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Amongst the essential elements of a binding agreement are offer, acceptance, consideration, and an intention to create legal relations. This question requires candidates to demonstrate their understanding of the way in which contractual agreements can be entered into, and the consequences of entering into such agreements. In particular it asks candidates to distinguish between offers and invitations to treat, and offers and counter offers. It also requires some consideration of the consequences of entering into a binding contract.
An offer is a promise to be bound on particular terms which is capable of acceptance. The offer sets out the terms upon which the offeror is willing to enter into contractual relations with the offeree, and if the latter party accepts those terms then the result is a legally enforceable contract which can be enforced through legal action.
It is important, however, to distinguish offers from other statements which do not provide the basis of an enforceable contract. For example, a mere statement of intention cannot form the basis of a contract even though the party to whom it was made acts on it (Re Fickus (1900)).
Nor can a mere supply of information amount to an offer (Harvey v Facey (1893)). The most important non-offer, however, is the invitation to treat. This is an invitation to others to make offers. The person extending the invitation is not bound to accept any offers made to them. Common examples involving invitations to treat are:
– the display of goods in a shop window. The classic case in this area is Fisher v Bell (1961), in which a shopkeeper was prosecuted for offering offensive weapons for sale, by having flick-knives on display in his window. It was held that the shopkeeper was not guilty as the display in the shop window was not an offer for sale but only an invitation to treat.
– the display of goods on the shelf of a self-service shop. In this instance the exemplary case is Pharmaceutical Society of
Great Britain v Boots Cash Chemists (1953). The defendants were charged with breaking a law which provided that certain drugs could only be sold under the supervision of a qualified pharmacist. It was held that Boots were not guilty as the display of goods on their shelves was only an invitation to treat. In law, the customer offered to buy the goods at the cash desk where the pharmacist was stationed.
– a public advertisement. Thus in Partridge v Crittenden (1968) a person was charged with ‘offering’ a wild bird for sale contrary to Protection of Birds Act 1954, after he had placed an advert relating to the sale of such birds in a magazine. It was held that he could not be guilty of offering the bird for sale as the advert amounted to no more than an invitation to treat.
Acceptance is necessary for the formation of a contract. Once the offeree has agreed to the terms offered, a contract comes into effect. Both parties are bound, and can enforce the terms of the agreement through the courts. However, if an offeree expressly rejects an offer made to them, then such rejection has the effect of bringing the offer to an end. The effect of this is that they cannot subsequently retract their rejection and purport to accept the original offer. A similar consequence follows from a counter-offer, which is treated as an implicit rejection of the original offer. In order to form a binding agreement acceptance must correspond with the terms of the offer, so it is not open to the offeree to unilaterally alter the terms of the offer. The effect of any such alteration is to bring the original offer to an end, and once again the offeree cannot accept the original offer. The classic case is Hyde v Wrench (1840) in which Wrench offered to sell his farm for £1,000. Hyde counter-offered £950, which Wrench rejected. Hyde then informed Wrench that he accepted the original offer. It was held that there was no contract. Hyde’s counter-offer had effectively ended the original offer and it was no longer open to him to accept it. A counter-offer must not be confused with a request for information. This does not end the offer, which can still be accepted after the new information has been elicited (Stevenson v McLean (1880)). Where a promise agrees to keep an offer open for a period, such a promise is only binding where there is a separate contract to that effect, supported by independent consideration. Without such an option contract the promisor is at liberty to withdraw the offer at any time before the promisee actually accepts the offer.
Applying the foregoing general statement of law to the situation in the problem:
(a) it is immediately apparent that Ade has no cause of action against the auctioneers, as their advert did not amount to an offer capable of acceptance. His situation is similar to that of the plaintiff in Harris v Nickerson (1873) who failed in his attempt to recover damages for his costs in attending a cancelled auction. In deciding against him the court held that he was attempting ‘to make a mere declaration of intention a binding contact’.