OFFER

The Meeting of Minds:

A contract can exist only where there has been an agreement to enter into, and be bound
by, the terms of the contract. In law it is called “consensus ad idem” or a meeting of the
minds. However, a mental state is not easy to ascertain. People may say or do something
that they don’t intend to have a particular consequence. Hence, a person may use
language that suggest an intention to enter into a contract, but may not have actually
intended to do so. But the law cannot delve into this situation to find out the actual
position, hence it assumes, from the circumstances surrounding the contract, whether
there has been a contract or not. Therefore, the mental state is arrived at through an
objective test, manifested by the conduct of the parties. This takes into account what a
reasonable person would have understood those acts or words to mean, regardless of what
the person who did or said them intended them to be. Hence the subjective meeting of the
minds is judged by the objective manifestation of mutual assent. It is where this
manifested meeting of minds exists that the law will hold that there has been a “meeting
of the minds”.

Smith v. Hughes: LR 6 QB 597:

“If whatever a man’s real intention might be, if he so conducts himself that a reasonable
man might believe he was assenting to the terms proposed by the other party, and that
other party enters into the contract, the man agreeing might believe he is bound by the
terms and conditions”.

Case Law: British Ceylon Corporation Ltd v. The United Shipping Board 36 NLR 225

Collen v. Reitfontein 1948 (1) SALR 413

The Offer:
It is generally, though not always, the first step in the formation of a contract.
Weeramantry defines it as “a proposal by one party to another of certain terms of
performance, which proposal is made with the intention that it be accepted by such other
person”.

A person who makes the offer is called the “offeror”; an offer is a promise of
performance. This promise matures into a contract (in the case of a unilateral contract)
upon an act or forbearance being received in exchange for it and (in the case of a bi-
lateral contract) upon a return promise being received.

What constitutes an offer/Requirements of a valid offer:

The offer must be certain: This means that the offer must contain definite terms of
performance. It must not be vague, as a vague offer indicates that the offeror was not

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interested in making a valid contract. Vague terms would be those which agree to “let
premises for the duration of the war” [Lace v. Chantler, (1944) 1 KB 368] or that
someone is to receive “a reasonable share of the profits” [Way v. Latilla 1937 (3)
All.E.R 759]. However, whether or not the offer is definite, the circumstances under
which the offer was made are also important. For example, an offer to sell 100 tonnes of
oil could be constituted as a vague offer. But if that offer was made by a coconut oil
dealer, the it is not vague, as he has only that type of oil to sell.

Can an offer be made to the whole world?

Carlill v. Carbolic Smokeball Co. 1892 2 QB 484

Owners of a medical preparation called carbolic smokeball advertised that they would
give 100 pounds to any person who succumbed to influenza after using carbolic
smokeballs in a specific time. They also said in the advertisement that they had deposited
1000 pounds to show their sincerity. The plaintiff, Mrs. Carlill, used this smokeball, and
still contracted influenza. She sued the company.
The defendants took up a variety of arguments. One was that they had not addressed any
definite person. This argument was rejected by the courts. Although the offer was to the
world at large, the contract is made with the limited number of people who come forward
and perform the terms of the contract.

“Invitations to Treat”:

An invitation to treat is a preliminary stage, which will not mature into a contract, unlike
an offer. Circulars, catalogues, price lists etc., are invitations to treat. They are not offers,
and should not be construed as such.
Grainger v. Gough 1896 AC 325
Partridge v. Crittendon (1968) 2 All.E.R 421

In a modern context, price tags and self-service shops have also been held to be
invitations to treat.
Pharmaceutical Society of Great Britain v. Boots Cash Chemists Ltd. (1953) 1 All.E.R
482

Crawley v. Rex 1909 TS 1105

A shopkeeper advertised a particular brand of tobacco and had a placard with the price.
Crawley bought a pound of tobacco, came back and asked for another pound. There were
many others, so he was refused. Crawley refused to go, and was charged with remaining
unlawfully on premises. He said he was justified in staying as he had a contract with the
shopkeeper, and it was not carried out yet.
The court held that there was no contract, and that the placard was merely an invitation to
treat. Also, the shopkeeper should have the freedom to contract with whoever he pleases.

This position is taken by both the EL and the RDL.

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Auction Sales:

The advertisement of auction is merely an indication of an invitation to sell. The

auctioneer’s request for bids at such a sale is only an attempt “to set the ball rolling” and
the buyer’s bid is the offer which the auctioneer may either accept or reject. The buyer’s
bid is the offer, and the auctioneer accepts or rejects it. Until the fall of the hammer , the
buyer can revoke his offer.

Harris v. Nickerson 1873 LR8 QB 286

One party indicated that there would be an auction, but the auction was cancelled. Harris,
who went for the auction, wanted his travel fare back. The court held that there was no
offer, merely an invitation to treat.

Auction sales without a reserve price:

A reserve price is the minimum price at which the article may be sold. There is a view
that this is merely an invitation to treat. However, another school of thought maintains
that there is an offer to sell to the highest bidder, whatever the price. Obiter in Warlow v.
Harrison (1859) 1 E&E 309 that the words “without reserve” would convert the
invitation to treat into an offer.

Tender Notices:
The circulars calling for tenders are Invitations to treat. They do not amount to an offer to
sell or buy from the person who makes the highest/lowest bid. The submitted tender is the
offer. When you accept the tender, if the tender notice is for a specified quantity of
goods, the acceptance of the tender amounts to acceptance of the offer, and will produce
a binding contract.

AG v. Vithilingam 43 NLR 117

A tender was awarded to the highest bidder for “exploiting the forest”. The party to
whom the tender was awarded refused to perform, so the tender was given to the 2 nd
highest bidder. It was held that if the tender is for goods of specific description upto a
stated limit (if the notice indicates merely that articles of specific description may be
required upto a stated limit) the acceptance of the tender will not amount to acceptance of
the offer, and the contract will come into being only at the time the order is placed for a
specified quantity.

Great Northern Railway Company v. Witham 1873 LR 9 CP 16

The plaintiffs advertised for tenders for the supply of stones. The defendant submitted a
tender in these words – “I undertake to supply the company for 12 months with such
quantities of stones as the company may order from time to time”.
This tender was accepted by letter. Later on, the company gave various orders, which the
defendant complied with. At one point, he refused to supply. The matter came to court.
The company was successful in an action for breach of contract.

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Once you make an order for specific goods, you cannot revoke it. In the future, the
person can regain his liberty if, before the order was made, he writes to the company,
revoking his offer.

Harvela Investments Ltd. V. Royal Trust Co. 1896 AC 207

The first defendant held 12% of the shares of the company. They wished to sell them.
The plaintiffs owned 43%, and the 2 nd defendant owned 40%. The first defendant decided
to sell the shares by sealed tender, and sent similar notices to both parties, stating
“we confirm that if the offer made by you is the highest offer received by us, we bind
ourselves to accept such offer, providing that such offer complies with the terms of this
telex”
The plaintiffs sent their bid for pounds 2,175,000. The 2nd defendants bid was for “pounds
2,100,000 or 100,000 in excess of any other offer you may receive”. (referential bids)
The 1st defendant accepted the 2nd defendants bid. The House of Lords held that the 1 st
defendant was obliged to accept the plaintiff’s bid.

The court held that the telex is treated as an offer of a unilateral contract to accept the
highest bid. The telex should be followed by a bi-lateral contract with the highest bidder.
Here, a referential bid was inconsistent with an obligation to accept the higher of two
sealed bids.

Harvey v. Facey 1893 AC 552

Plaintiffs telegraphed to defendant “will you sell us Bumper Hall Pen? Telegraph lowest
cash price”. The defendant telegraphed that the lowest price is pounds 900. Plaintiffs
telegraphed “we are willing to buy Bumper Hall Pen. Please send us your title deeds.”
There was no reply to this.

The Privy Council held that there was no contract because the defendant’s telegraph was
not an offer but only an indication of a minimum price and therefore the plaintiff’s
subsequent telegram was not an acceptance.

Clifton v. Palumbo (1944) 2 All.E.R 491

This dealt with the sale of a large estate. P. wrote to D “I am prepared to offer my estate
for pounds 600,000. I also agree that a reasonable time shall be granted to you for the
examination of it”.
The Court of Appeal said this letter was not a definite offer to sell, but only a preliminary
offer as to price.

Harvey and Clifton were distinguished in

Bigg v. Boyd Gibbins Ltd. (1971 ) 2 All.E.R 183

In reply to an offer from Boyd, Bigg replied “As you are aware that I had paid Pounds
25,000 for this property, your offer of pounds 20,000 appears to be optimistic. For a
quick sale I would accept pounds 26,000”.
Boyd replied “I accept your offer”.

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Here, on a true construction of these letters, the formation of a contract was held to have
been reached.

Gibson v. Manchester City Council (1979 ) 1 All.E.R 972

In September 1970, a local council adopted the policy of selling council houses to council
tenants. On 16th February 1971, the local council wrote to Gibson, that the council might
sell the house to him at the purchase price x,; the letter invited him to make a formal
application, which he did.
In may 1971, after the local government election, the policy changed. The council
decided only to go ahead with transactions where written documents had been
exchanged. The question arose whether Gibson’s application amounted to a contract.
The court held that Gibson’s application was an offer, but it was not accepted, and hence
there was no contract.

Further reading:

• Datec Electronic Holdings v. United Parcel Service Ltd. [2007] 4 Ell ER 765