The person to who the promise is made must have provided consideration and must do, give or promise something in return for it. For example - A cleans B's car and B gives a £10 in return.
Consideration must not be past. Something that has been done, given or promised prior to the formation of the contract will not count as consideration.
There are cases where no consideration has been provided and the law has introduced two ways to make certain promises binding in those circumstances.
These being the Intention to Create Legal Relations. If the parties make an agreement without any intention of being legally bound then that agreement will not be regarded by the courts as a contract. In commercial agreements there is a presumption that the parties intend the agreement to be legally binding. To rebut this presumption a party will have to produce clear evidence to that effect.
The other is Certainty of Terms. For an agreement to be regarded as a binding contract the terms must be certain. This means it cannot be vague, ambiguous or incomplete. Even if there is a clear intention to create legal relations, if the terms of the agreement are unclear then it cannot be viewed as a legally binding contract.
The courts will sometimes attempt to interpret ambiguous terms in a way that makes them more certain, by reference for example to trade custom or previous dealings between the parties, but this depends very much on the specific facts of the case
The legal requirements of offer and acceptance were shown in Gibson v Manchester city council (1979) WLR 294, HL where the defendant had sent the plaintiff a brochure explaining the then scheme for the sale of council houses with a form so he could apply to the council for information on the price at which his house could be brought at. The plaintiff sent his form to the council which he got a reply saying the price they may be prepared to sell. The letter also regarded also said that it was not to be regarded as a firm offer of a mortgage. The plaintiff was instructed to make a formal application which he did. The council never replied and took the house off the list of council houses under the control of its maintenance department. The House of Lords held that there was no concluded contact but at most an offer by the plaintiff which was never accepted.
In the earlier case of Storer v Manchester city council [1979] 1 WLR 294 the plaintiff had received a reply to his formal application to purchase. The reply was a letter from the town clerk forwarding a formal agreement for sale for the tenant to sign, and stating on receipt of that agreement that town clerk would send a copy of it, signed on behalf of the council in exchanged. It contained all the essential terms for the sale of the house. It was signed by the tenant and sent to the council but they failed to sign it and return their copy In exchange. It was held that there was a binding contract. The clerk’s letter forwarding the formal “agreement for sale” was a clear offer, containing all the essential terms and the tenant had accepted this offer by signing the agreement and sending it. Therefore an offer is a statement which objectively indicates that the offeror is prepared to contract on specified terms
An offer may be revoked or terminated if a reasonable period of time has elapsed - to avoid uncertainty as to what might constitute a 'reasonable period of time' time limits should be specified on any offers made or the offer is withdrawn or revoked at any time prior to acceptance provided that such withdrawal or revocation has been communicated to the person or persons to whom the offer was originally made or the person to whom the offer was made rejects the offer. The offer then lapses and the person to whom the offer was made cannot subsequently change their mind or the person making the offer dies and if any necessary conditions of sale are not fulfilled.
An invitation to treat is 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.
Contract lawyers distinguish invitation to treat from a binding offer, which can be accepted to form a contract subject to the conditions being met. The distinction between an offer and invitation to treat is best understood through the categories that the courts create. Invitations to treat include the display of a good, the advertisement of a price or an auction and an invitation for tenders
It is hard to distinguish between a genuine offer and an invitation to treat since it depends on the intention of the party making an invitation to treat which is shown in Pharmaceutical society of Great Britain ltd v Boots Cash chemists (1953) 1 QB 401 where the defendants changed the format of their shop from a counter service to self service. The Queens Bench and the Court of Appeal rejected this argument. This was because the courts' analysed the situation as follows: the offer to buy came from the customer when the article was put in the basket - this offer the defendants remained free to accept or reject. If they did accept, then this took place at the cash desk in the presence of a registered pharmacist and hence there was no breach of the Act
Advertisements are usually invitations to treat, which allows sellers to refuse to sell products at prices mistakenly marked. Advertisements can also be considered offers in some specific cases. Auctions are sometimes invitations to treat which allows the seller to accept bids and choose which to accept. However, if the seller states that there is no reserve price or the reserve price has been met, the auction will be considered an offer accepted by the highest bidder.
The principle from boots cash chemists was also applied in Fisher v Bell (1961) 1 QB 394 where a shopkeeper displayed a knife in his window and under the offensive weapons act 1959 it was illegal to offer for sale various offensive weapons. The shop keeper was prosecuted however this failed. The court held that the display of the knife in the window was an invitation to treat rather than an offer. Therefore the shopkeeper was not offering it for sale.
An advertisement that involves an offer is usually called a unilateral offer. A unilateral offer is an offer open to the world at large. In the famous case of Carllil v Carbolic Smoke Ball Company ltd (1893) 1 QB 256 the defendants sold a smoke ball and put a advertisement in the newspaper saying they would play £100 to anyone who catches influenza after using it according to the instructions. The claimant caught influenza after using the ball as directed and claimed the sum of £100.
One of the arguments used by counsel for the defendant manufacturers was that there would be no binding agreement because the manufacturers had by their wording, purported to make their offer to the whole world and that, as you cannot contract with everybody, the plaintiff was not capable of accepting this invalid offer. The Court of Appeal rejected this argument. The defendant's advert did amount to an offer to the whole world but it only matured into a contract when someone performed the condition required in the offer. Consequently, although the offer was made to the whole world, the contact is made with that limited section of the public who come forward and perform the condition requested. The plaintiff who had performed the condition by accepting the offer and providing the necessary consideration could enforce the unilateral contract constituted by the advert and won her case and the £100 claimed.
The principle from carllil also applies to advertisements offering rewards. There are traditionally treat as offers rather than invitations to treat. Since there is an intention for the offeror to be bound as soon as the information is given.
The distinction between an offer and invitation to treat is often hard to draw as it depends on the elusive criteria of intention. But there are certain stereotyped situations that the distinction is determined by rules of law. An offer is made when a person shoes a willingness to enter into a legally binding contract. An invitation to treat is a supply of information to tempt a person into making an offer. However the distinction between the two can be misleading and misinterpreted. When misinterpretations and complications happen then it is down to the courts to decide and to distinguish between the two terms so a person is not led into a binding contract of which he does not want to be apart of.
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Bibliography
www.wikipedia.co.uk/offers
www.wikipedia.co.uk/invitations to treat
An introduction to the law of contract By P.S Atiyah
Contract of law by Fafinski and Finch
Contract of law By Paul Richards
Zara Iqbal
Contract Law
John Hamer
