Contract formation is primarily governed by the “offer and acceptance” model: courts seek a clear proposal met by matching assent. It offers certainty but is criticised as a rigid, “mechanical” tool that forces messy negotiations into artificial “slots”.
The Offer and the Invitation to Treat
An offer expresses a willingness to be bound on specific terms; an invitation to treat is a preliminary negotiating position. The distinction is objective. By prima facie rules, advertisements are generally invitations to treat (Partridge v Crittenden), as is the display of goods (Boots Cash Chemists), unless the language is “clear, definite, and explicit” (Lefkowitz). In tenders, an invitation to bid is normally an invitation to treat, but a collateral offer to consider conforming bids may arise (Blackpool and Fylde Aero Club); in auctions, a sale “without reserve” creates a collateral contract with the highest bona fide bidder (Barry v Davies).
The Mechanics of Acceptance
Acceptance must be final and unqualified. Under the “mirror image” rule, a variation is a counter-offer that “kills” the original (Hyde v Wrench), producing the “battle of the forms” resolved by the “last shot” doctrine (Butler Machine Tool). Acceptance must generally be communicated (Entores), with three nuances:
- Silence cannot amount to acceptance (Felthouse v Bindley).
- The postal rule: where post is reasonable, acceptance is effective on posting, even if lost (Adams v Lindsell), unless excluded (Holwell Securities).
- Instantaneous communications (telephone, telex, email) are effective only on receipt.
Unilateral Contracts
Where one party promises a benefit in exchange for an act, performance is the acceptance and communication is usually waived (Carlill v Carbolic Smoke Ball Co). Once an offeree has begun to perform, the offeror is impliedly barred from revoking while performance is ongoing (Daulia, Errington).
Termination of an Offer
An offer ends by rejection, lapse of time, or failure of a condition, and can be revoked any time before acceptance provided the revocation is communicated — which may come reliably from a third party (Dickinson v Dodds). A promise to keep an offer open is not binding unless supported by consideration.