What are the purposes of the rules about offer and acceptance with regard to the formation of contracts?

        An offer is a statement of willingness by an offeror to enter a contract on stated terms, provided these terms are accepted by the offeree. This can be done by oral communication, conduct or in writing. The offeror leaves it to the initiative of the offeree to accept, and if accepted, is binding. One key rule is that the offeror must intend it to be binding on himself – he must intend to create legal relations, for it to be a bona fide contractual offer. This helps ensure that parties trying to enforce whimsical promises will not waste time and money in court, when a contract never existed.

   An offer can be distinguished from an ‘invitation to treat’, which is merely an invitation to enter into further negotiations. Advertisements and goods displayed on shelves in a shop are an invitation to treat (Pharmaceutical Society of GB v Boots Cash Chemist), as if it were an offer, once the customer had taken the item off the shelf, he or she would be contractually obliged to buy it, and the shopkeeper to sell it. One rule of offer is that it must be final, and is not open for negotiation, as opposed to an invitation. In Gibson v Manchester City Council a letter sent to the plaintiff inviting him to apply to purchase his council home was an invitation to treat, not an offer, as the council stated they “‘may’ be prepared to sell”, rather than the affirmative “‘will’ sell.”. As you can see, it is not easy to distinguish between a real offer, when the intention to create legal relations is not stated or clear.

    One could argue that the strict rules of offer and invitation are fundamental to the efficient functioning of the marketplace. If all offers, advertisements or shop displays were construed as contractual offers by the shopkeepers, they would legally be bound to sell as many as consumers demanded, and consumers would be bound to buy as soon as they picked the item off the shelf. The marketplace requires competition between businesses and individuals to work, and bargaining facilitates this competition. These strict rules about where the courts may find a contractual offer are important to preserve the freedom of a party seeking to make an exchange, and he must be able to give information about what he is willing to contract with, without finding himself with legal obligations he cannot meet.

    Acceptance occurs when the offeree, by words or conduct, assents that he agrees to the offeror’s terms. If he wishes to change the terms and re-negotiate, this is a counter-offer which destroys the original offer. There is a general rule that an offer cannot be accepted by silence,however there are some exceptions, for example where the offeree assumes that by silence he has accepted, and acts upon that. This gives some protection to the offeree, so that he does not find himself contractually bound where he gave no indication as to whether he wished to reject or accept the offer extended to him.

    There can be an acceptance in ignorance of the offer – for example, B puts up posters stating a reward for the return of his dog. C does not know of the reward, but finds the dog and returns him to B. The general rule in this situation is that C would not be able to sue for the reward on contract. The importance of this rule is to enforce the principle of a ‘mirrored’ offer and acceptance mentioned previously, without which there is not a true agreement. If the offeree performs an act not knowing that an offer exists, he cannot be said to be doing that act on the request of the offeror, therefore his act is not a true acceptance.

    The acceptance must be communicated to the offeror to be valid, except in certain circumstances such as adverts or rewards. This was illustrated in Entores v Miles Far East Corporation by Denning LJ, where he said that “if an oral acceptance is drowned out by overhead aircraft so the offeror cannot hear, then there is no acceptance until it is repeated when there is silence”. This rule is not an absolute one, and has a few exceptions, such as where the terms of the offer do not require notification of acceptance, or the controversial postal rule. It was held in Adams v Lindsell that acceptance takes place when the offeree posts the letter into the post-box. The justification for this rule is weak, but helps ensure that the offeree is not liable for problems with the postal service, and that he should be able to rely on the efficacy of his acceptance. There is a general moral grounding that if the offeror chose to start his communication by post, then so much the worse for him if he encounters problems with the postal system. In the modern context of phone, email and fax, there is less need to rely on the less efficient postal method of communication between parties.

    In conclusion, I would imply from these rules of application that they are designed to promote fairness and equity between contracting parties, and to enforce some moral common sense. If two parties do not agree completely on the terms of a contract, and neither know what the other is offering or if the other has accepted their offer, how is it ever possible for a court to apply and legally enforce such an agreement? In fact, is there an agreement at all? For a legally binding contract to exist, there must be some sort of intention to create legal relations – to make an offer to which the offeror intends himself to be bound. He is unlikely to intend this if it is a mere ‘puff’ or casual promise. Over all these other reasons, I would rather think of the law of contract in practice. It is a waste of time and court funds to bring a case to force one party to fulfil contractual obligations where a contract did not exist in the first place.

Excellent beginning, where the importance of the objective approach is brought into focus. However you can do more with this insight. How do you reconcile the judicial construction of agreement under the objective approach with the principle that the law upholds contractual obligations because they are voluntarily agreed to and O&A is supposed to capture that parties’ own agreement (are the judges deciding what parties agreed to and then imposing obligations?)

 

I also appreciate the specific page number pinpoints in the footnotes – makes the research trail easy to follow.

 

I agree with: ‘it is not easy to distinguish between a real offer, when the intention to create legal relations is not stated or clear’, but is there a principled distinction between the two Manchester CC decisions or are they distinct merely on policy grounds? Is the Invitation/Offer distinction more problematic than it seems?

 

Overall, comprehensively descriptive on what the rules are, logically structured, clearly written and systematically developed. However it remains a descriptive essay without sufficient appreciation of underlying issues which cut across the specific rules. As indicated above, where does the objective approach lead us? Or what about Hugh Collin’s insight that O&A rules determine at what moment of time it is reasonable to act in reliance upon the existence of a binding legal contract, not merely to ascertain whether in fact the parties were in agreement?

 

Mark: 67

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