Offer and Acceptance — formation of a UK contract

A contract under English law requires offer, acceptance, consideration, certainty, and intention to create legal relations. The first two — offer and acceptance — do most of the analytical work in a typical formation problem. Get them right and the rest of the question often falls into place.

Offer vs invitation to treat. An offer is a definite expression of willingness to be bound on stated terms once accepted. An invitation to treat is a step before that — an invitation for the other party to make an offer. Goods on shop shelves are an invitation to treat (Fisher v Bell [1961] 1 QB 394). Newspaper advertisements are usually invitations (Partridge v Crittenden [1968] 1 WLR 1204). Auction calls are invitations — bids are offers (Payne v Cave (1789)). Contrast unilateral offers to the world (Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256), which can be accepted by performance.

Communication.An offer must be communicated to the offeree before it can be accepted. You cannot accept an offer you don’t know about (R v Clarke [1927] HCA 47, applied in English cases). Counter-offers terminate the original (Hyde v Wrench (1840)); requests for information do not (Stevenson, Jaques & Co v McLean (1880)).

Acceptance — the mirror-image rule. Acceptance must be unqualified and on the terms of the offer. Adding terms turns acceptance into a counter-offer. In commercial dealing this surfaces as the battle of the forms: standard-terms documents fly in both directions, and the last shot fired before performance usually wins (Butler Machine Tool Co v Ex-Cell-O Corporation [1979] 1 WLR 401), though the Supreme Court in Tekdata Interconnections v Amphenol [2009] EWCA Civ 1209 accepted that the conduct of the parties can rebut the rigid last-shot doctrine.

Acceptance must be communicated. Silence cannot generally be acceptance (Felthouse v Bindley (1862)). The offeror cannot impose acceptance by prescribing silence; acceptance must reach the offeror to be effective. Exception: unilateral offers can be accepted by the requested act (Carlill).

Postal rule. Where post is the contemplated mode, acceptance is effective on posting, not on receipt (Adams v Lindsell (1818); Household Fire and Carriage Accident Insurance Co v Grant (1879)). The rule does not apply if the offeror has stipulated otherwise (Holwell Securities v Hughes [1974] 1 WLR 155) or to instantaneous communications — telex (Entores v Miles Far East Corporation [1955] 2 QB 327), email, fax. Modern instantaneous-communication cases require the message to be received during business hours (Brinkibon v Stahag Stahl [1983] 2 AC 34).

Revocation. An offer can be revoked any time before acceptance, but only if revocation is communicated (Byrne v Van Tienhoven (1880)). For unilateral offers, once performance has begun, the offeror cannot revoke if the offeree is in the middle of performing (Errington v Errington [1952] 1 KB 290).

Termination of an offer. Offers terminate by (a) revocation, (b) rejection, (c) lapse of time (express deadline or reasonable time — Ramsgate Victoria Hotel v Montefiore (1866)), (d) death of either party in many circumstances, and (e) failure of a condition precedent.

Exam approach. Identify the offer first — including any pre-offer invitations to treat. Track each communication chronologically. Decide whether each communication is offer, acceptance, counter-offer, or mere request for information. State the authority you rely on for each step. Apply the postal rule (or its exceptions) carefully, since timing flips outcomes.

For more contract cases at exam-essential depth see our 50 must-know contract law cases guide.