Offer

Notes:

Offer and Invitation to Treatofferitt.ppt  Contract Notescontractnotesmhage-1.doc

Introduction

An offer is the starting point for a contract and can be made either orally or in writing.

 

If a statement made by one party is regarded as negotiations, before a legal offer is made (known as an invitation to treat), then there will be no legally binding offer of a contract.

 

The offer must be communicated to the other party. Unless a person knows about an offer, it cannot be acted upon. Once it is known to exist, the essential point is to establish how long the offer lasts, as it can only be accepted whilst the offer remains open. Once the offer has ended it cannot be accepted and so it cannot be the basis of a contract. A new offer would then have to be made to start the process of forming a contract. The contract is formed when an offer has been accepted.

What are the differences between an offer and an invitation to treat?

 

An invitation to treat is merely an indication of a willingness to enter negotiations. In a lot of situations it is the buyer of the product/service not the seller that makes the offer. See below for some reasons why this is the case.

But an offer is a statement that a person is willing to enter into a legal contract.

 

Both an offer and invitation to treat can be made either verbally or in writing. However, cases have distinguished between situations that are an offer and those that are an invitation to treat and are mainly common sense.

 

Why do we have situations that are only classed as a willingness to start negotiating a contract rather than going straight into an offer that can be accepted?

 

One reason contract law has situations classed, as an invitation to treat is that there are many different goods and services that are traded which have many different methods of forming a legal contract. For example, to buy a house you cannot make a contract simply through an oral agreement. A written document must be signed by both parties and witnessed by an independent person, such as a solicitor.

 

Specific reasons for the sale of a product only being classed as an Invitation to treat:

 

  1. Limited stock of the item
  2. The item may have legal restrictions on its sale
  3. The seller may wish to choose who purchases the product
  4. The seller may wish to negotiate the price, e.g. on ebay or newspaper advert
  5. The seller may wish to decide on whether or not he sells the product at all

 

Invitation to treat

Offer

Case

Legal point

Advertisement in a newspaper

 

Partridge v Crittenden

An advertisement for the sale of protected birds was not an offer

Goods displayed in a shop window

 

Fisher v Bell

A knife with a price label on it in a shop window was not an offer but an invitation to treat.

Goods on a supermarket shelf

 

Pharmaceutical Society of GB v Boots

Goods in a self-service store are an invitation to treat, not an offer

 

Getting goods from a vending or other machine

Thornton v Shoe Lane Parking

A ticket from an automatic machine in a car park involved the car park owner making the offer and the customer accepting the offer by putting money in the machine.

 

Taking a chair and awaiting the attendant to collect your money

Chapleton v Barry

A pile of deckchairs for hire on a beach was an offer that the customer could accept.

 

Response to a request for information

 

Harvey v Facey

A response to a request for information is just an invitation to treat, not an offer

Uncertain words

 

Gibson v Manchester City Council

A statement is not an offer if the words you use show uncertainty as to whether there is a willingness to make a contract.

The offer must be communicated to the other party

 

An offer cannot be accepted unless the person who is seeking to accept it knows of its existence.  If the other person is not aware of the offer then it cannot be accepted.

 

Potential purchasers who are responding to an invitation to treat and do not realise that they have failed to communicate with the person making the invitation will have no legal claim as there is no contract.

 

 

Carlill v Carbolic Smoke Ball Co: Mrs Carlill claimed the reward offered by the Carbolic Smoke Ball Co. for anyone who used its smoke ball (a sort of medicinal vaporiser or inhaler) but caught influenza. The company refused to pay stating that the so-called offer of £100 was a mere marketing ‘puff’ and not intended to have any basis for a contract. Mrs Carlill argued that it was an offer, which she had accepted by buying and using the smoke ball in accordance with the instructions.

 

Held: An advertisement could contain an offer if it was clearly meant to be taken seriously and was not just an advertising gimmick. The court also said that an offer could be made to the whole world, and that anyone hearing the offer could accept it: it just had to have been communicated to the individual claiming to have accepted it.

 

Mrs Carlill therefore won her case because exceptionally the advert was clear enough to be an offer to anyone reading it, purchasing the product and following the instructions precisely.

 

This is an example of a Unilateral Contract, which is where one party makes a communication to any other parties that may read the advert and is therefore regarded as an offer to the whole world.

An offer can come to an end in one of six ways

 

 

 

 

  1. Lapse of time: Some offers are made for a fixed period of time, such as seven days or one month. At the end of that period, the offer lapses and comes to an end. Most offers do not have any fixed time limit and so will come to an end after a reasonable time. What is reasonable will depend on all the circumstances.


  2. Revocation: A person who makes an offer can revoke (withdraw) his offer at any time before it has been accepted. For this to happen, the person to whom the offer was made must receive notification of the withdrawal, at which point he can no longer accept the offer. A withdrawal of an offer can even occur during any period when the offer is said to be open.

    Revocation can be implied by another’s actions.

    Once an offer for an object is accepted, it cannot be accepted again. However, where the offer has been made to more than one person, there are potential difficulties, as there could be two contracts with respect to one object. The Situation where one person wants an offer to remain open for a period of time is quite common as the time period is to be used for getting financial and other plans drawn up. So as to make sure that the offer will remain open, a separate contract has to be made. This is usually a contract to keep the offer open for an agreed fixed period in exchange for an agreed sum of money. This is known as ‘buying an option'.



  3. Rejection: Once an offer is rejected, it cannot be accepted and the offer comes to an end. The person to whom the offer is made does not have a second chance to accept the offer. If he attempts to accept the offer he is in fact making a fresh offer that the person who originally made the offer can accept or reject. The rejection must be a clear rejection and not just a request for more information.
  4. Counter-offer: A counter-offer both rejects the original offer and creates a new offer that can then be accepted or rejected. This commonly takes place during negotiations.


  5. Death: In English law contracts can be enforced against a dead person’s estate, if necessary by suing the deceased's executors or administrators. However, an offer made by a person who dies before the offer ends cannot be accepted if the person to whom the offer is made knows of his death. If he does not know of the death, then the offer can still be accepted. This is logical as it could otherwise provide hardship for the family of a business owner who died, as contracts in the course of negotiation would have to be restarted.


  6. Acceptance.

 

Way offer can end

Case Name

Facts

Legal point

Lapse of time

Ramsgate Hotel v Montefiore

Defendant offered to buy shares in the Ramsgate Victoria Hotel on 8 June. On 23 November, the company tried to accept the offer but the defendant no longer wanted to buy the shares.

An offer to buy shares in a company had lapsed when the company responded five months later. The person making the offer was entitled to assume that the company did not want him to invest as the length of time was unreasonable.

Revocation

Routledge v Grant

Grant made an offer to buy Routledge’s house, the offer to remain open for six weeks. Grant decided not to buy the house three weeks later and told Routledge he was withdrawing his offer. Two weeks later Routledge tried to accept the offer.

The court decided that the offer had been withdrawn, so it could not be accepted.

 

An offer can be revoked at any time even if it is said to be open for a fixed period that has not yet ended.

 

Dickinson v Dodds

Where Dodd’s offered to sell his house to Dickinson. The offer was open until Friday. On Thursday afternoon, Dickinson heard from someone else, whom he knew to be reliable, that Dodds had sold the property to someone else. On the Friday morning Dickinson delivered a formal acceptance to Dodds but the court decided that the offer made to Dickinson had been revoked on the Thursday when he heard of the sale of the house.

Where a reliable person informs the person to whom an offer has been that the offer has ended, it is as if the revocation of the offer had been made by the person who had made the offer.

 

Hearing about the sale from a reliable source is the implied revocation of the offer.



Way offer can end

Case Name

Facts

Legal point

Rejection

Stevenson v McLean

There was an enquiry from a person to whom goods had been offered for sale as to whether he could have two months' credit. There was no reply, so assuming that there would be no credit; he accepted the offer being prepared to pay cash.

An enquiry about whether credit was available did not reject the offer, which could still be accepted.

 

The court decided that this enquiry about credit was not a rejection of the offer or a counter-offer and the offer remained open and had been accepted.

Counter offer

Hyde v Wrench

The facts of that case were:

 

6 June: Wrench offered to sell his farm to Hyde for £1,000. Hyde offered £950

9 June: Wrench rejected Hyde’s offer

21 June: Hyde tried to accept the offer to sell at £1,000. Wrench refused to sell at £1,000, as his original offer had ended with Hyde’s counter-offer of £950.

A counter-offer ends the original offer. In this case this occurred in negotiations over the price to be paid for a farm.

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