1. UNIVERSITY OF LUSAKA FACULTY OF LAW
LAW OF CONTRACT: UNIT 2: OFFER
First Semester, 2009
George Mpundu Kanja

2. STRUCTURE OF PRESENTATION
Introduction
What is Offer
Characteristics of a Valid Offer
Offer and Invitation to Treat
Offer or Invitation to Treat: Practical Examples
Communication of an Offer
Termination of an Offer

3. INTRODUCTION
For a contract to be created parties must reach an agreement. The idea of agreement is therefore central to an understanding of the law of contract.
Whether or not there is an agreement between the parties is a question, which can be answered by looking at the way parties have conducted themselves and examine what they have said and done.
Thus in Smith v. Hughes (1871) L R 6 QB 597, Blackburn J said:  
“If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms”.

4. INTRODUCTION
Likewise in Storer v. Manchester City Council [1974] 3 ALL ER 824 at p. 828 Lord Denning stated:
“In contracts you do not look into the actual intent in a man’s mind. You look at what he said and did. A contract is formed when there is, to all outward appearances, a contract”.

5. INTRODUCTION
In determining whether the parties have reached agreement the law looks for an offer by one party and an acceptance of the terms of that offer by the other.
In the bargaining process leading up to an agreement one party will finally propose terms such as price, date of delivery, and express a willingness to be bound by them if the other party signifies his acceptance of them.
The person making an offer is known as the offeror, and the person to whom the offer is addressed is called the offeree.

6. WHAT IS OFFER?
An offer is a promise or proposal by one party (the offeror) to enter into a contract, on a particular set of terms, with the intention of being bound as soon as the other party to whom the proposal or promise is made (the offeree) signifies his acceptance.
An offer may be made either to an individual person, or to a particular group of persons, or it may be made to the general public, as in the case of a reward offered for the provision of information.

7. WHAT IS OFFER? An offer may be written, spoken or implied by conduct.
For example, when a transport company runs a bus on a particular route, there is an implied offer by the company to carry passengers for a certain fare.
The offer is accepted when passengers board the bus.

8. CHARACTERISTICS OF A VALID OFFER
An offer is made up of terms, which if accepted would govern the contract.
For instance, an offer to sell a car will state the price and describe the type of car being offered for sale.
The offeror (promissor) becomes bound only if the offeree (promisee) accepts the terms of the offer as expressed by him.
An offer to be legally effective must satisfy the following general requirements:
the offer must be firmly made;
the offer must be communicated to the person to whom it is made;
the terms of the offer must be definite, clear and certain.

9. OFFER AND INVITATION TO TREAT
An offer is a statement by one party of a willingness to enter into a contract on stated terms, provided that these terms are in turn accepted by the party or parties to whom the offer is addressed.
As already noted there is generally no requirement that the offer be made in any particular form, as it may be made orally, in writing or by conduct.

10. OFFER AND INVITATION TO TREAT
However, care must be taken in distinguishing between an offer and an invitation to treat.
Invitation to treat (or "bargain" in the US) is a contract law term. It comes from the Latin phrase invitatio ad offerendum and means an "inviting an offer".
An invitation to treat is simply an expression of willingness to enter into negotiations which, it is hoped will lead to the conclusion of the contract at a later date.
In other words invitation to treat can be said to be a statement and an act that appears like an offer but is not an offer.
It is merely an incentive or encouragement designed by the person making it to encourage the making of offers to him and is certainly not intended to be legally binding.

11. OFFER AND INVITATION TO TREAT
The distinction between an offer and invitation to treat is said to be primarily one of intention, that is, did the maker of the statement intend to be bound by an acceptance of his terms without further negotiation or did he only intend his statement to be part of the continuing negotiation process?
See case of Gibson v. Manchester City Council [1978] 1 WLR 520, (CA), and [1979] 1 WLR 294 The House of Lords held that the letter written by the treasurer, which stated that the council may be prepared to sell, was not an offer as it did not finally commit the council to selling the house. It was simply an expression of their willingness to enter into negotiations for the sale of the house and was capable of being accepted. This was further evidenced by the fact that Mr. Gibson was invited to make a ‘formal application’ to purchase the house and not to signify his agreement to the stated terms.

12. OFFER AND INVITATION TO TREAT
In the famous case of Carlill v. Carbolic Smoke Ball Co. [1893] 1 QB 256: The defendants, who were the manufacturers of the Carbolic Smoke Ball placed an advertisement in the newspaper offering a reward of #100 to any person who contracted influenza after having used one of their smoke balls in according to the prescribed manner. The advertisement added that #1000 has been deposited at a bank ‘showing our sincerety in this matter’.
The plaintiff read the advertisement and used the smoke balls according to the directions of the company but contracted influenza. The plaintiff sued for #100. The defendant argued that no offer had been made which the plaintiff could have accepted, as it could not have been the intention of the company to make an offer to the whole world.
It was held that the advertisement was not an invitation to treat but was an offer to the whole world and that a contract was made with those persons who performed the condition ‘on the faith of the advertisement’. The plaintiff was therefore entitled to recover #100.

13. OFFER OR INVITATION TO TREAT: PRACTICAL EXAMPLES
Because of the difficulty in making a distinction between an offer and invitation to treat the law has attempted to clarify the position in certain common types of transaction which include the following:
Goods Displayed for sale in Shops
Advertisements
Auction Sales
Tenders

14. (i) Goods Displayed for Sale in Shops
The general principle of law is that the display of goods in a shop constitutes an invitation to treat and that the offer is made by the customer when he presents the goods at the cash desk, where the offer may be accepted by the shopkeeper.
The application of this rule can be seen in the case of Pharmaceutical Society of GB v. Boots Cash Chemists (Southern) Ltd [1953] 1 Q.B The defendants (Boots Cash Chemists Ltd) organized their shop on a self-service basis. They were charged with a breach of the Pharmacy and Poisons Act 1933, which required that a sale of drugs take place under the supervision of a registered pharmacist. There was no pharmacist present close to the selves, but a pharmacist supervised the transaction at the cash desk and was authorised to prevent a customer from purchasing any drug if he thought fit.
It was held that the sale took place at the cash desk and not when the goods were taken from the selves. The display of the goods was simply an invitation to treat and therefore had been no breach of the Act.

15. (i) Goods Displayed for Sale in Shops
Similarly, in Fisher v. Bell [1961] 1 QB 394, a shopkeeper was prosecuted for displaying a flick-knife inside his shop window with a price attached. He was found by the Court not to have committed the offence of offering for sale an offensive weapon contrary to the Restriction of Offensive Weapons Act 1959.
The Court held that the display of goods in a shop window was simply an invitation to treat rather than an offer.

16. (ii) Advertisements
The general rule is that the advertisement of goods for sale is an invitation to treat rather than an offer.
In Partridge v. Crittenden [1968] 1 WLR 1204, the appellant advertised Bramblefinch locks and hens for sale at a stated price. He was charged with the offence of ‘offering for sale’ wild live birds contrary to the protection of Birds Act 1954.
It was held that the advertisement was an invitation to treat and not an offer and so the appellant was acquitted.

17. (ii) Advertisements
Nonetheless, there are certain cases where an advertisement may be treated or interpreted as an offer rather than an invitation to treat because no further bargaining between the parties is possible or intended.
Advertisements of rewards, for example, for information or the return of lost property, fall in this category.
Carlill v. Carbolic Smoke Ball Co. [1893] 1 QB 256

18. (iii) Auction Sales
The general principle of law is that an advertisement of an auction sale is an invitation to treat.
Thus an advertisement of an auction of specific goods will not be construed as an offer to sell those goods.
There is no promise to sell the goods and the auctioneer will not be liable for withdrawing them from the sale without notice.
In Harris v. Nickerson (1873) LR 8 QB 286, plaintiff attended an auction in order to buy furniture which the auctioneer had advertised for sale. When the furniture was not put up for sale, plaintiff’s subsequent claim for damages, for his loss of time, failed as the court held that the advertisement was not an offer of sale, but an invitation to treat.

19. (iii) Auction Sales
Similarly, in British Car Auctions Ltd v. Wright [1972] 1 WLR 1519, the court held that an auctioneer by inviting bids to be made, makes an invitation to treat.
The offer is made by the bidder which in turn is accepted when the auctioneer strikes the table with his hammer.

20. (iii) Auction Sales
However, if it is stated by the owner that there is no reserve price or that there is a reserve price beyond which offers will be accepted then the auction is most likely a contractual offer which is accepted by the highest bidder; this was affirmed in the Court of Appeal in Barry v. Davies [2000] 1 WLR 1962.
Warlow v. Harrison (1859) 1 E & E 309; 120 ER 925
Barry v. Davies (t/a Heathcote Ball & Co.) [2001] 1 All ER 944

21. (iv) Tenders
Where a person invites tenders for a particular project the general rule is that the invitation to tender is simply an invitation to treat. The offer is made by the person who submits the tender and the acceptance is made when the person inviting the tenders accepts one of them.

22. COMMUNICATION OF AN OFFER
An offer must be communicated to the person to whom it is made, for otherwise the offeree has no opportunity of accepting or rejecting the offer.
Therefore the party to whom the offer is directed to must be made aware of it.
An offer will normally be made to a single individual or organization, though there is nothing to prevent an offer being directed to a specific group of individuals, anyone or more of whom may choose to accept it.
For example, a private limited company that is going public may offer some of its shares to the members of its workforce at a favourable rate.
It is also possible to make an offer to the general public in cases where the offeror is not able at the time the offer is made to identify who the possible recipients are.

23. COMMUNICATION OF AN OFFER
Only the person or persons to whom the offer is made can accept it.
A general offer may be accepted by anyone and when a certain person accepts it, it results in a contract.
If, for example, a bank offers a financial reward for information leading to the arrest of bank robbers by placing the advertisement in a newspaper or by displaying the notice inside the bank, any person who provides the information leading to the arrest of the robbers will satisfy the terms of the offer and hence entitled to the reward, as long as he was aware of the offer beforehand.
The classic case of Carlill v. Carbolic Smokeball Co. is a good illustration of the fact that the offer can be made to the whole public or world as opposed to an offer being made to a specific person.

24. Certainty of the terms of an Offer
The offer must be definite, clear and certain.
This means that the terms must be definite, clear and certain so that the offeree is in a position to know what exactly the offer is all about.
Where the terms of the offer are obscure, uncertain or meaningless the contract will fail. Thus, in Loftus v. Roberts (1902) 18 TLR 532, an agreement provided for the appointment of an actress by another person at a “West End salary to be mutually agreed between us.” Subsequently the parties were unable to arrive at a salary which satisfied them both.
The Court held that the contract must fail. Even if it were possible to assess a suitable salary by reference to West End rates of pay, the court could not impose such a figure since the parties had already stated that it had to be mutually agreed, something they had been unable to achieve. What they had was an agreement to agree at a further date. The contract thus failed.

25. TERMINATION OF AN OFFER
An offer may be terminated in a number of ways namely:
By Acceptance
An offer which has been accepted constitutes a contract. That offer is therefore no longer available for acceptance.

26. TERMINATION OF AN OFFER
(2) Revocation or withdraw of an offer
Although an offer cannot be withdrawn once it has been accepted, it may be revoked at any time before acceptance occurred.
The revocation of an offer is effective even if it is not communicated directly to the offeror, provided it is communicated through some reliable channel.
Routledge v. Grant (1828) 4 Bing 653; 130 ER 920
Byrne v. Van Tienhoven (1880) 5 CPD 344
Dickinson v. Dodds [1876] 2 Ch D 463
Errington v. Errington [1952] 1 KB 290

27. TERMINATION OF AN OFFER
(3) Rejection of an offer
An offer is rejected if: 
the offeree notifies the offeror that he does not wish to accept the offer;
the offeree attempts to accept subject to certain conditions;
the offeree makes a counter-offer.
In Hyde v. Wrench (1840) 3 Beav 334, Wrench offered to sell his farm to Hyde for £1,000. Hyde replied with a ‘counter-offer’ of £950, which was refused. Hyde then said that he was prepared to meet the original offer of £1,000.
It was held that no contract had been formed. The counter-offer of £950 had the effect of rejecting Wrench’s original offer.

28. TERMINATION OF AN OFFER
Sometimes it is difficult to decide whether the offeree is making a counter offer or simply asking for more information about the offer.
A request for more information will not amount to rejection of an offer. In Stevenson v. Mc Lean (1880) 5 QBD 346, the defendant offered to sell a quantity of iron to the claimants for cash. The claimants asked whether they could have credit terms. When no reply to their enquiry was forthcoming, the claimants accepted the terms of the original offer. Meanwhile, the defendant had sold their iron elsewhere.
It was held that the inquiry was a request for more information, not a rejection of the offer. The defendant was liable for breach of contract.

29. TERMINATION OF AN OFFER
(4) Lapse of time
An offer may come to an end due to the lapse of time. An offer which is expressly stated to last only for a specific period of time cannot be accepted after that date.
Where the offeror does not specify a time limit for acceptance, the offer will lapse unless it is accepted within a reasonable time. What amounts to reasonable time will depend on the circumstances of the case and must take account of the subject matter of the offer.
In Ramsgate Victoria Hotel v. Montefiore (1866) LR 1 Ex 109, the defendant was offered by letter on 8 June to buy shares in the company, and was allotted the shares on 23 November. It was held that the defendant was entitled to refuse the shares, since his offer had lapsed before the company had made the allotment. The offer had not been accepted in a reasonable period, bearing in mind the fluctuating nature of the subject matter.
Manchester Diocesan Council for Education v. Commercial Investments Ltd [1969] 3 All ER 1593

30. TERMINATION OF AN OFFER
(5) Failure of a Condition attached to the offer
(6) Death
An offer may be terminated by the death of the offeror, although the law is not entirely clear and settled on this point. One view is that death always terminates an offer because the parties cannot enter into an agreement once one of the parties is dead. However, it seems to be the case that an offeree cannot accept an offer once he knows that the offeror has died but that his acceptance may be valid if it is made in ignorance of the fact that the offeror has died, provided that the contract is not one for the performance of personal services. There is no authority on the position where it is the offeree who dies. The generally accepted view is that on the offeree’s death the offer comes to an end by operation of law.
Bradbury v. Morgan (1862) 1 H & C 249; 158 ER 877

31. THANK YOU