Contract Law: Offer and Acceptance in Mr. Wilson's Case

This article discusses the legal principles of offer and acceptance in contract law, specifically in the case of Mr. Wilson. It examines whether the advertisement was an offer or invitation to treat, and analyzes the offers made by Mavis and Polly. The rules of acceptance are also explained.

EXECUTIVE SUMMARY
Contract law has a well-known principle: Contracts are legally binding when
the offer and acceptance are made in a legitimate manner. The offeror is the
party that makes the offer, while the offeree is the party that accepts it.
When the offeree accept an offer made by the offeror is considered legally
binding. In offer and acceptance cases, the parties frequently disagree about
whether there was ever a contract or when the contract was made. The
court's task is therefore to determine whether it was reasonable for one
party to believe that the other was entering into a binding agreement at a
particular point. So for this particular client which is Mr. Wilson, we will apply
the law to identify the legal nature of the various communications and then
determine whether or not the parties have created a legally binding contract.
Introduction
Contract law refers to a legal agreement or promise binding involved parties
during a certain bargain or subject. All parties that tend to enter into a
contract are expected to understand the legal laws governing the
agreement. There are five primary elements governing a contract namely:
“offer and acceptance, consent, intention, consideration and contractual
capacity.”1 The issue at hand is whether there is a valid contract between
Mavis and Polly regarding their initial agreement on buying the paintings of
Mr Wilson. This paper will firstly determine whether the advertisement of Mr
Wilson was an offer or an invitation to treat. Secondly whether Mavis has
made an offer to Mr Wilson. We will then examine if the response of Mr
Wilson is an acceptance or a counter offer. If there is acceptance we will
access whether the offeree has properly communicated the acceptance and
finally we will analyze if there was any attempt to revoke the offer.
An offer is defined by (McKendrick 2019),as a statement of willingness to be
bound on stated term. Where the offer is clear, definite, and explicit, and
leaves nothing open for negotiation, it constitutes an offer, acceptance of
which will complete the contract, cases Lefkowitz v Great Minneapolis
Surplus Store Inc. (1957) 2.

________________________________
1. Clarke, J (2010), Elements of a Contract
2. Lefkowitz v. Great Minn. Surplus Store, Inc. - 251 Minn. 188, 86 N.W.2d
689 (1957)
In this case it is necessary to consider if Barbara has made a contract with Alan for the sale of the
painting. What must be looked at is whether Alan’s letter, or fax to Barbara, is an offer or an
invitation to treat. If there was an offer, it will need to be considered whether there was an
effective acceptance, and this will require revocation, and the postal rule, to be looked at.
Task 1
1.1 Distinguish between an offer and an invitation to treat
We refer to an offer as a statement of one party's intention to enter into a contract with another
party, known as the offeree, on the terms and conditions specified by the offeror. An offer is
defined by (McKendrick 2019),as a statement of willingness to be bound on stated term. When
the offer is accepted, the two parties enter into a legally binding agreement known as a contract.
Essentially, the offeree must accept the offer in order for the parties to be bound by it ( both the
offeror and the offeree ). The first requirement for the formation of a valid contract is o erff .
An invitation to treat, on the other hand, is an advertisement, promotion, or display of items that
invites a third party to make an offer in connection with the subject of the advertisement,
promotion, or display, as opposed to an invitation to treat. In essence, an offer to treat suggests
that the sender is open to receiving suggestions from people who have seen the invitation and are
interested in it. According to (Turner, 2014) an invitation to treat is a statement of intent by the
offeror to be legally bound by the terms of the offer.
Section 2 of the Contracts Act4 defines an offer as the willingness to do or abstain from doing
anything signified by a person to another. A good way of looking
at the di erenceff between the two terms is that an o erff is a definite promise to be bound on
specific terms, whereas an invitation to treat is only an indication that someone is prepared to
receive o ers with a view to forming a binding contract. A person making an invitation to treatff
does not intend to be bound as soon as it is accepted.
The distinction between an o er and invitation to treat can be seen in the following cases:ff
In Gibson v Manchester City Council [1979] 1 WLR 294 the defendant city council sold council
houses to tenants who wanted to buy them. A letter from the Council stated that ‘The
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Corporation may be prepared to sell the house to you at...£2,180'. An application for a purchase
was submitted by the claimant council tenant after discussions. However, due to a shift in
political control, the Council ceased selling council houses to tenants. The court had to decide if
a sale contract had been concluded. However, the words ‘may be prepared to' in the letter were
‘fatal' because they simply spelt out the financial circumstances on which the council would be
prepared to discuss a sale and purchase in due course.
Crucially, the use of the word ‘o er’ by one party is not decisive.ff
Partridge v Crittenden [1968] 1 WLR 1204 An advert for the sale of birds - an invitation to treat
(rather than an offer) because the seller could not have intended to contract with the large
number of people who could theoretically accept.
We are instructed to offer [certain business stock] to the wholesale trade for sale by tender',
defendants stated in Spencer v Harding (1870) LR 5 CP 561. The ad specified where to view the
goods, when to open tenders, and that payment must be made in cash. No reserve was stated. The
claimant made the highest offer, but the defendant refused. This is because the highest bidder is
not required to sell unless the advertisement specifies otherwise.
In Carlill V Smoke Ball Co. Ltd 5, the promise to pay £100 to anyone who took the smoke ball
and got influenza amounted to an offer. In a similar vein, the court in Carlill v. Carbolic Smoke
Ball Co. case determined that the company's marketing constituted an offer made entirely by the
company. The court reached this conclusion because Carlill followed the instructions in the
advertising and contracted a cold as a prerequisite of earning 100 pounds. Carlill accepted the
offer since she acted in response to the advertisement, resulting in the formation of a legally
enforceable contract.
In addition, another concept to consider is an invitation to tender. These are generally considered
invitations to treat, and the offer is made when the tender is submitted. The organisation looking
for tenders are then free to accept or reject this. However, an exception to this is an offer to sell
to the highest bidder. However, an exception to this is an offer to sell to the highest bidder. For
example, in the case of Harvela Investments Ltd v Royal Trust of Canada.6
However, where the advertisement is for a unilateral contract – such as the o er of a rewardff for
lost property – the courts have held that the advertisement will generally amount to an o er.ff
Also, it is important note that there is di erence between aff mere boast or ‘pu ’ff (a promotional
statement or claim, often associated with advertising, such as ‘your wife will absolutely love this
necklace!’) and a promise which a reasonable man would take seriously. The leading case on the
di erence between a mere pu and an o er, and on unilateralff ff ff contracts is Carlill v Carbolic
Smoke Ball Company [1893] 1 QB 256
Over the years, the courts have developed a set of rules to be applied in specific situations to
determine whether an offer or an invitation to treat has been made. One such rule pertains to
advertisements which is apply in the case of Mavis V Mr Wilson. An advertisement is not an
offer, but rather an attempt to entice one to make one.
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Mavis V Mr Wilson
Was Mr Wilson's advertisement an offer or merely an invitation to treat?
An advertisement is typically regarded as an invitation to treat by courts because it is a pre-
contractual arrangement. This is not always considered an offer, but it may be construed as one
in certain circumstances.
Wilson, sent out ads asking for the public's input on pricing so that they could negotiate and
come to a final agreement on a final price. According to the decision in Partridge v Crittenden 2,
an advertisement in a newspaper for the sale of protected birds did not constitute an offer to sell.
In another case, Grainger & Son v Gough (1896) AC 325, it was held that a issuing a pricelist
does not amount to an offer, but is an invitation to treat.
If we consider advertisement to be offers, then the person who created the advertisement has
already offered things to each and every person who reacts to the advertisement, which the court
finds to be irrational.
When Mavis sent an email to Mr Wilson saying that she will pay £200 for both painting
advertised, then an offer has been made. However Mr Wilson is free to accept or reject offer.
Because Mr Wilson is the one who placed the advertisement and is not liable in contract with
everyone who is willing to purchase the paintings.
To conclude, there is a clear distinction between an offer and an invitation to treat, and what this
means when applied to different circumstances. The distinction between both, is essential with
regards to understanding what constitutes as an offer or invitation to treat, whether it is capable
of acceptance, and whether it is binding on either party. It is most likely that the advertisement of
Mr Wilson is an invitation to treat which invites others to make an offer to buy his paintings.
Both Mavis and Polly the offerors made offers to buy the painting with Mr Wilson.
_________________________________________________
1. Fisher v Bell (1961) 1 QBD 795
2. Partridge v Crittenden 1968] 1 WLR 1204
3. Williams v Carwardine [1833] 5 C&P 566
4. Contract Act 2010 5.2
5. Carlill v Carbolic Smoke Ball Company (1893) 1 QB 256
6. Harvela Investments Ltd v Royal Trust of Canada [1986] AC 207
1.2 Identify and explain the legal rules applicable to acceptance of an offer
An offer is an expression of willingness to contract on certain terms. It must
be made with the
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intention that it will become binding upon acceptance. There must be no
further negotiations
or discussions required.
On the facts, we may examine two cases. First of all is Storer v Manchester
City Council (1974)
wherein the COA found that there was a binding contract. Council had sent
Storer a
communication that they intended would be binding upon his acceptance. All
Storer had to do
to bind himself to the later sale was to sign the document and return it.
In Gibson v Manchester City Council (1979) the Council sent Gibson a
document which asked
him to make a formal invitation to buy and stated that the council ‘may be
prepared to sell’.
Gibson signed the document and returned it. CoA held that a contract had
been concluded but
the House of Lords held the opposite because the Council had not made an
offer capable of
being accepted. Lord Diplock stated that the words ‘may be prepared to sell’
are fatal .
It is clear from these cases that not all communications will be offers.
Chris Turner (2014) defines valid acceptance as a statement of intention to be bound absolutely
and unconditionally by the terms of the contract. The second requirement for the formation of a
valid contract is acceptance.
Once a valid acceptance takes place, a binding contract is formed. It is therefore important to
know what constitutes a valid acceptance in order to establish if the parties are bound by the
agreement. There are three main rules relating to acceptance:
1. The acceptance must be communicated to the offeree.
2. The terms of the acceptance must exactly match the terms of the offer.
3. The agreement must be certain.
Acceptance entails unconditional agreement to all of the terms of the offer. It can be verbal,
written, or inferred from behavior. It must be unqualified and absolute. The traditional approach
is known as the 'mirror image' rule of contractual formation because the court must find a clear
and unequivocal offer that is mirrored by a clear and unequivocal acceptance. While this
approach has the advantage of providing a degree of certainty, it is important to remember that it
has been criticized for being overly rigid. Acceptance must be made in response to an offer, as
acceptance cannot 'mirror' an offer if it is made unaware of the offer. This requirement is
necessary because, if a contract is an agreed-upon bargain, there can be no agreement without
knowledge. So, for example, a claimant would not be entitled to a reward if he or she performed
the act unaware of the reward offer. This rule is nicely illustrated in the following example.
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R v Clarke (1927) 40 CLR 227: The Government offered a monetary reward for information
leading to the arrest and conviction of people responsible for the murder of two police officers. C
was arrested in connection with the murders and made a statement to police about the murders
which led to the conviction of other men. C was released and subsequently claimed the reward.
Held: C gave information to secure his own release and not in response to the offer for reward(it
probably didn’t help his case that he admitted this!) – to be effective as an acceptance the
information needed to be ‘given in exchange for the offer’.
Did Mr Wilson agree with the offers of Mavis and Polly? We must assess whether Mr Wilson's
communication with Mavis and Polly represents an acceptance, as well as whether the
communication results in the formation of any legally enforceable contract on the part of either
party.
Butler v Ex-Cell-O Corporation (England) Ltd, 1 WLR 401 (1979). Lord Denning rejected the
traditional approach, stating in Gibson v Manchester City Council [1978] 1 WLR 520, 523, "to
my mind, it is a mistake to think that all contracts can be analyzed into the form of offer and
acceptance."
Acceptance must be made in response to an offer, as acceptance cannot'mirror' an offer if it is
made unaware of the offer. This requirement is necessary because, if a contract is an agreed-
upon bargain, there can be no agreement without knowledge. So, for example, a claimant would
not be entitled to a reward if he or she performed the act unaware of the reward offer. The
following example nicely exemplifies this rule.
R v Clarke (1927), 40 CLR 227: In R v Clarke, the government offered a monetary reward for
information leading to the arrest and conviction of those responsible for the murder of two police
officers. C was arrested in connection with the murders and provided police with information
about the murders, which led to the conviction of other men. C was released and later claimed
the reward.
Held: C gave information to secure his own release, not in response to the offer for reward
(which probably didn't help his case!) – for the information to be effective as an acceptance, it
had to be 'given in exchange for the offer.'
The offeree must accept all of the terms of the offer and must not try to introduce new terms. If
the offeree, instead of agreeing to all of the terms of the offer, attempts to change the terms or
introduce new terms, this is not considered acceptance, but rather a counter-offer. A counter-
offer does not imply acceptance. A counter-offer is an offer made by the offeree in response to
an offer that implies rejection of the original offer, which is thus destroyed and cannot be
accepted later. The following example exemplifies this:
Hyde v Wrench, 49 ER 132 (1840):
The defendant Wrench (the offeror) offered the claimant a farm for £1,000. In response, the
claimant Hyde (the offeree) offered £950, which the defendant declined. The claimant (H) then
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attempted to accept the original offer of £1,000 as well. The defendant (W) refused to sell to the
claimant, so the claimant filed a specific performance action. It was determined that there was no
contract. When a counter offer is made, the original offer is destroyed, and the offeree is no
longer able to accept it.
If, on the other hand, the offeree simply requests more information before accepting, this does
not constitute a counter-offer, and the offer remains 'open,' i.e. available to accept.
Acceptance must be communicated to the offeror as a general rule. Acceptance must be
manifested in some way. Silence alone does not usually constitute acceptance. This proposition
is supported by Felthouse v Bindley (1862), 11 CB (NS) 869. In this case, negotiations for the
sale of a horse were taking place. Felthouse wrote to his nephew, 'If I hear no more about it, I
consider the horse to be mine for £30 15s.' His nephew remained silent. The court ruled that
there was no sale because silence does not constitute acceptance. If the nephew wanted to enter
into the contract, he should have clearly indicated his acceptance, which he had not done. The
rule that silence does not imply acceptance is useful, and it is the foundation of the Unsolicited
Goods and Services Act of 1971. Furthermore, the Consumer Protection (Distance Selling)
Regulations 2000, which went into effect in October 2000, provide that unsolicited goods can
now be kept as an unconditional gift by the customer. As a result, there is no need to return them
(as set out in the original 1971 Act). Acceptance must be communicated in order to be received,
according to the general rule. As a result, where the parties are in each other's presence or on the
phone, the acceptance must be heard. When the parties are not in each other's presence and
instead use a long-distance means of communication, such as a telex, the contract is only
complete when the offeror receives the acceptance.
[[1955] Entores v. Miles Far East Corporation QB 327 is number two. In this case, the offeror, a
company based in London, made an offer to the offeree, a company based in Amsterdam, via
telex. The offeree telegraphed their acceptance of the offer back to the company in London. The
court had to decide where the contract was made. It was held that the contract is only complete
when the offeror receives the acceptance, and the contract is made at the location where the
acceptance is received (in this case it was received in London). The Entores decision was
reaffirmed in the House of Lords in Brinkibon v Stalag Stahl [1983]2 AC 34, in which an offer
was made by telex in Vienna and accepted by telex in London. It was assumed that the contract
was made in Vienna, i.e., where the acceptance was received. Similarly, fax acceptance is
required:
EWHC 245. JSC Zestafoni Nikoladze Ferroalloy Plant v Ronly Holdings Ltd.
In the case of Brinkibon v Stalag Stahl [1983]2 AC 34, an offer was made by telex in Vienna and
accepted by telex in London. It was assumed that the contract was made in Vienna, i.e., where
the acceptance was received. Similarly, fax acceptance is required: [2004] JSC Zestafoni
Nikoladze Ferroalloy Plant v Ronly Holdings Ltd 245 EWHC
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The difficult question then becomes when a telex, fax, or answer phone message is actually
communicated to the offeror. Is it when it is actually received on the machine, or when the
offeror reads/hears it? Furthermore, what would happen if, say, a fax was sent outside of
business hours? Both the cases of The Brimnes [1975] QB 929 and Mondial Shipping and
Chartering BV v Astarte Shipping Ltd [1995] CLC 1011 concluded that a message sent outside
of business hours was not communicated until the office reopened for business.
Communication by post presents unique practical challenges because a letter of acceptance may
take several days to arrive. When does acceptance become complete? The offeree knows he has
accepted the offer from the moment he posted the letter, but how will the offeree know when this
is? To address these issues, the courts devised an exception to the general communication
requirement. However, if acceptance is communicated by mail, the acceptance takes effect when
the letter is properly mailed (as long as it is properly stamped and addressed), not when it is
received by the offeror.
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Conclusion
Wilson and Mavis have not entered into a legally binding contract as a result of the failure to
meet the conditions necessary to form a legally binding contract. Wilson and Polly's contract is
valid since it satisfies all of the legal elements for a legally binding agreement. Wilson is unable
to cancel his deal with Polly as a result of this situation.
References
Ewan McKendrick, Contract Law (13th Ed, Red Globe, 2019) 27
Chris Turner Unlocking Contract Law 4TH Edition, 2014 Section 2.2 and Section 2.3.2
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