Offer and Acceptance: Chapter 1:

Topics: Unilateral and Bilateral Contracts, Invitation to treat, Offer,

Termination of Offers.

Contract: Purpose of understanding Offer and Acceptance.

When one party makes an offer and the other party accepts it, a contract
comes into existence.
Once the acceptance takes place, the contract is binding on both parties.
The rules of offer and acceptance are crucial in identifying whether the
contract was existent or not, since its existence would bind both parties to
fulfil their obligation.

The rules of offer and acceptance are separate for Unilateral Contracts and
Bilateral Contracts, thus it is important to understand the difference between the
two:

Unilateral and Bilateral Contracts

1: Unilateral Contracts:
A contract in which only one party assumes an obligation under the contract is
called unilateral contract. These contracts are also known as if and reward
contracts. These contracts come into existence with performance of an act as
opposed to by promising to do an act.
Examples:
A: Lost and found advertisements: Whoever finds my dog will get 100 from me.
Now it is not an obligation on you to find my dog, however, the only obligation is
on me that is to pay you 100 if you find my dog. However, if you promise me
that you will find my dog, the unilateral contract will be converted into a bilateral
contract as for a unilateral contract, acceptance is in the form of fulfilment of
act/action and not by a promise in return. So the only way the contract will come
into existence is if you successful in finding my dog.
B: If you get A* in A-Levels Law, I will give you a treat in XYZ restaurant: Now I
cannot sue you for not getting an A*, however, I am legally bound to give you a
treat if you get an A*.
Case: Errington v Errington (1952)
A father bought a house in his own name for 750 which includes 500 of
borrowing on mortgage terms from a building society. He told his son and
daughter-in-law that if they pay the mortgage instalments/repayments, the
house would be signed over to them. Now the son and daughter-in-law never
promised to pay the complete instalments, however they were managed to do
so. The house was handed over to the son and daughter-in-law after completion
of repayments.

2: Bilateral Contracts:
A contract in which each party assumes an obligation by promising the other
something. Most contracts are bilateral contracts.
Bilateral contracts may have more than two parties.
Examples:
A: Buying and selling contracts: one party pays a price the other gets the
ownership
B: Employment contracts: employee is liable for completing certain jobs while
employer is legally bound to pay its salary
Case:
Any case of involving a bilateral contract e.g. Thomas v Thomas
Exercise: Write down three examples of Unilateral Contracts and three
examples of Bilateral Contracts. Unilateral Contracts cannot be of lost
and found advertisement.

Offer
Offer:
That communication which indicates the terms on which the offeror is prepared
to make a contract and clearly express the intention to be bound by those terms
if they are accepted by the offeree is known as an offer.
Offeror: Person making the offer
Offeree: To whom the offer is being made.
Characteristic features of Offer Which Distinguish Offer from
Invitation from Treat:
1: Sufficiently specific in terms of the main obligation and price to be capable of
immediate acceptance
2: Made with an intention to be bound by the mere fact of acceptance (i.e. a
definite promise to be bound)
Offers to the Public at Large:
Offers can be made to more than one person at a time and even to public at
large. Such offers are generally unilateral in nature.
Example:
A: The owner of a lost wallet may offer to a reward to anyone who finds it
Case: Carlill v Carbolic Smoke Ball Co (1893)

Defendants were the manufacturer of smoke balls which they claimed could
prevent flu. They published an advertisement stating that if anyone used their
smokeballs for a specified time and still caught flu, they would pay that person
100. They deposited 1000 with their bankers to prove their seriousness.
Mrs. Carlill bought and used a smoke ball and still ended up with flu. She
therefore claimed 100, which the company refused to pay. They argued that
their advertisement could not give rise to a contract since it was impossible to
make a contract with the whole world and that therefore they were not legally
bound to pay the money. This argument was rejected by the court, which held
that the advertisement did constitute an offer to the world at large which
became a contract when it was accepted by Mrs. Carlill using the smoke ball.
Is this an example of unilateral contract or bilateral contract?
Case 2: Bowerman v Association of British Travel Agents Ltd. (1996)

Invitations to Treat:
A communication in which one party invites the other to make an offer is called
invitation to treat. It does not constitute an offer and it is not present in every
transaction/contract. It generally opens doors to negotiation where final offer
could be made once the terms and conditions and price are agreed.
It can also be termed as any point in communication before offer is made by the
offeror indicating offerees willingness to receive offers.
Language plays a very important for courts in identifying whether
communication can be termed as an offer or as an invitation to treat.
Case: Gibson v Manchester City Council
Mr. Gibson sent an application form to purchase council house
Council wrote to Mr. Gibson that it may be prepared to sell the house
to you for 2180 (invitation to treat)
Mr. Gibson queried the purchase price, pointing out that the path was in a
bad condition
Council refused to charge the price
18 March 1971 Mr Gibson wrote asking the council to carry on with the
purchase as per my application
Council informed Mr. Gibson that he could not buy his council house since
the policy has changed.
Mr. Gibson argued that he had accepted the offer on 18 March 1971 and
thus contract was formed
Court rejected his argument and said that his letter was invitation to treat
and not an acceptance.
In Storer v Manchester City Co uncil (1974) a letter from the council is
considered as an offer because of its wordings which are if you will sign the
agreement and return it to me, I will send you the agreement signed on behalf of

the council in exchange. The court decided that these words exhibit the
intention of council to be bound by terms, thus constituting as an offer.
Common scenarios where invitation to treat should be separated out
from offers:
1: Advertisements for Unilateral Contracts:
Advertisements for unilateral contracts are considered offers. For such an
advertisement to be considered as an offer it must be clear and definite in its
terms and leave nothing open for negotiations.
These contracts can normally be accepted without any need for further
negotiations between the parties, and the person making the advertisement
intends to be bound by its terms.
Case: Carlill v Carbolic Smoke Ball Co.
Case: Bowerman v ABTA Ltd. (1996)
Explanation: For unilateral contracts, if the ad is not considered as offer than
performance of an act (in response to the ad) would constitute an offer. This
would give the person placing ad the liberty to accept or reject the offer (as he
would be the offeree). This would benefit the person who is placing the ad to
have people perform the act and yet not be bound to reward/pay them.
2: Advertisements for Bilateral Contracts: (e.g. buying/selling)
Advertisements for bilateral contracts are considered invitation to treat as it is
expected that further negotiation/bargaining will take place before final offer is
made.
Also since, stocks may run out it would be unreasonable to think that everyone
who accepts the offer will be able to form a contract.
Case: Partridge v Crittenden (1968)
Bramblefinch cocks and hens were advertised for sale in a magazine for 25s
each. As the Bramblefinch was a protected species, the person offering to selling
them was charged for breach of Protection of Birds Act 1954, but his conviction
was quashed on the grounds that the advertisement was not an offer but an
invitation to treat.
3: Shopping:
Price marked goods on display on the shelves are considered invitation to treat
rather than offers to sell.
Case: Fisher v Bell

Defendant had displayed flick knives in his shop which were illegal to sell. Lord
Parker CJ stated that the display of goods is merely invitation to treat and not an
offer to sell, thus conviction was overturned.
Case 2: Pharmaceutical Society of Great Britain v Boots Cash Chemist
(southern) Ltd. (1953)
Boots were charged with an offence concerning the sale of certain medicines
which could only be sold by or under the supervision of a qualified pharmacist.
Two customers in a self-service shop selected the medicines, which were pricemarked, from the open shelves and placed them in the shops wire baskets. The
shelves were not supervised by a pharmacist, but a pharmacist had been
instructed to supervise the transaction at the cash desk.
The Court of Appeal decided the shelf display was like an advertisement for a
bilateral contract and was therefore merely an invitation to treat.
Explanation: There are three possibilities in cases pertaining to display of goods
for shopping at a supermarket.
1: Price marked goods are considered as offer. Customer picking up the goods
and putting into their shopping basket is considered as acceptance. This would
lead to an undesirable situation for customers where they cannot change their
mind as the offer and acceptance have taken place even before paying for the
goods.
2: Price marked goods are considered as offer. Customers taking the goods to the
cash desk is considered acceptance. In this case shopkeeper loses its inherent
right of freedom of contract as the contract is formed as soon as the customer
presents the goods at the cash desk. Since shopkeeper has a right to refuse to
sell anything to anyone, it can be exercised in this scenario. Also it takes away
the liberty of shopkeeper to bargain/negotiate. And thirdly, if price marked goods
are considered as offer, the shopkeeper might not be able to accept enough
offers due to limits on stock.
3: Price marked goods are considered invitation to treat. Customer taking goods
to the cash desk is considered an offer which is accepted by the cashier at the
cash desk. It doesnt have the drawbacks of earlier situations; however, it may
create inconvenience for the customer if he is told at the cash desk that the price
of goods is higher than what is written on the display. Since the display price is
only invitation to treat, the shopkeeper is not legally bound to sell on that price,
unless required by a separate legislation.
4: Timetables and Tickets for Transport:
There are no fixed rules on it. The legal position is unclear. There are at least
three positions available in different cases.
A: Railway company advertisements detailing timings and terms as Offer:
Case: Denton v GN Railway (1856)

B: Passenger makes and offer either by standing on the platform or inside the
bus.
Case: Wilkie v London Passenger Transport Board (1947)
C: Passenger asking for a ticket is an invitation to treat. Issuing of ticket is an
offer while accepting the ticket without objection is acceptance.
Case: Thornton v Shoe Lane Parking Ltd (1971)
Homework: Find out the facts of the above three cases and identify why
different legal principles were established in all three cases.

5: Tenders:
Invitations to tenders are generally considered invitation to treat. By submitting
tenders parties are making an offer which is accepted by the person inviting
tenders.
The following are two exceptions to the rule, where invitation to tenders is
considered as an offer and not as invitation to treat.
A: Contractual obligation to accept the most competitive bid if expressed.
Case: Harvela Investments Ltd. V Royal Trust Co. of Canada (1986)
Referential Bid.
Implied Unilateral Contract.
B: Contractual Obligation to consider all tenders which conform to the bid
condition.
Case: Blackpool and Fylde Aero Club Ltd. V Blackpool Borough Council (1990)
Delay caused by postman. Court ordered to consider their bid.
6: Auctions:
The general rule is that an auctioneer, by inviting bids to be made, makes and
invitation to treat. The offer is made by the bidder which, in turn, is accepted
when the auctioneer strikes the table with this hammer.
Case: British Car Auctions Ltd. V. Wright (1972)
The advertisement of an auction sale is generally only an invitation to treat.
Case: Harris v Nickerson (1873)
Websites:

The websites are considered as a display of goods and thus considered as

invitation to treat. When customer places its order, it is making an offer which is
accepted by the website by further correspondence.

How Long Does an Offer Last:

1: Specified Time:
When an offeror states that an offer will remain open for a specific length of
time, it lapses when that time is up. It can also be revoked before that up until it
is accepted.
2: Reasonable Length of Time:
Where no specified time limit is given, offer will lapse after a reasonable length
of time has passed. The reasonableness will depend on two things:
1: Method of communication
2: Nature of subject matter: For something such as a commodity where price
fluctuates daily an offer would lapse quite quickly. For stocks offer may last for
few seconds.
Case: Ramsgate Victoria Hotel Ltd. V Montefiore (1866)
Defendant applied for shares in a company paying a deposit into their bank. After
hearing nothing from them for five months he was then informed that the shares
had been allotted to him and asked to pay the balance due on them. The court
upheld the argument that five months is too long a period for a transaction of
shares.
3: Failure of a Precondition
Some offers are made subject to certain conditions and if such conditions are not
in place, the offer may lapse.
Case: Financings Ltd. V Stimson (1962)

defendant signed a form provided by dealer by which he offered to take a car on HP terms
from the plaintiffs

defendant paid a deposit and took the car away on March 18th

on March 20th defendant was dissatisfied with care and returned it to the dealer, saying he no
longer wished to purchase it

night of March 24/25th, car was stolen from the dealer's premises and damaged

on 25th March, HP company (the plaintiffs), not having been informed that the defendant had
returned the car, signed the agreement

HP company subsequently sold damaged car, and tried to claim damages from defendant for
breach of contract

defendant counter-claimed for 70 instalment

defendant succeeded since return of car was revocation of offer so no concluded contract
between parties

court also held there was an implied condition that car would remain in substantially same
condition and since damage occurred before acceptance, offer had lapsed

4: Rejection
An offer lapses when the offeree rejects it.
5: Counter-offer
A Counter-offer terminates the original offer.
Case: Hyde v Wrench

Defendant offer to sell his farm for 1000

Claimant responded to buy it for 950
The farm owner refused to sell it for 950
The claimant later returned to accept the offer and buy it for 1000 but
the offer was not valid.
Offeror can make a new offer on exactly the same terms but is not obliged
to do so.

6: Requests for information

Request for information such as queries on delivery terms, etc do not constitute
as counter-offers and thus do not revoke offers.
Case: Stevenson Jaques & Co v McLean (1880)
7: Death of the offeror
If the contract requires any such thing which could not be done by others than
offer will be lapsed.
If the offeree knows of offerors death before his acceptance than offer will lapse.
In other situations it would be binding on offerors representatives to fulfil the
offer.
8: Death of the offeree
The representatives of the offeree cannot accept the offer on his behalf.
9: Withdrawal of offer

Offers can be withdrawn even before the specified time.

Withdrawal should be communicated to the offeree.
Case: Byrne & Co v Leon Van Tienhoven (1880)

defendant in UK posted offer on Oct 1st

offer received by plaintiffs Oct 11th

plaintiffs accepted immediately by telegram and posted acceptance on Oct 15th

defendants posted revocation on Oct 8th

revocation received by plaintiffs on Oct 20th

court held revocation too late as received after contract formed on Oct 11th

If revocation would have been received by offeree but for their negligence it did not reach them then it
is not offerors fault.

It is not necessary for the offeree to be informed of the withdrawal by the offeror.
Oferree can be informed by any other reliable source.
Case: Dickinson v Dodds (1876)

on June 10th, defendant offered to sell house to plaintiff for 800, stating offer open until June
12th, 9am

On June 11th, defendant sold property to someone else

plaintiff informed that evening

same evening pl aintiff sent letter of acceptance and followed it up with duplicate letter
delivered at 7am June 12th (before deadline)

court said acceptance invalid as plaintiff knew offeror no longer intended to sell to him

Withdrawal of Offer in the case of Unilateral Contract:

An offer can be revoked/withdrawal at any time before the completion of the
task. However, this may lead to undesirable situation for the offeree if he is very
close to completion of the task and offer has been revoked.
The general rule stays that offers can be revoked even moments before the
completion of the act as it is only then the contract comes into existence.
However, courts have given decision to protect offeree from this hassle. There is
an argument which suggests that for some purposes acceptance may be
constituted by commencing performance of the stipulated condition, so that any
attempt to revoke the offer after the commencement of performance will be too

late. It follows that both parties are bound on acceptance. But no reward will be
payable until the complete performance of the act.
Three possible legal rationales have been given to explain such court decisions.
1: Promissory Estoppel:
Errington v Errington
Prior Legal Relationship
2: Acceptance upon Commencement
Freedom to contract
3: Collateral Contract
Two separate contracts, artificial and distant from reality.