FORMATI ON OF CONTRACT

OFFER AND
ACCEPTANCE

Introduction to Contracts under
English and American Law
Chapter II

CONTRACT LAW HISTORY
English contracts history dates back to the 13 and 14 c., when parties used
forms established for torts to enforce obligations in contracts
Contractual liability and enforcement of contracts were developed using the mechanisms
available for tortious liability, several stages of development of contract law mechanisms
being known:
initially, only contracts under seal were enforceable (the formality of the seal was used because of
widespread illiteracy);
thereafter, the oral agreements could be enforced only in case a duty of payment of money was
not observed (ie any other type of non-performance of the agreement was non-actionable)
known as trespass on the case or assumpsit; the legal fiction used was that when property passed
or activity under the contract was performed, but money due was not paid, the plaintiff
(aggrieved party) should be allowed to recover their own money or property, thus using an
argument specific to liability in tort and not contractual liability
only later on (end of 16 c.) did a party to an oral contract get the legal possibility to enforce any
breach of contract and not only those relating to money not paid
The golden age of contract is in 19 c., when the basis of what is nowadays a
contract were set, based on the principle of the freedom of the parties will
However, very soon after its foundation was set, the freedom of contract
principle began to fade (industrial revolution, mass production,
consumerism and standard contracts, protectionism etc.)
Currently, we are witnessing a rebirth of the freedom of contract
(Thatcherism, competition etc.)


March, 20
English and American contract law
DEFINITION OF CONTRACT
Treitel (in The Law of Contract):
Contract = an agreement giving rise to obligations which are
enforced or recognized by law
Distinguishing element: obligation arising from the
contracting parties agreement
Beatson, in Ansons Law of Contract:
Contract = a legally binding agreement made between
two or more persons by which rights are acquired by one
or more to acts or forbearances on the part of the other(s)
Objectivity in assessing the existence of a contract is
a characteristic of the English law (England and
Wales being covered here)

March, 20
English and American contract law
ELEMENTS OF CONTRACT

Offer
Acceptance
Consideration
Sometimes, are also considered elements of contract:
Intention to create legal relations
the intention to be legally bound generally viewed as
part of a valid offer
presumption of existence of legal intention in
commercial agreements
presumption of lack of legal intention in family/social
arrangements
Capacity of parties
Principle = the existence of capacity;
Exceptions to the principle of capacity: infants, mentally
disordered, under influence (drugs, alcohol etc.)

March, 20
English and American contract law
THE OFFER
March, 20
English and American contract law
Offer = expression of willingness to contract on
clear terms with the intention that it shall become
binding contract as soon as it is accepted
Form of offer
oral
written
by conduct
An offer is to be distinguished from a variety of
other situations which are not constitutive of
offers from a legal perspective (eg invitations to
treat).
Display of goods on shelves
offer

Display of goods in a shop-
window with a price tag
offer

March, 20
English and American contract law
Boots case [QB, 1953]:
contract completed when
buyer indicates objects
by taking them off the
selves (makes an offer)
and shopkeeper accepts
that offer to buy by
taking payment
Fisher v. Bell [QB, 1961]:
even when there is a price
tag on the product, that is a
mere invitation to treat and
not an offer
But: American case law on
special offers ! (selling a fur
coat worth 10,000$ at 1$ is
a special offer, labeled as
such => contract for first
come; decided under
Lefkowitz v. Great
Minneapolis Surplus Store,
Inc, 1957))
INVITATION TO TREAT (I)
INVITATION TO TREAT (II)
Both Boots and Fisher v. Bell were triggered by
situations which were strictly regulated under existing
legislation, although not strictly related to contract
formation:
in Boots, the Pharmacy and Poisons Act 1933 prohibited the
sale of listed poisons without the supervision of a registered
pharmacist;
in Fisher v. Bell it was illegal, as per Restrictions on Offensive
Weapons Act 1959, to offer for sale a flick knife
March, 20
English and American contract law
INVITATION
TO TREAT
(III)
Advertisements are not
offers (Partridge v.
Crittenden [1968])
Exception: in unilateral
contracts, when offers are
usually made to the world
at large;
Carlill v. Carbolic Smoke
Ball Company [1893]
(unilateral offer to
contract, acceptance by
conduct, consideration,
intention to be legally
bound, absence of need
to communicate
accepance => there was a
valid contract)

March, 20
English and American contract law
More on Carbolic Smoke Ball case
Bowen L.J. when deciding Carlill:
How would an ordinary person construe this document? Was it intended
that the 100 should, if the conditions were fulfilled, be paid? The
advertisement says that 1000 is lodged at the bank for this purpose.
Therefore the statement was not a mere puff
I think it was intended to be understood by the public as an offer which was
to be acted upon.
Bowen L.J. gave particular weight to how the ordinary person would construe the intention of
the person placing the advertisement (constituting an the offer at the case at hand), rather than
the subjective intention of that person, insofar as that intention was not properly expressed.
The interpretation of the outward communication of the intention is an example of application
of the objectivity principle under English law
The extravagance of a promise is no reason in law to not enforce a contract.
If this is an offer to be bound, then it is a contract the moment the person
fulfills the condition.
March, 20
English and American contract law

US law on the distinction between
advertisements and special offers
Lefkowitz v. Great Minneapolis Surplus Store, Inc,
86 NW 2d 689 (Minn, 1957)
Under US law as well advertisements are not offers, yet they
may constitute unilateral offers made to the public at large,
which are legally binding offers
Condition for an advertisement to constitute valid offer:
something positive is offerred by offerror on clear, explicit
terms, whose mere acceptance suffice to complete the contract
Saturday 9 A.M. 2 Brand New Pastel Mink 3-Skin Scarfs Selling for
$89.50
Out they go Saturday.
Each ... $1.001 Black Lapin Stole Beautiful, worth $139.50
... $1.00
First Come First Served
March, 20
English and American contract law
INVITATION TO TREAT (IV)
March, 20
English and American contract law
Public tenders whereby, although a call for tender is
only an invitation to treat, it does create specific
obligations on the authority (e.g. to consider the
tender if properly and timely made)
Auctions (with/without reserve)
Offer needs communication to offeree by offeror, in
order for the latter to act in reliance upon the offer
or with the intention of entering into a contract (see
Australian case of R. v. Clarke [1927])
Perfectly identical cross-offers = no contract

TERMINATION OF OFFERS (I)
March, 20
1. Rejection by offeree
2. Counter-offer ( simple inquiry to find out more about the
offer)
Possible evolutions for the English law on counter-offer: art. 2 in
UCC and Vienna Convention on international sale of goods
(1980), for whom acceptances may contain immaterial
alterations to the initial terms of the offer, if offeror does not
object (prior or after the alterations)
Impact on the battle of the forms issues
3. Revocation of offer
Revocation can be made expressly (orally or by notice) or by conduct
and at any time, although offeror promises with delay
Revocation needs effective communication to the offeree to set the
offeror free
Pb: revocation of offers made to the world; English and American answer to
this
Impossibility to revoke when performance began

English and American contract law
TERMINATION OF OFFERS (II)
March, 20
English and American contract law
4. Death of offeror / offeree
5. Lapse of time
when period for acceptance not specified, offer should
be accepted within reasonable period, as there is an
implied term in the offer in this respect
when specified, after the lapsing of the period
6. Failure of an implied/express condition
contained by the offer, irrespective of the
offerees knowing about it
Acceptance of the offer
March, 20
English and American contract law
Acceptance = unconditional agreement to all the
terms of the offer
It is the mirror image of the offer
If not mirror image, then counter-offer that kills
the offer
May be oral/written/by conduct
Acceptance needs to be communicated to offeror by
offeree himself or by authorized agent - Powell v Lee
[1908]
Silence is not acceptance - Felthouse v Bindley
[1862] (application of principle of objectivity)
Definition and application Case law on the rule
March, 20
English and American contract law
Mailbox (postal) rule =
the acceptance of the offer
takes effect as of posting
of acceptance by offeree
It does not matter if offeror
actually received it
Contract is concluded when
mailing the acceptance
Adams v. Lindsell [1818]:
acceptance made during
every moment that the
letter was in post

Henthorn v. Fraser [1892]:
if the circumstances indicate
that it must have been
within the contemplation of
the parties that the post
must be used as a means of
communicating the
acceptance, then the
acceptance is complete
as soon as it is posted =
reasonable and
comparable use of the
post must be made

Mailbox rule
By-passing mailbox rule and
pre-contractual arrangements
March, 20
English and American contract law
One party may not apply the rule if:
Offeror prescribed a certain way of acceptance (e.g. by notice in
writing excludes the use of the post)
Offeree uses a medium more advantageous to offeror
Pb: may one revoke by a speedier means of communication an
acceptance mailed by post? Not clear under English law, Yes under
Scottish case Dunmore v. Alexander [1830]
Receipt rule (not mailbox rule) applies to instantaneous means of
communication
English contract is a bargain, an exchange
To be a good contract there must be a concluded bargain
and a concluded contract is one which settles everything
that is necessary to be settled and leaves nothing to be
settled by agreement between the parties May and
Butcher v. R [1934]
Nowadays
March, 20
English and American contract law
Offer and acceptance analysis may prove inadequate to
complex commercial transactions
Lord Denning: in many cases our traditional analysis of offer,
counter-offer, rejection, acceptance and so forth are out of date The
better way is to look at all the documents passing between the parties
and glean from them or from the conduct of the parties, whether they
have reached agreement on all material points.
However, Lord Denning failed to persuade judges of the
merits of his view. Therefore, currently the offer and
acceptance analysis is not abandoned, but applied with a
certain flexibility to facts in a variety of cases
Overall assessment of commercial reality and intention of
parties in G Percy Tretham Ltd. v. Archital Luxfer [1993]
1 Lloyds Rep 25, as certain elements did not fit easily
into the normal analysis of the offer and acceptance.