LAW OF CONTRACT
Question 1
“Invitation to treat is not an offer. It is just an invitation to
make an offer”.
Based on the above statement, explain the concept of
‘invitation to treat’. Support your answer with relevant cases.
LAW OF CONTRACT
QUESTION 2
On 1 November 1989, Muhammad who lives next door to
Abdul Aziz called on Abdul Aziz and offered to sell his IBM
computer for £2,000. On 3 November 1989 Abdul Aziz
wrote and posted a letter to Muhammad accepting the offer.
The letter was not addressed properly. Hence Muhammad
received the letter of acceptance on 8 November 1989
instead of 5 November 1989. On the evening of 6 November
1989, Muhammad telephoned Abdul Aziz and said, ‘I
revoke my offer.’
Advise Muhammad.
LAW OF CONTRACT
Question 1
Answer Plan:
• Address the meaning of the term an ‘invitation to treat’. Point out briefly
how it is distinguished from an offer.
• Address the operation of an ‘invitation to treat’ in contract law. Make
reference to some examples considered by the courts as illustrations of
an ‘invitation to treat’ and not an offer. (See examples such as: goods on
display in a supermarket, goods on display in a shop window,
advertisements, goods advertised for sale by tender and supply of
information/mere statement of price)
• Conclusion.
LAW OF CONTRACT
Answer:
Introduction:
• An ‘invitation to treat’ is a statement made by one person asking
the other to make to the first person an offer. In other words, an
‘invitation to treat’ is considered as an offer to negotiate, an offer
to receive offers or an offer to chaffer. It is a mere request to the
other party to negotiate or to make a proposal. On the other hand,
an offer is defined as a proposition put by one person to another
person made with the intention that it shall become legally
binding as soon as the other person accepts it. (See sec 2(a) of the
Contracts Act 1950 on how the term ‘offer’ is defined).
LAW OF CONTRACT
Answer: (Continuation)
The body:
• In explaining the concept of an ‘invitation to treat’ based on the
statement forming part of the question, reference must be made to the
different situations considered by the courts as cases of ‘invitation to
treat’ and not as an offer i.e. display of goods in a supermarket or shop
window, circulars and advertisements, tenders, supply of
information/mere statement of price, etc.
• Display of goods in a supermarket/shop window: The display of goods
with a price ticket attached in a supermarket shelf or shop window is not
an offer to sell but an invitation for customers to make an offer to buy.
(See the case of Pharmaceutical Society of Great Britain v Boots Cash
Chemists Ltd- where the court was faced with the issue as to when and
where the sale of the medicine took place. Was it when a customer put
the medicines in her shopping basket or was it when she presented the
goods to the cashier. The court held that the sale could only be said to
have taken place when the customer presented the goods to the cashier)
Judicial Review
•
•
•
Answer: (Continuation)
Still on the above issue, reference could be made as well to the case of Fisher v
Bell- where the authorities charged the defendant with offering for sale a flickknife in his shop-window that was against the law. The English Court of Appeal
treated the point as beyond dispute: “ It is perfectly clear that according to the
ordinary law of contract the display of an article with a price on it in a shop
window is merely an invitation to treat. It is in no sense an offer for sale, the
acceptance of which constitutes a contract”. This case shows that goods on
display are inviting customers to make an offer to buy them from the shopkeeper.
Advertisements: Advertisements of goods for sale are normally interpreted as
invitations to treat unless they come from the manufacturers. (See the case of
Partridge v Crittenden- where the defendant escaped liability for unlawfully
offering to sale brambleflinch because the advertisement he placed in the
classified section of a magazine was held to be a mere invitation to treat and not
an offer.
Still on the issue of advertisement, it is important to make reference to the case
of Mazumder v Attorney General of Sarawak- where the Federal Court held
that an advertisement in the newspaper for the post of a doctor was an invitation
to treat.
LAW OF CONTRACT
•
•
Answer: (Continuation)
Still on the issue of advertisement, it is important to point out that
advertisements may be construed as offers if they are unilateral i.e. open to all
the world to accept (e.g. offers for rewards. (See the case of Carlill v Carbolic
Smoke Ball Co- is a good example of a manufacturer’s offer by means of
advertisement)
Goods advertised for sale by tender: Tenders are offers and therefore, an
advertisement for tenders is an invitation to treat. In other words, where goods
are advertised for sale by tender, the statement is not an offer, but an invitation to
treat; that is, it is a request by the owner of the goods for offers to purchase them.
(See the case of Havela Investments v Royal Trust Co of Canada- where the
defendant invited two parties to purchase quantity of shares. The House of Lords
held that the referential bid was ineffective and that the fixed bid of the plaintiffs
should have been accepted. The bids were to be confidential and no bidder
would know the amount bid by the others. To allow the practice of referential bid
would be to defeat the notion of confidential competitive tender). See also the
case Blackpool Aero Club v Blackpool Borough Council-where the held that in
certain circumstances an invitation to tender could give rise to binding
obligations. This was such an instance since the tenders had been sought from a
number of parties, all of them known to the defendant, who had also imposed
strict rules of compliance on them. Take note that the principles are not
applicable in Malaysia.
LAW OF CONTRACT
•
•
Answer: (Continuation)
Supply of information/mere statement of price: Prospective sellers sometimes
provide details of what they may sell without any intention of making the
proposal to be legally binding. Hence, a statement of the minimum price at
which a party may be willing to sell will not amount to an offer. (See the case of
Harvey v Facey- where the appellant sent a telegram to the respondent asking
the price of Bumper Hall Pen to which the respondent replied: “Lowest cash
price for Bumper Hall Pen $900”. It was held that the respondent was not bound
by the subsequent telegram from the appellant, stating that “we agree to buy
Bumper Hall Pen for $900 asked by you” because the respondent telegram was
merely a supply of information and not an offer.
Still on the above issue, reference could be made also to the case Preston
Corporation Sdn Bhd v Edward Leong- where the Federal Court found that the
opening words of the respondents’ quotations, “we thank you for your inquiry
and have pleasure in submitting our quotation for the printing and supply of…”
and the concluding sentences “all prices quoted are net and subject to final
confirmation upon receipt of your order” and “We hope our quotation will meet
your kind approval” do not indicate and were never intended to be a binding
offer so that acceptance of the quotation would result in a contract between them.
They were merely a supply of information or an invitation to enter into a
contract.
LAW OF CONTRACT
Question 2
•
•
•
Answer Plan:
Address the issue (s) that the problematic question is addressing i.e. whether
there was a valid offer made and followed by acceptance of the said offer. In
other words, could it be said that there was a valid communication of the
acceptance from the other party (Abdul Aziz)? Was it reasonable for the other
party (Abdul Aziz) to resort to this mode of communication in accepting the
proposal/offer from his neighbour Muhammad? Assuming that it was clearly
stated in the proposal i.e. the means of communication, what would have been
the effect of the letter not being properly addressed to the other party
(Muhammad) and was well as the revocation of the offer.
Apply the law on the issue (s) identified. For example, the question requires a
thorough discussion on the ‘postal rule’ like the rules governing its application,
etc.
Conclusion.
LAW OF CONTRACT
Answer:
Introduction:
• Point out that the first requisite of any contract is an
agreement (consisting of an offer and acceptance). In other
words, there must be an offeror and an offeree. In the
present case, Muhammad is considered as the offeror and
Abdul Aziz as the offeree. However, point out that the
important point to address here is as to whether the
communication of the acceptance was conveyed to the other
party (Muhammad) for us to say that there was a valid
agreement between the two parties. Here, reference must be
made to the ‘postal rule’ and the conditions surrounding its
application.
LAW OF CONTRACT
Answer: (Continuation)
•
•
The body:
Point out that the gist of the problematic question revolves around the ‘postal
rule’. This rule only applies when the acceptance is sent by post or telegram.
Acceptance here takes effect when the letter is posted. (See sec 4(2)(a) and (b) of
the Contracts Act 1950). In other words, with regard to postal communication
and telegraph, acceptance is complete upon posting or dispatch of the telegram.
The ‘postal rule’ is an exception to the general rule that the acceptance is only
complete when it is communicated to the offeror/proposer.
Point out that in advising Muhammad, it is important to touch on the
fundamental principles surrounding the ‘postal rule’. Point out that where a party
uses the post as his means of communicating acceptance, it must be reasonable
in all circumstances. (See sec 7(b) of the Contracts Act 1950 where it is provided
that in order to convert a proposal/offer into a promise the acceptance must be
expressed in some usual and reasonable manner unless the proposal/offer
prescribes the manner in which it is to be accepted). Was it reasonable for a
neighbour to use this mode of acceptance?
LAW OF CONTRACT
Answer: (Continuation)
• Still in advising Muhammad, point out that it would not be normal to
reply by letter a proposal that he made to his neighbour Abdul Aziz
unless he had clearly stated the mode of acceptance i.e. by letter.
Assuming that Muhammad did not state clearly the mode or means of
acceptance of the proposal/offer from his neighbour Abdul Aziz, the
governing principle is that where a party uses the post as his means of
communicating acceptance, the circumstances must be such that ‘it must
have been within the contemplation of the parties that, according to the
ordinary usages of mankind, the post might be used as a means of
communicating the acceptance of an offer’ as per the case of Henthorn v
Fraser. Based on this principle, it could not be said that Muhammad and
Abdul Aziz had that kind of contemplation in mind i.e. that Abdul Aziz
will respond to the offer via a post. So, what’s the effect of the
revocation made by Muhammad?
LAW OF CONTRACT
Answer: (Continuation)
•
In advising Muhammad, point out also by way of making an assumption as to
what would have been the situation assuming that Muhammad clearly stated that
the acceptance of the proposal/offer must be made by way of a post. If that were
to be the position, then the promisee or offeree (Abdul Aziz) is bound to accept
in the prescribed manner. From the facts of the case, it would then be alright for
Abdul Aziz to do what he did irrespective of being neighbours with Muhammad.
Hence, communication of acceptance here will be complete upon posting of the
letter (i.e. 3 November 1989)- See the case of Adams v Lindsell where the rule
was laid down. (See also the case of Ignatius v Bell- where the defendant, Bell,
gave an option to the plaintiff to purchase a piece of land on condition that the
option must be exercised on or before 20 August 1912 by a notice in writing.
The plaintiff exercised the option by posting a letter on 16 August. The
defendant only received the letter on 25 August. The plaintiff sued the defendant
for specific performance. The Court of Appeal held that the acceptance was
complete against the proposer, Bell (the defendant), when it was put into the post
on 16 August).
LAW OF CONTRACT
Answer: (Continuation)
• Still on the above issue, point out that although acceptance is
complete upon posting of the letter, from the present facts
given it is stated that the letter was not addressed properly
and thus reached Muhammad on 8 November 1989 instead
of 5 November 1989. Point out that in such a situation i.e.
where a letter is not properly addressed- the governing
principle is that the ‘postal rule’ will not apply. So, what do
you think of Muhammad’s position revoking the offer? Was
he right even after having made the assumption i.e. that he
clearly stated the mode or means of acceptance e.g. by post.
LAW OF CONTRACT
Conclusion:
• Point out that your advise to Muhammad will revolve
around the issues pointed above and it is most unlikely for
the court to consider that there was a valid mode or means of
communicating the acceptance by Abdul Aziz to
Muhammad because of the arguments presented above.