In English contract law, an agreement establishes the first stage in the existence of a contract. The three main elements of contractual formation are whether there is (1) offer and acceptance (agreement) (2) consideration (3) an intention to be legally bound.
One of the most famous cases on forming a contract is Carlill v Carbolic Smoke Ball Company,[1] decided in nineteenth-century England. A medical firm advertised that its new wonder drug, a smoke ball, would cure people's flu, and if it did not, buyers would receive £100. When sued, Carbolic argued the ad was not to be taken as a serious, legally binding offer. It was merely an invitation to treat, and a gimmick. But the court of appeal held that it would appear to a reasonable man that Carbolic had made a serious offer. People had given good "consideration" for it by going to the "distinct inconvenience" of using a faulty product. "Read the advertisement how you will, and twist it about as you will," said Lindley LJ, "here is a distinct promise expressed in language which is perfectly unmistakable".
The most important feature of a contract is that one party makes an offer for a bargain that another accepts. This can be called a 'concurrence of wills' or a 'meeting of the minds' of two or more parties. There must be evidence that the parties had each from an objective perspective engaged in conduct manifesting their assent, and a contract will be formed when the parties have met such a requirement.[2] An objective perspective means that it is only necessary that somebody gives the impression of offering or accepting contractual terms in the eyes of a reasonable person, not that they actually did want to contract.[3]
Where a product in large quantities is advertised for in a newspaper or on a poster, it is generally regarded as an offer, however if the person who is to buy the advertised product is of importance, i.e. his personality etc., when buying e.g. land, it is merely an invitation to treat. In Carbolic Smoke Ball, the major difference was that a reward was included in the advertisement which is a general exception to the rule and is then treated as an offer. Whether something is classified as an offer or an invitation to treat depends on the type of agreement being made and the nature of the sale. In retail situations an item being present is normally considered an invitation to treat; this was established for items on display in shop windows in Fisher v Bell [1961] 1 QB 394 and for items on shelves in Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401.
Retail agreements can also be considered invitations to treat if there is simply not enough information in the initial statement for it to constitute an offer.[4] In Partridge v Crittenden [1968] 1 WLR 1204 the defendant had placed an advertisement indicating that he had certain birds for sale, giving a price but no information about quantities. He was arrested under the Protection of Birds Act 1954 for 'offering such birds for sale'; it was ruled that since the advertisement did not specify the number of birds he had it could not constitute an offer; if it did he could have been legally bound to provide more birds than he possessed.[4] The same principle was applied for catalogues in Grainger v Gough [1896] AC 325, when it was ruled that posting catalogues of items for sale to people did not constitute an offer since there was insufficient detail.[4]
Routledge v Grant (1828) 4 Bing 653; 130 ER 920: Grant offered to buy Routledge’s house, and laid down a requirement that his offer had to be accepted within six weeks. During that period he withdrew the offer. The court held that "the offeror was entitled to revoke his offer at any time prior to acceptance because no option agreement existed",[5] which would have obliged Grant to keep the offer open.
In Bradbury et al. v Morgan et al. (1862),[6] the court ruled that a death does not in general operate to revoke a contract, although in exceptional cases it will do so.[7]
A writes to B offering to sell certain property at a stated price. B writes to A offering to buy the same property at the same price. The letters cross in the post. Is there (a) an offer and acceptance, (b) a contract?
In this case, it is assumed that "where offers cross there was no binding contract", because B's acceptance was not communicated to A. Therefore, there was no contract what so ever.
Tinn v Hoffman (1873) 29 LT 271: "A rejection terminates an offer, so that it can no longer be accepted." The authority cited in Bonner Properties Ltd v McGurran Construction Ltd, a Northern Ireland case of 2008, is Tinn v Hoffman and Company (1873):
In that case Mr Tinn was negotiating with the defendants for the purchase of some 800 tons of iron. The exchange of correspondence between them dealt with quantity, time and price. The majority of the Court of Exchequer held that there was no binding contract as the plaintiff's purported letter of acceptance of 28 November did not constitute the same as it was too late for the defendant's offer to sell contained in the letter of 24 November (which had requested "your reply by return of post"). On appeal to the Court of Exchequer Chamber the majority of that court (Blackburn, Keating, Brett, Grove and Archibald JJ, with Quain and Honeyman JJ dissenting) affirmed this judgment of the majority below.[8]
Revocation can be made by the offeror only before acceptance is made. Also the revocation must be communicated to the offeree(s).Unless and until the revocation is communicated, it is ineffective. See:
Byrne v Van Tienhoven (1880) 5 CPD 344.
Hudson ‘Retraction of Letters of Acceptance’ (1966) 82 Law Quarterly Review 169
If the terms of the contract are uncertain or incomplete, the parties cannot have reached an agreement in the eyes of the law.[9] An agreement to agree does not constitute a contract, and an inability to agree on key issues, which may include such things as price or safety, may cause the entire contract to fail. However, a court will attempt to give effect to commercial contracts where possible, by construing a reasonable construction of the contract (Hillas and Co Ltd v Arcos Ltd[10]).
Courts may also look to external standards, which are either mentioned explicitly in the contract[11] or implied by common practice in a certain field.[12] In addition, the court may also imply a term; if price is excluded, the court may imply a reasonable price, with the exception of land, and second-hand goods, which are unique.
If there are uncertain or incomplete clauses in the contract, and all options in resolving its true meaning have failed, it may be possible to sever and void just those affected clauses if the contract includes a severability clause. The test of whether a clause is severable is an objective test—whether a reasonable person would see the contract standing even without the clauses.
↑ Carlill v Carbolic Smoke Ball Company [1893] 2 QB 256
↑ e.g. Lord Steyn, Contract Law: Fulfilling the Reasonable Expectations of Honest Men (1997) 113 LQR 433; c.f. § 133 BGB in Germany, where "the actual will of the contracting party, not the literal sense of words, is to be determined"
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1 is an English criminal law decision by the Court of Appeal, which held an advertisement containing certain terms to get a reward constituted a binding unilateral offer that could be accepted by anyone who performed its terms. It is notable for its treatment of contract and of puffery in advertising, for its curious subject matter associated with medical quackery, and how the influential judges developed the law in inventive ways. Carlill is frequently discussed as an introductory contract case, and may often be the first legal case a law student studies in the law of contract.
Obiter dictum is a Latin phrase meaning "other things said", that is, a remark in a legal opinion that is "said in passing" by any judge or arbitrator. It is a concept derived from English common law, whereby a judgment comprises only two elements: ratio decidendi and obiter dicta. For the purposes of judicial precedent, ratio decidendi is binding, whereas obiter dicta are persuasive only.
Meeting of the minds is a phrase in contract law used to describe the intentions of the parties forming the contract. In particular, it refers to the situation where there is a common understanding in the formation of the contract. Formation of a contract is initiated with a proposal or offer. This condition or element is considered a requirement to the formation of a contract in some jurisdictions.
Consideration is an English common law concept within the law of contract, and is a necessity for simple contracts. The concept of consideration has been adopted by other common law jurisdictions, including the US.
Offer and acceptance are generally recognised as essential requirements for the formation of a contract, and analysis of their operation is a traditional approach in contract law. The offer and acceptance formula, developed in the 19th century, identifies a moment of formation when the parties are of one mind. This classical approach to contract formation has been modified by developments in the law of estoppel, misleading conduct, misrepresentation, unjust enrichment, and power of acceptance.
Partridge v Crittenden [1968] 1 WLR 1204 is an English legal case which was heard by the Divisional Court of the Queen's Bench Division of the High Court of England and Wales on appeal from Chester magistrates' court, and is well known for establishing the legal precedent in English contract law that advertisements are usually considered to be invitations to treat.
The law of contract in Australia is similar to other Anglo-American common law jurisdictions.
Spencer v Harding (1870) LR 5 CP 561 is an English contract law case concerning the requirements of offer and acceptance in the formation of a contract. The case established that an offer inviting tenders to be submitted for the purchase of stock did not amount to an offer capable of acceptance to sell that stock, but rather amounted to an invitation to treat.
Fisher v Bell [1961] 1 QB 394 is an English contract law case concerning the requirements of offer and acceptance in the formation of a contract. The case established that, where goods are displayed in a shop, such display is treated as an invitation to treat by the seller, and not an offer. The offer is instead made when the customer presents the item to the cashier together with payment. Acceptance occurs at the point the cashier takes payment.
Revocation is the act of recall or annulment. It is the cancelling of an act, the recalling of a grant or privilege, or the making void of some deed previously existing. A temporary revocation of a grant or privilege is called a suspension.
English contract law is the body of law that regulates legally binding agreements in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth, from membership in the European Union, continuing membership in Unidroit, and to a lesser extent the United States. Any agreement that is enforceable in court is a contract. A contract is a voluntary obligation, contrasting to the duty to not violate others rights in tort or unjust enrichment. English law places a high value on ensuring people have truly consented to the deals that bind them in court, so long as they comply with statutory and human rights.
A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more mutually agreeing parties. A contract typically involves the transfer of goods, services, money, or a promise to transfer any of those at a future date. In the event of a breach of contract, the injured party may seek judicial remedies such as damages or rescission. A binding agreement between actors in international law is known as a treaty.
Brogden v Metropolitan Railway Company (1876–77) L.R. 2 App. Cas. 666 is an English contract law case which established that a contract can be formed by the conduct of the parties.
An invitation to treat is a concept within contract law which comes from the Latin phrase invitatio ad offerendum, meaning "inviting an offer". According to Professor Andrew Burrows, an invitation to treat is
an expression of willingness to negotiate. A person making an invitation to treat does not intend to be bound as soon as it is accepted by the person to whom the statement is addressed.
The Litigation before the judgment in Carlill v Carbolic Smoke Ball Company was a rather decorated affair, considering that a future Prime Minister served as counsel for the company. A close reading of the submissions and the decision in the Queen's Bench show that the result of the Court of Appeal was not inevitable or necessarily a decision on orthodox principles of previous case law.
Intention to create legal relations, otherwise an "intention to be legally bound", is a doctrine used in contract law, particularly English contract law and related common law jurisdictions.
Holwell Securities Ltd v Hughes [1974] 1 WLR 155 is an English contract law case overriding the usual postal rule. Ordinarily, a contractual offer can be deemed to be accepted when it leaves the offeree and enters the postal system.
Certainty in English law sets out rules for how judges will interpret, sever or put contracts, trusts and other voluntary obligations into effect.
Welch v Jess [1976] NZ recent Law 185 is a reported precedent case in New Zealand on intention to create legal relations in the law of contract.
Power of acceptance is a concept of contract law. It refers to the power vested in the offeree by the offeror through the offer being made. It is used to determine whether the acceptance of an offer is valid.
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