General Principles of Offer and Invitation to Treat

Learning Objectives:
Students will -
a) learn the basics about 'offer'
b) be able to differentiate between offer and invitation to treat
c) be acquainted with precedents which led to established rules of law regarding the status of offer and invitation to treat under Common Law

1. Offer and Acceptance in Contract Preeti Kana Sikder Lecturer Department of Law & Justice Jahangirnagar University

2. Contents of Current Chapter Rules of law relating to offer Elements of Offer Distinction between offer and invitation to treat Identifying offers in everyday transactions Termination of offer Rules of law relating to Acceptance Elements of Acceptance Communication of Acceptance Prescribed Method of Acceptance

3. What is an ‘offer’? An expression of willingness to contract on specified terms, made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed.

4. Has an agreement been reached? Under the objective test of agreement, an apparent intention to be bound may suffice, even though in fact he has no such intention.

5. Manchester City Council: the local government authority for Manchester , a city and metropolitan borough in Greater Manchester, England

6. Gibson v Manchester City Council (1978) Defendant prepared a brochure explaining how a council tenant could purchase his council house. Mr. Gibson completed the form contained in the brochure and sent it to the council together with a request that he be told the purchase price of the house. Treasurer of the council wrote to inform him that the ‘council may be prepared to sell the house’ to him at a stated price and that if he wished to make a ‘formal application’ to purchase the house he should complete a further form.

7. Gibson v Manchester City Council (1978) Mr. Gibson completed the form, but he left the purchase price blank because he wished to know whether the council would repair the path to his house or whether he could deduct the cost from the purchase price. The Council replied that the price had been fixed according to the condition of the property, and so allowance had been made in the price for the condition of the path

8. Gibson v Manchester City Council (1978) Mr. Gibson accepted this and asked the council to continue with his application. Mr. Gibson carried out maintenance to the house.

9. The party's platform emphasises greater state intervention, social justice and strengthening workers' rights

10. Gibson v Manchester City Council (1978) Winning the local elections, labour party promptly discontinued the policy of selling off council houses, unless there is already a legally binding contract at force. The Council refused to sell the house to Mr. Gibson because they claimed that no contract had been concluded for the sale of the house.

11. The Decisions The Trial Judge and the Court of Appeal held that a contract had been concluded. Lord Denning held that there was an agreement between the parties on all material points, even though precise formalities had not been gone through. House of Lords held that no contract had been concluded. The letter written by the treasurer, which stated that the council may be prepared to sell, was not an offer itself. It was simply an expression of their willingness to enter into negotiations for the sale of the house

12. A TEST OF INTENTION? While negotiating many preliminary communications may pass between the contracting parties before a definite offer is made. Whether a statement among such negotiations is an offer depends primarily on the intention with which it was made. A statement is not an offer if it in terms negatives the maker’s intention to be bound on acceptance.

13. Offer A statement by one party of a willingness to enter into a contract on stated terms, provided that these terms are, in turn, accepted by the party or parties to whom the offer is addressed Invitation to Treat An expression of willingness to enter into negotiations which, it is hoped, will lead to the conclusion of a contract at a later date.

14. Manchester City Council: the local government authority for Manchester , a city and metropolitan borough in Greater Manchester, England

15. Storer v Manchester City Council (1974) In 1970 the defendant city council, which was then controlled by the Conservative Party adopted the policy of selling council houses to sitting tenants .

16. The Conservative and Unionist Party

17. Storer v Manchester City Council (1974) The council instructed the town clerk to devise a simple form of agreement enabling sales to take effect at the earliest possible date with the object of dispensing with legal formalities

18. Storer v Manchester City Council (1974) The plaintiff applied to buy the council house which he was renting, with a mortgage loan from the council. The application was approved by the city treasurer. the town clerk, in a letter dated 9 March 1971 , wrote to the plaintiff: ‘I understand you wish to purchase your Council house and enclose the Agreement for Sale . 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.’

19. Storer v Manchester City Council (1974) The plaintiff filled in the name of his solicitors and, on 20 March , he signed the agreement and returned it to the council . Before the town clerk had signed the agreement on behalf of the council and sent the council’s part of the agreement to the plaintiff, there was an election and the Labour Party gained control of the council. Under Labour control the council resolved to discontinue selling council houses.

20. The party's platform emphasises greater state intervention, social justice and strengthening workers' rights

21. Guesses on the decision?

22. Storer v Manchester City Council (1974) It was held that a binding contract for the sale of the house had been concluded by offer and acceptance when the plaintiff accepted the offer to sell contained in the letter of 9 March by signing the agreement for sale and returning it to the council. So, the negotiation had advanced beyond the stage reached in Gibson but had not resulted in an exchange of contracts.

23. Storer v Manchester City Council (1974) It was the council’s intention (having regard to their instructions to devise a simple form of agreement and to the terms of the actual agreement sent to the plaintiff and the accompanying letter of 9 March) that the council would become contractually bound when the plaintiff had signed the agreement and returned it. The letter of 9 March signed by the town clerk constituted a sufficient note or memorandum of the agreement .

24. Observation In both of these cases it has been proved that judges can and do differ in the results which they reach in interpretive exercise of determining an offer. It has also been proved that such interpretation must ultimately rest on its own facts.

25. The distinction between offer and invitation to treat is primarily one of ‘intention, that is, did the maker of the statement intend to be bound by an immediate acceptance , or did he only intend his statement to be a part of the continuing negotiation process ?

26. Prima Facie Rules of Law (rules accepted as correct until proved otherwise) There are certain stereotyped situations in which the distinction between offer and invitation to treat is determined by rules of law.

27. Prima Facie Rules of Law (rules accepted as correct until proved otherwise) It may be possible to displace these rules by evidence of contrary intention, but in absence of such evidence they will determine the distinction between offer and invitation to treat, without reference to the intention within

28. Most Commonly Encountered Examples of such rules Shop Display Advertisements of unilateral contracts Advertisements of bilateral contracts Auction Sales Timetables and Passenger tickets Tenders Sales of shares

29. Who makes the offer in Shops?

30. Who makes the offer in Shops?

31. Three Approaches: Who makes the offer in Shops? The shopkeeper makes an offer by displaying the goods which are accepted when the goods are picked up by customer Display of goods is an offer which is accepted when the purchaser takes the goods to cash desk Display of goods constitutes an invitation to treat. Offer is made by the customer when he presents the goods at the cash desk. The offer may be accepted or not.

32. Fisher v Bell (1961 ) Display of goods in a shop window is an invitation to treat The defendant had a flick knife displayed in his shop window with a price tag on it. Statute made it a criminal offence to 'offer' such flick knives for sale. His conviction was quashed as goods on display in shops are not 'offers' in the technical sense but an invitation to treat. 

33. Pharmaceutical society of GB v Boots Cash Chemists (1953) Sale took place at the cash desk as the display of the goods was simply an invitation to treat

34. Lefkowitz v Great Minneapolis Surplus Stores (1957) The defendants placed two advertisements in a newspaper.

35. Lefkowitz v Great Minneapolis Surplus Stores (1957) First Ad read : “Saturday 9 am sharp; 3 Brand New Fur Coats, worth 100 Dollars; First Come, First Served, 1Dollar each.” Second Ad read: “Saturday 9 am…1 Black Lapin Stole…worth 139.50 Dollars…1.00 Dollar; First Come, First Come, First Served.”

36. Lefkowitz v Great Minneapolis Surplus Stores (1957) Advertisement was an offer as it mentioned definite conditions and no house rule was mentioned

37. Chapelton v Barry Urban District council (1940) Chapelton approached a pile of chairs owned by Barry Urban District Council. A notice adjacent to the chairs detailed the cost of hire and advised customers to obtain tickets. It also declared that the tickets shall be retained for inspection. Chapelton purchased tickets and placed them in his pocket. When Chapelton sat down on the deck chair, the canvas broke down and he became injured.

38. Should the District Council be held liable for putting up defective chair on the pile?

39. On one side of the tickets, the council purported to exclude liability for any accident caused by hiring the chairs . Chapelton v Barry Urban District council (1940)

40. Chapelton v Barry Urban District council (1940) In lower court, BUDC was effectively excluded of any liability put forward. They claimed Chapelton had notice of the terms as those were printed on the ticket. The adjacent notice was an invitation to treat while the ticket was the written contract itself, detailing the terms by which the . In appeal, it was decided that the ticket should be regarded as a receipt provided after the formation of the contract and not a written contract.

41. Reasoning Backwards?

42. Two more categories of contracts Contract where one party makes another party an offer to perform an act and assent is promised by performing the act is an unilateral contract. Bilateral (or reciprocal) contracts are those by which the parties expressly enter into mutual engagements, such as sale or hire. a contract in which both the contracting parties are bound to fulfill obligations reciprocally towards each other

43. Advertisements of unilateral contracts Bowerman v Association of British Travel Agents Ltd (1996) Carlil v Carbolic Smoke ball Co (1893)

44. Bowerman v Association of British Travel Agents Ltd ( 1996) The claimant was to take part in a school skiing trip. The first operator was a member of the defendant association, and ceased trading through insolvency . The advert ‘ABTA arranges re-imbursement’ constituted a unilateral offer to contract in this context. The notice would be seen to create legal relations. The ABTA notice displayed in the travel agent’s offices created a contract between ABTA and the client.

45. Advertisements of bilateral contracts Patridge v Crittenden (1968)

46. What is an Auction Sale? A public sale of land or goods, at public outcry, to the highest bidder . At an auction, an auctioneer will invite bids on an item (a lot), people will bid and once the bidding ceases the auctioneer brings down his hammer and the highest bidder is sold the item. With Reserve v Without Reserve

47. Auction Sales: When does Offer Arise? An auctioneer, by inviting bids to be made, makes an invitation to treat . Offer is made by the bidder and accepted by the auctioneer when he signifies his acceptance in the customary manner. Before such acceptance the bidder may withdraw his bid and the auctioneer may withdraw the goods. Collateral contract

48. WARLOW V HARRISON (1859) A public auction of a horse, without reserve, was advertised by the defendant, an auctioneer. The plaintiff bid 60 guineas and the owner of the horse bid 61 guineas. There were no further bids and the defendant put down his hammer on the bid for 61 guineas. The plaintiff claimed the horse should be his as he was the highest bona fide bidder.

49. WARLOW V HARRISON (1859) The advertisement , as it included the words without reserve, was an offer to sell to the highest bona fide bidder. The defendant was in breach of that promise. It was an offer of a unilateral contract as the defendant bound himself to sell to the highest bidder . The plaintiff had performed the required act (made the highest bid). However, because the hammer had not been put down on the plaintiff's bid there was no acceptance of his offer. Therefore, there was no contract for the sale . The plaintiff was only entitled to sue the defendant for the loss of the opportunity to buy the horse.

50. BARRY V DAVIES [ 2001] The defendant, the auctioneers, were instructed to sell two machines used in the motor industry. The claimant was told the sale would be without reserve . The claimant was the highest bidder, bidding £200 for each. The defendant refused the claimant's bid and withdrew the lots from auction as the machines were worth £14000 each. The claimant sought damages for breach of contract.

51. BARRY V DAVIES [2001] The court followed that there was an offer by the defendant because the auction was without reserve. The claimant had accepted such offer by making the highest bid. Therefore, the defendant was in breach of contract. The claimant was awarded £27600 in damages. The cost of buying the machines (£28000) minus his bid of £400, in order to compensate him for his loss due to the breach of contract.

52. Tenders The process whereby governments and financial institutions invite bids for large projects that must be submitted within a finite deadline

53. The general rule is that these requests are an invitation to treat and any submission of tenders are offers. It is then up to the person who requires the service to decide whether to accept any of the offers .

54. Spencer v Harding (1870) The circular read: “28, King Street, Cheapside, May 17th, 1869. We are instructed to offer to the wholesale trade for sale by tender the stock in trade of Messrs. G. Eilbeck & Co., of No. 1, Milk Street, amounting as per stock-book to 2503l. 13s. 1d., and which will be sold at a discount in one lot. Payment to be made in cash. The stock may be viewed on the premises , No. 1, Milk Street, up to Thursday, the 20th instant, on which day, at 12 o'clock at noon precisely, the tenders will be received and opened at our offices. Should you tender and not attend the sale, please address to us sealed and inclosed , 'Tender for Eilbeck's stock.' Stock-books may be had at our offices on Tuesday morning. Honey, Humphreys, & Co.”

55. Spencer v Harding (1870) The claimant made the highest bid and was refused the final sale. The court held that the circular was a mere proclamation that the defendant's were interested in negotiating a price for the sale of the stocks and to receive offers. Therefore, the plaintiff's claim failed . Willes J noted that there was no unilateral contract because there was no specific wording such as and we undertake to sell to the highest bidder to make the circular a binding offer.

56. A statement inviting tenders for the supply of goods is not normally an offer But the position is different where the person who invites the tenders states in the invitation that he binds himself to accept the highest offer to buy.

57. BLACKPOOL & FYLDE AERO CLUB LTD V BLACKPOOL COUNCIL [1990] IN NEXT CLASS

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