Issue
This case raises the following three pertinent issues:
1. Whether the display of the patio furniture online amounted to an offer.
2. Whether a valid contract existed in the circumstances.
3. Whether Sarah is obligated to sell the patio furniture to either Carl or Dan.
Rule of Law
Offer and invitation to treat
The first stage in the formation of a contract is the making of an offer by one party to the
agreement. An offer is the manifestation of a party’s willingness to enter an agreement 1 . An
offer must contain specific terms, which include the subject matter, price, identity of the
parties, and the time of performance. Another crucial feature of an offer is that it must be
made with the intention to be legally binding. This means that the person making the offer
must have the intent to be bound to the contract in the event the other party accepts the offer.
It is important to distinguish between an offer and invitation to treat. In Carlill v. Carbolic
Smoke Ball Company, [1893] 1 QB 256 (CA), the Defendant, Carbolic Smoke Ball Company
had placed an advertisement on a newspaper that their product, when used three times daily,
could cure influenza. The company further stated that in the event someone got influenza
after using their product, the company would give them a reward. Plaintiff Carlill therefore
bought the product, used it according to the instructions provided, but still got influenza.
When the company refused to give Plaintiff the reward, the Plaintiff sued the company. The
court held that the company’s display of the advertisement on the newspapers amounted to an
1 Stover v Manchester City Council [1974] 1 WLR 1403; see also U.C.C. § 2-205.
invitation to treat. However, when the company went ahead to promise a reward for any
person who got influenza after using their product, that amounted to an offer to reward. The
company was therefore ordered to pay the reward.
The foregoing shows that generally, advertisements of goods either on online sites or on
stores amount to an invitation to treat. The law assesses advertisements in two categories:
those which promote unilateral contracts and those promoting bilateral contracts 2 . A
unilateral contract consists of an offer that is accepted by performance 3 . Accordingly, a
unilateral contract is one in which money, generally, is offered to another party to perform
some act without that person promising anything in return. A person accepting the offer does
not need to communicate this fact to the offeror or to complete the contract; he simply needs
to do what is required of him.
On the other hand, a bilateral contract requires mutual obligations; they constitute the
consideration from each party necessary to create the contract 4 . A "meeting of the minds" is
therefore necessary to create an enforceable bilateral contract 5 . Each offer is usually accepted
by a communication of the other’s promise.
The fundamentals of online contract formation are not be different from ordinary contract
formation 6 . The display of goods and their prices in a shop window; on shop shelves; or on
online sites are not offers to sell those goods; they are merely invitations to any customers to
make an offer to make the purchase 7 . Instead, a customer makes an offer to the retailer, which
the retailer may choose to accept or reject. It follows; an offer is made when the other party
2 Bowerman v Association of travel Agents Ltd [1995] NLJR 1815.
3 New England Retail Properties, Inc. v. Maturo, 120 Conn.App. 476 (2007).
4 Quashie v Stringfellows Restaurants Ltd. [2013] IRLR 99 at paragraph 10.
5 Frensley v. Mills, 746 S.W.2d 427, 428 (Mo.App. 1988).
6 Sgouros v. TransUnion Corp., 817 F.3d 1029, 1034 (7th Cir. 2016).
7 Pharmaeutical Society of Great Britain v Boots Cash Chemists Ltd [1952] 2 QB 795
expresses their intention to buy the good. The buyer’s offer could either be accepted or
rejected by the seller of the goods.
Counter offer
A counter-offer amounts to a rejection of the earlier offer 8 . As stated by Justice Megaw in
Trollope & Colls Ltd. & ors. v. Atomic Power Constructions Ltd, [1963] 1 W.L.R. 333 at
page 337: "… the counter-offer kills the original…offer". In Hyde v Wrench [1840] 49 ER
132, Wrench offered to sell his farm for £1200, an offer which Hyde declined. Thereafter,
Wrench wrote to Hyde’s agent offering to sell the farm for £1000, stating that it was the final
offer and that he would not alter from it. Hyde offered £950 in his subsequent letter, and after
examining the offer, Wrench refused to accept, and informed Hyde of this. Afterwards, Hyde
agreed to buy the farm for £1000 without any additional agreement from Wrench, and after
Wrench refused to sell the farm to him he sued for breach of contract. The Court held that
there was no valid binding contract between the parties because, by offering to purchase the
farm at £950, Hyde had rejected the previous offer.
Consideration
Consideration given in return for a promise is the main ingredient that returns promises into
contracts. Consideration has been variously defined as “something of value in the eye of the
law… a [d]detriment to the promise… the price for which the promise is bought” 9 . It is
important to further note that English law has always recognised that mutual promises may be
adequate consideration for each other, thus forming a contract.
8 Hyde v Wrench [1840] 49 ER 132.
9 Thomas v. Thomas (1842) 2 QB 851 at 859.
Acceptance
It is a general rule that for acceptance to be valid, it must be communicated to the offeror,
unless the need for communication is waived by the offeror 10 . Thus, communication is key to
acceptance of an offer. The rule protects the offeror from being bound by a contract without
knowing that the offer is accepted.
Communication of acceptance
The postal rule in common law provides that acceptance takes place when a letter (or
message) is posted, rather than when the acceptance is received by the offerree. In Adams v
Lindsell (1818) 1 B & Ald 681, Defendants mailed their offer to sell on the 2nd of
September, 1817. The Defendants’ letter was misdirected and did not reach the plaintiffs
until 7:00 p.m., Friday the 5th. That night, Plaintiffs accepted Defendant’s offer, and mailed it
directly back in a timely manner. It was received by Defendant on the 9th, but they expected
to receive it on the 7th and, in the meanwhile, had offered and sold their wool to another
person. Plaintiffs brought suit for the losses they sustained by not receiving the wool. The
court held that when forming contracts by mail, acceptance is valid from the time of mailing
a letter containing language of same.
However, the postal rule does not apply to instantaneous communications such as modern
methods of communication including emails, telephone calls, and text messages. In Entores
Ltd v Miles Far East Corporation [1955] 2 QB 327, the claimant sent a telex message from
England offering to purchase 100 tons of Cathodes from the defendants in Holland. The
defendant sent back a telex from Holland to the London office accepting that offer. The
question for the court was at what point the contract came into existence. The court held that
10 Holwell Securities v Hughes [1974] 1 WLR 155.
to amount to an effective acceptance the acceptance needed to be communicated to the
offeree. Therefore the contract was made in England.
Revocation of an offer/acceptance
An offer or an acceptance is only revoked when there is direct communication of the
revocation. The landmark case is the ruling in Byrne v Van Tienhoven, [1880] 5 CPD 344. In
this case, the judges were convinced that the plaintiff had accepted the original offer by
posting a response before the letter of revocation was received.
Application
Whether the display of the patio furniture online amounted to an offer
Sarah posted her patio furniture on an online site. The post included a photo, her address and
cell phone number, and a description that said "Good condition patio chairs with table. First
$400 takes them”. Advertisements of goods either on online sites or on stores amount to an
invitation to treat. Besides, Sarah’s posting amounted to a bilateral contract, a “promise for a
promise”. This means that the posting and/or advertisement did not amount to an offer, but an
invitation to treat.
Whether a valid contract existed in the circumstances
A contract is entered when an offer is accepted, and consideration is given. In this case,
Bob’s message to Sara to wit, "Interested in patio set. Will you take $200?" amounted to
Bob’s offer to purchase the patio furniture for $200. In response, Sarah’s texted back, "No.
But I’ll take $300." This amounted to a counter offer, which Bob should either have accepted
or denied. No contract was formed at this time between Bob and Sarah.
Before Bob responded with either an acceptance or a decline, Carl sent Sarah a text message
stating "I’ll give you $350 for the patio furniture." This amounted to an offer from Carl to
Sarah, to purchase the patio furniture for $350. Immediately, Sarah accepted Carl’s offer by
sending Carl a text stating “deal”. At this point, a valid contract was already formed between
Sarah and Carl.
Consequently, Sarah began typing a text to Bob, stating: "Sorry, I’ve sold the patio set to
someone else." However, this text message was not delivered. Sarah’s communication to Bob
did not amount to a revocation of acceptance since Sarah had not accepted Bob’s offer.
However, since Sarah had already made a counter offer to Bob, the unsent communication
amounted to a revocation of the counter- offer. A revocation of a counter offer is only valid
upon delivery to the other party. In this case, the revocation did not reach Bob. It was
therefore not a valid revocation.
When Sarah’s text message was not sent, Bob called Sarah and said, "Hi, this is Bob. I’ll pay
the $300 you asked for the patio furniture. I have your address and I’m on the way to pick
them now." Bob followed up the call with a text to Sarah stating, "Sorry, must be bad
connection. On my way for patio set for $300." This communication amounted to an
acceptance of Sarah’s counter offer. However, at this point, Sarah had already entered into a
valid agreement with Carl. Therefore, Bob’s acceptance was ineffective.
Thereafter, Sarah received a text from Dan stating “I’ll take your patio furniture set. Am I the
first with $400?" This communication amounted to Dan’s offer to purchase the furniture.
Sarah did not accept the offer. Therefore, no contract existed between Sarah and Dan.
Whether Sarah is obligated to sell the patio furniture to either Carl or Dan
Sarah is obligated to sell the patio furniture to Carl. It is only with Carl that a valid contract
existed.
Conclusion
There was no valid contract between Sarah and Bob or Dan. The only valid contract existed
between Sarah and Carl. Sarah should therefore sell the furniture to Carl.
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