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This lesson covers one of the most fundamental topics in AQA A-Level Law: how a contract is formed through offer and acceptance. A valid contract requires an offer made by one party (the offeror) that is unconditionally accepted by another (the offeree). Understanding the precise legal rules governing when an offer exists, how it can be terminated, and what constitutes valid acceptance is essential for exam success and for building a solid foundation in contract law.
An offer is a clear and definite statement of the terms on which the offeror is willing to be bound, communicated to the offeree. If the offeree accepts the offer, a binding agreement is formed.
Treitel defines an offer as:
"An expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed."
| Characteristic | Explanation |
|---|---|
| Definite terms | The offer must be sufficiently clear and certain |
| Communicated | The offer must be communicated to the offeree |
| Intention to be bound | The offeror must intend that acceptance will create a binding contract |
| Distinguished from an invitation to treat | An offer must be more than a mere invitation to negotiate |
An invitation to treat is not an offer; it is merely an invitation to others to make offers. The distinction is critical because accepting an invitation to treat does not form a contract.
In Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953], the Court of Appeal held that goods displayed on self-service shelves are an invitation to treat, not an offer. The customer makes the offer when presenting the goods at the till, and the shopkeeper accepts (or rejects) at that point. This case arose because certain pharmaceutical products had to be sold under the supervision of a pharmacist — the court found that the sale occurred at the cash desk where a pharmacist was stationed, not at the shelf.
In Fisher v Bell [1961], a shopkeeper displayed a flick knife in his shop window. He was charged under the Restriction of Offensive Weapons Act 1959 with "offering for sale" an offensive weapon. The Divisional Court held that the display was an invitation to treat, not an offer for sale. The shopkeeper was therefore acquitted.
In Partridge v Crittenden [1968], the defendant placed an advertisement in a magazine: "Bramblefinch cocks and hens, 25s each." He was charged with "offering for sale" a wild bird contrary to the Protection of Birds Act 1954. The court held that the advertisement was an invitation to treat, not an offer. Advertisements are generally invitations to treat because the advertiser could not intend to contract with everyone who responds — stock may be limited.
Exception — Unilateral Offers: In Carlill v Carbolic Smoke Ball Co [1893], an advertisement promising £100 to anyone who used the smoke ball as directed and still caught influenza was held to be a unilateral offer to the whole world. The company had deposited £1,000 in a bank to demonstrate sincerity. This remains the leading exception to the general rule.
At an auction, the auctioneer's call for bids is an invitation to treat. Each bid is an offer, and the fall of the hammer constitutes acceptance. This principle was affirmed in Payne v Cave (1789) and is now codified in s57(2) of the Sale of Goods Act 1979.
An invitation to tender is generally an invitation to treat. Each tender submitted is an offer that the party inviting tenders may accept or reject. However, in Blackpool and Fylde Aero Club v Blackpool Borough Council [1990], the court held that where a formal tendering process is used, there may be a collateral contract to consider conforming tenders.
graph TD
A["Communication"] --> B{"Is it definite and<br/>intended to be binding?"}
B -->|Yes| C["OFFER"]
B -->|No| D["INVITATION TO TREAT"]
C --> E["Can be accepted<br/>to form a contract"]
D --> F["Merely invites others<br/>to make offers"]
D --> G["Examples:<br/>Shop displays (Boots [1953])<br/>Window displays (Fisher v Bell [1961])<br/>Advertisements (Partridge v Crittenden [1968])"]
C --> H["Examples:<br/>Unilateral offers (Carlill [1893])<br/>Definite proposals<br/>Auction bids"]
style C fill:#27ae60,color:#fff
style D fill:#e74c3c,color:#fff
style E fill:#2ecc71,color:#fff
style F fill:#c0392b,color:#fff
An offer has no legal effect until it is communicated to the offeree. A person cannot accept an offer they do not know about.
In Taylor v Laird (1856), a ship captain who gave up command of a vessel during a voyage could not claim payment for work done on the return journey because no offer of payment had been communicated to him.
The offer may be communicated by any effective means: words (oral or written), conduct, or even electronic communication. The offeror is free to choose the method of communication.
An offer can be made to a specific individual, a group, or the entire world. In Carlill v Carbolic Smoke Ball Co [1893], the court confirmed that a unilateral offer can be made to the world at large and accepted by anyone who performs the stipulated conditions.
An offer does not last forever. It can be terminated in several ways:
If the offeror specifies a time limit, the offer expires at the end of that period. If no time limit is given, the offer lapses after a reasonable time. What constitutes "reasonable" depends on the circumstances.
In Ramsgate Victoria Hotel v Montefiore (1866), an offer to buy shares in June was held to have lapsed by November — a delay of five months was unreasonable for shares whose value fluctuated.
The offeror can revoke (withdraw) the offer at any time before acceptance, even if they promised to keep it open.
In Routledge v Grant (1828), the defendant offered to buy a house and gave six weeks for acceptance. He withdrew the offer before the six weeks expired. The court held this was valid — an offeror can revoke at any time before acceptance unless the promise to keep the offer open is supported by consideration (i.e., an option contract).
Key Rule — Revocation Must Be Communicated:
In Byrne v Van Tienhoven (1880), the defendants in Cardiff posted a letter of revocation on 8 October, but the claimants in New York had already accepted by telegram on 11 October. The revocation letter did not arrive until 20 October. The court held that revocation is only effective when it is communicated to the offeree — not when it is sent. The contract was therefore binding from 11 October.
Revocation Through a Reliable Third Party:
In Dickinson v Dodds (1876), the offeror told a mutual friend that he no longer wished to sell his property. The court held that revocation can be communicated through a reliable third party — it need not come directly from the offeror.
An offer is terminated if the offeree rejects it. Once rejected, the offeree cannot subsequently change their mind and accept.
A counter-offer is a response that changes the terms of the original offer. It destroys the original offer and creates a new offer.
In Hyde v Wrench (1840), the defendant offered to sell his farm for £1,000. The claimant counter-offered £950. When this was refused, the claimant tried to accept the original £1,000 offer. The court held that the counter-offer had destroyed the original offer, so it could no longer be accepted.
Distinction — Requests for Information: A mere request for information or clarification is not a counter-offer and does not destroy the original offer. In Stevenson v McLean (1880), a telegram asking whether delivery could be spread over two months was held to be a request for information, not a counter-offer.
If the offeror dies and the offeree knows of the death, the offer terminates. If the offeree does not know, the position is less clear — for personal service contracts the offer will terminate, but for other contracts it may survive.
If the offer is subject to a condition and that condition fails, the offer lapses. For example, an offer to buy a house "subject to survey" terminates if the survey reveals serious defects that the offeror does not wish to accept.
| Method of Termination | Key Principle | Leading Case |
|---|---|---|
| Lapse of time | Expires after stated or reasonable period | Ramsgate Victoria Hotel v Montefiore (1866) |
| Revocation | Must be communicated before acceptance | Byrne v Van Tienhoven (1880) |
| Reliable third party | Revocation via reliable source is effective | Dickinson v Dodds (1876) |
| Rejection | Terminates the offer permanently | — |
| Counter-offer | Destroys original offer | Hyde v Wrench (1840) |
| Request for information | Does NOT terminate offer | Stevenson v McLean (1880) |
| Death | Usually terminates (especially personal services) | — |
Acceptance is the unqualified agreement to all the terms of the offer. It is the second essential element in contract formation. Once an offer is validly accepted, a binding contract comes into existence.
Acceptance must correspond exactly with the terms of the offer — the mirror image rule. Any variation amounts to a counter-offer (see Hyde v Wrench above). The acceptance must be a "mirror image" of the offer.
The general rule is that acceptance must be communicated to the offeror. Silence cannot amount to acceptance.
In Felthouse v Bindley (1863), an uncle wrote to his nephew offering to buy a horse and said: "If I hear no more about him, I consider the horse mine at £30 15s." The nephew did not reply but told the auctioneer not to sell the horse. The court held there was no acceptance — silence cannot be imposed as acceptance by the offeror.
For instantaneous methods of communication (telephone, telex, fax, email), acceptance takes effect when and where it is received by the offeror.
In Entores Ltd v Miles Far East Corporation [1955], Lord Denning MR held that when parties communicate by telex (an instantaneous method), the contract is formed when and where the acceptance is received by the offeror. This means the offeree bears the risk of non-communication.
This principle was affirmed by the House of Lords in Brinkibon Ltd v Stahag Stahl (1983) for telex communications, though Lord Wilberforce acknowledged that no universal rule could cover all situations.
The postal rule is an exception to the general rule. Where the use of the post is contemplated as a means of acceptance, acceptance takes effect at the moment the letter is posted — not when it is received.
| Rule | When Acceptance Is Effective | Key Case |
|---|---|---|
| General rule (instantaneous) | When received by the offeror | Entores v Miles Far East [1955] |
| Postal rule | When posted by the offeree | Adams v Lindsell (1818) |
The postal rule was established in Adams v Lindsell (1818). The defendants wrote to the claimants on 2 September offering to sell wool, but misdirected the letter. The claimants received it on 5 September and posted their acceptance the same day. Meanwhile, the defendants sold the wool to a third party on 8 September. The claimants' acceptance arrived on 9 September. The court held that the contract was formed when the acceptance was posted on 5 September.
When Does the Postal Rule Apply?
Other Limitations on the Postal Rule:
The offeror may prescribe a particular method of acceptance. If the method is mandatory (e.g., "acceptance must be by registered post"), then only that method is valid. If the method is directory (merely suggestive), then an equally effective or better method will suffice.
In Yates Building Co v R J Pulleyn & Sons (1975), the offer stated acceptance should be by registered or recorded delivery post. The claimant used ordinary first-class post, which arrived on time. The court held that the stipulation was merely directory, and since the purpose (ensuring the letter arrived) was achieved, the acceptance was valid.
In commercial dealings, the "battle of the forms" arises when each party seeks to contract on its own standard terms. Each set of terms sent constitutes a counter-offer that destroys the previous one. The contract is formed on the terms of the last document sent before performance begins.
In Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979], the Court of Appeal held that the "last shot" wins — the contract was formed on the buyer's terms because those were the last terms sent before the seller began performance.
sequenceDiagram
participant Seller
participant Buyer
Seller->>Buyer: Quotation on Seller's terms (offer)
Buyer->>Seller: Purchase order on Buyer's terms (counter-offer)
Seller->>Buyer: Acknowledgement slip returned (acceptance of Buyer's terms)
Note over Seller,Buyer: Contract formed on Buyer's terms — "last shot" wins
| Term | Definition |
|---|---|
| Offer | A definite proposal made with the intention of being bound upon acceptance |
| Offeror | The person who makes the offer |
| Offeree | The person to whom the offer is made |
| Invitation to treat | An invitation for others to make offers; not an offer itself |
| Counter-offer | A response that changes the terms of the original offer, destroying it |
| Revocation | The withdrawal of an offer before acceptance |
| Postal rule | Acceptance by post takes effect when the letter is posted |
| Mirror image rule | Acceptance must match the offer exactly |
| Unilateral offer | An offer to the world at large, accepted by performing the required act |
| Battle of the forms | Where parties each try to contract on their own standard terms |
The rules on offer and acceptance were largely developed in the 19th century and can appear rigid when applied to modern transactions. The distinction between an offer and an invitation to treat is sometimes artificial — consumers generally believe that goods on display are "offered" for sale. The postal rule creates potential unfairness because the offeror may not know a contract has been formed. However, the courts have shown some flexibility (e.g., Holwell Securities v Hughes) and the rules generally produce certainty, which is valued in commercial contexts.
This content is aligned with the AQA A-Level Law specification.