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Formation of contract The English law of contract is largely uncodified, and is derived from common law precedents set down over the years. Equity has played some part, and in recent years European and domestic legislation have contributed, but contract law is still essentially a common law subject. Common law makes no distinction between commercial contracts and consumer contracts: most of the leading cases arose out of contracts between major companies (because they had the money to fight the case to the last appeal, and the value of the contract made it worthwhile for them to do so), but the principles thus established apply to consumer contracts as well. There are some differences: in commercial contracts the most important attribute is certainty, so that the parties can make their arrangements accordingly, but in consumer cases the courts are more willing to stretch the rules where necessary to achieve justice. Thus although the older cases deal very much with formalities, some more recent decisions show a greater emphasis on such concepts as reliance (as seen in the various forms of estoppel), good faith (fundamental to many civil law systems but found only in specific cases in English law) and restitution (based on the equitable notion of unjust enrichment). More generally, cases such as Williams v Roffey [1990] 1 All ER 512 and Atlas v Cafco [1989] 1 All ER 641 show a trend towards the development of underlying principles rather than excessive formalism.

OFFER AND ACCEPTANCE A simple contract (that is, a contract made not under seal) requires:  an offer made by one party and accepted by the other;  valuable consideration given by either side; and  a common intention that the agreement should be legally binding. An offer is made when one party makes it clear, by words or actions that he is prepared to be bound as soon as the offer is accepted by the person to whom it is made. An offer is thus quite different from an invitation to treat, though it is not always easy to distinguish the two. Grainger v Gough [1896] AC 325, HL AA were London agents for a French wine merchant X; they distributed catalogues and accepted orders which they passed on to X, X reserving the right to refuse any order. The case turned on whether X was liable for tax on contracts made by his agents in England. The House of Lords held that the distribution of catalogues was an invitation to treat and that the offer was made by the intending purchaser. This offer was transmitted by AA to X, and the contract was not made until X accepted the offer in France. Gibson v Manchester CC [1979] 1 All ER 972, HL A local council writes to tenants inviting them to apply to purchase their homes. One such tenant P did apply, and a price was agreed. Following a change of party control, the new council DD refused to go ahead with the sale. The House of Lords said there was no binding contract: P had made an offer which DD had not yet accepted. Phrases in the correspondence such as "may be prepared to sell" and "please complete the enclosed application form" were indicative of an invitation to treat. A display of goods in a shop window, or on the shelves of a self-service shop, is generally regarded as an invitation to treat rather than as an offer to sell. Law treats each party to contract equally. When buyer has a right not to buy the goods, the

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seller should have a right to refuse the sale. If the display is offer then seller cannot refuse the sale the if the buyer decides to buy it. Pharmaceutical Society v Boots Cash Chemists [1953] 1 All ER 482, CA Certain products that were to be sold only under the supervision of a registered pharmacist were displayed on shelves in a self-service shop. The Pharmaceutical Society of Great Britain (who are responsible for enforcing this legislation) brought a prosecution against the shop for allowing customers to buy these products by helping themselves, but the Court of Appeal (upholding Lord Goddard CJ) said they had no case. The customer having selected the goods made an offer to purchase when he took them to the cash desk, and there was a registered pharmacist supervising that point at which the sale took place. Fisher v Bell [1960] 3 All ER 731, DC It was a statutory offence under the Restriction of Offensive Weapons Act 1959 to offer for sale any of various items, including flick-knives. A Bristol shopkeeper R displayed such a knife in his window, with a ticket reading "Ejector knife - 4s." [4 shillings = 20p], and was prosecuted for an offence under the Act. The Divisional Court took a literal interpretation of the statute and said he had committed no offence: the display was an invitation to treat, not an offer to sell. This analysis of the transaction leaves both parties free to change their minds. The shopkeeper can refuse to sell to a customer whom he does not like (for example, one who is under the influence of drink), and the customer having taken goods from a supermarket shelf can return them if he changes his mind before going to the till. An advertisement is usually an invitation to treat but can be an offer, depending on its wording and on the circumstances. Partridge v Crittenden [1968] 2 All ER 421, DC The appellant placed an advertisement in a magazine: "Bramblefinch cocks and hens, 25s. [£1.25] each". He was charged with offering for sale a wild bird, contrary to statute, but the Divisional Court said he must be acquitted. The advertisement was an invitation to treat, not an offer to sell; with limited stock the advertiser could not reasonably intend to be bound to sell to all those who might accept. (If the advertiser indicated that he was willing to sell only to the first person accepting, there would be no such problem.) Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, CA The makers DD of a health product published newspaper advertisements promising to pay £100 to anyone who contracted flu after buying one of their smoke balls and using it as directed. The advertisement also said DD had deposited £1000 in a named bank to show their sincerity in this matter. P bought a smoke ball, used it as directed, and still caught flu; she sued for the £100 promised. The Court of Appeal said the advertisement in this case was an offer; the wording of the advertisement clearly showed an intention to be bound to anyone accepting. Thornton v Shoe Lane Parking [1971] 1 All ER 686, CA The case concerned the validity of an exclusion clause which depended inter alia on when a contract was made; the facts are set out below. Lord Denning said a motorist buying a car park ticket from a machine was irretrievably committed when he put the money in the machine, and that the contract must have been completed at that time. The offer must therefore have been made by the car park owners when they held out the machine as ready to receive money, and accepted by the motorist when he put the necessary coins in the slot. Adeel Kamran

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Wilkie v London Passenger Transport Board [1947] 1 All ER 258, CA P was an employee of DD and was injured through the negligence of the driver when traveling on one of DD's buses. He was traveling on a free pass subject to wide exclusions of liability, and so was unable to claim. But Lord Greene MR said obiter that when a public bus plies for hire it is making an offer accepted by the passenger on boarding. This analysis has been doubted by some writers, and it would certainly make it difficult (unless the offer is regarded as conditional) for the bus driver to refuse to allow a drunk or abusive passenger to board. On the other hand, the passenger should not be allowed to escape payment merely because he gets down before the conductor accepts his offer by collecting his fare, nor should the company be able to disclaim liability for any injury the passenger may suffer before the conductor reaches him. At an auction sale, s.57(2) of the Sale of Goods Act 1979 confirms the common law rule that a prospective buyer makes an offer by bidding, which the auctioneer accepts when he drops his hammer. Thus a buyer may withdraw his bid until the hammer falls, or an item may be withdrawn from the sale even after bidding has begun. The special rules for auctions, however, mean that the lot cannot legally be sold at the auction to anyone other than the highest bidder. Barry v Davies (2000) Times 31/8/00, CA A sale of machinery by auction was advertised as being "without reserve". Two machines were put up, whose list price would have been £14000 each, but the only bid (of £200 each) was made by C. The auctioneer D refused to accept the bid and withdrew the machines from sale. C sued, and the judge's award of £27600 damages was affirmed on appeal. Although there had been no contract between vendor and purchaser, there was a collateral contract between auctioneer and bidder.

Formal tenders Public authorities are required by law to invite tenders for many services, and some other bodies do so even when not so required. The offer in such cases is clearly made by the tenderor and accepted by the authority, but the situation is more complex than it might seem. Warlow V. Harrison Harvela Investments v Royal Trust [1985] 2 All ER 966, HL Two parties were invited to bid secretly for a block of shares, on the understanding that the shares would be sold to whoever bid higher. PP bid $2175000, while the other party bid "$2100000, or $10000 more than any other cash bid, whichever is higher". The House of Lords said the referential bid was ineffective and that PP's cash bid should have been accepted. The use of referential bids, they said, defeated the whole purpose of confidential competitive tendering and was not to be encouraged. Blackpool & Fylde Aero Club v Blackpool BC [1990] 3 All ER 25, CA PP and six other parties were invited to submit tenders for the concession to run pleasure flights from Blackpool Airport. PP submitted a tender in due form, but this was not considered owing to a clerical error. DD argued that PP had merely made an offer which they (for whatever reasons) had not accepted, but the Court of Appeal said there was an implied collateral warranty. The Council had selected the parties invited to tender and thus knew them all, and had set out in detail the procedure to be followed; this implied that any invitee conforming with that procedure would be entitled to have his tender properly considered. Adeel Kamran

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Withdrawal As a general rule, an offer can be withdrawn at any time before it has been accepted; any purported acceptance after withdrawal is ineffective. Routledge v Grant (1828) 130 ER 920, Best CJ D offered to take a lease of P's premises, a definite answer to be given (by P) within six weeks. After three weeks D withdrew his offer, and just within the six weeks P purported to accept it. The judge said the acceptance was too late; if one party has six weeks to accept an offer, the other has six weeks to put an end to it. One party cannot be bound without the other. Mountford v Scott [1975] 1 All ER 198, CA D offered to sell P his house for £10000, and P paid him £1 for an option to purchase at that price, exercisable within six months. Before the end of that time, and before the option was exercised, D purported to withdraw his offer. P then exercised the option, and the Court of Appeal said he was entitled to specific performance. The token payment was valuable consideration, however small, and made the offer irrevocable until the option expired. Withdrawal must normally be communicated to the offeree, and does not take effect until such communication is received: the special rule for postal acceptances ( below) does not apply. Byrne v Van Tienhoven (1880) LR 5 CPD 344, Lindley J DD posted a letter on 1 October offering to sell PP a quantity of tinplate, and then posted another letter on 8 October withdrawing the offer. The first letter reached PP on 11 October and they accepted the offer at once by telegram, following with a confirmatory letter four days later. The second letter purporting to withdraw the offer arrived on 20 October, by which time the offer had been accepted and it was too late for DD to withdraw. Dickinson v Dodds (1876) LR 2 ChD 463, CA D offered to sell P his house, leaving the offer open until Friday. On Thursday P decided to buy the house, but then heard from another person that D had contracted to sell to a third party. On Friday P accepted the offer, and subsequently sought specific performance. The Court of Appeal said the news (conveyed by a reliable third party) that the house had been sold was sufficient notice of the withdrawal of the offer for sale, and the purported acceptance was therefore ineffective. Shuey v United States (1875) 92 US 73, Supreme Court (USA) An advertisement was published in several newspapers advertising a reward to be paid for information leading to the arrest of any of several named criminals. Six months later the President issued a proclamation cancelling the reward, and this was published in a similar manner. Five months after that, P (who was aware of the original advertisement but not that the reward had been cancelled) identified one of the wanted men and claimed the reward. The Supreme Court said that since the offer had been made by general advertisement rather than to him personally, he should have realised that it might be withdrawn in the same way. Financings Ltd v Stimson [1962] 3 All ER 386, CA D decided to buy a car on hire purchase and signed a form supplied by the dealer which declared that the HP agreement became binding only when signed by the finance company PP. D paid a first instilment and took the car away, but returned it two days later saying he had changed his mind. The court said this was an effective withdrawal, and that PP's purported acceptance five days after the car was returned was too late. (In fact, the car was stolen from the dealer's forecourt Adeel Kamran

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during the five days and was recovered in a damaged state; PP were thus unable to fulfill their part of the bargain to supply the car as originally seen, giving another reason for their purported acceptance to be ineffective.) Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Exch 109, Exchequer D made an offer in June to buy shares in PP's company, but heard nothing. PP made an allocation of shares in November, and purported to accept D's offer, but D refused to go ahead. The court said that although the offer had not been formally withdrawn, it would expire after "a reasonable time", and given the fluctuating nature of the subject matter the time interval had gone beyond what was reasonable. Luxor (Eastbourne) v Cooper [1941] 1 All ER 33, HL Vendors AA promised an estate agent R £10000 as a fee for selling a piece of land; R found a buyer and a sale was agreed "subject to contract", but AA then decided not to complete the deal and disposed of the cinemas elsewhere. R sued for his commission but lost: the House of Lords found for AA on the basis that there was no reason to infer an undertaking by not to revoke their offer. R was being offered a substantial sum for comparatively little effort, and should therefore have realised that AA might wish to withdraw.

Rewards and challenges Where the offer is to be accepted by conduct, then it is not clear what rules govern its withdrawal. This is particularly important to rewards and "challenges" (e.g. £10000 to the first person to swim the Atlantic): although such offers can certainly be withdrawn - that is only reasonable - it is unfair if the offeror can withdraw his offer moments before the other party accepts by completing his task. Errington v Errington & Woods [1952] 1 All ER 149, CA A father bought a house for his son and daughter-in-law DD to live in, paying £250 in cash and borrowing the other £500 from a building society. The house was put into the father's name, but he said that as long as DD paid the installments he would transfer it to them as soon as the mortgage was discharged. After some fifteen years the father died, and his widow P sued for possession of the house. The Court of Appeal said there was a unilateral contract: DD were not bound to go on paying, but if they did so that father was bound to transfer the house to them in accordance with his promise. Denning LJ said (perhaps obiter) that a unilateral contract could not be revoked once the potential acceptor had embarked upon performance. Daulia v Four Millbank Nominees [1978] 2 All ER 557, CA PP sought to buy various properties from DD, and draft contracts were prepared. DD undertook that if PP produced the draft contract and a bankers' draft by a certain time they would enter into a full contract. PP obtained the bankers' draft and attended at DD's offices before the deadline, but DD refused to go ahead. PP's claim for damages was dismissed by Brightman J and the Court of Appeal because the collateral contract (relating to an interest in land) did not conform with the Law of Property Act 1925 s.40, but Goff LJ said obiter that while the offeror of a unilateral contract is entitled to require full performance of his condition and short of that is not bound, there must be an implied obligation on his part not to prevent the condition becoming satisfied, and that obligation arises as soon as the offeree starts to perform. Until then the offeror can revoke the whole thing, but once the offeree has embarked on performance it is too late for the offeror to revoke his offer.

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The second essential feature of a contract is that the offer be accepted and, in most cases, that this acceptance is communicated to the offeror. Felthouse v Bindley (1863) 142 ER 1037, Exch Ch P discussed the purchase of a horse from his nephew J, and prices were discussed. On 2 January P wrote to J saying "If I hear no more about him, I consider the horse is mine at £30-15-0" [£30.75]. J did not reply, no money was paid, and the horse remained in J's possession. J decided to sell the horse to P and told an auctioneer D to withdraw it from a sale, but D forgot this instruction and sold the horse elsewhere. P now sued D in conversion, claiming the horse was his property. The Court of Common Pleas (whose judgment was affirmed by the Court of Exchequer Chamber) said there was no contract: P's letter was an open offer that had not been accepted. Although the offeror cannot stipulate that the offeree's silence is to be taken as a sign of his acceptance of the offer, he can generally specify the method by which acceptance is to be communicated. Compagnie de Commerce v Parkinson Stove [1953] 2 Lloyds Rep 487, CA AA negotiated to buy some steel from RR, and RR made an offer with a stipulation that acceptance be notified only on a pre-printed form. AA accepted by letter and then sought to cancel their acceptance. The Court of Appeal said there was no valid acceptance and hence no binding contract, but added obiter that it might be possible to say in some cases that those in RR's position had waived the condition as to the mode of acceptance, expressly or by their conduct. Eliason v Henshaw (1819) 4 Wheaton 225, Supreme Court (USA) D offered to buy a quantity of flour from P, and wrote asking for a reply "by return of wagon". P replied by post to D's other address, which took considerably longer, by the time the letter arrived D had already bought from other sources all the flour he needed. D refused to accept the purported contract as binding, and the court supported his view. The court said that the actual mode of reply was unimportant, and that any means might be used as long as the reply was received no later than would be expected by the method specified, but a different address and a substantial delay were enough to invalidate the acceptance. Tinn v Hoffman (1873) 29 LT 271, Exch.Ch. P wrote to D asking for a price on 800 tons of iron. D offered the iron at 69s [69 shillings, or £3.45] per ton and asked for a reply "by return". It was conceded that since the offer was not in fact accepted by return of post there was no contract, but Honeyman J said obiter that a telegram or verbal message or any other means not letter than a letter written by return of post would have been sufficient. Manchester Dioces...