Legal Environment of Business

BUS 7305

Law of Contract
 Law of Contract
Offer & invitation to treat:
In fact the Contract Act, 1872 does not define the term of
invitation to treat. However, a proposal must be
distinguished from an invitation to treat.
However, in Carlill vs. Carbolic Smoke Ball Company Case
D was the owner of Carbolic Smoke Ball, issued an
advertisement in which they offered to pay 100 dollars to
any person who succumbed to influenza after having used
one if their smoke balls.
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They also added that they had deposited a sum of
1000 dollar with their bankers to show their
sincerity.
The Plaintiff, on the faith of the add., bought and
used the ball as prescribed, but succeeded in
catching influenza. She sued for the 100 D.
Held: the nature of add was not an invitation to treat
but an offer.
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An offer and an invitation to treat may be distinguished
based on two factors:
1. Nature of the statement; and
2. The intention of the party who is making the statement.
 
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Display of goods in a shop window is an invitation to treat.

Goods or services advertised in a newspaper or magazine is
an invitation to treat.
Mare statement of the price is an invitation to treat.
Invitation to council tenants to by their property is an
invitation to treat.
Standard form fill up/complete – does not mean offer –
acceptance.
However, another case has given a different view.
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Offeror, open an offer, will remain open for a reasonable
time.
Where offeror and offeree, cross their letter for the same
purpose/ same subject matter, in that case, there is no legal
relationship between them.
Someone request for bid is an invitation to treat- Payne v
Cave.
Advertisement for an auction is an invitation to treat—
Harris vs. Nickerson.
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Time tables and boarding on a bus or train:
It has four probable exceptions:
1. In Wilkie vs. LondonTransport Board, Lord Greene
Expressed that offer was made by the bus company and it
was accepted when a passenger “puts himself either on the
platform or inside the bus.
2. Alternatively, acceptance takes place when the passenger
asks for a ticket and pays the fare.
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3. The bus time table is an invitation to treat, the offer is
made by the passenger on boarding the bus and acceptance
take place when the bus conductor accepts the money and
issue the ticket.
4. The bus contractor makes the offer when he issues the
ticket, and this offer is accepted by paying the fare and
retaining the ticket.
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Case references relating to offer and acceptance:

* Offer must be communicated – Taylor v Laird
* Offer can be withdrawn any time before acceptance –
Routledge v Grant
* But withdrawn of an offer have to communicate to
offeree – Byrne v Van Tienhoven
* Unilateral offer is accepted by performing and offer
cannot be withdrawn while the offeree is still
performing – Carlill v Carbolic Smoke Ball Com. (offer
may be made to the whole world)
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* Unilateral offer do not require acceptance, only
performance is essential – Errington v Errington & Woods. 
** Competitive tendering is to be an offer – Royal Trust
Com of Canada v Harvela Investment 
* Highest bidder & owner of goods may be an offer and
acceptance - Royal Trust Com of Canada v Harvela
Investment
Or lowest bidder & owner of goods may be an offer and
acceptance - Royal Trust Com of Canada v Harvela
Investment (if it is mentioned in an auction)
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* Offeree must be aware of the existence of the offer –
Inland Revenue Commission (IRC) v Fry (2001).
* An offer ends –
on acceptance;
on proper withdrawal ;
on a lapse of time;
on the death of either party.
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 * Counter offer breach the original offer and no longer open
to acceptance – Hyde v Wrench (acceptance will be
unconditional).
* Counter offers will be a term if offeror accepts it – Davies
& Com v William Old.
* Acceptance must be communicated, silence is not
acceptance – Felthouse v Bindley, however, it has exception,
i.e., unilateral offer – Carlill v Carbolic.
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Acceptance must be communicated to offeror – Powell v
Lee. (Claimant applied for the post of a headmaster, the
board decided to appoint him, however, not apprised him
officially).
* where the post is the usual anticipated method of
accepting that the contract is formed when the letter is
posted, not when it is received – Adams v Lind Sell.
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When a letter of acceptance is sent by post, would be made
acceptance even if it is not received by the offeror (sending
by wrong address will not be applicable) – Household Fire
& Carriage Accident Insurance v Grant

* Mere enquiry has no any effect of an offer, i.e., mere

enquiry does not reject an offer – Stevenson v McLean. 
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Note:
Modern methods of communication, i.e., fax, e-mail &
internet causes problems in determining when a contract is
formed – generally it depends on how instant the
communication is – Brinkibon v Stahag Stahl
Some of these problems have now been resolved by
= The Electronic Commerce Director &
= The Consumer Protection (Distance Selling) Regulations,
2000
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•Technical counter offers will not always count as a
rejection of the offer if they are of no importance of the
parties – Brogden v Metropolitan Railway Com. (both the
contracting parties have long-standing arrangement,
however, for a formal shape RC has sent a draft where
Brogden mentioned in the last side ‘arbitration’ then sign
and returned to RC. The flip side, RC have not seen but
kept it with its sign. When a dispute is raised Brogden
argued there was no contract due counter offer.
Held: House of Lord has rejected this argument).
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* Laps of time:
• When offeror does not give any time limitation in that case, the
offer remains open for a reasonable time. –
Case: Ramsgate Victoria Hotel Com Ltd v Montefiore.
• What is the basis on which the court assesses a reasonable time? –

Case: Manchester Diocesan Council for Education v Commercial and

General Investment Ltd.
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* A letter crosses between offeror and offeree for the same purpose –
No legal relation between them. –
Case: Tinn v Hoffman & Com.
* 5 pounds will be extra paid if the horse is lucky. However, what is
mean by lucky was not defined. So due to vague or uncertainty, there
was no contract has been made between the party. -
Case: Guthing v Lynn.  
* Letter post for an offer of acceptance both has to be reasonable
(Henthorn v Fraser) and convenient (Cole v Carwardine).
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Cases relating to offer & Invitation to treat:

• Offer must be distinguished from ITT –

Case: Pharmaceutical Society of GB v Boots Cash Chemists Ltd.
• Goods display in a shop window is ITT –

Case: Fisher v Bell

• Goods or services advertised in a newspaper or magazine ITT –

Case: Partridge v Crittenden

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• Mere statement of a price is ITT –
Case: Harvey v Facey (will u sell me Bumper Hall Pen?
What is the lowest price?)
• Invitation to council tenants to buy their property is
ITT (standard form fill up does not mean that offer &
acceptance is made) –
Case: Gibson v Manchester City Council 1979 However,
Case: Storer v Manchester City Council has given a
different opinion.