Offer and acceptance

A contract is a promise or a set of promises which the law will enforce. For a valid contract, there has to be two or more definite and separate parties to the contract. There must be an offer from one party (offeror) which is then accepted by the other (offeree). A contract is only formed in law if consideration, capacity and intention exist. An offer is an agreement is a set of terms that an offeror is bound under. An invitation to treat is also an offer. This is where the party invites offers where they can accept or decline.

The law of Advertisements states that advertisements to sell goods or supply services are merely invitations to treat. However, In Xan's case the advertisement was described with a bit of detail and was precise; therefore it is considered as an offer. This was clearly illustrated in the Leftkowitz v Great Minneapolis Surplus Stores. Here the claimant was not sold the item as they were only available to women. This is because company said that the advertisement was an invitation to treat. However the court stated that an advertisement can be elevated to an offer, if the offer is clear, definite and leaves nothing open for negotiations.

The carpet is being sold for £100, but Xan is offering £95. He is making a counter offer. A counter offer is an offer made by the other party to negotiate for a final contract. Making a counter offer automatically rejects the original offer, and requires the acceptance under the terms of the new offer, or there is no contract. Acceptance has to be like a mirror image, it is expected to match exactly the terms of the offer.

The offeror (shopkeeper) then revokes the offer until Xan decided to add another £5. These points are well illustrated in the case Hyde v Wrench (1840).

In this case Wrench offered to sell his land for £1000. Hyde offered £950 for it. Wrench turned down the proposal. Later Hyde told Wrench that he was prepared to pay £1000. The communication was ignored. This shows that Hyde was unable to change Wrench's mind to accept the new offer of £1000 which he was entitled to refuse. In Xan's case, there is a possibility that the shop keeper can change his/her mind and refuse to sell the carpet to Xan as he offered £95 for it. Later he was willing to pay the full price, but it now depends if the Shop Keeper, if they offer it again. The common rule established in the case is “An offer can be withdrawn at any time before the acceptance has taken place, but this must be communicated and it must be received by the offeror to be effective.”

However, Xan can ask for additional information. Additional information is not a counter offer and therefore it still enables him (offeree) to accept on the offer. This can be proved by Dickinson v Dodds (1875-76).