Contract Law Basics for Students
Contract Law Basics for Students
TORT LAW
LSC0144
WEEK 2:
FORMATION OF A VALID CONTRACT
OFFER
1. What is an offer?
2. Invitation to Treat
3. Communication of offer
4. Termination of an offer
OFFER
For a contract to exist usually
- one party must have made an offer
- the other party must have accepted
it.
Facts
The defendant City Council had adopted a policy of selling council houses to its tenants. The claimant was a
tenant of such a council house, who had applied for details of the house he was renting and applicable mortgage
terms, using the printed form designated and supplied by the defendant for this purpose. In February 1971, the
city treasurer responded to this application stating that ‘The [council] may be prepared to sell you the house at
the purchase price…’, and providing details of the mortgage. This letter also stated that it did not amount to a
‘firm offer’ of a mortgage, and invited the claimant to make a formal application using an enclosed form. In
March 1971, the claimant returned the completed form to the defendant. Following local elections in May of the
same year, control of the Council passed from the Conservatives to Labour. The new Labour Council policy was
that council houses would not be sold under the previous Conservative policy unless a legally binding contract
was already in place. The defendant refused to sell to the claimant, who brought an action against them in
breach of contract. This action was successful at first instance and the Court of Appeal, upon which the
defendant appealed to the House of Lords.
Issue
The issue on appeal was whether the defendant’s letter of February 1971 was properly construed as an offer or as
an invitation to treat.
Held
The House of Lords held that there was no concluded contract and the defendant was not legally bound to sell
the property, as the council’s letter did not state the price and was not an offer but an invitation to treat.
It is further stated in this case that :-
“a letter giving the purchase price was
merely one step in the negotiations for
a contract and amounted only to an
invitation to treat. Its purpose was
simply to invite the making of a
“formal application”, amounting to an
offer from the tenant”.
Advertisements
Auction Shopping/Display of
goods in a shop.
Types of
invitations to
treat
Timetables and
Tenders tickets for
transport
1. Advertisement Partridge v Crittenden [1968] 2 All ER 421
Advertise specified goods at a certain
price, such as those found at the back of
Facts
newspapers and magazines. Considered
as invitations to treat, on the grounds The defendant advertised for sale a number of Bramblefinch cocks and hens, stating that the price was
that they may lead to further to be 25 shillings for each. Under the Protection of Birds Act 1954, it was unlawful to offer for sale any
bargaining. wild live bird. The Royal Society for the Prevention of Cruelty to Animals (RSPCA) brought a
prosecution against the defendant under the Act. At his trial, the defendant was found guilty of the
offence by the magistrates; he appealed this conviction.
Issue
The issue on appeal was whether the advertisement was properly construed as an offer of sale (in which
case the defendant was guilty) or an invitation to treat (in which case he had committed no offence). A
further issue was whether it was appropriate to adopt a different interpretation of the phrase ‘offer for
sale’ in the context of criminal law than was accepted in the context of contract law.
Held
The court held that the advertisement was not an offer but an invitation to treat, and as such the
defendant was not guilty. The court also rejected the suggestion that the court should adopt a stricter
interpretation of the phrase ‘offer for sale’ in the criminal context compared to the contractual context,
reasoning that to do so would usurp the legislative function. The legislature had chosen the phrase ‘offer
for sale’ based on its existing understanding, and to alter this understanding under the pretext of
‘interpretation’ was not the proper role of the court.
Grainger & Son v Gough [1896] AC 325 HL
Facts
The defendant wine merchant circulated a catalogue which contained a price list for its products. The
claimant ordered several bottles of wine from the catalogue and, when the defendant refused to deliver
these at the stated price, alleged that a contract had been formed.
Issue
The issue was whether the price list constituted an offer to sell wine at a certain price (in which case the
contract was fully formed, and the claimant had a valid claim), or an invitation to treat (in which case no
contract had been formed).
Held
Rejecting the claim, the House of Lords held that the price list must be construed not as an offer, but as an
invitation to treat. In reaching this conclusion, it reasoned that to interpret the list as an offer would mean
that in theory the defendant would be obliged to deliver an unlimited quantity of wine at the stated price,
upon receipt of an order. This would be unreasonable and would not reflect the intentions of the parties as
the merchant’s stock is necessarily limited, and it would not be possible for him to carry out such an order.
Both reasonableness and objective intention are key to distinguishing between an offer and an invitation to
treat. On this basis, the list was interpreted an invitation to customers to offer to buy wine at the stated
price, which the merchant may then accept or reject. In this case, the defendant was not bound to deliver the
wine ordered by the claimant.
2. Shopping/Display of goods in a shop. Pharmaceutical Society of Great Britain v. Boots Cash Chemist (Southern)Ltd [1952] 2 QB 795
An act of displaying goods in shop
window with the price clearly marked
Facts:
may seem to indicate an offer to sell the
goods at those price. However, such act is According to the UK Pharmacy and Poison Act 1933, there shall be no sale of any poison listed under the
not amount to an offer to sell as a mere act unless it was effected under the supervision of a registered pharmacist. The defendant was a retail
display of goods for sale at marked price pharmaceutical company and had adapted one of it shops to self-service shop. The customer can select
is regarded as an invitation to treat any items displayed on the shelves and took them to the counter, where a registered pharmacist was
authorised, if necessary, to stop the customer from buying any particular items/drugs. The defendant
was charged for selling a listed poison without the supervision of a registered pharmacist. It was alleged
by the plaintiff that the act of displaying the items/drugs constituted as an offer by the defendant to
sell. When the customer selected those items, it indicated as an acceptance to the offer. Hence, the
contract of sale arose at a point that was not under an immediate supervision of the pharmacist who
could not see all part of the shop from the counter.
Issue:
Whether the display of the items/drugs on the shelves was an offer to sell or just merely an invitation to
treat for the customer to make an offer to buy?
Held:
The displayed of the items was only an invitation to treat. The customer made an offer to buy when they
picked up the items from the shelf. There was no contract of sale effected until the offer was accepted by
the registered pharmacist at the counter.
Fisher v Bell [1961] QB 394
Facts
The defendant shopkeeper displayed in his shop window a flick knife accompanied by a price ticket displayed just
behind it. He was charged with offering for sale a flick knife, contrary to s. 1 (1) of the Restriction of Offensive
Weapons Act 1959.
Issue
The issue was whether the display of the knife constituted an offer for sale (in which case the defendant was
guilty) or an invitation to treat (in which case he was not).
Held
The court held that in accordance with the general principles of contract law, the display of the knife was not an
offer of sale but merely an invitation to treat, and as such the defendant had not offered the knife for sale within
the meaning of s1(1) of the Act. Although it was acknowledged that in ordinary language a layman might consider
the knife to be offered for sale, in legal terms its position in the window was inviting customers to offer to buy it.
The statute must be construed in accordance with the legal meaning, as “…any statute must be looked at in light
of the general law of the country, for Parliament must be taken to know the general law” (per Lord Parker C.J. at
para. 4). It is well established in contract law that the display of an item in a shop window is an invitation to
potential customers to treat. The defendant was therefore not guilty of the offence with which he had been
charged.
3. Timetables and tickets for transport.
However, a tender may not be Unless the advertisement specifies that the highest tender would be accepted there was no
regarded as an invitation to treat obligation to sell to the person submitting the highest tender. The advert amounted to an
if:- invitation to treat, the tender was an offer, the defendant could choose whether to accept
the offer or not.
However, it should be noted that a For example, Siti offers to sell 100
mere request for information is not copies of books to Soto for RM500.
Simply said, counter offer is the
a counter offer. If the offeree asks Soto asked whether the price
offeree’s adding of terms whereas a
the offeror for more information, includes delivery charge or not. The
mere request for information is a
the original offer still stands as the question put forward by Soto would
question about the original offer.
offeree has yet to accept or reject be classed as a mere request for
the offer. information, not a counter offer.
Thus, if A respond to an offer by putting
forward an alternative proposal. It will
likely be regarded as a counter offer, the
effect of which will be to terminate the
original offer.
The defendant, Mr Wrench, offered to sell the farm he owned
to the complainant, Mr Hyde. He offered to sell the property
for £1,200, but this was declined by Mr Hyde. The defendant
decided to write to the complainant with another offer; this
time to sell the farm to him for £1,000. He made it clear that
Hyde v Wrench (1840) 49 ER 132 this would be his final offer regarding the property. In
response, Mr Hyde offered £950 for the farm in his letter. This
was refused by Mr Wrench and he confirmed this with the
complainant. Mr Hyde then agreed to buy the farm for
£1,000, which was the sum that had previously been
offered. However, Mr Wrench refused to sell his farm.
The court dismissed the claims and held that there was no
The complainant brought an action for specific performance,
binding contract for the farm between Mr Hyde and Mr
claiming that as Mr Wrench refused to sell the farm, this was a
Wrench. It was stated that when a counter offer is made, this
breach of contract. The issue in this case was whether there
supersedes and destroys the original offer. This original offer is
was a valid contract between the parties and if a counter offer
no longer available or on the table. In this case, when Mr Hyde
was made in discussions, whether the original offer would still
offered £950, he cancelled the £1,000 offer and could not back
remain open.
track and accept.
HOWEVER, A "mere inquiry"
not a counter-offer (request
for information)
A request for information
about an offer does not
amount to a counter offer, so
the original offer remains
open.
The court held the complainant was only inquiring
for more information about whether the terms of the
offer could be changed; there was no specific
wording to indicate that it was a counter offer or
rejection. This was in contrast to Hyde v Wrench. This
Stevenson Jaques & Co. v McLean meant that the offer made by the defendant was
(1880) 5 QBD 346 still valid and the second telegram by the complaint
formed a binding contract. While the promise of the
offer remaining open until Monday was not itself
binding and an offeror can revoke this at any time,
there had been no revocation communicated to the
complainant in this case.
▪ Thus, what appear to be a reasonable time will differ from one case
to another depending on what court think fair base on the fact
presented before it. What is a reasonable time will depend upon
the nature of the transaction and the circumstances as a whole.
The defendant, Mr Dodds, wrote to the complainant, Mr
Dickinson, with an offer to sell his house to him for £800.
He promised that he would keep this offer open to him
until Friday. However, on the Thursday Mr Dodds
accepted an offer from a third party and sold his house to
them. It was claimed that Mr Dickinson was going to
Dickinson v Dodds accept this offer, but had not said anything to Mr Dodds
because he understood that he had until Friday. Mr
(1875) 2 Ch D 463 Dodds communicated that the offer had been withdrawn
through a friend to the complainant. After hearing this,
Mr Dickinson went to find the defendant, explaining his
acceptance of the offer. The complainant brought an
action for specific performance and breach of contract
against the defendant.
For instance, Rozi promises to sell her car to Rizal. However, she
dies soon after the offer was made. Rizal accept the offer not
knowing that Rozi is dead. In this situation, it seems that the
executor of Rozi’s affairs would be obliged to sell the car to Rizal.