Chapter 2 Flashcards
The courts have, traditionally, ascertained that parties have, in fact, reached agreement, by analysing the dealings between the parties, in terms of offer and acceptance. What two questions are asked in court?
The question asked is whether there has been a definite offer by one party (the “offeror”) and an unqualified acceptance by the other (the “offeree”).
The majority of offers are negotiated on a “promise for a promise” basis. Explain this with the example of selling a house.
An offer to sell a house involves a promise by the offeror to sell, in return for the offeree’s promise to pay. This is called a bilateral offer.
To whom is an offer made in case of a unilateral offer?
A unilateral offer, on the other hand, is made to the world at large, or at least to anyone who comes forward and performs the conditions.
What are the elements to constitute a valid offer?
1) Made in writing, by words or by conduct
2) Complete
3) Operable
4) Made with the intention that they should be binding on anyone that accepts them
What is an invitation to treat?
One party, demonstrating a willingness to negotiate, merely invites offers, which the other party is then free to accept or reject, or a “statement of intention”. Essentially, it is an invitation, extended by one party to the other, to enter into negotiations, or to make an offer himself.
What is the difference between an offer and an invitation to treat?
Why is this difference important?
In contract law, the distinction between an “offer” and an “invitation to treat” is important in determining the legal consequences of communication in the context of making a contract.
An “offer” is a definite expression of willingness to enter into a contract on specific terms, creating a power of acceptance in the offeree (the person to whom the offer is made). Once the offer is accepted, a binding contract is formed.
On the other hand, an “invitation to treat” is an invitation for others to make offers or to engage in negotiations. It is not an offer itself but an invitation to enter into negotiations or make offers that can be accepted or rejected.
The determination of whether a communication is an offer or an invitation to treat depends on the intention of the person making the communication, as revealed by their words, actions, and the surrounding circumstances. Courts consider various factors to determine the intention, including the language used, the context, and the parties’ conduct.
When a company publishes a prospectus offering shares to potential investors, is it an offer or an invitation to treat?
When a company publishes a prospectus offering shares to potential investors, it is generally considered an invitation to treat rather than a binding offer. The company is inviting potential investors to make offers to purchase shares, and the company’s directors then have the discretion to accept or reject those offers.
How will requests and replies to requests for information will generally be interpreted?
As invitations to treat.
In Harvey v Facey [1893] AC 552, the buyer telegraphed, “Will you sell us B. H. P? Telegraph lowest cash price.” The seller replied, “Lowest price for B. H. P. £900,” to which the buyers telegraphed, “We agree to buy B. H. P. for £900 asked by you. Please send us your title-deed in order that we may get early possession.” However, no reply was received. What did the court find?
It was held that there was no contract as the final telegram was an offer to buy, the acceptance to which must be expressed. It was not an acceptance of an offer to sell.
Gibson v Manchester CC [1979] 1 WLR 294 involved a council house tenant who wished to buy his house under a “right to buy” policy. The council wrote to the tenant informing him that it might be willing to sell the property and the tenant replied, confirming that he wished to buy. The council’s leadership changed hands, however, and the right to buy option was withdrawn. The tenant claimed against the council for breach of contract. What did the House of Lords find?
The House of Lords held that the council never made an offer to sell; there could be no valid acceptance, since the parties were, effectively, in negotiations.
In Storer v Manchester CC [1974] 3 All ER 824, however, the council sent a council house tenant an application form to buy his council house. It promised that, when the form was completed by the tenant, it would sign and complete the sale. He followed the council’s instructions and returned the completed application form. The council, subsequently, refused to sign and complete the sale, as promised. What did the court find?
It was held that a contract had been formed, since the council’s letter constituted a firm intention to continue with the sale once the tenant had returned the application form. The council was, therefore, bound to complete the sale.
What are the three cases that need to be known regarding invitation to treat vs. offer?
1) Harvey v Facey [1893] AC 552
2) Gibson v Manchester CC [1979] 1 WLR 294
3) Storer v Manchester CC [1974] 3 All ER 824
The distinction between offers and invitations to treat, i.e. the exact point at which an invitation to treat is converted into an offer, is often hard to draw, as it depends upon the intention of the person making the statement. What may give valuable clues as to parties’ intentions?
Surrounding circumstances and the normal pattern of dealing (e.g. what is usual in a particular trade or industry).
However, in some cases, the distinction has been settled - at least presumptively - by authority or by statute.
There are principles applied by the courts in ascertaining whether there has been an offer capable of acceptance. In what areas do these principles exist?
1) Window and self-service display of goods in shops
2) Advertisements
3) Ticket cases
4) Auction sales
5) Tenders
6) Subject to contract
The display of goods in shops, on shelves, or in the window, with a price tag attached, are they offers or invitations to treat?
They can constitute either an offer or an invitation to treat. If it is an offer, the customer can accept it simply by indicating his desire to buy the item and the shopkeeper must then sell it to him at the stated price. By contrast, the customer seeking to buy the item will make the offer, which the shopkeeper can then accept or refuse as he wishes - if it is an invitation to treat.
In the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 All ER 456, the question the Court of Appeal had to consider was whether the display of certain drugs on open shelves in a self-service store, which required the supervision of a registered pharmacist at the point of sale, constituted an offer to sell or an invitation to treat. What was the point of view of the Pharmaceutical Society? How did the Court of Appeal decide?
The Pharmaceutical Society argued that such a display constituted an offer to sell, which the customer accepted by placing the selected items into the shopping basket provided. However, the Court of Appeal held that the items on display were invitations to treat. The customer made an offer to buy, rather than the chemist making an offer to sell, by the customer tendering the items for payment at the sales counter. Accordingly, there was effective supervision of the drugs at the point of sale.
In regard to Window and self-service display of goods in shops, what two cases must be known?
1) Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 All ER 456
2) Fisher v Bell [1961] 1 QB 394 (display of flick knives in a shop window, same result as first case, this case was discussed in the introduction to UK law)
What case must be known in regard to advertisements? What is the statement made?
In Partridge v Crittenden [1968] 1 WLR 1204 (a case similar in its facts to Fisher v Bell, but concerning the sale of bramble finches, rather than flick knives), Lord Parker CJ stated that:
“…when one is dealing with advertisements and circulars, unless they…come from manufacturers, there is business sense in their being construed as invitations to treat, and not offers for sale…”
Newspaper advertisements of bilateral transactions are (unless they come from manufacturers) generally considered to be attempts to induce offers from recipients, rather than offers themselves.
How do advertisements differ from window and self-service display of goods in shops?
They don’t, both are generally regarded as invitations to treat, with the exception for advertisements when the manufacturer advertises goods (Partridge v Crittenden [1968] 1 WLR 1204)
Is a posting an advertisement on a website (e-commerce) an offer or invitation to treat?
Invitation to treat as it lacks the necessary elements that would make it an offer.
if a computer firm which mistakenly advertises on its website that it is selling PCs for £20, instead of £200, would it be an offer?
No, it’s an invitation to treat, so it could refuse to sell goods at the advertised price.
In which case could an advertisement be deemed an offer?
Where descriptive words are used to intend to bind a prospective buyer and all the applicable terms are definitive, an advertisement is likely to be deemed an offer instead of an invitation to treat.
Let’s say a car dealership places an advertisement in a newspaper with the following statement: “Brand new luxury car for sale. Price: $50,000. First come, first served.”
In this case, the descriptive words used, such as “for sale,” “price,” and “first come, first served,” indicate a clear intention to be bound by the terms stated. The advertisement provides all the necessary details, including the specific car model and the price.
If a prospective buyer sees this advertisement and goes to the dealership, they would expect to be able to purchase the car for $50,000 as stated in the advertisement. In this situation, the advertisement would likely be treated as an offer rather than a mere invitation to treat.
If the dealership refuses to sell the car at the advertised price to a qualified buyer who arrives first, it may be considered a breach of contract. The prospective buyer’s acceptance of the offer is simply their act of showing up at the dealership ready to purchase the car at the advertised price.
Are unilateral offers for a reward of lost property generally regarded as invitation to treat or offers?
By contrast, a unilateral offer of a reward for lost property or for information leading to the capture or conviction of a criminal will, generally, be treated as an offer and the first person to return, e.g., the lost pet, will be able to claim the money. Provided the advertisement is not mere sales promotion or “puff”, not intended to create legal relations, then, even if the offeree has not supplied any consideration and has not communicated his acceptance of the offer, the advertisement will be deemed sufficiently clear to constitute an offer (Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256 CA).
Which case must be known in regard to unilateral offers?
Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256 CA - unilateral offers of a reward for lost property constitute an offer, not an invitation to treat
In which cases can with certainty be said that a ticket constitutes a contract? What constitutes the offer and acceptance?
Cinema, raffle (Gewinnspiel) and cloakroom tickets
Offer: The request for a ticket
Acceptance: The issue of that ticket
There is an unethical practice of companies excluding liability with tickets. There have been two cases where courts decided against this practice. Which?
Chapelton v Barry Urban District Council [1940] 1 KB 532 - Deck chairs were offered for hire by a local council, on the ticket it excluded the council from any liability. The Court of Appeal held that the ticket amounted to no more than a receipt. Any terms printed on the back of the ticket claiming to exclude liability were of a non-contractual nature, since a customer would not expect to find such terms contained there.
Thornton v Shoe Lane Parking Ltd. [1971] 1 All ER 686, the Court of Appeal deemed that provisions exempting a company from liability on a ticket issued by a machine at an automatic barrier at the entrance to one of its car parks were communicated too late to be effective. The contract was completed only when the claimant drove up to the sensor that activated the automatic barrier. This was prior to the ticket being issued.
In auction sales, we differentiate two different cases. Which? What are the relevant cases?
1) An auctioneer’s call for bids is regarded as an invitation to treat, a mere request for offers - offers which the auctioneer can accept (with the fall of the hammer) or reject as he chooses (Payne v Cave (1789) 3 TR 148 and s. 57 Sale of Goods Act 1979). Likewise, the bidder is entitled to withdraw his offer, at any time, before the auctioneer has signified acceptance with the fall of the hammer.
2) In an auction which is advertised as being held “without reserve” (a “reserve price” is the price which bidders must reach for the auctioneer to be obliged to accept the highest bid), the auctioneer is obliged to accept the highest bid. In Barry v Heathcote Ball & Co [2001] 1 All ER 944; [2000] 1 WLR 1962, an auctioneer refused to accept a bid of £200 for two machines worth £14,000 on the open market, even though the auction was without reserve. The Court of Appeal, relying on the decision in Warlow v Harrison (1859) 1 E & E 309; 29 LJ QB 14, decided that, if the auctioneer had specified that the auction was “without reserve”, a legal commitment arose which bound the auctioneer.
Where goods are advertised for sale by tender, is the statement an offer or an invitation to treat?
An invitation to treat. i.e. a request by the owner of the goods for offers to purchase them.
An invitation to tender can give rise to a binding obligation on the part of the inviter to consider tenders submitted, in accordance with the tender conditions. So, where the claimant delivered a tender and placed it in the letterbox of the defendant council, in accordance with the latter’s instructions, one hour before the time limit for submitting the tender, did the council have a duty to consider the claimant’s tender? If so, by failing to do so, was the submitter of the offer entitle to damages for breach?
Yes, the council had a duty to consider the claimant’s tender.
By failing to do so, the club was entitled to damages for breach of an implied unilateral contract (Blackpool and Fylde Aero Club Ltd v Blackpool BC [1990] 3 All ER 25).
Why is “subject to contract” formula used in contract negotiations?
The words “subject to contract” are used by parties who are negotiating as to the terms of a contract involving the sale of land, to indicate that documents passing from one to the other are not intended to be offers capable of acceptance, so as to form a binding contract. No contract will, thus, come into existence, until a formal contract has been drawn up and approved by the parties. This allows either party to withdraw from the agreement at any time, and for any reason, even if he has incurred considerable expense in negotiations, without facing an action for breach of contract.
The phrase “subject to contract” is commonly used in the context of negotiations for contracts involving the sale of land, but it can also be used in other types of contractual negotiations. While its usage is most prevalent in property transactions, it can be employed in various commercial negotiations as well.
Why does the “subject to contract” formula not work in Switzerland?
Other legal systems impose a duty to negotiate, in good faith, in order to overcome this loophole, English law does not recognise such a duty. In Switzerland, this is called “Pflicht zur Verhandlung nach Treu und Glauben”.
Is the “subject to contract” formula absolute?
If there is clear evidence of a contrary intention, a court may be prepared to find that a contract has been concluded, despite the use of this formula. It should be noted that courts will generally not imply a duty of good faith into the performance of a contract as well.
In the case when two parties make identical cross-offers, but each party has no knowing of the other’s offer, will there be a contract?
No. The establishment of a contract fails as one or both parties must seek to confirm that they are in agreement; without such extra communication and consequent guarantee of certainty, no acceptance and thus no contract can be implied.
If a new term is added, or the terms of offer are altered, does this represent a new offer?
Yes, this amounts to a counter-offer that ends the original offer and is in effect a new offer (Hyde v Wrench [1840] 49 ER 132).
Is a mere request for extra information a counter-offer?
No (Stevenson v Mclean [1880] 5 QBD 346).
