6 THE MOMENT OF RESPONSIBILITY: KEY CONCEPTS IN DETERMINING WHETHER AGREEMENT HAS BEEN REACHED
CHAPTER 6
THE MOMENT OF RESPONSIBILITY: KEY CONCEPTS IN DETERMINING WHETHER AGREEMENT HAS BEEN REACHED
INTRODUCTION
In the last chapter, we looked at the expectation that a contract is only formed when there is a valid offer which is met with an acceptance of that offer. Collins (2003) refers to this marrying of offer and acceptance as the ‘moment of responsibility’. The main focus of case law in this area has been on finding a way of determining when it is appropriate to attach legal liability to statements or the conduct of the negotiating parties. It was made clear in the last chapter that the idea that there are rules which allow us to identify an ‘offer’ and ‘acceptance’ is an artificial one. Despite the tendency to aspire to clear, if somewhat illogical, rules, in practice it is often difficult for the judiciary to separate the two concepts of offer and acceptance out. Negotiations leading up to a contract are often messier than some textbooks would have us think. In this chapter we will turn to some of the key concepts that have been used by the judiciary in an attempt to organise cases according to a coherent set of principles. In the chapter that follows we will turn to look at some of the difficulties which have arisen in using traditional concepts of offer and acceptance in the complex world of business.
If the courts are disposed towards a formalistic approach, it is important for students to understand the method of analysing negotiations in this way. An examination of the various things that occur in the pre-contractual stage requires an understanding of a range of terms such as invitation to treat, unilateral and bi-lateral offers, counter offers and revocation that have been used to distinguish the various activities which are akin to an offer or acceptance but do not quite fulfil the relevant criteria. It is to these various terms that we now turn. A major issue underpinning many of the judgments we will be considering is the courts’ reluctance to bind the parties to a contract at an unexpectedly early stage.
OFFERS, INVITATIONS TO TREAT AND ADVERTISEMENTS
As was made clear in the last chapter, an offer has traditionally been defined by the courts as an expression of a willingness to enter into a binding contract was manifested by words or conduct. In determining whether something constitutes an offer, the courts place considerable emphasis on certainty and completeness. In other words, the offer must be clear enough for the person accepting it to understand the key matters on which the parties are in agreement. These commonly include issues such as price, quantity, the timing and manner of performance. There must also be an indication that the person making the offer intends to be bound as soon as the offer is accepted.
As a general proposition, offers must be distinguished from other statements made at a pre-contractual stage known as ‘invitations to treat’. This is an old-fashioned expression which describes attempts by one party to encourage the other to enter into negotiations with them or make them an offer. Most people come across several examples of invitations to treat each day without being aware of this term of art used by lawyers to describe them. Each time you pass a shop which declares that it has the ‘lowest prices in town’ or an advertising board which declares that a certain airline offers ‘lower prices than all its competitors’ you are being tempted, or invited, to approach them with a view to buying a product or service from them. But few would expect the claims made to be substantiated. They are part of the ‘puff’ or sales technique used to encourage customers to enter a shop or access a website. But, as one moves on to look at other inducements and more specific wording, it becomes clear that there are fine lines to be drawn between what should be taken seriously and what should not.
A number of problems have arisen over whether the display of goods in a shop window or on the shelves in a shop with prices attached amounts to an offer. It could easily be argued that the display could amount to an offer if the price is clear and the goods can be clearly seen and inspected. However, as early as the mid-nineteenth century in the case of shop displays, the courts took a different view, which was endorsed in the supermarket case of Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd (1953) in which the terms on which a shop was prepared to sell displayed items appeared very clear. In this landmark case in which the focus was on the mechanics of buying and selling in one of the first self-service stores, a Boots customer selected goods from the shelves and presented them at the cash desk where she paid the price. Some of the goods were required by the Pharmacy and Poisons Act 1933 to be sold only under the supervision of a registered pharmacist and a pharmacist was present at the cash desk for this purpose. Boots were alleged to have infringed the Act because the contract had been formed before the woman presented the goods at the cash desk. The Pharmaceutical Society argued that the sale took place when the customer put the goods into her wire basket, so accepting the offer constituted by their display on the shelves. If this were so, certain medicines and poisons were being ‘sold’ without supervision contrary to the Act. However, the Court of Appeal disagreed and ruled that the sale took place at the cash desk. They argued that display of the goods did not mean that they were on offer. Instead, they argued that an offer to buy was made by the customer at the cash desk subject to supervision and possible refusal. In their view, the display of goods was merely an ‘invitation to treat’.
This decision really rests on a policy choice which supported commercial innovation and convenience rather than on orthodox analysis of contract formation. The same issue usually arises in the context of criminal statutes where the Boots ruling has led to difficulties; (see, for instance, Pilgram v Rice-Smith 1977). In Fisher v Bell (1961), a case involving the alleged offence of ‘offering for sale’ a flick-knife contrary to the Restriction of Offensive Weapons Act 1959, the court was asked to analyse the law in relation to priced goods in a shop window. Although the statute was clearly intended to cover the situation, it was held that the display was merely an invitation and that no offence had been committed because an offer had not been made.
It has been argued that the law would be better served to regard displays or advertisements as offers subject to the condition, sometimes found in advertisements, that stocks remain available, as this position would better reflect the expectations of the public and business community. Parties may of course indicate that their statements do not constitute offers. Estate agents often do this by including a form of words on printed details of properties, such as the statement that: ‘These particulars do not form, nor constitute any part of, an offer, or a contract, for sale’. However, the courts are not well disposed to this approach. Even where an advertisement in the ‘For Sale’ columns of a newspaper contains specific wording, a court would almost certainly, on the basis of the ‘limited stocks’ argument, regard the advertisement as an invitation to treat. This was ‘business sense’ according to Lord Parker in Partridge v Crittenden (1968), another statutory offence case in which the defendant inserted a notice in a periodical named Cage and Aviary Birds stating ‘Bramblefinch cocks, bramblefinch hens, 25s each’. If the advertisement had been construed as an offer and demand had exceeded the defendant’s supply, he could have faced any number of actions for breach of contract, as well as being guilty of an offence under the Protection of Birds Act 1954.
The issue of identifying whether a statement in an advertisement was specific enough to be construed as an offer which was intended to be binding was also addressed by the Court of Appeal in the famous case of Carlill v Carbolic Smoke Ball Co (1893). The case concerned a slightly different type of contract from the ones discussed so far, which have revolved around the bilateral negotiations in which two parties swap other of offers and acceptances. In contracts termed ‘unilateral’, the person making the offer waives the requirement that notification of acceptance be communicated to them. Instead, they can simply require that the contract can be accepted by any person who hears about the offer has doing something in a prescribed way. This means that acceptance can take place without the person making the offer even being aware that a contract has been formed. This may sound illogical but it is important to remember that the requirement of notification of acceptance is there to protect the person making the offer. It is for them to choose whether they wish to waive this right. An example of a contract formed in this way is a poster advertising that there will be a reward of £500 for anyone who returns a missing car to its owner at a specified address. The offer is accepted when a person performs the act of returning the car. A failure to provide the reward to someone who had done all that was requested of them would constitute a breach of contract.
In considering cases involving unilateral offers, the courts have been keen to stress that the offer must be sufficiently certain and much consideration has been given to the issue of what constitutes a valid offer. As a result, these cases are of significance to cases involving both unilateral and bilateral contracts. In the much cited Carlill case, the Carbolic Smoke Ball Company produced a medical preparation called the Carbolic Smoke Ball. They inserted an advertisement in the Pall Mall Gazette in which they offered to pay £100 to anyone who caught influenza after having used the Smoke Ball in a specified manner and for a specified period of time. They also stated that they had deposited £1,000 with the Alliance Bank as a sign of their good faith in making these payments should anyone fall ill. On the strength of the advertisement, Mrs Carlill bought a smoke ball from a chemist, used it as prescribed, but nevertheless caught influenza. It was held that there was a contract between the parties and that the claimant could recover £100.
Much discussion in the case centred on the specificity of the wording of the advertisement. Bowen LJ stated that the advertisement in question ‘was intended to be understood by the public as an offer to be acted upon’ and Lindley LJ said: ‘Read this how you will … here is a distinct promise, expressed in language which is perfectly unmistakeable, that £100 will be paid by the Carbolic Smoke Ball Co to any person who contracts influenza after having used the ball three times daily, and so on’. In finding that the company’s advertisement was to be construed as an offer, the court rejected the claim that it was ‘a mere puff’ or a vague and non-actionable invitation to treat. The offer therefore constituted an express promise to pay £100 to any party who fulfilled its terms. When Mrs Carlill used the smoke ball as prescribed, she should be regarded as accepting the company’s offer. The fact that communication of acceptance was not required was inferred from the wording of the offer and the nature of the transaction. The offer was seen as a serious one, showing an intention to create legal relations and therefore imposing a legally enforceable obligation on the company. Many commentators view the case as one which challenges the traditional conceptualisation of offer but it is clear that policy issues also underlie the court’s ruling, decided as it was in an age of ‘quack’ medical preparations produced by rogues who did not deserve to succeed in the courts.
COUNTER OFFERS
The point has already been made that, in trying to determine whether agreement has been reached, the judiciary place considerable emphasis on certainty and completeness. They look for a firm offer and a firm acceptance of that particular offer. In other words, acceptance is expected to correspond exactly