Agreement in English law

The Carbolic Smoke Ball offer

In English contract law, an agreement establishes the first stage in the existence of a contract. The three main elements of contractual formation are whether there is (1) offer and acceptance (agreement) (2) consideration (3) an intention to be legally bound.

One of the most famous cases on forming a contract is Carlill v Carbolic Smoke Ball Company,[1] decided in nineteenth-century England. A medical firm advertised that its new wonder drug, a smoke ball, would cure people's flu, and if it did not, buyers would receive £100. When sued, Carbolic argued the ad was not to be taken as a serious, legally binding offer. It was merely an invitation to treat, and a gimmick. But the court of appeal held that it would appear to a reasonable man that Carbolic had made a serious offer. People had given good "consideration" for it by going to the "distinct inconvenience" of using a faulty product. "Read the advertisement how you will, and twist it about as you will," said Lindley LJ, "here is a distinct promise expressed in language which is perfectly unmistakable".

Offer

The most important feature of a contract is that one party makes an offer for a bargain that another accepts. This can be called a 'concurrence of wills' or a 'meeting of the minds' of two or more parties. There must be evidence that the parties had each from an objective perspective engaged in conduct manifesting their assent, and a contract will be formed when the parties have met such a requirement.[2] An objective perspective means that it is only necessary that somebody gives the impression of offering or accepting contractual terms in the eyes of a reasonable person, not that they actually did want to contract.[3]

Invitations to treat

Main article: Invitation to treat

Where a product in large quantities is advertised for in a newspaper or on a poster, it is generally regarded as an offer, however if the person who is to buy the advertised product is of importance, i.e. his personality etc., when buying e.g. land, it is merely an invitation to treat. In Carbolic Smoke Ball, the major difference was that a reward was included in the advertisement which is a general exception to the rule and is then treated as an offer. Whether something is classified as an offer or an invitation to treat depends on the type of agreement being made and the nature of the sale. In retail situations an item being present is normally considered an invitation to treat; this was established for items on display in shop windows in Fisher v Bell [1961] 1 QB 394 and for items on shelves in Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401.

Retail agreements can also be considered invitations to treat if there is simply not enough information in the initial statement for it to constitute an offer.[4] In Partridge v Crittenden [1968] 1 WLR 1204 the defendant had placed an advertisement indicating that he had certain birds for sale, giving a price but no information about quantities. He was arrested under the Protection of Birds Act 1954 for 'offering such birds for sale'; it was ruled that since the advertisement did not specify the number of birds he had it could not constitute an offer; if it did he could have been legally bound to provide more birds than he possessed.[4] The same principle was applied for catalogues in Grainger v Gough [1896] AC 325, when it was ruled that posting catalogues of items for sale to people did not constitute an offer since there was insufficient detail.[4]

Offers generally

Auctions

Termination of offer

Revocation

Lapse of time

Death

Counter offers

Acceptance

Acceptance by conduct

Prescribed method of acceptance

Knowledge and reliance on offer

Cross offers

Battle of the forms

Acceptance in case of tenders

Communication of acceptance

Waiver

Silence a condition of acceptance

Post or telegram

Telex

Revocation of Acceptance

Certainty and completeness

If the terms of the contract are uncertain or incomplete, the parties cannot have reached an agreement in the eyes of the law.[5] An agreement to agree does not constitute a contract, and an inability to agree on key issues, which may include such things as price or safety, may cause the entire contract to fail. However, a court will attempt to give effect to commercial contracts where possible, by construing a reasonable construction of the contract (Hillas and Co Ltd v Arcos Ltd[6]).

Courts may also look to external standards, which are either mentioned explicitly in the contract[7] or implied by common practice in a certain field.[8] In addition, the court may also imply a term; if price is excluded, the court may imply a reasonable price, with the exception of land, and second-hand goods, which are unique.

If there are uncertain or incomplete clauses in the contract, and all options in resolving its true meaning have failed, it may be possible to sever and void just those affected clauses if the contract includes a severability clause. The test of whether a clause is severable is an objective test—whether a reasonable person would see the contract standing even without the clauses.

See also

Notes

  1. ↑ Carlill v Carbolic Smoke Ball Company [1893] 2 QB 256
  2. ↑ e.g. Lord Steyn, Contract Law: Fulfilling the Reasonable Expectations of Honest Men (1997) 113 LQR 433; c.f. § 133 BGB in Germany, where "the actual will of the contracting party, not the literal sense of words, is to be determined"
  3. ↑ Smith v Hughes
  4. ↑ 4.0 4.1 4.2 Poole (2004) p.40
  5. ↑ Fry v Barnes (1953) 2 DLR 817 (BCSC)
  6. ↑ (1932) 147 LT 503
  7. ↑ Whitlock v Brew (1968) 118 CLR 445
  8. ↑ Three Rivers Trading Co Ltd v Gwinear & District Farmers Ltd (1967) 111 Sol J 831

External links