Category Archives: Law

Elements in a Contract II – Offer (I) – Invitation to Treat

Not all items on display equate or translate to an offer for sale and it is essential that we understand what constitutes an offer for sale and what doesn’t. The distinction becomes especially important with regards and reference to controlled items, or items the sale of which are often regulated by statute (an act of parliament).

These items among others things include cigarettes, medicines or medications and offensive weapons. In most cases or instances when we walk into a supermarket, we find that cigarettes for example are kept away and separated from the other items that are on sale and are only displayed at the counter, behind a glass window, in the presence of a cashier and more often than not there is a warning that is plainly visible at the counter which reads “it is an offence to sell cigarettes or tobacco to anyone below the age of 18”.

Now if the cigarettes on display were indeed an offer, anyone, regardless of age should be able to walk up to the counter and purchase them. In cases of items displayed at the counter, behind glass windows however, the polite lady at the counter is well within her rights to ask for some form of id prior to commencing with the sale or prior to initiating the contract and should the id not be forthcoming or if she is suspicious or uncertain about the would-be purchaser’s age, she can refuse to sell the item to the prospective purchaser.

Therefore, we can surmise that the cigarettes at the counter are not items that fall within the general category of items on offer but rather are items that are sold under supervision. Therefore, if these items do not constitute an offer, what do they constitute?

These items constitute an “invitation to treat” i.e. an intending purchaser is allowed to make the relevant inquiries with regards to purchasing the item but the seller reserves the right to sell. It implies that there is a condition precedent (a prior condition or requirement) that has to be satisfied before commencing with the sale and that the offer is based on first acquiring the consent of the seller to sell.

A condition precedent is an event that must occur prior to the contract coming into existence, for example, when it comes to cigarette purchases, the prospective purchaser or would be purchaser must satisfy the condition or stipulation that he or she is above 18.

Let’s look at another example, let’s say that a well intending merchant, displays in his shop window, for the purposes of benefitting connoisseurs and collectors of such items, certain types of offensive weapons, including flick knives, the sales of which are regulated by s1 of the Restriction of Offensive Weapons Act 1959, which reads as follows: –

(1) Any person who manufactures, sells or hires or offers for sale or hire, (or exposes or has in his possession for the purpose of sale or hire) or lends or gives to any other person –

(a) any knife which has a blade which opens automatically by hand pressure applied to a button, spring or other device in or attached to the handle of the knife, sometimes known as a “flick knife” or “flick gun”; or

(b) any knife which has a blade which is released from the handle or sheath thereof by the force of gravity or the application of centrifugal force and which, when released, is locked in place by means of a button, spring, lever, or other device, sometimes known as a “gravity knife”,

shall be guilty of an offence and shall be liable on summary conviction in the case of a first offence to imprisonment for a term not exceeding three months or to a fine not exceeding (fifty pounds) (level 4 on the standard scale) or to both such imprisonment and fine, and in the case of a second or subsequent offence to imprisonment for a term not exceeding six months or to a fine not exceeding (two hundred pounds) (level 4 on the standard scale) or to both such imprisonment and fine.

(2) The importation of any such knife as is described in the foregoing subsection is hereby prohibited.

In Fisher v Bell (1961) – the respondent was the owner of a shop and had displayed in his shop window knives with tags attached that read “ejector knife”. A policeman entered the shop to examine the weapon and took it back to the station for further investigation. The chief inspector of police, convinced that it was indeed a flick knife charged the owner of the shop.

The matter before the courts was to decide if the display at the shop window constituted an offer for sale or an invitation to treat. “It is clear that, according to the ordinary law of contract, the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract”.

It was held that the items on display behind shop windows or glass windows were merely invitations to treat. Another example of such items, in addition to that given above would be strong alcoholic beverages

Let’s now briefly turn our attention to the pharmaceutical sector. Let’s say for example a new player has entered the market and has opted, to safe costs, to display pharmaceutical drugs on shelves like items at a normal supermarket, so that any person can select the item(s) that he or she wants and take it to the counter, where a registered pharmacist is on duty, and who will inspect the item(s), to ensure that they correspond with the prescription that is on hand, prior to selling the item(s).

The sale of pharmaceutical items is governed by s. 18 of the Pharmacy and Poisons Act 1933. The sale has to be conducted in a lawful retail pharmacy i.e. a premise that has complied with all the legalities to retail pharmaceutical products, the sale has to be effected on the premises which is a registered pharmacy and the sale has to be conducted under the supervision of a pharmacist.

In Pharmaceutical Society of Great Britain v Boots (1953) Boots Chemists introduced a new self-service system, similar to that in supermarkets, whereby customers could pick the items that they required off the shelves and proceed to the counter to pay. A registered pharmacist was stationed at the counter.

The Pharmaceutical Society brought an action to determine the validity of the new system. It was held that the goods on display were invitations to treat because the items could only be sold with the approval of a pharmacist who incidentally was stationed at the counter.

Now let’s look at another mode of sales through which business is conducted, newspaper advertisements. Let us say for example Mr. Smith took out an advertisement in the local paper to let the residents of Slone County know that he had in his possession certain rare birds and chicks, without using the words “offer for sale”.

Under s. 1 of the Protection of Birds Act 1954 it is an offence, with the exception of those holding a license granted under section 10 of the Act, for any person to sell, to offer for sale or to have in his possession for sale, various species of wild birds.

A Mr. Fritz who has read the advertisement sends Mr. Smith a cheque for a certain amount of money in the hope that Mr. Smith will sell him a hen and his prayers are answered when he wakes up one morning, a week later, and finds the hen that he had hoped for at his doorstep. Is Mr. Smith’s advertisement an offer on an invitation to treat?

Well it’s the latter because Mr. Smith is not obliged to sell to Mr. Fritz and if anything it’s up to Mr. Fritz to step up and make an offer which Mr. Smith can either accept or reject. Therefore, it is an invitation to treat.

In Partridge v Crittenden (1968) Mr. Partridge took out an advertisement stating that he had either in his possession or access to, Bramblefinch cocks and Bramblefinch hens, without using the words offer for sale. Mr. Crittenden upon reading the advertisement sent Mr. Partridge a cheque and Mr. Partridge in turn sent him a hen. Mr. Crittenden on behalf of the RSPCA brought the matter to the attention of the courts.

The matter before the courts was to decide whether the advertisement was an offer for sale or if it was an invitation to treat. It was decided that the advertisement was an invitation to treat and therefore Mr. Partridge was not guilty (s. 1 of the Protection of Birds Act 1954 only applies to those who offer for sale, rare birds and not those who do not or have a license to do so).

In Grainger & Son v Gough (1896) a wine merchant distributed a catalogue listing the wines he had for sale. If the wines in the catalogue we indeed offers for sale, the acceptance of which would constitute a contract, then the wine merchant would be contracted to the first person that steps up an accepts his offer.

It was held that items listed in catalogues are invitations to treat. Sellers of goods are free to advertise their goods in order to attract potential purchasers.

Similarly, items advertised for sale at an auction are also not offers for sale. In Harris v Nickerson (1873) the defendant had advertisement certain items for sale at an auction and the plaintiff turned up hoping to purchase the items. The items were not auctioned as per the advertisement and the plaintiff sued for damages.

It was held that items that were advertised were merely invitations to treat and may be withdrawn at any time.

In Payne v Cave (1789) the defendant had made the highest bid at an auction but withdrew his bid prior to the fall of the hammer. The plaintiff sued. It was held that goods at an auction were invitations to treat and the defendant’s bid is an offer which he can revoke at any time prior to acceptance.

Acceptance at an auction is indicated by the fall of the auctioneer’s hammer and therefore the defendant was free to withdraw his bid at any time prior to the fall of the auctioneer’s hammer.

This common-law rule was later codified by s57(2) of the Sale of Goods Act 1979 which states that the sale of goods at an auction is only complete when an auctioneer announces its completion by the fall of the hammer.

It is common especially among those who have acquired the habit of reading the newspapers, to come across invitations to bid (tenders) i.e. a general invitation inviting others to submit a proposal to either purchase goods, shares or even to offer their services.

Are these invitations to bid (tenders), offers, the acceptance of which would constitute a contract or are they an invitation to treat in which case the party that placed the advertisement is free to either accept or reject the proposal it has received? It would certainly be most unfair to expect any party that advertises to be bound by the first proposal that it receives. In Harvela Investments Ltd v Royal Trust of Canada (CI) Ltd. It was held that general tenders are an invitation to treat.

It is normal practice, prior to entering into a contract to negotiate the terms of a contract. Let us say for example that Mr. Coombes wants to sell his property (Blue Orchards) and places an advertisement in the local daily.

A resident of Slone County, a Mr. Dexter, reads the advertisement and sends Mr. Coombes a telegram which reads, “will you sell us the property, Blue Orchards? Telegraph lowest price”.

Mr. Coombes replies with a telegraph of his own which reads as follows: – “lowest price for Blue Orchards is £9 million”. Mr. Dexter then responds to Mr. Coombes telegraph by sending another telegraph stating that “we accept to buy Blue Orchards for £9 million”. Is Mr. Coombes telegraph stating the lowest price for Blue Orchards, an offer or an invitation to treat?

In Harvey v Facey (1893) the plaintiff telegraphed the defendant asking “will your sell us Bumper Hall Pen?”. “Telegraph lowest price for Bumper Hall Pen”. The defendant replied “lowest price for Bumper Hall Pen £900”. The plaintiff then sent the defendant another telegraph stating that he accepted and requested that the defendant send him the title deed.

The Privy Council held that the defendant was merely supplying information i.e. it was an invitation to treat and not an offer.

In all the above cases and instances, there is an inference that there is a presumption to sell and it is up to the defendants/respondents to rebut the presumption, and establish that there isn’t an intention to sell or an offer for sale but a mere invitation to treat. The defendants/respondents in all the above cases have successfully done so.

Copyright © 2017 by Dyarne Ward

Elements in a Contract I

When we refer to a contract, we are often confronted, mentally at least, with images of stacks and stacks of papers that are filled with pages of paragraphs, written in a manner that is often confusing to most readers. A majority of contracts however are far simpler instruments, that most of us come across on a daily basis, often without realizing it and therefore it is only fitting that we acquire some knowledge of it.

Contracts can be divided into unilateral contracts and bilateral contracts. In instances of unilateral contacts, the offeror (the person who makes the offer) makes an offer in exchange for a performance of an act or provides monetary rewards when the offeree (the person who accepts the offer) abstains or refrains from doing a certain act.

An example of a unilateral contract occurs when an offeror says to the offeree that “I’ll give you a hundred pounds for painting my house” (contracts can either be oral or written). Likewise, a unilateral contract also occurs when someone says to another person “I’ll give you a hundred pounds if you stop smoking”. In both instances the offeree is entitled to the remuneration or the reward he has been promised as soon as he complies with the conditions or stipulations set by the offeror.

A bilateral contract occurs when promises are mutually exchanged. A man goes over to a newsstand and purchases the local daily. He pays the vendor for a copy of the local daily and he in turn receives a copy of the local daily. The exchange that occurs is an example of a bilateral contract. Bilateral contracts are commonly used in business especially with regards to the sale of goods.

Let’s look at a simple day to day example of a bilateral contract. A man enters a supermarket and after spending a minute or so walking down the aisles looking at the various products that are neatly stacked on the shelves to his left and to his right, he picks out a can of baked beans. He looks at the label, which according to law must fulfill certain criteria, and reads what’s written on it.

Because the buyer is not able to look at the contents of the can, prior to making the purchase, reasonable steps must be taken to ensure that he is made aware of what he is purchasing and therefore the label must satisfy certain requirements.

The label must be clear and easy to read, it must be permanent i.e. affixed to the can in a manner that it cannot be easily removed, it must be easy to comprehend or understand and it must not be misleading i.e. the description on the label must correspond with the content in the can.

Information on the label includes the type of food or the name of the food that’s in the can, the best before date or the expiry date, any necessary warnings, quantity information (weight), a list of ingredients, the name and address of the packer or seller, the lot number, any special storage conditions and any instructions for cooking, if necessary.

Now the man having read the label is satisfied that that is the can of baked beans that he wants or requires and takes it to the counter to pay the cashier and to conclude the purchase. On most occasions, if a person purchases an item without reading the label on it, he or she is deemed to have read the label.

He stands in line and waits for his turn. When his turn arrives, he hands the can of baked beans to the polite lady at the counter who scans the barcodes printed on the label with a scanner that is attached to her terminal and the information is entered into the terminal and the price pops up on a little screen, on the small window on the till, and is visible to him.

The man looks at the numbers on the screen, fishes out his wallet from his pocket and pays the polite lady at the counter the exact amount that is required. The lady takes the money and hands him a receipt or a proof of purchase which normally contains the following information: – the date the item was purchased on, the type of item, the quantity and the amount that was paid as consideration for the item. In some cases, or instances the details of the sales person who assisted with the purchase is also on the receipt or the proof of purchase.

The man takes the receipt or the proof of purchase, puts it in his pocket and picks up the can of baked beans that he had just purchased and heads for home. This is now a valid contract in that the seller has sold an item as per the descriptions on the label and the buyer has purchased the item as per the descriptions on the label and interestingly enough during the whole transaction neither party has actually looked at the contents of the can.

A contract contains five essential elements or ingredients. They are as follows: –

(i) offer

(ii) acceptance

(iii) consideration

(Iv) intention or an intention to create a legal obligation

(v) form

An offer is made when the seller (offeror) makes an offer to sell and stacking the items on a shelf that is easily accessible to everyone that walks into the store, clearly indicates that the items on display are for sale.

The buyer (offeree) accepts by picking out the product of his choice and by taking it to the counter, after reading the label, and consideration for the item he has purchased changes hands when he hands over the money or the amount that is required for the purchase of the item.

Consideration is always in monies or monies worth and the whole transaction is done with the intention to create a legally binding obligation in that should the buyer return home and discover, when he opens the can, that in contains corn instead of beans, he can return the item to the seller and be reimbursed accordingly. The form of the contract is written as evidenced by the receipt or the proof of purchase.

We have to keep in mind that in order for there to be a contract there must be one exchange of a promise with another or one party must have acted to his or her detriment based on a promise. In the example given above, the can of baked beans was exchanged for money i.e. there was a mutual exchange.

In the instances of the unilateral contacts, the offeree acted to his or her detriment by either painting the house or refraining from smoking and therefore should be remunerated or rewarded accordingly.

Not all agreements however mature into contracts. In Re Hudson (1885) Hudson promised to pay £4,000 per year to a chapel, for 5 years, to help it pay off its debt. He died before the last 2 installments could be made and his estate refused to pay the outstanding installments. It was held that a contract had not come into existence and that there was only a gratuitous promise in place. As a result Hudson’s estate could discontinue the payments if they so desired.

It is also important to distinguish between a commercial agreement and a purely social agreement. While the former creates, a legal obligation governed by the law of contract, the latter does not. In Balfour v Balfour (1919), the husband while working overseas agreed to send regular payments to his wife. Subsequently the relationship went downhill and the husband stopped sending his wife money. Mrs. Balfour brought an action against her husband and it was held that the agreement that was in place was a purely social agreement and that it didn’t amount to a contract.

Copyright © 2017 by Dyarne Ward