Basic Requirements for the Making of a Contract 1 - Offer (Contract Law)

Focus:

An "offer" is the first basic requirement for the making of a contract.

One needs to be very clear about the differences of two things - an "offer" and an "invitation to treat".

Definition:

Offer: A statement is an offer if the person making it intends to be bound as soon as the recipient accepts the terms stated.

Invitation to treat: An invitation to treat is an indication of a willingness to

conduct business.

Case Authority:

Must-know cases of distinction from "invitation to treat":

Gibson v Manchester City Council (1979)

[The City Council adopted a policy of selling council houses to tenants. The respondent tenant applied on a printed form for details of the price and mortgage terms. The city treasurer wrote to the respondent that the Council ‘may be prepared to sell the house to you at the purchase price of GBP2,725 less 20% = GBP2,180’. The letter gave details of the mortgage likely to be made available and stated ‘If you would like to make a formal application to buy… please complete the enclosed application form and return it to me as soon as possible.’ The respondent completed the application form and returned it on 5 March. Before contracts were prepared and exchanged, political control of the Council changed and the Council decided to proceed only with those sales where contracts had already been exchanged. The respondent sought specific performance of the contract, claiming that the offer in the city treasurer’s letter had been accepted by him. 

HELD: there was no binding contract because no offer capable of acceptance had been made by the Council. The statements in the city treasurer’s letter that the Council ‘may be prepared to sell’ and inviting Mr Gibson ‘to make a formal application to buy’ were not an offer to sell, but merely an invitation to treat.

Storer v Manchester City Council (1974)

[The City Council decided to sell council houses to tenants and devised a simple form for quick agreements which dispensed with legal formalities. The plaintiff applied to buy his council house, and on 9 March 1971 the town clerk wrote to him ‘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.’ The enclosed ‘Agreement for Sale’ had been filled in with details which included the purchase price, the amount of the mortgage and the monthly repayments, although the date when the tenancy was to cease and the mortgage repayments begin had been left blank. On 29 March, the plaintiff signed and returned this Agreement for Sale, but before the town clerk had signed the Agreement on the Council’s behalf, the Council changed political control and discontinued such sales unless contracts had already been exchanged. The plaintiff sought specific performance alleging a binding contract. 

HELD: a binding contract had been concluded. The Council’s intention was to become contractually bound when the plaintiff had signed the Agreement and returned it.

Other examples of "invitation to treat":

1. Display of Goods in Shops

General Rule: Displays of Goods in shops are merely an invitation to treat.

Fisher v Bell (1961)

[A shopkeeper displayed a flick knife in his shop window with a ticket stating ‘Ejector knife – 4s’. he was charged with offering the knife for sale contrary to s.1 (1) of the Restriction of Offensive Weapons Act 1959. 

HELD: a display of goods in a shop window with a price ticket attached was merely an invitation to treat and not an offer for sale so that no offence had been committed]

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd (1953)

[Boots was charged with an offence under the Pharmacy and Poisons Act 1933, s. 18, which required that sales of poisons in Part I of the Poisons List take place under the supervision of a registered pharmacist. Boots operated a self-service system, and a pharmacist at the cash desk was authorized to prevent the removal of any drug from the premises. The factor determining whether an offence had been committed was the point at which the sale in this self-service shop took place. The Court of Appeal agreed with Lord Goddard CJ.

HELD: Boots had not committed the offence. The display of goods on a supermarket’s shelves was merely an invitation to customers to make offers to buy.]

to be continued...