Formation of A Valid Enforceable Contract:

Offer + Acceptance + Consideration + Intention to Create Legal

Relationship
The Eurymedon(1975), Lord Wilberforce

Offer:
1. Unilateral offer: Promise in exchange for an ACT, made to the
world at large
2. Bilateral Offer: Promise for a promise

Bilateral Offer:
Treitel: An expression of willingness to be bound by the terms of the
agreement once it is accepted by the other party.
OR
An expression of willingness to contract on certain terms, with the
intention that it becomes binding upon acceptance. There are no
further negotiations required.
There is no requirement that the offer take any particular form; it can
be in writing, oral or by conduct.

Contrasted with:
Invitation to Treat
- An expression of willingness to enter into negotiation. An
invitation for the other party to make an offer which might lead
to a contract later. Willingness to do business.
- Distinction is one of intention
Gibson v MCC:
- Defendant MCC had a policy of selling council houses to
tenants. Gibson completed MCC’s form and sent it back with
request for purchase price. Treasurer wrote back saying that the
“council MAY be prepared to sell the house” to him at a stated
price if he wished to make a formal application with a further
for.
- Gibson completed the second form leaving the price blank and
sent it to MCC. After Labour gained control of MCC, it
discontinued policy of selling council houses except for
completed contract and claimed that no contract between Gibson
and MCC was concluded,
Held : HL said that no contract concluded because letter “may be
prepared to sell” was not an offer as it did not finally commit
council to selling the house. Merely precatory.

Storer v MCC:
Held: Distinguished from Gibson, the courts held that due to the
language of the previous council, it can be seen that they had
intention to be legally bound thus forming a binding contract.

a) A statement of intention – where the party says that he intends

to do something will not be an offer.
Harris v Nickerson: D(auctioneer) advertised that certain items
including office furniture would be sold to him at Bury St
Edmunds on a certain day. The conditions included ‘highest
bidder to be the buyer’. C attended sale and ‘office furniture’
was not put up for sale. C brought action to recover two days
loss of time. It was held that it would be extremely inconvenient
rule of law to say auctioneer is bound to give notice for any
withdrawal and to be held liable for anyone attending the sale.
Therefore, sale = ITT.
b) Supply of information is not an offer.

c) Harvey v Facey:

- Plaintiff told defendant “will you sell the Bumper Hall pen?”
Telegraph lowest cash price.
- Defendant replied, “lowest price for Bumper Hall pen, 900
pounds”
- Claimant then telegraphed, “we agree to buy Bumper Hall pen
for 900 pounds asked by you. Please send us details.”
- Held: PC held that there was no contract as the mere indication
of the LOWEST PRICE was not an offer. Thus it was not
capable of acceptance.
d) Cliffton v Palumbo
-Plaintiff and defendant were negotiating for the sale of a large
land. Plaintiff said to the defendant, “I am prepared to OFFER
you my Lytham Estate for 600,000 pounds.”

Held: CA said it was NOT an offer even though the word

OFFER was used. Merely a preliminary statement used in the
negotiations.

e) Bigg v Boyd Gibbins Ltd

“For a QUICK SALE, I will accept…”
Held: it was an offer due to the urgency to conclude the contract
and the parties agreed to conclude the contract.
STEREOTYPE cases where the court concludes that it would be
ITT
1. Advertisement:
Partridge v Crittinden:
-An advert was placed, “Bramblefinch cocks and hen for sale”
-Charged with offering for sale wild live birds contrary to
Protection of Birds Act 1954.
Held: Advert was an ITT, not an offer. Thus he was not guilty of
breaching. Lord Parker states that it makes more business sense
otherwise he would have to sell more than he has.

Lefkowitz v Great Minneapolis Surplus Store (American)

Facts: Defendant places ads in the newspaper.

1st ad: Sat 9 am sharp, 3 fur coats – 100 p going for 1p. First come
first serve basis
2nd ad: Sat 9am sharp – 1 Black lapin stope 139p going for 1 p. First
come first serve basis
- Claimant was 1st on both occasions but the D refused to sell it
to him
- Reason was that the house rules states that this only applies to
women and that the claimant was aware of house rules.
- Claimant sued for damages for breach of contract.
- Claimant succeeded to get damages of 138.50 p for second ad.
Advert was an offer and not ITT. Women only cannot apply as
ad did not say so.
- Basically, one cannot, after acceptance impose new, arbitrary
conditions.

-Carlill v Carbolic Smoke Ball

 2. Display of Goods
- Pharmaceutical Society of GB v Boots Cash Chemist
- Charged with breach of s.18(1) of Pharmacy and Poisons Act
1933 – sale of drug must be supervised with a pharmacist
- No pharmacist near the shelves but at the cash desk
- The pharmacist supervised all transactions as was authorised to
refuse transactions if thought fit.
- Held: Sale took place at the cash desk and not at the shelf. The
display of goods was merely an ITT and not an offer. Thus, not
breach of the act.

- Fisher v Bell:

- Defendant displayed a flick knife in his shop window, with the

ticket that read “Ejector Knife – 4s”

- He was charged with offering a knife for sale – against s1(1)

Restriction of Offensive Weapons Act 1959.

- Held: Lord Parker – no offence as it was not an offer, display

was ITT

Unilateral Offers
- A promise in exchange for a conduct
- Terms must be clear as to what is the Act that is required to
constitute acceptance.
- Advert/ email/ announcement could be made to the world at
large or to only one person

Advertisement:
- Generally in relation to ads such as Partridge v Crittinden. but in
Carlill, was considered an offer.
Acceptance:
- Offer must have been accepted by the offeree before an
agreement can be formed/
- Definition: Final and unqualified expression of assent to all
the terms of the offer and it has to be communicated to the
Offeror.
- Communication which falls short o this (merely expressing
gratitude for instructions will not constitute acceptance –
Arcadis Consulting v AMEC)
- Methods of acceptance:
o Can be by words – oral or in writing (Brogden v MRC)
o Can be by conduct
o If a particular method is stipulated by the offeror in the
offer and he states that it is the only method of acceptance
then it should be complied with as that is the ONLY
method which will be accepted by the courts – Manchester
Diocesan Council for Edu v Commercial and General
Investments Ltd.
Postal Rule:
-This is an exception to the requirement of communication
Adams v Lindsell:
A by letter offered to sell to B certain specified goods, if he received
an answer by return of post. The offer letter was misdirected thus the
answer notifying the acceptance of the offer arrived two days later
than it ought to have done. On the day following that when
acceptance should have arrived, A sold the goods to a third party.
Held: There was a contract binding the parties from the moment the
offer was accepted and B was entitled to recover against A in an
action for not completing his contract.
i. The Rule: Valid acceptance the moment the letter of acceptance is
posted. The offeror at this stage DOES NOT have actual knowledge
of the acceptance.
ii. Postal Rule will apply.
1. Use of post was reasonably contemplated by both parties
(Offeror) –
Household Fire Insurance v Grant: Grant applied for
shares in Household Fire Insurance. Household allotted
shares to Grant and they completed this contract by posting
him a letter with notice of the allotment. The letter never
reached Grant and Grant never paid for the shares. When
Household went bankrupt, liquidator asked Grant for
payment of the shares. Grant refused as he believed he was
never a shareholder.

Held:: Liquidator was entitled the money. Postal rule was

applied.

2. Post is the only reasonable form of communication. Must be

reasonable for offeree to use post.
Henthorn v Fraser:
 The application for Postal Rule does not depend on the
medium by which the offer was made or communicated but
upon whether the parties contemplated that the postal rule
might be used.

3. Valid acceptance even if the letter was lost in post.

Household Fire Insurance v Grant
Holwell Securities v Hughes

Prof Treitel – Letter must be correctly addressed and

stamped

While the offeror may have taken the risk of delay, loss,
destruction and other.
It would be unfair to ask him to also bear the further risk of
the offeree’s carelessness.

How does one prove this?

By specifying acceptance applies when the letter reaches
offeror.
Postal Rule will NOT apply:
1. Not reasonable to use post
2. Not reasonably contemplated by the parties
3. Offeror did not intend for postal rule to apply or the terms of the
offer expressly exclude the application of Postal Rule
4. Where the use of post will lead to manifest inconvenience or
absurdity – Holwell Security v Hughes
5. Incorrectly addressed or insufficient postage – LJ Korbetis v
Transgrain Shipping ; Treitel
s
Mason v Benhar Coal Co Ltd, Lord Shand, Scotland – if the
letter is posted and it never reaches the offeror, there should be
no contract. Since the offeree posted the acceptance, he should
know if the letter has reached the offeror and should take steps
to check if the letter has arrived.

Practical difficulties of using Post:

1. Contract formed without offeror knowing(offeror took the
risk)
Example: Offer open till 5pm on Friday. Letter of acceptance
posted at 4.55pm on Fri.

2. Letter lost in post

The contract is still concluded unless it was wrongly
addressed or insufficient postage

Household Fire Insurance v Grant

Mason v Benhar Coal Co Ltd: M, a shareholder who was also

a creditor of the company, filled up this schedule for 50
shares. A second circular was sent out after the meeting
inviting the shareholders to subscribe to them. But M
changed his mind and did not fill up the second form. It was
doubtful an allotment letter was received by him. In the
 subsequent liquidation, he was sought to be liable as a
contributor for the 50 preference shares.

Held: Lord Shand states that where an acceptance of an offer

is said to have been sent out by post, it is not sufficient proof
to bind the offeror that the acceptance is proved to have been
posted without proof that it reaches him.

Revocation of Acceptance
- Position in the UK is that once letter is posted, there would be
valid acceptance and a valid agreement at the time of posting.
There are no English authorities on retraction of the postal
acceptance.
HOWEVER 2 conflicting authorities to note:
1. CANNOT retract acceptance
Retraction will have NO effect
A to Z Bazaar v Minister of Agriculture (1974) [South Africa]
VALID CONTRACT FORMED

2. CAN retract acceptance

Countess of Dunmore v Alexander (1830) [Scotland]
NO VALID CONTRACT FORMED

Arguments to Note:
1. Treitel: Offeror has not suffered any damage yet
2. Allowing the offeree to blow hot and cold – speculate and do
what is most advantageous
3. Hudson LQR 196 – It is a question of prejudice. The offeror
would not have been prejudiced by the retraction because he still
has not yet known about the acceptance. When you speedier
means, the offeror knows of the retraction first before the
acceptance comes to his knowledge. Thus he would know that
there is no contract. Since the offeror undertakes the risk of the
 letter of being lost or delayed, he should also take the risk of the
letter being revoked by the offeree.
BUT it must be noted that the former is beyond the control of the
offeree but the latter is the offeree’s conduct.
v. Reasons for Postal Rule:
I. Since the offeror used post, offeree should also be able to use it.
The offeror should accept whatever risk that comes with using
post
II. Offeree should not be prejudiced once he sends the letter and
should be able to rely on its efficiency
III. Public perception of post in mid-19th century

vi. Today Postal Rule is not used too much:

 Technological advances in communication methods – quicker
modes of communication
 The notion of postal delivery is losing its appeal
 PR is said now said as ‘something of a museum piece’
 The current world bears no relationship with the world that it
was first introduced in
 No longer serves its purpose


 Acceptance in Ignorance of the Offer

 Offer is effective only if it is communicated to the offeree

 Offeree must be aware of the offer. Must have actual knowledge
of the offer
 Cannot accept in ignorance of the offer
 A contract is a consensus ad idem (a meeting of minds). It
cannot happen unless there is a knowledge of the offer – agreed
bargains.
 Can lead to injustice and unfairness to both parties

Gibbons v Proctor (1891)

Facts:
Claimant was a police office who had info which would lead to the
arrest of an individual.
The claimant told a colleague , X, with a request that that X would
pass on the information to the officer in charge of the case.
X then passed that info to another colleague with the same
instructions
Defendant posted an offer of a reward requesting the info which
Claimant had passed onto his colleagues.
Claimant became aware of the offer
Defendant received the info after the reward had been posted and
after claimant had become aware of the reward.

Held: Court found in favour of the claimant. D’s offer was

identified as having been acceptance when D received the relevant
info. At that point, the claimant had knowledge of the offer.
R v Clarke (Aus)
Claimant gave info which led to the capture of a criminal. The
claimant knew about the reward but when he gave the info, he
forgot about the reward.

Held: Not entitled to claim as there was no contract. The offer must
be present to his mind when he did the act of acceptance. Offeree
CANNOT accept in ignorance of the offer.

- It should be noted that motif of acceptance is irrelevant as

stated in Williams v Carwardine
- Prof Hudson said that reward cases are exempted from this rule