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Disclaimer: I’m not a lawyer and I have no claim that this advice should be taken as legal advice in replacement of seeking out professional help. What I hope to do is educate you over a series of small posts about what constitutes a contract and you should be able to figure out when you might need to see a real lawyer. Although this series is in the Australian context many of the principles apply in other countries.

As Part 4 of the Contracts 101 series noted, the agreement consists of an offer and an acceptance. The four rules that apply to an offer are:

1. Must be distinguished from an invitation to treat… Pharmaceutical Society of Great Britain v Boots Cash Chemist (Southern) Ltd (1953)
2. Can be made to a specific person or to the whole world… Carlill v Carbolic Smoke Ball Co (1893); Thornton v Shoe Lane Parking Ltd (1971)
3. Must be communicated
4. Can be withdrawn at any time prior to acceptance

Also, an offer ceases by the lapse of a reasonable time… Ramsgate Victoria Hotel Co Ltd v Montefiore (1866); Ballas v Theophilos (1957). But if the time limit is stated then the offerer is bound not to revoke the offer until the end of that time… Goldsbrough, Mort & Co Ltd v Quinn (1910).

The main point to understand about the offer is the distinction between the offer and an invitation to treat. In simple language, it is an offer where there is an intent to be immediately bound by the contract, othewise it is an invitation to treat. The following examples may help you recognise the difference.

An offer might include a can of soft drink for sale in a vending machine because there is an intention to be bound to supply you with the goods. An offer might include an item listed on Ebay for the same reason and an offer would be that of a reward poster for a missing dog. Each of these situations displays an intention to be bound at the time the offer was made. In a store the customer makes the offer to the shop at the till… Pharmaceutical Society of Great Britain v Boots Cash Chemist (Southern) Ltd (1953).

However, items on display in a shop are not an offer but are only an invitation to treat… Fisher v Bell (1960), as are price lists… Grainger v Gough (1896), and announcements… Rooke v Dawson (1895). The offer to buy is made by the customer; the store is not bound to sell you the item if you take it to the counter, they could refuse as it is their last one, for example. Similarly, an invitation to treat would be a personal advertisement in the local newspaper for the sale of a car… British Car Auctions Ltd v Wright (1972). An auction is another example where the auctioneer invites the audience to treat and the audience makes an offer (bids) on the goods… Payne v Cave (1789). Again, a statement of price that you would be willing to sell something is not an offer, but it is an invitation to treat… Harvey v Facey (1893); Gibson v Manchester County Council (1979). Where a tender is put out there is also no offer, rather it is a request for offers to be made to purchase and therefore an invitation to treat… Harvela Investments v Royal Trust Co of Canada (1985). Invitations to treat are not made with an immediate intention to be bound to a contract.

To recap the four rules of an offer in plain english, the offerer must intend to be bound to the contract and is not just inviting you to treat; the offerer can specifically make the offer to an individual or they can offer to everybody (for example, using a poster to offer a reward for their missing cat); the offer must have been communicated (so you can’t return the cat then find the reward poster and then demand the reward you were previously unaware of being offered); also, the offerer can withdraw the offer right up to the point immediately prior to anybody’s acceptance of the offer.

Continuing the series, Part 6 of Contracts 101 will pursue the second part of the agreement – acceptance.

Note: Resources used for this series are identified in the first installment – Contracts 101 – Part 1: Outline.

Installments in Contracts 101

• Contracts 101 – Part 1: Outline
• Contracts 101 – Part 2: Which Contract?
• Contracts 101 – Part 3: The Six Elements
• Contracts 101 – Part 4: The Agreement
• Contracts 101 – Part 5: The Offer
• Contracts 101 – Part 6: The Acceptance
• Contracts 101 – Part 7: Battle of the Forms
• Contracts 101 – Part 8: Consideration
• Contracts 101 – Part 9: Capacity
• Contracts 101 – Part 10: Legality of Object
• Contracts 101 – Part 11: Possibility of Performance
• Contracts 101 – Part 12: Genuine Consent
• Contracts 101 – Part 13: Promissory Estoppel
• Contracts 101 – Part 14: Ending the Contract
• Contracts 101 – Conclusion: Protect your Business

This entry was posted on Wednesday, November 11th, 2009 at 6:27 am and is filed under business, contracts 101, legal. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.