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offer is an expression, words or conduct, of a willingness to be bound specified terms as soon as there is acceptance the person to whom the offer is EG Chitty on Contracts (32nd ed., 2015), cited Blue v Ashley (below), para. Intention to be bound is called There must be sufficient certainty of term...

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“An offer is an expression, by words or conduct, of a willingness to be bound by specified terms as soon as there is acceptance by the person to whom the offer is made”: EG Chitty on Contracts (32nd ed., 2015), cited Blue v Ashley (below), para.52. Intention to be bound is called “contractual intention”. There must be sufficient certainty of terms and the discussion/communication must show an intention to be bound by the terms of the offer. Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256, Court of Appeal  CSBC issued an advert for its Smoke Ball.  It promised that if anyone bought the smoke ball and used it 3x a day for two weeks, as directed, and they still caught the flu, then the Company would pay them £100.  The advert also stated that, in order to show its sincerity, the Company had deposited £1,000 with the Alliance Bank, Regent Street.  Mrs Carlill bought a Smoke Ball, used it in accordance with directions, and caught flu.  The Company argued that the advert did not show sufficiently serious intent to be bound by the statement and could not be taken to be an offer at all.  Court of Appeal held: Although this advert in different facts might just be seen as advertising blurb, this particular one demonstrated a serious intention to be bound.  Therefore, the statement made in the advert was a binding promise as soon as Mrs Carlill followed instructions. REASONING:  The contractual intention was found in the fact that the terms of the offer were clear and very specific (if Mrs C used the smoke ball as directed and still caught flu whilst she was using it, then she could claim £100 – no ambiguity there).  It showed serious contractual intent when the company said they had deposited the money with their bank to be used for the “reward”.  

Adverts in magazines etc not normally interpreted as contractual offers. Note the difference between bilateral and unilateral contracts.

Harvey v Facey [1893] AC 552 PC A series of telegrams between the parties had given rise to a dispute as to whether there was a contract for Facey to sell land (Bumper Hall Pen) to Harvey.

Requesting information only

HARVEY: “Will you sell us Bumper Hall Pen? Telegraph lowest cash price”.

Only a response to request – no details, or terms, or intent to be bound to sell.

FACEY: “Lowest price… £900”.

Because there was no offer, this could not be HARVEY: Replied “agreeing” to buy Bumper Hall Pen. an acceptance.

Facey had not made an offer here that showed a serious intention to be bound to sell the land to H for £900. He was only responding to a request for further information. Therefore, because Facey had made no offer, Harvey’s final response “agreeing” to buy could not be a legal acceptance. There was not legal offer for him to accept. No offer and acceptance = NO CONTRACT. BTW: If any offer had been made, it was Harvey’s final communication saying that he would buy the land for £900. But because there were no further communications between the parties, it had not been “accepted”. Blue v Ashley [2017] EWHC 1928  Mr Blue was a specialist in investment banking and corporate finance.  Mr Blue suggested it would be a good idea for Mr Ashley to meet a couple of other specialists, with the aim of persuading them to work on behalf of Sports Direct.  After a good deal of drinking, the parties discussed Sports Direct’s share price and the price it might reach. The current share price was £4.  Then followed jokey banter about what incentive Mr Blue should be paid, along the following lines: Ashley – If the shares go up to £8, I’ll be so wealthy it won’t matter – how about £10million? Others – should really be £20million; Ashley: let’s split the difference and call it £15million if price gets to £8 in the next three years.  Not a serious conversation, but Mr Blue took it seriously.  Leggatt J held that there was no contract: Mr Ashley was not required to make the £15million payment. Mr Blue’s claim failed on the point of contractual intention. Before an offer and the agreement resulting from acceptance can amount to a valid contract, the parties must intent to create legally enforceable rights.  The purpose of the occasion was not for Mr Ashley to make a contract with Mr Blue, but to meet the others.

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The terms were too vague and did not specify what Mr Blue had to do in terms of work involved and there were no performance measurement standards: How long did the share price have to stay above £8? The amount of £15million was fixed arbitrarily and casually – no business person could be expected to act this way. It was obviously a joke. There was no commercial sense to the offer – far too high for the work involved. Mr Blue could not be expected to bring about such a change in the share price. A reasonable business person would have confirmed the arrangement, e.g. in writing.1

A communication might be an invitation to treat which is something not definite enough to be an offer but only an opening gambit in negotiations or willingness to receive offers. An invitation to treat is not an offer so it cannot be ‘accepted’. The law generally presumes that a statement made in an advert is an invitation to treat. This presumption can be dislodged if there is sufficient indication that it is an offer, as in the Carbolic Smoke Ball Case. Partridge v Crittenden [1968] 1 WLR 1204:  Advert in magazine for sale of birds: Held to be an invitation to treat.  In theory, had it been construed as an offer, there could have been large numbers of people “accepting”: i.e. it would have been commercially unworkable. Lefkowitz v Great Minneapolis Surplus Store Inc. (1957) 251 Minn. 188, 86 N.W.2d 689 (Supreme Court of Minnesota)  Advert: “3 fur coats for $1 each: first come – first served”.  This was an offer. The terms were certain and potential acceptances (i.e. contracts) were limited to the first three customers. These are different as partridge could’ve had several buyers as there was no number however in Lefkowitz after the first 3 sales the offer would’ve died. Responses to an offer 1) Rejection: An offer is dead if it is rejected. It can no longer be accepted.   

EXAMPLE: A-B: “I offer to sell you my car for £1,000.” B-A: “No thank you”. The offer is now DEAD and cannot be accepted by B saying “actually… I’ve changed my mind”.

2) Counter-offer: The offeree changes the terms of the offer and bounces it back for the offeror to accept. Taylor, p.29: “The offeree changes the terms of the offer and bounces it back for the offeror to accept.” Hyde v Wrench (1840) 3 Beav 334; 49 ER 132  W offered to sell his farm to H for £1,000.  H responded to this offer by offering to pay £950. 1

The question was whether this counter-offer rejected the original offer, i.e. could the offeree still “have his cake and eat it” – make a counter-offer but still reserve his ability to accept the original offer? (Taylor).  HELD: A counter-offer kills the original offer and it cannot later be accepted. A counter-offer should be distinguished from a mere request for information, which does not kill the original offer. The offeree can still accept it. 

3) Acceptance: Once there is an acceptance of an offer there is a contract. It is an absolute, unconditional and unequivocal assent to the terms of the offer. Acceptance must be a mirror image of the offer. Butler Machine Tool Co. Ltd. v Ex-Cell-O Corporation [1979] 1 WLR 401  Seller: offered to sell a machine tool, on their standard terms and conditions (which included a price variation clause).  Buyer: said they accepted on their standard terms and conditions (which did not contain a price variation clause).  The buyers sent a form with their Terms and Conditions, which included a tear-off slip for the sellers to return which stated “we accept the buyer’s order on their Terms and Conditions”.  Seller returned the tear-off slip.  HELD: The majority held that the seller made an offer; the buyers: a counter-offer. The seller’s accepted this by returning the tear-off slip. 4) Communication of the acceptance  In order to make a binding contract it is necessary for acceptance to be notified to the offeror: Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256, per Lindley LJ. (Although exceptionally the offeror may waive the notification requirement.) The courts have developed rules to determine whether an acceptance has been communicated. This depends on the mode of communication used: 1. Instantaneous communication - Acceptance occurs at the point it is received by the offeror. 2. Non-instantaneous communication - The postal rule: Acceptance is communicated at the point of posting the letter. The offeror does not have to receive the letter or read it: Adams v Lindsell (1818) 106 ER 250. 1) Instantaneous communication Entores Ltd. v Miles Far East Corporation [1955] 2 QB 327  RULE: Communication of acceptance takes place at the time it is received.  In face-to-face situations, it will usually be clear if the offeror has received the acceptance.  If it was the offeror’s fault that he did not hear the words of the acceptance, and the offeree reasonably believed that he did, then acceptance is communicated.

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What about electronic communications? Denning LJ said that generally acceptance is communicated when the telex or fax etc is received at the other end. This is now also thought to apply to emails. If the line goes dead or the offeree gets an error message, the offeree will know the message has not got through and will have to send it again.

The Brimnes (1975) Acceptance sent by telex and printed out on D’s machine at 5.45pm. HELD: Acceptance communicated effectively at 5.45pm. It was D’s fault that they left the office early without checking the machine. Thomas v BPE Solicitors (a firm) (2010) (obiter):  The email was received in the inbox at 6pm.  This was still within working hours.  The email was an effective communication of acceptance even though it had not been read.  The contract failed for other reasons. 2) Non-instantaneous communication  Acceptance is still made, even when the post is delayed or the letter lost: Household Fire & Carriage Accident Insurance Co. Ltd. v Grant (1879) LR 4 Ex D 216, CA, unless the delay or loss is due to the offeree’s fault.  The offeror may exclude the postal acceptance rule and require acceptance to be notified:  Holwell Securities Ltd. v Hughes [1974] 1 WLR 155. Offer stated: Accept by “notice in writing” (implied they wanted to be notified). 2  The postal rule will not apply where it would lead to “manifest inconvenience or absurdity”: Holwell Securities Ltd. v Hughes (above). As Lord Wilberforce’s comments in Brinkibon Ltd. v Stahag Stahl und Stahl gmbh [1983] 2 AC 34  “No universal rule can cover all such cases: they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie.” 5) The mode of acceptance: The offeror can stipulate the method of acceptance (‘please reply to my email’) Acceptance by conduct: Brogden v Metropolitan Railway Co. (1877) LR 2 App Cas 666, House of Lords.  No formal acceptance of offer for sale of coal.  However, the coal was ordered and delivered in accordance with the terms of the agreement. So acceptance was implied by this course of conduct of the parties. Acceptance by silence? Felthouse v Bindley (1862) 142 ER 1037: An offeror cannot impose a contract by saying that silence is acceptance. Re Selectmove Ltd [1995] 1 WLR 474  Silence may exceptionally amount to an acceptance where there is an agreement to that effect or established practice between the parties. 2

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The Court of Appeal thought that it may be possible for an offeree to use silence, e.g. if you don’t hear from me by Friday assume that I accept.”

Death of an offer 1) Revocation: When an offer is made, can the offeror withdraw the offer? Dickinson v Dodds (1876) LR 2 Ch.D 463: Deals with a lot of points on revocation  An offer can be revoked at any time before it has been accepted.  This means that no contract is entered into (should an attempted acceptance follow).  If an offeror attempts to revoke an offer after it has been accepted, the revocation is ineffective. A contract has already come into being and it is too late.  BUT: Like acceptance, revocation must be communicated: A revocation can be communicated via a third party.  In this case, the offeree found out through a third party that the property they had been offered had been sold.  This was held to be an effective communication of revocation of the offer.  What if there is a promise to keep the offer open, e.g. “until Friday”? Can an offer be revoked before Friday despite such a promise?  Yes it can: A promise to keep an offer open is not enforceable in the absence of a deed (a specific formal document) or consideration (something for value given in return for the promise). NB: The postal rule: does not apply to revocation of an offer: Henthorn v Fraser [1892] 2 Ch.27. 2) Time lapse: If an offer prescribes a time limit for acceptance, the offer lapses if not accepted by the time stipulated. If there is no set time limit, offer lapses after a reasonable time: Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109. 3) An offer comes to an end when it is rejected. Bilateral contract: This is what we have been looking at so far. Both parties are identified as taking on an obligation, usually by promising the other party something. Such as the person selling the product is obligated to hand it over and the person buying it is obligated to pay for it. Unilateral contract: A term we have not encountered yet. The “one-sided” element is that only one party has to perform an obligation. Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256, Court of Appeal  Mrs Carlill made no promise to use the smoke ball as directed and was under no obligation to do so.  But as soon as she had done so, and when she caught the flu, the company became obligated to make the payment (because she had fulfilled the conditions they specified in their advert).

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Note that Mrs Carlill did not have to communicate her “acceptance” in the ordinary way. The company were taken as having “waived” this requirement.

Meeting of the minds: Consensus ad idem When making an offer and an acceptance, we have already seen that there must be contractual intention: Blue v Ashley. There must also be a “meeting of the minds” (consensus ad idem). The parties must be agreeing to the same thing. Not usually an issue, but as Taylor & Taylor puts it (pp.18-19) there may be “confusion between what a party meant and what [they] actually said”. Smith v Hughes (1871) LR 6 QB 597        

Seller was negotiating for sale of oats with buyer (who was a racehorse trainer and wanted oats for his horses). Seller gave a sample of the oats to the buyer The oats in the sample were “new oats” (cheaper). However, the buyer didn’t look at the sample and made the assumption that the oats he was buying were “old oats” (much tastier for horses apparently!) There was agreement on the price and the oats were delivered. The buyer refused to pay because he said he was contracting to buy old oats. The seller wanted to get the contract price on the basis that the contract was for new oats. If the law held that there was a contract, the buyer would have to pay.

The objective test: Would the reasonable observer, on the basis of external appearances, think that the buyer had agreed to the seller’s terms? APPLICATION: A sample of the oats had been given by the seller and the buyer agreed to purchase the oats after having had the sample for two days.

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The reasonable person who observed this would conclude that the agreement had been for new oats. Therefore, a contract would be upheld. OBJECTIVE TEST APPLIED: Centrovincial Estates plc v Merchant Investors Assurance Co. Ltd. [1983] Com LR 158 The seller of a commercial lease mistakenly entered a significantly lower figure on the contract for the rent. Figure entered was £65,000/ intended rent was £126,000. The buyer (tenant) accepted. The landlord/seller then tried to get out of the contract. The court applied the objective test: Therefore, it would not look at what the parties actually intended, but what the external appearances suggested to the reasonable bystander. If the buyers could not reasonably have known that this was a mistake, the sellers would be held bound by the agreement to sell the lease at £65,000. There was no evidence that the buyers were aware, or ought reasonable to have been aware, that this was a mistake. There will generally not be an agreement where:

1. One party is aware (or ought to have been aware) that the other party has made a mistake: Hartog v Colin and Shields [1939] 3 All ER 566. 2. The seller causes the buyer to make a mistake: Scriven Brothers & Co v Hindley & Co [1913] 3 KB 564. No: is it an invitation to treat? Is the statement an offer? (Apply definition etc)

YES: What is the response to the offer: an acceptance, counter-offer, or request for information? Apply the mirror image rule.

Yes: Has there been an offer made in response to it? Apply definition etc.

If you have concluded that the offeree’s statement is an acceptance, has this acceptance been communicated?

INSTANTANEOUS COMMUNICATION Communicated when received by offeror: Entores Ltd v Miles Far East Corporation [1955] 2 QB 327. The offeree reasonably believes the acceptance has been received/ it was the offeror’s fault that it was not. The Brimnes [1975] QB 929: Offerors left the office early.

NON-INSTANTANEOUS COMMUNICATION Postal rule: Acceptance communicated when letter is posted. Adams v Lindsell (1818) 1 B & Ald 681 The postal rule may not apply:  

If the offeror has expressly or impliedly excluded it. If it would lead to “manifest inconvenience or absurdity”: Holwell Securities v Hughes [1974].

Has the offer been revoked before acceptance was communicated? 

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Can be revoked even if there is a promise to keep the offer open (unless there is consideration for the promise). Revocation must be communicated, but can be by a third party: Dickinson v Dodds (1876) LR 2 Ch D 463.

i) The Policies of Contract Law A number of fundamental principles underpin the law of contract. These are not legal rules. They are often seen to be objectives of the law, i.e. the law should be developed in such a way as to facilitate these aims. Sanctity of contract (pacta sunt servanda): English law is generally reluctant to excuse non-performance of a contract.

Freedom of contract: People are generally free to choose whether and with whom to make a contract. Contracting parties are generally free to agree on the terms they want. The courts consider the principle of freedom of contract to be very important.

Protection of vulnerable parties: It is important that the institute of contract is not abused to the detriment of one of the contracting parties, for example, the party in the stronger bargaining position may seek to impose an unfair term such as an exceptionally broad exemption clause.

Certainty in commercial transactions: It is important that the rules that tell us when a contract comes into existence and what terms apply to it, are certain, clear and predictable in advance. Transactions within the commercial world must be reliable. Business people need to be able to organise their affairs on the basis of a law that is not constantly changing at the whim of the judge.

A contract is an arrangement that creates obligations that can give rise to an action for breach of contract. Therefore, there must be an intention to create legal relations. Lecture Case Study 1 Deborah, has recently renovated an old stately manor house, for her business – which is to put on national events. Deborah’s sister Janice is quite a good garde...