an unlawful practice. Under section 18(1), a pharmacist needed to supervise at the point where "the sale is effected" when the product was one listed on the 1933 Act's schedule of poisons. It was held that the goods on the shelf constitute an invitation of treat and not an offer.
- In Fisher v Bell (1961), the defendant had a flick knife displayed in his shop window with a price tag on it. Statute made it a criminal offence to 'offer' such flick knives for sale. His conviction was quashed as goods on display in shops are not 'offers' in the technical sense but an invitation to treat.
In Grainger v Son and
Gough (1896), Lord Hershell
commented that (obiter dictum) price-list would not be considered as an offer,
if the supplier could not fulfill the orders. On the contrary, the price-list
could amount to an offer, if they are specified price, specified description
and its supply to specific people. Of cause, the supplier must have the ability
to make loads as soon as possible.
Advertisement
A distinction must be made between bilateral advertisement
and unilateral advertisement.
In Partridge v
Crittenden, the defendant placed an advert which stated “Bramble finch
cocks and hens, 25s each.” He was charged under the provisions of the Protection of Birds Act 1954 for
unlawfully offering for selling wild life bird.
His conviction was quashed. The advertisement was held to be an
invitation to treat and not an offer for sale. Lord Parker CJ expands the obiter dictum of Grainger v Son and Gough (1896) and suggest that, if the seller is
the manufacturer , then perhaps this justification for the rule does not apply
(as manufacturer could potentially make loads).
In Carlill v Carbolic
Smoke Ball Company (1892), the Carbolic Smoke Ball Company published advertisements,
claiming that it would pay £100 to anyone who caught influenza after using its
product according to the instructions. A newspaper advert placed by Carbolic
Smoke Ball Company stated: “£100 reward will be paid by the Carbolic Smoke Ball
Company to any person who contracts the influenza after having used the ball
three times daily for two weeks according to the printed directions supplied
with each ball… £1000 is deposited with the Alliance Bank, shewing our
sincerity in the matter.” Mrs. Carlill raised the following arguments to
demonstrate the advertisement was a mere invitation to treat rather than an
offer. The Court of Appeal held that Mrs. Carlill was entitled to the reward
for the following reasons:- The advertisement was not a mere puff because the act that they deposited £1000 in the Alliance Bank was proof of their sincerity to pay.
- A promise is binding even if it was not made to anyone in particular. This unilateral offer has been made to the whole world and will ripen into a contract with anybody who comes forward and performs the conditions. In unilateral contracts, there is no requirement that offeree communicates an intention to accept, since the acceptance is through full performance.
- There was consideration in this case for two reasons. Firstly, Carbolic Smoke Ball Company received a benefit through the sales made by their advertisement. Secondly, the people using the smoke ball according to the directions as indicated by the company have suffered inconvenience and detriment. Performance of the specified constitutes consideration for the promise.
- The defendant argued that the terms are too vague to constitute an offer since there was no stated time limit, as to catching the flu. A person might claim they contracted influenza 10 years after using the smoke ball. This argument has failed because if you use the remedy for two weeks, you shall not be contact the flu within a reasonable time after that.
Auction
In an auction, the bid made by the bidder is the offer,
acceptance takes place when then auctioneer signifies his acceptance by the
customary fall of the hammer.
- In Payne v Cave (1789), in an auction of a worm tub, the defendant bided £40. He then asked the auctioneer if it was worth that price, to which he received a negative answer. The defendant then changed his mind and withdrew his bid before the auctioneer bought down his hammer. The tub was auctioned off the next day to D for £30. P tried to recover the difference. It was held that the contract is formed at the end of the auction, when the hammer strikes.
- In Harris v Nickerson (1873), Nickerson advertised in the London newspapers that a public auction of certain goods and office fittings would take place in Bury St Edmunds on 14 August 1872. On the faith of the advertisement Harris attended the auction and 'was ready to purchase in pursuance of such request and public notification' but Nickerson 'suddenly and without notice withdrew the goods and office fittings from the sale'. Harris sued for £2 16s 6d (two days' lost time, railway fare and two days' board and lodging). It was held that an advertisement for an auction is merely an invitation to treat.
In McManus v
Fortescue (1907), it was held that if goods are put for sale “with a
reserve price” and the auctioneer accepts a bid that is lower than the reserve
price, then there is no contract has been formed.
The auctioneer is bound to accept the highest bidder’s
offer.
- In Warlow v Harrison (1895) the defendant, who was an auctioneer, advertised that ‘The three following horses, the property of a gentlemen, without reserve.’ P attended the auction and bid 60G. The owner of the house, Mr. Henderson attended the auction too and bid 61G. The plaintiff knew that it was the house owner who bid 61G, so he did not bother bidding any higher. The defendant knocked down the hammer 3 times to the horse owner.
- The courts has now accepted the obiter dicta of Martin B in this case in the future case, in which it was stated that the auctioneer is liable personally to the highest bidder under a separate and distinct contract. There is an implied undertaking to accept the highest bid. This means that an offer is made by the auctioneer that the sale will be without reserve. The highest bidder than accepts this offer.
Tenders
An advertisement to tender is an invitation to treat. An
offer is made when the offeror submit the tender, and it is up to the offeree
to accept or refuse the offer. Unlike auction, there is no legal obligation to
accept the highest tender.
- In Spencer v Harding (1870), the defendant advertised, 'We are instructed to offer to the wholesale trade for sale by tender’. The advertisement specified where the goods could be viewed, the time of opening for tenders and that the goods must be paid for in cash. No reserve was stated. The plaintiff has submitted the highest tender but the defendant refused to sell to him. The advertisement was held to be an invitation to treat, the tender was an offer, and the defendant could choose whether to accept the offer or not. There was no obligation to sell to the person submitting the highest tender unless the advertisement specifies that the highest tender would be accepted.
A referential bid is not a valid offer.
- In Harvela Investments Ltd v Royal Trust of Canada (1896), the Royal Trust of Canada owned shares in a company, and invited bids for them. Harvela bid $2,175,000 and Sir Leonard Outerbridge bid "$2,100,000 or $101,000 in excess of any other offer… expressed as a fixed monetary amount, whichever is higher." The Royal Trust accepted Sir Leonard's bid as being $2,276,000. Harvela sued for breach of contract, saying a referential bid was invalid. The House of Lords held that the referential bid were invalid, so that the only bid was Harvela and Royal Trust of Canada was bound to accept it. It must be noted that before the bid began, Royal Trust of Canada telexed Harvela and Sir Leonard Outerbridge inviting tenders and stating, ‘We confirm that if the offer made by you is the highest offer received by us we bind ourselves to accept such offer providing that such offer complies with the terms of this telex.’ Royal Trust of Canada’s specification that it binds itself to accept the highest bid meant that the invitation to submit tenders amounted to an offer. By submitting the highest bid, Harvela accepted the offer and a unilateral offer was formed. By the way, Sir Leonard Outerbridge’s referential bid was deemed invalid because the specification of the intention, to submit tenders implied no referential bids.
There is an obligation to consider all tenders.
- In Blackpool & Fylde Aero Club v Blackpool Borough Council (1990), the defendant has invited tenders to operate flights. It was submitted that the tenders had to be submitted no later than noon on 17 March 1983. The plaintiff posted tender in Town Hall letter box at 11am on 17 March 1983, letter box was due to be collected at noon but in fact it was not. The defendant did not consider the plaintiff's tender because it was wrongly recorded as a late submission. The Court of Appeal held that the council’s invitation to tender was a unilateral offer to consider all tenders which fell within its rules. The tender constituted an offer which had been accepted by the Aero Club. The offer was accepted by any party who put in a tender. Thus the council was obliged to consider all tenders, including the Aero Club tender’s. However there is no legal obligation to accept any particular tender.
---------------------- THE WALLY EFFECT http://thewallyeffect.blogspot.com/ ----------------------
Communication of the offer
An offer must be communicated to the offeree to be capable
of acceptance.
- In R v Clarke (1927), the plaintiff wanted to compel the Crown to pay a reward it had offered for information leading to the conviction of a murderer. It was submitted that he was “first decided to claim the award a few days after the appeal had been dealt with” and “gave no consideration and no intention with regard to the reward.” The Crown held that no contract was formed between him and the Crown. It was uncertain whether the claimant was thinking about the reward at the time he provided the information.
- In Gibbons v Proctor (1891), a police officer supplied the information for which a reward had been offered. He was unaware of the offer at the time that he gave the information but he had become aware of the offer by the time the information was relayed to the police. It was held that the police officer was entitled to claim the reward.
In Tinn v Hoffman
(1873), there were negotiations as to the quality and price of iron, letters crossed
in the past. The plaintiff wrote to the defendant asking for a price on 800
tons of iron. The defendant has offered the iron at 69s per ton and asked for a
reply “by return”. It was conceded that since the offer was not at in fact
accepted by return of post, there was no contract but Honeyman J said (obiter dicta) that a telegram or verbal massage
or other means at least as a letter written by return of post would have been
sufficient. Further, there would be no contract if letters cross in the post
because there is no identifiable offer and acceptance. Cross-offer doesn’t
constituted acceptance.
In Williams v
Carwardine (1833), the plaintiff knew of the offer of a reward in exchange
for information, but her motive was to salve her conscience and she was in
hopes of forgiveness. It was held that she was entitled to recover the award
since she had clearly performed the terms of the offer (giving information that
lead to the conviction of the murderer) and handbill, which she must have been
known of given that is was posted and promised to give money for that
information. As a result, a contract was formed with any person who performed
the condition, without considering the motivations of the individual.
Termination of an offer
Termination of an offer - Revocation of an offer
According to Offord v
Davies (1862), an offer can be revoked or terminated by the offeror at any
time before it has been accepted. It must be done before the communication of
acceptance. There is no legal commitment until a contract has been formed,
either party may change their mind and withdraw from negotiations.
In Byrne & Co v
Leon Van Tienhoven & Co (1880), the defendant posted a letter on 1
October, to the plaintiff offering to sell 1000 boxes of timplates. This offer
was only received by P on 11 October, who sent an acceptance immediately. The
defendant sent a letter on 8 October to revoke his offer. The letter containing
the revocation reached the plaintiff on 20 October. It was held that there was
a binding contract and the revocation is ineffective. It only took effect on 20
October in which, by the time, a contract had already been concluded. It should
be noted that postal rule does not apply to revocation of offer.
An offer cannot be revoked once it is accepted: Great Northern Railway v Witham (1873)
In Dickinson v Dodds
(1876), the defendant on 10 June offered to sell to the plaintiff a house for
£800. It was further provided in the offer letter that the offer is to be left
open until Friday. However, on Thursday, the defendant sold the house to a
third party and the plaintiff was told of this sale by another third party. The
plaintiff sent an acceptance to the defendant on Friday. It was held that
communication of the withdrawal of the offer can be made by any reliable third
party.
It shall be noted that the principle is not to be applied
too mechanically. It has been suggested that whether the communication of a
revocation of an offer by a third party is effective or not depends on the
reliability of the information relayed by the third party. Therefore, regard
must be had of the credibility of the third party informer.
For revocation of unilateral offer, English law provides no
answer to this question.
- In the American case Shuey v United States (1875), it was stated that to revoke a unilateral offer, it must be done in the same or better way as the declaration of the offer. It was suggested to use the same or better mode of communication to revoke and target the same group of renders of the offer.
- But this does not apply in unilateral offers where acceptance requires full performance. In the case of Errington v Errington and Wood (1952), the Court of Appeal held that the personal representatives of the offeror could not revoke the offer, as the offeree had started upon the performance of the act, and that provided that they had not left the performance “incomplete and unperformed”, the revocation of the offer was not possible.
Termination of an offer - Counter-offer
If the offeree rejects an offer or made a counter-offer, the
original offer is terminated: Hyde v
Wrench (1840)
Termination of an offer - Unfulfilled condition
Where the offer is made subject to a condition which is not fulfilled,
the offer terminates. The condition may be implied.
In Financings Ltd v
Stimson (1962), the offeror purported to accept an offer to purchase a car
after the car had been badly damaged. An offer will lapse where it is made on
an unfulfilled condition.
Termination of an offer - Death
In Bradbury v Morgan
(1862), it was held that the deceased offeror’s estate was liable on the offer
of a guarantee after the death of the offeror. Channel B commented that, “In this case of a contract death does
not in general operate as revocation, but only in exceptional cases, and this
is not within them.”
However in Dickinson
v Dodds (1876), it was mentioned that (obiter
dicta) the death of either party terminated the offer because there could
no agreement.
Professor Ewan
McKendrick suggested that an offeree cannot accept an offer once he knows
that the offeror has died but that his acceptance may be valid if it is made in
ignorance of the fact that the offeror has died, provided that the contract is
not one fir the performance of personal services.
There is no authority on the position where it is the
offeree who dies. The generally accepted view is that on the offeree’s death,
the offer comes to an end by operation of law.
Termination of an offer - Lapse of time
In Ramsgate Victoria Hotel v Montefoire (1866), an offer will terminate after a reasonable lapse of time. What amounts to a reasonable period will depend on the circumstances.
---------------------- THE WALLY EFFECT http://thewallyeffect.blogspot.com/ ----------------------
Feel free to comment if you find any mistakes, or if you have anything to share.
Please read the disclaimer (at the top of the page) before proceeding.
Please do not take this note as the sole and only sources to study. It is only a guidance which may assist you in drawing out the full picture of the particular area of law. It is never meant to be a comprehensive text.
Feel free to comment if you find any mistakes, or if you have anything to share.
COPYRIGHTS © 2017 WALLACE LEE CHING YANG. ALL RIGHTS RESERVED.
