Elements in a Contract 3

An offer is best described as a willingness to be bound by the terms of a contract, once it has been accepted. It can either be expressed verbally or in writing or it may be implied.

In Brogden v Metropolitan Rly Co. (1877), Brogden had supplied the Metropolitan Rly Co. for years without a formal agreement. The parties then intended to formalize the arrangement and the Metropolitan Rly Co. sent Brogden a draft. Brogden completed the draft, filled in some of the details that had been left out including the name of the arbitrator and sent it back. The draft was handed to a manager and no further action was taken and the parties continued as per normal until a dispute arose. Brogden argued that there was no contract in place between the parties.

It was held that the fact that the parties continued to deal as per normal after the draft had been returned with the changes indicated that there was a willingness to continue with the arrangement. The fact that both parties continued with their obligations as agreed constituted a contract.

In Storer v Manchester City Council (1974) – The city council wrote to a sitting tenant (a sitting tenant is a tenant who is already occupying a property and has a legal right to stay on the premises) asking him if he wished to purchase the property he was residing in, and if so to sign and return the council’s standard form agreement, which the tenant did.

Soon after a new council took over and did not wish to proceed with the agreement and put forward the argument that the agreement had not been signed on the council’s behalf. It was held that the council had made a valid offer and its acceptance constituted a contract, despite the fact that, it was not signed by the council’s representative.

Storer however has to be read in light of Gibson v Manchester City Council (1979). The Manchester City Council advertised details of a scheme for tenants to buy their council houses. The plaintiff wrote to the council and the council accordingly replied with a price and certain terms. The house was then taken off the list of tenant-occupied houses maintained by the council and put on the house purchase list. A local election ensued and the new council reversed the policies of the former council and the sale did not go through. Gibson sued.

The Court of Appeal held that despite the fact that all the formalities had not been concluded, there was a clear intention to contract based on the transaction or what had transpired as a whole and found in favor of the plaintiff.

The council appealed. The House of Lords held that the fact that the council stated the price of the house and some other terms did not mean that there was an offer. It was merely a step in the negotiation process and the negotiations had not yet ripened into a contract, i.e. it was an invitation to treat.

An offer can be addressed to a specific person or to the world at large. Let’s look at an example. Mr. Smith wants to sell his car and in the past his neighbor Mr. Jones had indicated that should Mr. Smith ever wish to sell his car; he’d be happy to purchase it.

Mr. Smith informs Mr. Jones of his intention to sell his car and names a price. Mr. Jones accepts and hands him the specified amount, in return for which, Mr. Jones receives the car. The contract that ensues following the negotiations is a bilateral contract made between two parties.

Now let’s say for example that Smith Industries have concocted a remedy that will cure the common cold and confident of their new product they place an advertisement in the local daily stating that they are willing to pay £100 to anyone who catches a cold after using their product for two weeks in the prescribed or stipulated manner.

Let us say that half the residents of Slone County, purchased the product and all of them despite having used the remedy concocted by Smith Industries, in the prescribed manner, ended up with a cold after using their product for two weeks. Smith Industries is only required to pay the aggrieved residents £100 each if there was a contract in place.

In Carlill v Carbolic Smoke Ball Co. (1893), the defendant placed an advert in the newspaper stating that the Smoke Ball Co. would pay anyone £100 if they caught influenza after using their smoke balls in the prescribed manner for two weeks. In order to show their sincerity, the Smoke Ball Co. had deposited £1000 in their bank account.

The plaintiff used the smoke balls in the prescribed manner and after two weeks, she caught influenza. The plaintiff sued.

The defendant argued that it was not possible to make an offer to the world at large. It was held that it is in fact quite possible to make an offer to the world at large.

An offer is an expression of a willingness to enter into a contract in accordance with the specified terms, and the Smoke Ball Co. depositing £1000 in their bank account indicated their willingness to be bound by the terms. Mrs. Carlill in purchasing the smoke balls and using them in the manner that had been prescribed had accepted the offer.

An offer may be made orally, in writing or it may be implied by conduct and acceptance need not always be conveyed. It suffices that the offeree acted in the prescribed and stipulated manner.

In Carlill v Carbolic Smoke Ball Co. (1893), the court rejected the argument that the plaintiff did not convey her acceptance. The fact that she had purchased the smoke balls and used them as instructed, in the prescribed manner, was sufficient to constitute an acceptance.

Ticketing and vending machines are modern mechanisms used to convey an offer. In Thornton v Shoe Lane Parking Ltd. (1971) the defendant was injured in a carpark after he had purchased a ticket from the ticketing machine and had driven his vehicle into the parking area. There were signs posted on the walls after he had passed the barrier that the company was not liable for any personal injuries incurred while in the parking area.

It was held that tickets in ticketing machines and items in vending machines are in fact offers and therefore the contract comes into existence as soon as the offeree accepts the offer by providing consideration, i.e. slotting in the coins. The exemption clauses or the clauses attempting to exempt liability for personal injury were not valid because the said clauses were brought to the attention of the offeree after the contract had come into existence.