For a Contract to Become Legally Binding an Offer Is Essential

One evening, Ron received a telephone call at his home from Sally. Sally said that she ran a marketing company and told Ron that if he answered a few questions about a product she was promoting, his name would be put in a draw for two free return air tickets to a holiday destination of his choice. Ron answered the questions she put, which took about ten minutes.

Sally also invited Ron to a promotional event in a neighbouring town the next day. Ron attended with his wife Julie. During the event, Sally conducted a quiz amongst the fifty or so people who were there, promising at the outset that anyone who got all the answers correct would get a free vacuum cleaner. Julie took part in the quiz on her own (because Ron said that he hated quizzes) and got all the answers correct. However, Sally refused her request for the free vacuum cleaner, saying that Julie was not eligible because it was Ron and not Julie who had been invited to the event and, anyway, there were insufficient vacuum cleaners because she only had three to give away and ten people had got all the quiz answers correct.

Advise Ron and Julie, who have now discovered that the free draw referred to by Sally on the telephone has never taken place, as to their contractual position.

INTRODUCTION

The main point of the whole scenario is whether Sally, who runs a marketing company, is in the contractual relation with either Ron or Sally or with both of them. For a contract to become legally binding an offer, which is made by one party, and accepted by another one, is essential. As a matter of fact, both an offeror and an offeree have to be intended to be bound. Moreover, an agreement has to be certain, consequently, there is no need for negotiations between parties about further terms and conditions and the offer should be accepted blindfold, i. e. without changing any details of an offer. If an offer is accepted and the aforementioned features of a contract are found, then the contract is concluded and both parties have a duty to fulfil their promises to each other.

RON

Ron will state that the contract between him and the marketing company has been concluded, for Sally promised him to put in a draw with a chance to win two return tickets to the selected holiday destination if he answered some questions in return about a product she was promoting. Ron agreed to spend ten minutes answering questions and this can be regarded as a consideration arisen from him, whereas the one arisen from the company can be a promise to add Ron to the lottery. On the contrary, the company will insist that Sally’s statement was an invitation to treat and by no means an offer, since it lacks certainty and requires further negotiations between parties.

From Ron’s point of view, the agreement between him and Sally can be considered as legally binding, as her offer was followed with his acceptance, two considerations arisen from both parties and an intention to create a contractual relationship could be identified from the fact that Sally made a call to Ron and gave him a proposal. Among other things, taking into account that Ron fulfilled his promise (answered Sally’s questions) it can be presumed that the contract is executory one.

Moreover, the fact that the draw was not actually held means that the company could be accused of fraudulent misrepresentation. As a matter of fact, it can be assumed that Sally knew that the draw would not take place. In the leading case of fraudulent misrepresentation Derry v Peek it was held that fraudulent misrepresentation appears when a party makes a false statement on purpose or in a reckless manner. In a similar fashion, given that Sally is an executive of the company means that without a doubt she knew whether any lottery would be organised by a company. Thus, from the facts above it can be seen that not only did the company fail to fulfil its promise to Ron but it can also be considered as it was fraudulent.

On the other hand, it can be argued that the terms of the contract are vague. To illustrate, it has not been mentioned when the draw will take place. Furthermore, a phrase ‘a holiday destination of his choice’ seems to be too ambiguous, since it is not defined what a holiday destination means. Both of these questions reveal that the agreement lacks certainty. In fact, in Scammel and Nephew Ltd v Ouston2 it was that the phrase ‘on hire-purchase terms’ is too vague and Viscount Maugham held that creation of a legally binding contract requires certain and unequivocal expression from both parties so that no ambiguity has been left. However, in Hillas & Co Ltd v Arcos3 despite the defendants’ arguments that the description of the goods was not clear enough and required further negotiations, it was held that the definition of goods was certain to make the agreement binding. Consequently, even though the ambiguity can be found within the agreement, the company might struggle to prove that the terms of it are unclear.

In this scenario, it was clearly stated that Sally, who runs the company, would put Rod in the draw as soon as he answered the questions about the company’s product. Even though some discussions can be raised on some points of the agreement, it is most likely that the court decide in favour of Rod, since contractual features (an offer, an acceptance, an intention to be legally bound) can be identified in the agreement. Thus, as mentioned before, if the courts decide that the agreement is legally binding, the company will be charged with fraudulent misrepresentation.

JULIE

Julie’s case is quite different to that of Ron. In fact, if a court were to find that there was a contractual relationship between Julie and Sally, (in contrast to Ron’s case, where both parties have obligations as well as they both have made a promise to each other) it would be a unilateral contract, as Sally was the only one, who made a promise to give vacuum cleaners to those participants who answered all the questions correctly. Nevertheless, the company claims that the quiz was orientated to people, who were invited to the event and since Rod was the only one who was invited to a promotional event means that Julie could be considered as nothing but an accompanying person.

On the contrary, Julie could claim that the term above was stated by Sally after Ron’s wife had answered questions and fulfilled the requirement to get a free vacuum cleaner. In a similar fashion, in Thornton v Shoe Lane Parking Ltd4 Lord Denning held that the claimant was not bound by the defendants’ terms, since the notice of them came after the contract had been concluded.

Indeed, it is likely that the company will argue that Sally’s statement about the prize contained no offer and it was merely invitation treat. To illustrate, the terms could be regarded as too ambiguous and taking into account that only three vacuum cleaners were distributed, although ten participants answered all the questions correctly, means that the company was not intended to create a legal relationship with the participants. Similarly, in Rook v Dawson5 it was held that the promise that a student, who got the highest marks, will be awarded a scholarship, is not a legally binding offer. Consequently, it can be assumed that due to its uncertainty and company’s reluctance to be in contractual relations with the participants of the promotional event, the proposal was only an invitation to treat.

However, another interpretation of the scenario will lead to a presumption that the unilateral contract was made between Julie and the executive of the company. In Carlil v Carbolic Smoke Ball Company6 it was held that the company’s promise to pay one hundred pounds for any individual, who caught flu after using it, was an offer. On the other hand, the advert, where the promise was stated, included some more particular details such as how long and how often a drug should be used. Given that there were not mentioned any more details concerning Sally’s statement means that Julie’s chances of winning case are very little.

Conclusion

To conclude, Ron’s chances of winning a case against the company are creditable. Although given that the company might argue that Sally’s offer is too vague, it is very likely that it will be held by judges that there was a contractual relationship between Ron and the company, consequently, it could be sued for fraudulently misinterpretation. In contrast, Julie would probably not be able to prove that she and the company concluded a legally binding contract, since from the facts above it can be seen that the company was not intended to create a contractual relationship. Therefore, in all probability Sally’s action can be considered as nothing more but an invitation to treat.

1 Derry v Peek (1889) L.R. 14 App. Cas. 337

2 Scammel and Nephew Ltd v Ouston [1941] 1 All ER 14

3 Hillas & Co Ltd v Arcos [1932] All ER Rep 494

4 Thornton v Shoe Lane Parking Ltd [1971] 2 Q.B. 163

5 Rooke v Dawson [1895] 1 Ch. 480

6 Carlil v Carbolic Smoke Ball Company [1893] 1 Q.B. 256