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Formation of the Contract - Offer
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Formation of the Contract - Offer
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Formation of the Contract - OfferOffer and Acceptance
There must be agreement between both parties.
An agreement is made when one party accepts an offer made by another. This must
be final.
Consensus ad idem- the minds need to meet.
‘If the parties reach accord by means of offer and acceptance then they should be
contractually bound’. Martin Smith v Williams (1998) CMLR 334.
The court should abandon the offer and acceptance, and should open to all evidence
before a decision can be made as to whether they come to an agreement.
Objective Test
Court uses an objective test (what was actually said and done) when dealing with
contract cases.
Smith v Hughes (1871) LR 6: Smith offered to sell oats to defendant and was
accepted, when delivered Hughes refused to pay for them and further deliveries
were not accepted. Hughes said that ‘when he agreed to buy them, he wanted old
oats rather than green oats’. Smith said that ‘he didn’t know that Hughes wanted old
oats’. The court came to decision that they are all oats as contract was to buy oats
(not specifically old ones).
Storer v Manchester City Council (1974): ‘You do not look at the actual content in a
man’s mind, you look at what he said and did. A contract is formed where there is to
all outward appearances, a contract. Lord Denning.
Court can’t always look at subjective meanings and intentions of parties as it would
be too difficult, and disputes would go on for too long. Hence why the objective test
is taken.
The objective approach stops one party from changing their mind from the initial
agreement.
This will not take place where the offeree knew the truth of what the offer or
mistake that had been made. This VERY rarely takes place.
Offer
An expression of willingness to contract on specified terms, made with the intention that it
shall become binding as soon as it is accepted by the person to whom it is addressed.
An offer can be made to an individual; a group; a class of persons; even the whole
world in its entirety.
An offer can be expressed, in writing or orally.
An offer can also be implied, with no words or writing, such as going to a shop or
vending machine.
Carlill v Carbolic Smoke Ball Company (1892) EWCA Civ 1.
, This case considered amongst other things, the question of whether an offer should
be an offer in law had been made to a particular person, or whether it could be
made to the world at large. Unilateral agreement.
The defendant (company) owned a medical preparation which they advertised as
‘£100 reward will be paid by the Carbolic Smoke Ball Company to any person who
contracts the increasing epidemic influenza, colds or any disease caused by taking
cold, after having used our ball 3 times daily for 2 weeks, according to the printed
directions applied with each ball. £1000 is deposited with alliance bank in Regent
Street showing our sincerity in this matter’.
In simple terms, anyone that catches the flu after having used the ball according to
instructions in given time period will receive £100. To prove that this will be done,
£1000 has been put away in the bank.
Mrs Carlill bought the ball and used it as directed from 20th November 1891 to 17th
January 1892. After this period, she caught the flu and sought the payment of £100,
as offered by CSBC, who refused to pay.
The judges in court were in agreement that Mrs Carlill could succeed in her claim.
The defendants argued several points: the language used in their advert was too
vague (sales talk or ‘mere puff’); ad never intended to create legal relations with the
readers.
The court said that the fact they stated ‘£1000 is deposited showing our sincerity’,
shows that case should be dismissed and that Carbolic Smoke Ball Company had
made a contract when saying this, regardless of what was now being said in court.
Bowen, LJ: ‘this is not a contract with all the world… it is an offer made to the world;
and why should not an offer be made to all the world which is to ripen into a
contract with anybody who comes forward and performs the condition?’
Bowerman v ABTA: school party booked ski trip with a company under ABTA. The
company became bankrupt and the school made a claim. As they had not yet been
on the holiday, ABTA arranges you to have the holiday reimbursed. The school was
reimbursed for cost of holiday, but not for the insurance paid. The notice in travel
agents amounted to a unilateral offer to all customers. ABTA argued that offer was
not intended to be binding, but just for information. ABTA failed as the notice
(objectively) was an offer which could be accepted by making a booking.
When is an offer not an offer?
When it is an ‘invitation to treat’.
Most ads require further bargaining or negotiation before an agreement is made.
Some ads entice people to buy products, it is more of an invitation rather than offer.
Only an offer can be accepted and form a contract.
Statements which indicate the makers willingness to receive offers, they are not
offers themselves.
Gibson v Manchester City Council (1970s).
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