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Agreement- Offer & Invitation To Treat
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This lecture explains Offer & Invitation To Treat as a form of acceptance in contract law.
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L3. Agreement: Offer & Invitation To TreatAgreements within contact law do not have any formal requirements. They
do not have to be written or signed. Instead, agreements may be purely
verbal and no particular form of words need to be used.
3 fundamental cornerstones when forming a contract:
• Consideration
• Intention
• Agreement
Agreement
Within a contract, an agreement is the agreement which the parties have
reached or deemed to have reached agreement. This is usually established
by identifying a clear offer from the offeror and is accepted by the offeree.
The offeror is the person making the offer which has been unconditionally
accepted by the offeree who is the person to whom the offer is made.
For agreement there are two elements:
>Offer
>Acceptance
Intention
The intention of contracts is to create legal relations. This means that the
parties must have intended or deemed to have intended to enter into a
legally binded contract.
Consideration
Consideration is the kind of the value the bargain element of a contract.
Objective Principle vs Subjective Principle
An objective principle in the law determines the intentions and agreement
the parties to be. It is a reasonable impartial third party asking what their
view would be watching what was going on.
A subjective principle means asking what the offeror actually means. It asks
us to look inside their head and find out what their real intention was.
Subjective principle is looking for the actual intention.
Overall, an objective principle is what is used for looking for intention in an
agreement, because if it was subjective it would be open to abuse for every
offeror and would cause potential unfairness to offerees.
> ‘If, whatever a man’s real intention, he so conducts himself that a
reasonable man would believe that he was assenting and that other party
upon that belief enters into the contract with him, the man thus conducting
, himself would be equally bound as if he had intended to agree…’ (Smith v
Hughes 1871 per Blackburn J)
Agreement
As stated previously, there are two elements for an agreement:
• Offer
• Acceptance
Offer
An offer is an expression of willingness to contract on specified terms made
with the intention that it is to become legally binding as soon as it is
accepted by the person to whom it is addressed. (Treitel)
Offers are an expression of willingness to contract on particular terms with
intention to be bound.
The key things the courts look for when looking for an offer are words or
behaviour that unequivocally indicate willingness to contract on specific
terms.
It is important to know that you’ve got an offer because once a statement or
action is categorised as an offer by the law then the party who made the
statement or offer has put themselves in a position where they can become
legally bound simply by the other party accepting their terms.
It is important to be able to distinguish between an offer and an
invitation to treat.
> An invitation To Treat
>First step in negotiations
> An action inviting other parties to make an offer to form a contract.
An invitation to treat is a preliminary step and it has no legal function.
Cases
Gibson V Manchester City Council (1979)
• This case has a very political background.
Manchester City Council had a policy of selling council houses to its tenants.
At the beginning of this transaction, Manchester City Council was a
conservative council. One of the conservative policies was to encourage
everyone to buy their own houses, including council tenants, allowing them
to buy their own council houses.
Mr Gibson wrote to the council and requested details of the price, what
mortgage should be available to him to enable him to buy his own council
house.
The crucial letter came back on the 10th February 1971, and the council
replied stating the corporation to the council may be prepared to sell the
house to him at the price of £2725. The letter also contained details of the
mortgage and ended with the words ‘if you would like to make formal
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