Offer and Acceptance

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Q. How does an invitation to treat differ from an offer?

The main distinguishing factor between an invitation to treat and an offer is that of the offeror’s intention and whether or not they intended to be bound by the terms set by them. The distinction between the two is important in deciding whether or not a contract is binding on the parties involved and generally sets the tone for adjudication on this topic.

An offer, as per Professor Trietel, is an expression of willingness to enter into a contract on certain terms, made with the intention to be bound by them as soon as it is accepted by the person to whom it is addressed. An offer can be made in writing, expressed orally, or made evident through one’s conduct. On the other hand, an invitation to treat is a mere expression of willingness to enter into negotiations in the hope of reaching a conclusion of a contract in the future.

This distinction between an offer and an invitation to treat can be understood from the case of Gibson v Manchester CC 1979, where the council’s letter, stating they ‘may be prepared to sell the house’, was treated as an invitation to treat as there were clear signs of a negotiation process taking place, as opposed to the council setting the terms of the agreement to which Mr. Gibson must respond with an acceptance or rejection. Therefore, the city council was within its rights in deciding not to sell the house to Mr. Gibson. However, a similar case by the name of Stoner v Manchester CC had a very different outcome. In this case, a price for the house had already been decided by the two parties and a final document was sent to Mr. Stoner which was to be signed and returned to the city council. In light of these additional elements, the city council was bound by the terms of the contract as it was no longer an invitation to treat but, in fact, an offer.

Another area of business where this distinction is important is in the display of goods for sale. If simply displaying goods for sale amounted to an offer, the shopkeeper would be bound to sell his/her goods to any customer, willingly or unwillingly. This would strip the owners of their right to refuse sale to certain clients, and conflict with the owner’s right to exercise discretion in their sales. Therefore, as established in Fisher v Bell, the display of goods for sale is generally considered to be an invitation to treat.

Similarly, advertisements too, are considered to be invitations to treat, except in certain circumstances where there is an advertisement for a reward. The latter is generally considered to be an offer as it is assumed that the offeror intends to be bound by the terms of the contract as soon as the prerequisites of the offer are fulfilled, as was in the case of Carlill v Carbollic smoke ball co, where the company was obligated to reward mrs. Carlill as promised in return for her completion of the terms set by the advertisement. An explanation on the logic of the former rule is given in Partridge v Crittenden, wherein it was said that the treatment of advertisements as offers might mean that the offeror is obligated to enter into a contract regarding the sale of goods with more customers than his available stock can cater to.

Therefore, the facts of each case are imperative in deciding whether there has been an offer or an invitation to treat, regardless of the general rules available for certain generic cases. 



Q. What is the postal acceptance rule and are there any exceptions to the rule?

Acceptance is generally said to result in the formation of a contract once it has been received by the offeror. However the postal acceptance rule has different implications whereby a contract is said to be binding as soon as the letter of acceptance is posted, as opposed to when it is received by the offeror and were established in Adams v Lindsell.

A number of attempts have been made as justifying the authenticity of this rule.  One argument is that the post office is the agent of the offeror so receipt of the acceptance by an agent is equivalent to receipt by the offeror. This is a dubious statement as it can be questioned whether the post office can really be considered an ‘agent’ of the offeror, and even more so, has the authority to make contracts on behalf of him. A more palatable argument presented is that the offeror should bear the risk of delay which the postal method entails as they initiated the negotiations through post on their own discretion. Finally, it is said that the offeree should not be prejudiced once he has dispatched his acceptance; he should be able to rely on the efficacy of his acceptance.

The postal rule only applies to situations where the use of post to confirm acceptance is either the prescribed mode of communication by the offeror, or it is more beneficial to use post than any other method in the given circumstances. This is reaffirmed in the case of Henthorn v Fraser. In Household Fire Insurance Co v Grant, acceptance took place as soon as the notice of allotment of shares was posted to the plaintiff, regardless of whether it reached the plaintiff or not.

In an instance where a letter of acceptance is posted to the wrong address, as in the case of Korbetis v Transgrain, the rule of post is ousted as the negligence or carelessness of the offeree has no bearing on the offeror’s burden of responsibility and therefore does not result in a binding contract.

The postal rule of acceptance may be avoided if the terms of the offer are such that they require the following of a particular procedure in order for the acceptance to be valid. For example, if the terms of an offer include a time constraint within which the letter of acceptance is to be received, then simply posting the letter before the given time constraint is not enough for a contract to be formed, and it must be received by the offeror at the prescribed time. This was the case in Holwell Securities Ltd v Hughes.

Finally, in the unlikely event that the acceptance is revoked before the offeror receives notice of it, it is said that there is no binding contract as it is only logical to think that there will be no contract when both parties clearly know there was no intention by the offeree to accept the offer and the intention was to reject, especially if the rejection is communicated to the offeror through a faster means of communication than the one used to send the acceptance. In the case of Countess of Dunmore v Alexander, where the letter of acceptance and revocation of the acceptance were both received together, it was decided that there had been no contract. 

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