2.1.

2 Offer Lecture
What makes an offer?

The first requirement of a legally binding agreement is that there is an

offer. One party is the offeror, who presents the offer, and one party is the
offeree, who is the potential acceptor of the offer.

The case of Storer v Manchester City Council [1974] 1 WLR 1403 outlines
that an offer is:

1. An expression of willingness to contract on specified terms

2. With the intention that it is to be binding once accepted

Storer v Manchester City Council confirmed that in assessing whether

these conditions have been met, the courts will take an objective
approach. Therefore, the courts will consider how the conduct of the
offeror would appear to an objective party, which requires an application
of the ‘reasonable man’ standard. Therefore, the question to ask is:

‘On examination of the offeror’s conduct as a whole, would the reasonable

person consider the offeror to have expressed a willingness to contract on
specified terms with the intention that it is to be binding once accepted?’

There is no consideration of the intentions of the offeror or their state of

mind. Even if the offeror did not intend his conduct to amount to an offer
at all, the courts may still find contractual intent amounting to an offer
based on this test.

The offer must be communicated to the offeree – Taylor v Laird (1856 25

LJ Ex 329)

Offer v Invitation to Treat

An important distinction to make in contract law is that between an offer

and an invitation to treat. An invitation to treat can be defined as an
indication that a party is open to negotiation.

The case of Gibson v Manchester City Council [1979] 1 WLR 294 held the
following statement to be an invitation to treat

“May be prepared to sell the house to you”

There was clearly no display of contractual intent, due to the words “may
be prepared”, which suggest the Council were open to negotiation, and
therefore the statement was construed as an invitation to treat, rather
than an offer.
Here are some key distinctions between an offer and an invitation to treat.

Offer:

 Certain promise to be bound

 Clear and specified terms
 The conduct or words of the party show certainty
 There is no room for negotiation

Invitation to treat:

 There is room for negotiation

 There is an invitation for offers
 There is a request for information
 Lack of certainty

Presumptions

Throughout the history of contract law, there has been various disputes
over the distinction between an offer and an invitation to treat. Therefore,
in order to provide consistency, there are a number of presumptions
which are applied to certain types of conduct.

Display of goods

The case of Pharmaceutical Society of Great Britain v Boots Cash

Chemists [1953] 1 QB 401 confirms that a display of goods is considered
to be an invitation to treat. The specific approach taken is as follows:

 The display of goods in a shop/self-service shop are an invitation to

treat
 The customer makes the offer to the cashier by presenting the
goods at the service desk
 The cashier accepts the offer by scanning the goods and requesting
payment

Reasons why a display of goods is an invitation to treat: There are

a multitude of reasons for which the court construed the display of goods
in this way. It is evident that there would be various issues with the
display of goods constituting an offer. If a display of goods was an offer,
the acceptance would occur when the customer removes the goods from
the shelves. The type of problems that may occur are:

 The shopkeeper has no choice whether or not to sell to somebody

once they have removed an item from the shelves, preventing the
shopkeeper’s ability to choose their customers
 The acceptance has occurred at the price specified for the goods,
meaning there can be no negotiation between the buyer and seller.
This is not particularly relevant in most shops where negotiation is
 not possible, but it is still a relevant issue in some cases, and
particularly if an item is mispriced
 A customer couldn’t choose to exchange the item for another once
they have removed it from the shelf, or replace the item, as
acceptance has already occurred. Otherwise, they would be in
breach of contract

Display of goods in a shop window

The case of Fisher v Bell [1961] QB 394 is the legal precedent that
confirms the display of goods in a shop window is an invitation to treat. In
this case, the defendant had a knife in the window of their shop with a
price tag attached, which was held to be an invitation to treat.

Reasons why a display of goods in a shop window is an invitation

to treat: This presumption is based upon the rules from the above case
of Pharmaceutical Society v Boots Cash Chemists, in that if it was
considered an offer, the shopkeeper could not pick and choose his
customers.

There is a further consideration for display of goods in a shop window; the

shop may have a limited stock of the item, therefore if two individuals saw
the ‘offer’ at the same time and there was only one available item, the
shopkeeper would be in breach of contract to one of the individuals.

Advertisements

As a general rule, the case of Partridge v Crittenden [1968] 2 All ER 421

rules that an advertisement is an invitation to treat. The reason for this is
the “multi-acceptance” principle.

The multi-acceptance principle: If an advertisement is considered an

offer, theoretically, an unlimited amount of people could accept that offer,
which causes obvious problems when the advertisement is for a limited
amount of goods, as the seller would be in breach of contract to each
individual whom they could not provide goods for.

Theory behind the multi-acceptance principle: Following this

consideration, it is obvious that an advertisement does not fulfil the
requirement from Storer v Manchester City Council, as there is clearly no
unequivocal display of contractual intent; the reasonable person would
recognise that the individual who placed the advertisement never
intended to contract with everybody who responds to the advert.

Exceptions to advertisements as invitations to treat:

 One theoretical argument suggests that an advertisement from a

manufacturer may be construed as an offer, as the manufacturer
would be able to make more of the item in question in response to
 all of the acceptances. This is not a rule, but may be a factor in
a court’s decision!
 Advertisements which negate the ‘multi-acceptance’ problem.
Lefkowitz v Great Minneapolis Surplus Stores Inc(1957) 86 NW 2d
689 did this by stating “3 coats for sale, first come first served”,
making it clear only the first three individuals would be sold the
coat.
 Unilateral contracts. A Unilateral contract is formed where the
offeror makes a promise in exchange for an act by any offeree. An
example of this would be where an individual puts a poster up,
offering money to anybody who finds their lost dog. A practical
example of this is seen in Carlill v Carbolic Smoke Ball Co
Ltd[1893] 1 QB 256

In the Carlill case an advertisement promised a £100 reward to anybody

who contracted influenza after using the Carbolic Smoke Ball in a certain
way over a fixed period of time. This is a unilateral contract as there is
only obligations for one of the parties – i.e anybody could choose to use
the smoke ball, but they didn’t have to, but the seller had to pay the £100
if anybody met the requirements.

The defendant had deposited £1,000 with a bank for the purpose of
paying these £100 rewards. Therefore, the court decided that as the
terms were certain, and there was a clear display of intent displayed via
the deposit of £1,000 for the reward payments, the advertisement should
be construed as an offer.

It is important to note that not every unilateral contract is an offer, only

ones where clear intent and certainty is shown.

This can be a rather complex differentiation to make, but again, it

essentially requires a consideration of the rule from Storer v Manchester
City Council; is there an unequivocal display of contractual intent? The
objective evidence in this case was the £1,000 deposit.

Tenders

A tender is where an individual seeks specific goods or services and

advertises their need for them. This is construed as an invitation to treat,
and any response to the tender will be an offer.

Automated machines

The operation of an automated machine is considered an offer, as the

machine cannot negotiate the price – if an individual inserts the correct
amount of coins, the contract will be formed. Acceptance is considered to
take place when the offeror inserts the coins and chooses an option
(Thornton v Shoe Lane Parking [1971] 2 QB 163)
Auctions

Auction without reserve: Where an auction is “without reserve” (i.e

there is no minimum priced bid required to win the auction) each bid is an
offer, and when the auctioneer ends the bidding, this is the acceptance.
Therefore, each bidder may revoke their offer at any time before the end
of the bidding.

The auctioneer could, in theory, refuse to accept the offer, however, in the
case of auctions, there is a collateral contract, this is between the
auctioneer and the highest bidder, which involves the obligation to accept
the highest bidder, meaning any refusal of a highest bid would amount to
a breach of contract (Barry v Davies [2000] 1 WLR 1962).

Damages for a breach of collateral contract: The court will consider

the position the bidder would have been in if his bid was accepted. For
example, if the auctioneer declined a highest bid of £10 for an item worth
£100, the price difference between the bid and the market price of the
item would be awarded – in this case, £90.

Auction with reserve: Where an auction is “with reserve”, (i.e the

owner of the goods has set a minimum price) the auctioneer is only
obliged to accept any bids which are above the minimum price.

Advertisement of an auction: An advertisement of an auction is

considered to be an invitation to treat, meaning an individual who
intended to bid on items cannot bring an action against the auctioneer
who does not auction the item. In the case of Harris v Nickerson(1872) LR
8 QB the claimant attempted to claim for travel expenses and the time
spent travelling for the auction.

Revocation of an offer

How to revoke an offer: An offeror may revoke an offer at any point

prior to acceptance (Routledge v Grant [1828] 4 Bing 653). In order to be
effective, the revocation must be communicated. An offer may also be
revoked if there is a fixed time for acceptance; once this period is over,
there is an automatic revocation of the offer.

Automatic revocation of an offer: An offer will automatically be

revoked after a reasonable lapse of time. ‘Reasonable’ is assessed on a
case-by-case basis. In Ramsgate Victoria Hotel v Montefiore(1866) LR 1 Ex
109 an offer was accepted by the claimant six months after the offer, but
the courts held that this offer had been revoked due to the lapse of time.

Third-party revocation: A third-party may also revoke the offer by

communicating this to the offeree. In order for the revocation to be
effective, the third-party must be objectively reliable (Dickinson v
Dodds(1875) 2 Ch D 463).
Revocation of unilateral contracts: Unilateral contracts pose a
different issue, as there are any number of potential offerees to
communicate revocation to. In the case of unilateral contracts, the courts
require the offeror to take reasonable steps to communicate the
revocation. Shuey v USA (1875) 92 US 73 suggests revocation should
occur in the same manner that it was offered. For example, if the offer
was made via a post on a website, the revocation should also be posted
on the website.

Revocation of unilateral contracts when the offeree has begun

performance: As previously explained, unilateral contracts require the
performance of an act for acceptance. The current judicial precedent from
Dahlia v Four Millbank Nominees [1978] Ch 231 is that the unilateral
contract cannot be revoked once the offeree has embarked on
performance.

Counter offers: A counter-offer from the offeree has the effect of

revoking the original offer (Hyde v Wrench (1840) 49 ER 132).
2.1.3 Offer - Hands on Example
The following scenario aims to test your knowledge of what constitutes an
offer and the effect on the potential contract. The answers can be found at
the bottom of the page. Try to think about the relevant principles, cases
and the outcomes of the scenario.

There is also a full written answer to the questions at the end of this
section, which would be how you may approach a question such as this in
an exam. Don’t be discouraged if you can’t identify the issues at first –
applying the law is very different than learning about it! Referring back to
the notes for this section should be able to help you. This section should
help you see how questions regarding offers will be structured. Think
about everything this section has taught you, and remember not all of the
content you have learnt will be included in this question.

The sensible approach to a problem question regarding an offer is:

 Can I identify any of the presumptions (If you can identify a

presumption, you won’t need to consider the objective test to
decide whether the conduct constitutes an offer, simple!)
 If there is no presumption, is there an objective intention to create
contractual relations
 Has there been a revocation of the offer?

After completion of this section, you may wish to create your own scenario
with similar issues, or issues that have not been included in this question,
which will help you further with your understanding.

Scenario

Roger is a successful businessman who has just moved to London, he has

an unfurnished apartment which needs renovating and furnishing. Roger
decides to travel into town and make some purchases for his house.

1. Roger goes into a hardware store and spots a chainsaw for £20, he
desperately needs to get rid of some trees in his garden so he
considers purchasing it. After a quick check online, he is surprised to
find that in fact, the chainsaw is worth £250. He rushes to the till in
order to make his purchase but the cashier explains that the price
was a misprint, and it should have been £280. Roger explains to the
cashier that they must sell it to him for £20, otherwise it is false
advertising, but the cashier still refuses to sell the chainsaw.

Can Roger insist on the sale for £20?

2. Roger leaves the store and attempts to ring his friend to vent his
frustration, but he realises that he has lost his phone and thinks he
 probably dropped it whilst rushing to the cash desk with the
chainsaw. Roger searches high and low in the store but can’t find it.
He is about to give up when he notices a notice board for buying
and selling. He quickly grabs some paper from the cashier and puts
up two different adverts

1. Lost phone! iPhone 12, if anybody can return it to me I will reward

them £50.
2. Looking for a chainsaw, will not pay any more than £150.

Subsequently, days later, Glen, a young boy, returns his phone to him and
demands the £5,000 reward. Roger laughs and gives him £5 instead.
Roger is also contacted by Joe who says he has a chainsaw he will sell to
him for £149

What type of contract did Roger form when he put the advert for his lost
phone up, and can the young boy enforce this contract against him?

What presumption does advert b fall under? The chainsaw seller is

demanding Roger buy the chainsaw for £149, does he have to buy it?

3. Roger’s business isn’t doing too brilliantly, and he can’t afford brand
new furniture for his house. He sets off to the auction house on a
Monday morning. Unbelievably, he is the only person at the auction
hall. The first auction is for a sofa, and the bidding is started at £1.
Roger bids £1 and wins the bid. Following, the auctioneer says “this
sofa is worth £1,000, I can’t take a bid for £1!” and tells him to
leave.

Can Roger make the auctioneer give him the sofa?

4. The following year, Roger’s business is back on track, and he has

now completed the renovation of his house. In celebration, he is
hosting various charity events. At one of his events, he announces
he has posted online a challenge for charity, if somebody can swim
the channel between England and France in under 12 hours, he will
donate £500,000 to a charity of their choice. After six months,
Roger’s friend, Alex, asks Roger if he is still offering the £500,000
reward, Roger tells him he isn’t. The following week, it comes to
Roger’s attention that an Olympic swimmer, Ryan, has taken up his
challenge and is already half-way across the channel in under 4
hours. Roger’s investments have taken a huge dive and he no
longer has the £500,000, so before Ryan completes the challenge,
Roger quickly posts online that the £500,000 reward has been
revoked.

Was Roger’s revocations of the offer valid, if not, is there any other way
the offer may have been revoked?
Answers

The legal issue here is whether or not the display of the chainsaw was an
offer, and by picking up the goods, did Roger accept the offer and form a
binding contract? Essentially, does the cashier have the negotiation power
to refuse the sale?

The case of Pharmaceutical Society of Great Britain v Boots Cash

Chemists [1953] 1 QB 401 applies – the display of goods in an invitation to
treat. This means that Roger makes the offer when he brings the chainsaw
to the desk, and the cashier has every right to refuse the sale.

Outcome: Roger cannot purchase the chainsaw for £20.

The advertisement for the return of Roger’s lost phone constitutes a

unilateral contract – anybody who finds Roger’s phone can accept the
offer. The offer is clear and fits the criteria laid out in Carlill v Carbolic
Smoke Ball Co Ltd [1893] 1 QB 256, therefore, Glen will be able to enforce
the £50 reward payment.

Advert b falls under the ‘tender’ presumption. Roger does not have to buy
the chainsaw for £149 from Joe, as a tender is a mere invitation to treat.

This outcome will be dependent on the type of auction. If the auction is

without reserve, Roger is entitled to the sofa, and if the auctioneer refuses
to give him the sofa, he would be entitled to damages of £999 (Market
value minus the bid - £1,000 minus £1).

If the auction was with reserve, and the reserve was more than £1, the
auctioneer would not have breached a contract by declining the bid.

This offer from Roger amounts to a unilateral contract, to revoke the

contract, Roger must take reasonable steps to communicate the
revocation.

Roger telling Alex the offer was revoked would not be reasonable steps, as
he has only informed one person. As per Shuey v USA (1875) 92 US 73,
the offer should be revoked in a similar fashion that it was offered, in this
case, the offer was made online.

Therefore, when Roger revokes the offer online, this will suffice, but, as
Ryan, an offeree, has begun performance, he cannot revoke the offer at
this time (Dahlia v Four Millbank Nominees [1978] Ch 231).

Roger may suggest that the offer has been revoked due to a lapse of time.
Roger must argue that six months is a long enough period to
automatically revoke the offer.

Full model answer

This scenario involves various contractual issues pertaining to whether or
not there has been an offer made. An offer can be defined as an
unequivocal display of contractual intent (Storer v Manchester City
Council). This requires an objective assessment using a ‘reasonable man’
test, and does not take into consideration any subjective intentions of the
parties.

The chainsaw

The first legal issue in this scenario is whether or not Roger can purchase
the chainsaw for £20, this is a question of whether or not there has been a
contract formed when Roger picks up the chainsaw. In order for a contract
to be formed, there must first be offer and acceptance. Roger may
attempt to assert that the display of the chainsaw priced at £20 amounted
to an offer, and by taking the chainsaw to the till he had accepted that
offer, therefore forming a binding contract which would mean the cashier
was unable to refuse the sale.

Legal precedent has developed ‘presumptions’ of what will amount to an

offer, and instead of applying the test from Storer v Manchester City
Council these presumptions can be followed. The case of Pharmaceutical
Society of Great Britain v Boots Cash Chemists asserts that a display of
goods, such as the chainsaw, does not amount to an offer, instead it will
be considered an invitation to treat. This is distinct from an offer as it
essentially invites others to make an offer or negotiate with the party
(Gibson v Manchester City Council).

Therefore, when Roger takes the chainsaw to the till, he has not accepted
an offer, he is responding to an invitation to treat. This means taking the
chainsaw to the till amounts to an offer from Roger, meaning the cashier
then has the discretion of whether to accept that offer or not. Following, it
is clear that the cashier may refuse the sale, and Roger cannot enforce
the sale for £20.

Reward poster

The next legal issue is whether Roger must give the Glen, who returned
his iPhone, £50 as stipulated in his reward poster. The case of Partridge v
Crittenden rules that the presumption is that advertisements would
amount to an invitation to treat, unless the offer is for a unilateral contract
with clear intention to create legal relations as per Storer v Manchester
City County Council.

Roger’s poster would amount to a unilateral contract, as there is only an

obligation on one party – Roger must pay the £50 reward if somebody
returns his phone, but there is no obligation on anybody to find the phone.
A unilateral contract will be for the performance of an act, acceptance
takes place on performance of the act, and there is no requirement to
communicate an intention to perform the act, the performance alone is
sufficient as acceptance.

Applying the subjective reasonable man test to Roger’s poster, it is clear

there is an intention to create legal relations, as the £50 reward is a
reasonable amount for the return of an expensive possession. If the
reward had been, for example, £5,000, the courts would rule that the
reasonable man would not consider Roger’s advert to express an
unequivocal intention to create legal relations, as £5,000 is an absurd
amount and probably more than the cost of the actual phone – it would be
seen as a marketing device, or a ‘mere puff’ as suggested in Carlill v
Carbolic Smoke Ball Co Ltd.

Therefore, as there is an offer, it is clear that when the boy returns

Roger’s phone, he has performed the requisite act that constitutes
acceptance, meaning a binding contract had been formed and Roger
would have to pay the whole £50 as promised in his reward poster.

Tender for chainsaw

The next legal issue is whether Roger must buy the £149 chainsaw in light
of his poster which states he is looking to buy a chainsaw for any price
below £150. This poster amounts to a tender, which is where an individual
seeks specific goods or services, advertising their requirement for them.
Roger is seeking the purchase of a chainsaw, therefore this amounts to a
tender.

A tender has a presumption that it will be an invitation to treat, as parties

will then contact the owner of the tender to negotiate/offer their
goods/services. Therefore, when Roger is contacted by Joe, this amounts
to an offer, meaning Roger can decline the offer, and is subsequently not
bound to buy the chainsaw for £149.

The sofa

The legal issue with the sofa is whether there has been offer and
acceptance between Roger and the auctioneer which would result in a
binding contract. A definitive decision cannot be made on the facts given,
as it is not clear whether the auction is with reserve or without reserve.
Following, both scenarios will be considered and explained.

If the auction is without reserve, the case of Barry v Davies is precedent

that the presumption is that each bid is an offer, and that acceptance
occurs when the auctioneer ends the bidding. This suggests that the
auctioneer may refuse bids, but as there is a collateral contract between
the auctioneer and the bidders to accept the highest bid, any refusal of a
highest bid would amount to a breach of contract. Therefore, the
auctioneer cannot decline Roger’s bid, and must allow Roger to buy the
sofa for £1.
If the auctioneer refuses to allow Roger to take the sofa, he will be
awarded damages which amount to the difference between the market
value of the sofa and his bid. The market value of the sofa is £1,000;
therefore, the damages will amount to £999.

If the auction is with reserve, an auctioneer is only obliged to accept any

bids which are above the minimum reserve price. Therefore, if the reserve
price is higher than £1, the auctioneer can legally prevent Roger from
purchasing the Sofa.

The reward for swimming the channel

The legal issue here is whether Roger’s offer would amount to an offer,
and if so, can Roger revoke the offer so to not be required to pay the
reward to Ryan.

For identical reasoning as the reward poster regarding the return of the
phone, the promise of a £500,000 donation for somebody to swim the
channel in under 12 hours will amount to a unilateral contract. Whether or
not it would amount to an offer is dependent on whether the requisite
intention is clear from the view of the objective reasonable person.

Roger may attempt to argue his original offer was in fact not an offer, as
no reasonable person would objectively consider it to be an intention to
create legal relations, as the challenge was absurd and practically an
impossibility. Evidently, this argument would fail as it is in fact a clear
possibility if Ryan is able to complete half of the swim in under 4 hours.
This may also involve a consideration of past successful swims/attempts
at swimming the channel – has anybody been close to beating 12 hours or
actually beat it? This argument is tenuous at best given the facts and
would likely fail.

In the same vein as above, he may argue the reasonable person would
not identify an intention to create legal relations due to the extremely
high reward of £500,000. This would depend on the public’s perception of
Roger, if it was known he was extremely wealthy and charitable the
reasonable person would consider his offer to have clear intent. The fact
he was hosting various charitable events would give weight to this
suggestion, if he had donated similar amounts previous this would also
support this assertion. However, if his wealth was unknown to the public,
the reasonable person would likely consider such an offer to be some kind
of joke, meaning it would lack the required objective intention.

If the courts find that the required intention is clear, and the
advertisement is considered an offer, the legal issue here is whether
Roger has successfully revoked the offer in order to prevent him having to
pay the £500,000.
Roger’s first attempt at revocation comes when he tells his friend, Alex,
that the offer is revoked. Reasonable steps must be taken to revoke a
unilateral contract, which Shuey v USA suggests would involve a
revocation in a similar fashion to the way in which the offer was made. In
this case, the offer was posted online, meaning an online post would
amount to revocation. It is clear that privately telling Alex would not
constitute ‘reasonable steps’, meaning the revocation is ineffective at this
point.

However, Roger does at a later point post his revocation online.

Unfortunately, as per Dahlia v Four Millbank Nominees, a unilateral offer
cannot be revoked once an offeree has begun performance. At this point,
Ryan has already started on performance, as he is half way across the
channel, meaning this revocation is ineffective, and once Ryan completes
performance, Roger will be bound to pay the £500,000.

Roger may attempt to argue that the offer has been automatically
revoked due to a lapse of time. The time required is a ‘reasonable time’.
In the case of Ramsgate Victoria Hotel v Montefiore 6 months was held to
be a reasonable time, but this was due to the subject matter of the
contract being shares, which had volatile prices and it would be unfair to
leave such an offer open. In Roger’s case, the difficulty of swimming the
channel would not fluctuate and could not be considered ‘volatile’,
meaning it is likely the courts would rule in favour of Ryan, that the offer
had not been revoked due to a lapse of time. The only argument Roger
may assert is that the difficulty of swimming the channel is volatile
dependent on the time of year – perhaps the offer was made in the winter
and it is considerably easier to swim the channel six months later, in the
summer, therefore, the lapse of time to the summer would revoke the
offer. However, this is not clear from the facts, but is one potential
argument Roger may use.

Conclusions

Concluding: Roger would not be able to buy the chainsaw for £20; he must
give the £50 reward to Glen; he would not have to purchase a chainsaw
from Joe; the outcome of the sofa is dependent on whether the auction
was with or without reserve; Roger would probably be bound to pay the
£500,000 to Ryan if he completes the swim in under twelve hours, but his
strongest potential counter-argument being with regards to the £500,00
being an extremely high reward and no objective reasonable person
would take the offer seriously, although this is dependent on his previous
conduct and public perception.