The enforceability of contracts is based on three significant factors:

■ An agreement made between two parties creates legitimate expectations in both that the terms of
the arrangement will be carried out and that they will receive whatever benefit that is expected from
the agreement.

■ Parties will commonly risk expenditure or do work in reliance on a promise that a particular
agreement will be carried out.

■ It is simply unfair that if one party is ready to perform, or indeed has performed, their part of the
bargain, the other party should escape or avoid his obligations without some means of redress for the
injured party.

Freedom of contract

An agreement (offer and acceptance) is said not to exist unless there is a consensus ad idem, the so-
called mutuality of the parties. So even though the parties think that they have agreed on something,
there will not be an enforceable contract between them unless this mutuality can be shown. The law
prevents one party from forcing goods and services on another party without an actual agreement to
take them. This is apparent in the common law rules on acceptance as well as in statutes such as the
Unsolicited Goods and Services Act 1971.

■ Contract law only concerns itself with the enforcement of bargains. The rules on consideration,
including the most modern case law such as Williams v Roffey Bros & Nicholls Contractors Ltd [1990] 1
All ER 512, demonstrate that the courts are not interested in the quality of the bargain that parties
freely reach. They are merely concerned with the existence of a bargain that is then enforceable.

■ The requirement that an enforceable agreement must also include within it the intention that the
parties are legally bound is another example of freedom of contract. Many agreements are reached
between parties where they would not consider that they had brought themselves within the law. We
are free to make contracts where we agree to be bound. We will not be bound by agreements that we
never intend should carry any legal weight. Even if it is wrong that we break these agreements, it is
equally wrong that we should be hauled before the courts for a promise that has no legal basis which for
some reason we cannot keep, and the law sensibly recognizes this.

■ Freedom of contract is recognized also in the fact that many of the terms or obligations of the contract
by which the parties are then bound are decided upon by the parties themselves. Where bargaining
strength is equal, the law will even allow terms that are clearly disadvantageous to a party if he freely
agreed to be bound by it. A very extreme example of this can be seen in the so-called ‘Securicor cases’ in
exclusion clauses.

■ Even though the court can be seen to be operating in a protectionist manner towards one party, the
rules relating to the various vitiating factors are in effect another example of freedom of contract. This
relates back to the idea of a consensus ad idem. If a party is entering a contract only because of false
information, or being mistaken as to material facts, or is in any way coerced to enter the contract, then
the law will declare the contract void or will set it aside. This will happen because the basis of
contracting must be that a party enters the arrangement with free will and by exercising choice.
■ Freedom can even be seen in one sense in the rules on discharge. For instance, where a party has
failed to perform all obligations under the contract precisely, it may still be possible for the other party
to accept part-performance, and inevitably to pay only for the part done or given. In the same way, the
rules on breach of contract allow a party who is the victim of the breach of a central term to choose
between giving up his own obligations or continuing with the contract, if it would be advantageous, and
merely gaining compensation for the breach in question.

Offer and Acceptance

A contract is only formed in law where the following can be shown to exist:

■ An agreement – which is based on mutuality between the parties – the so-called consensus ad idem

■ Consideration – which means that both sides are bound to give something to each other – the quid
pro quo or proof that a bargain exists, and

■ Intention – it must be the intention of both parties to be legally bound by the terms of the agreement
that they have reached

Offer is an expression of willingness to be bound by certain terms. The offer is a statement of intent by
the offeror to be legally bound by the terms of the offer if it is accepted.

An invitation to treat is a statement or conduct made to invite others to make an offer.

Examples of invitation to treat:

Sale of goods by display (Pharmaceutical society of Great Britain v Bootes Cash Chemists)

The offeree must know of the existence of an offer. (Inland Revenue Commission v Fry). The IRC was
owed 113,000 by Mrs. Fry who paid in form of a check worth 10,000 instead. The procedure was

Terms of the offer must be certain. (Guthing v Lynn)- Agreement for the sale of a horse and payment of
an extra 5 pounds if the horse was lucky. The court found that such terms were vague and thus both
parties were not bound by the contract

Revocation of offers

1. It must be communicated to the offeree (Bryne v Van Tienhoven) On 1st October Van Tienhoven
posted a letter to Bryne offering to sell certain specific goods. On 8th October Van Tienhoven
changed his mind and sent a letter withdrawing the earlier offer. On October 11 th Bryne having
received the letter accepted the offer and posted a letter on 15th October confirming this in
writing. On October 20th Bryne received Van Tienhoven’s letter revoking the offer. The second
letter and revocation of the offer was invalid as it had not been received until after Bryne’s
acceptance of the offer in the telegram of October 11th
2. It is possible to withdraw an offer at any time before it is accepted. (Routledge v Grant) Grant
had offered his house for sale on the understanding that the offer would remain open for six
weeks only. Grant in fact took the house off the market before the period ended. The court held
 that his actions were legitimate because at the time of his revocation there had been no
acceptance.
3. Communication of the withdrawal of the offer can be made by any reliable third party.
(Dickinson v Dodds)
4. A unilateral offer cannot be withdrawn while the offeree is performing. (Carlill v Carbolic Smoke
Ball Co) (Errington v Errington and Woods)

Termination of offer
1. Acceptance of the offer
2. Rejection of the offer by the offeree
3. Revocation of the offer by the offeror
4. Lapse of time (Ramsgate Victoria Hotel Co Ltd v Montefiore) Montefiore had offered to buy
shares in June but the company only issued the shares in November. It was held that his offer to
buy had lapsed. The court recognized that no offer could stay open indefinitely and that after a
reasonable time an offer would lapse. In the case of a transaction where the values of goods
changed rapidly such as is the case here the reasonable time is short.
5. Death of one of the parties. (If the offeree dies then this will cause the offer to lapse and his
representatives will be unable to accept on his behalf)
6. Non-fulfilment of a condition precedent.

Acceptance
An acceptance is an unconditional positive response to an offer.
A valid acceptance is a statement of intention to be bound absolutely and unconditionally by the
terms of the offer.
Mirror image rule states that for an acceptance to be unequivocal and unconditional it must
correspond exactly and in every detail to the offer made.
Basic Rules of acceptance
1. Acceptance must be unconditional (Hyde v Wrench)
2. Even ancillary terms should be accepted- (Jones v Daniels) - Here, the defendant had offered to
buy land from the claimant for a price of £1,450. The claimant wrote in response to the offer,
accepting it and including a document of sale requiring the defendant’s signature and also
containing a number of additional terms on method of payment, proof of title and final
performance. The court held that these ancillary terms could not be contractual until such time
as the defendant had agreed to them and accepted them himself. They were counter-offers and,
even though they concerned ancillary matters, they amounted to a counter-offer and a rejection
of the original offer by the defendant.
3. Mere inquiries do not count as rejection (Stevenson v McLean) In a response to an offer to sell
iron, the price and quantity were accepted but the offeree wished to know whether delivery
could be staggered, as he would have to make arrangements otherwise to accept delivery of the
total. Having heard nothing further, the claimant then sent a letter of acceptance. He sued on
discovering that the iron had been sold to a third party. The defendant’s claim that there had
been a counter-offer failed. The court held that it was not a rejection of the offer; it was merely
 an enquiry about details, and the offer was still open to acceptance. The claimant was successful
in his action for breach of contract.
4. A counter offer can become a term of the agreement if it is accepted- (Davies and Co v William
Old) Sub-contracted shop fitters had contracted with the architects in a building contract on the
basis of their tender to sub-contract to the main contractors, the defendants in the case. The
main contractors, under instruction from the architects, issued the order for the work. The
contractors did so on their own standard forms which included a clause that the contractors
would not be bound to pay sub-contractors until the contractors themselves were paid. The
work order was accepted by the sub-contractors who commenced work on the project. When
the sub-contractors were then not paid for some work that they had done under the contract
they sued for breach of contract. Their action failed. The court identified that the clause in the
work order amounted to a counter-offer which had then been in effect accepted by the sub-
contractors when they commenced the work under those terms.
5. Technical counter offers will not always count as a rejection of the offer if they are of no
importance to the parties. (Brogden v Metropolitan Railway Co)
6. The courts will not allow a party to benefit from both the counter offer and the original offer.
(Pars Technology Ltd v City Link Transport Holdings Ltd)
7. The acceptance may be in any form but if there is a required form then it must be in that form
to be valid. (Compagnie de Commerce et Commissions SARL v Parkinson Stove Co)

Communication of the acceptance

1. The acceptance must be communicated to the offeror. (Powell v Lee) The claimant here had
applied for a position as headmaster of a school and had attended an interview. The
interviewing committee decided to appoint him but did not officially tell him at that point. One
of the panel, who was clearly not authorized to do so, then told Powell what the decision of the
committee had been. The committee later changed its views and Powell was not appointed. He
sued, claiming that the committee had already in effect accepted his offer of work. The court
rejected this claim. He was not in a contractual position until the official notification of the
committee was given to him.

2. Silence can never amount to acceptance (Felthouse v Bindley) an uncle and nephew had
negotiated over the sale of the nephew’s horse. The uncle had said, ‘If I hear no more from you I
shall consider the horse mine at £30 15s’. The nephew’s stock was then put up for auction. At
the sale the auctioneer failed to withdraw the horse from the sale as he had been instructed to
do by the nephew, and the horse was sold to another party. In order to claim conversion in tort
against the auctioneer, the uncle needed to prove that a contract existed with his nephew for
the sale and purchase of the horse. The uncle’s action against the auctioneer failed. He was
unable to prove that the horse was his. The nephew had not actually accepted his offer to buy.
The court would not accept the nephew’s silence on the matter as any indication of acceptance

3. The acceptance can be in any form (Unless the offeror has indicated a particular method of
acceptance) Yates v Pulleyn One party was given an option to purchase land. According to the
 terms of the offer, this option was required to be exercised by notice in writing ‘sent by
registered or recorded delivery post’. While ordinary post was accepted as a suitable alternative,
the court did acknowledge the importance of responding by a stipulated method.

4. A unilateral offer requires no acceptance other than performance (Carlill v The Carbolic Smoke
Ball Co Ltd)

5. The postal rule

Where use of the ordinary postal system is the normal, anticipated or agreed means of accepting the
offer then the contract is formed at the time that the letter of acceptance is posted, and not when it is
actually received.

(Adams v Lindsell) The rule actually began with this case. It involved an offer for the sale of wool.
Because the parties were not in close contact, the seller asked for an acceptance by post. The
prospective purchaser replied on the same day that the offer was received and sent the acceptance in a
letter, as required. However, the letter of acceptance was not received until long afterwards, by which
time the seller had sold the wool. The purchaser sued, claiming a breach of contract. The court
examined the reality of contracting at a distance at the time. The court developed the rule because of
the possible injustices that could be caused by delays in the postal system in its early days. It was held
that the letter of acceptance was effective from its time of posting and that a binding contract existed at
that point rather than at any later point when the letter may or may not be received.