Contract Law - Lecture 4 Formation of Contracts - Offer Requirements for 'contract' " The courts look for external (objective) signs of an agreement. The courts look for a number of specific elements as follows: V Offer V Acceptance V Consideration . Together with an intention to create legal relations. Bilateral Contracts " Formed by an exchange of promises. " Offeror makes an offer. " Offeree accepts the offer. " Contracts are about bargains. " Usually, one party proposes the terms. " The other party has to agree to the terms. " So, starting point=Offer + Acceptance. Meaning of 'offer' " A promise or indication by a party that he/she is prepared to enter into contract with another party, on certain terms. " The courts look for some behaviour which indicates a willingness to enter into a contractual agreement. " This indication could be by words or conduct. " The indication needs to communicate to the potential 'acceptor' of the offer, the basis upon which the 'offeror' is prepared to contract. " The terms of the offer need to be clear. " The offer could refer to terms which were discussed in earlier communication. " An offer can be contained in spoken words, a document, a letter, email communication or an advertisement. " A simple 'yes' to an offer will lead to a binding contract. " Note: The use of the word 'offer' does not necessarily mean a contractual offer has been made- Spencer v Harding [1870] LR 5 CP 561 " Circular issued by the defendants read 'we are instructed to offer to the wholesale trade by tender the stock in trade ... ' " Claimants made the highest tender but defendants refused to grant them the goods. " Held: the request for tenders was not an offer. Distinguish 'offer' from 'Invitation to treat' " Once a statement or action is categorised as an 'offer', a simple yes or assent to it will lead to a binding contract. " Therefore, it must be clear that the statement or action indicates an intention to be bound in contract, without anything more. " An intention to open negotiations is not an offer
" Preliminary communications in which parties only wish to open negotiations is 'invitation to treat' Gibson v Manchester City Council Mr Gibson received a letter which indicated a price for the house and stated as follows: " 'The Corporation may be prepared to sell the house to you ... ' at that price. " The letter also instructed Mr Gibson, if he wished to make a 'formal application', to complete a form and return it to the Council. " Council hadn't signed part of their application " The issue of price had not been completely argued " Lord Denning felt there was enough correspondence for there to be a contract House of Lords felt that the words 'may be prepared' were not terms that could be an acceptance too - there wasn't an offer there was an 'offer to