As the advertisement had also stated that ‘£1,000 is deposited with the Alliance Bank, showing our sincerity in this matter’, the court decided that a reasonable person would therefore take the offer of £100 seriously. It was held by the court that the advertisement was capable of forming a binding contract, and so Mrs. Carlill was entitled to the payment of £100.
The better view would be that this leaflet constitutes an offer which, on acceptance, would form a unilateral contract.
A unilateral contract occurs when one party promises that they will do something, in return for something being done by the other party. The promise made by the first party only becomes binding once the action has been carried out. Examples of unilateral contracts are often seen in cases dealing with rewards for the giving of information, for instance Errington v Errington and Woods.
The facts of the case were that a father bought a house, in his name, for his son and daughter-in-law to live in. He paid cash deposit of £250.00 but had to borrow a further £500 from a building society, which was to be paid back in installments of 15s per week. He told the couple that if they paid the installments each month, then when the mortgage was paid off, he would sign the house over to them. After paying the weekly installments over a period of time, the couple was no longer able to afford to re-pay the mortgage, and so the father paid all future installments.
On delivering his judgment on this case, Lord Denning quoted:
“The father’s promise was a unilateral contract – a promise of the house in return for their act of paying the instalments. It could not be revoked by him once the couple entered on performance of the act, but it would cease to bind him if they left it incomplete and unperformed, which they have not done.”
The appeal was later dismissed by the court.
This case highlights the view that if one party carries out the action, then they are entitled to claim the reward. In the situation concerning D & M Rewards, if the offeree (Mr. Taylor) telephoned, wrote or sent a text message to the claim line he would be entitled to receive one of the prizes listed in the leaflet.
The next step in determining whether the leaflet could form a binding contract is to look at the certainty of the terms of the offer. A contract cannot exist if the terms are not certain.
The prizes available have been listed in the leaflet and the appropriate methods of communication of the acceptance have been stated (by telephone, text message or post).
It has been made clear to the offeree that they must, if they would like fast delivery, accept the offer within “9 working days”. The offeror has also clarified what his or her own contractual obligations would be, on acceptance of the offer, by stating:
“We GUARANTEE after you have claimed, to personally pack and post your reward that has been allocated to you from our reward fund.”
There can be no doubt that the terms of this offer are definite and so in order to confirm that this leaflet could form the basis of a legal contract, the intentions of D & M Rewards, in publishing the leaflet, must be identified.
By looking at the leaflet objectively, there does seem to be a genuine intention to create legal relations with the reader on behalf of D & M Rewards. The offer is in writing (in the form of the leaflet) and the contractual obligations of D & M Rewards have been stated clearly, and unambiguously.
The information needed in order to claim a prize has been provided not only once, but twice. There would be no point in the reader calling, or sending a text message to, the claim line (which would carry a cost of approximately £10.50 for a phone call, and £7.50 for a text message) to claim a prize, if the intention of D & M Rewards was anything other than to make the offer into a legally binding contract.
In past cases, it has been found by the judges that the language used in the offer can be a strong suggestion as to the offeror’s intentions. The language used by D & M Rewards in this leaflet emphasises the certainty of receiving a prize. For example, the words “guaranteed” and “rightfully yours” would have a persuasive effect on the reader.
The language used by the offeror in the leaflet, coupled with the listing of previous winners and the prizes they claimed, would persuade the reader to call and claim their prize, therefore accepting the offer made to them in the leaflet.
The method of listing previous winners is similar to the use of testimonials in the case of Carlill v Carbolic Smoke Ball Co.. It is fact that through depositing £1,000 in a building society account, it was considered by the court as proof that the Carbolic Smoke Ball Co. intended to become legally bound. In a similar way, D & M Rewards, through purchasing the prizes that are listed in their leaflet, are also showing an intention to create legal relations with the offeree.
The final stage in creating a legally binding contract is that of acceptance.
“An acceptance is a final and unqualified expression of assent to the terms of an offer.” (Treitel)
Acceptance of an offer made as part of a unilateral contract is always via conduct. This would further reinforce the opinion that D & M Rewards have formed a unilateral contract, as the offer could not be accepted by silence. Acceptance of the offer in the leaflet is only to be communicated (as requested by D & M Rewards) by post, telephone or in the form of a text message.
If acceptance has taken place, then it is important to consider the stage at which the contract is made. This relies heavily upon the method of communication, although it is generally accepted that in relation to offers, a contract is not formed until the acceptance has been read and understood by the addressee.
The communication of acceptance by post means that the postal rule applies. The postal rule was formed following the case of Adams v Lindsell. The defendants sent a letter to the claimants offering wool for sale, also requesting a reply by post. The letter was misdirected by the defendants and so arrived later than expected. When the letter was received, the claimants posted their acceptance immediately. In the meantime, however, the defendants had sold the wool to another party, thinking that the claimants were not interested in the offer. The claimants sued.
The courts decided that it would be much better, in business terms, if the contract were to exist as soon as the acceptance has been posted. This would allow the offeree a degree of certainty.
There are, however, limitations on the postal rule. The postal rule can only apply to acceptances; other forms of communication are exempt. It cannot apply if it would not be considered reasonable to accept an offer by post (for instance, if the offer is not communicated by post, then acceptance by post must be stated in the document as being allowed). Finally, the offeror always has the right to displace the rule.
Communicating acceptances by either telephone or text message are viewed, in this essay, as similar methods. When accepting an offer over the telephone it is reasonable that the contract should come into force as soon as the offeror either picks up the telephone and speaks to the offeree, or (in the case of missed telephone calls) hears the answering machine message which has been left by the offeree. In some cases, it would be reasonable to expect that communication of acceptance took place during office hours, although this is not so with the D & M Rewards’ leaflet. It is stated that the claim line operates 24 hours a day so a contract could be formed at any time of day.
Acceptance by text message is slightly different in that it is possible to send a message without it reaching the intended recipient (e.g. because of network faults). As with the postal rule, there is a possibility (although not as great) that receipt the message will be delayed. This, as with communication by telephone, still means that a contract exists the moment that the message is read.
For a contract to be enforceable there must be ‘sufficient’, but not ‘adequate’, consideration by the offeror. Consideration is:
“…what one party to an agreement is giving, or promising, in exchange for what is being given or promised from the other side.”
The fact that D & M Rewards are offering prizes of a considerable value for the cost of a postage stamp, phone call or text message, means that some people would view this exchange as being ‘inadequate’ on the grounds that they are not of a similar value. The courts, however, would still consider this to be a binding contract.
In conclusion to this essay, the view is taken that D & M Rewards’ leaflet would be considered, by a reasonable person, to be an offer. The offer would, on acceptance, have the potential to form a legally binding contract. There is an intention, on the behalf of D & M Rewards, to create legal relations and the terms of their offer are certain. The moment when a binding contract is formed would vary and this depends on the method of communication of acceptance, as discussed above. The fact that there is sufficient consideration shown by D & M Rewards reinforces the opinion that this leaflet is an offer.
Word Count: 2312
Bibliography
D & M Rewards’ leaflet
R Stone, The Modern Law of Contract, 2005, 6th Edition
Smith and Thomas, A Casebook on Contract, 2005, 11th Edition
Treitel, The Law of Contract, 9th Edition
Wikipedia,
Table of Cases
Adams v Lindsell (1818) 106 All ER 250
Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256
Errington v Errington and Woods [1952] 1 All ER 149
Partridge v Crittenden (1968) 2 All ER 421
Table of Statutes
None
Treitel, The Law of Contract, 9th Edition
Partridge v Crittenden (1968) 2 All ER 421
Partridge v Crittenden (1968) 2 All ER 421
Wikipedia, http://en.wikipedia.org/wiki/Invitation_to_treat
R Stone, The Modern Law of Contract, 2005, 6th Edition (ch.2.6 p26)
Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256
Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256
Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256
Errington v Errington and Woods [1952] 1 All ER 149
Lord Denning, Errington v Errington and Woods [1952] 1 All ER 149
Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256
Treitel, The Law of Contract, 9th Edition
Adams v Lindsell (1818) 106 All ER 250
R Stone, The Modern Law of Contract, 2005, 6th Edition (ch 3.2 p74)
