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Legally Binding Contracts

Legally Binding Contracts

First and foremost, the advertisement placed in the newspaper by Kelly, constitutes an invitation to treat. This is due to the fact that the terms of the sale advertisement were such that there was an unclear intention to be bound by the agreement.

In Carlill v. Carbolic Smoke Ball the defendant company advertized in the newspaper, whereby they offered to pay a hundred pounds to anyone who suffered from influenza, subsequent to using their product in the manner specified. The plaintiff purchased a smoke ball and used it in the manner speci...

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...fied by the defendant. All the same she was infected with influenza.  The court held that the advertisement constituted the offer, because it was apparent that an offer had been made that was to be acted upon (Carlill v. Carbolic Smoke Ball).

Therefore, the act of the plaintiff in purchasing the product and using it in the manner specified, constituted acceptance. Moreover, the offer was such that no notice of acceptance was required. In addition, the consideration was the amount paid by the plaintiff, while purchasing the smoke ball. Therefore, the refusal by the defendant to pay the plaintiff the hundred pounds constituted a breach of contract (Carlill v. Carbolic Smoke Ball). The court considered, in this case that there was a unilateral offer, because there was a reward for complying with the condition of the advertisement. However, in our case there is no such offer, because of the absence of a reward.

 In Harvela Investments Ltd v. Royal Trust Co of Canada, some shares were to be sold to the higher of two bidders. The House of Lords opined that the promise to sell to the highest bidder could be construed to be a unilateral contract. It was held that the contract was formed when the invitation to bid had been received by each bidder. Moreover, the fulfilment of the condition was indicated by the submission of the tender (Harvela Investments Ltd v Royal Trust Co of Canada (CI), 1986 ).

In such contracts, the promise constitutes a unilateral offer and it results in some response. The receipt of a suitable response places the seller under a contractual obligation to complete the sale transaction with the highest bidder (Harvela Investments Ltd v Royal Trust Co of Canada (CI), 1986 ).

In Blackpool and Fylde Aero Club v. Blackpool Borough Council the defendant did not consider the plaintiff’s tender for the mistaken reason that it had been submitted late. The plaintiff was able to establish that he had submitted the tender within the deadline. The court held that in not considering the plaintiff’s tender the defendant had been in breach. The implication was that tender advertisements should result in binding contracts (Blackpool and Fylde Aero Club v. Blackpool Borough Council , 1990).

In Gibson v. Manchester City Council, the council had initially made a policy, whereby publicly owned houses were to be provided to those who could neither afford to buy or rent them. However, due to a policy change, the council refused to do so. The House of Lords held that there was no contract between Gibson and the council. It was also opined that a holistic view was to be taken of the dealings between the parties and only then it should be decided as to whether a contract existed between them or not (Gibson v Manchester City Council , 1979).

In Livingstone v. Evans, the court opined that an original offer on being renewed served as an indication to the plaintiff that he was still willing to treat on its basis. Despite, being a reply to the plaintiff’s counter offer or enquiry, it was also a signal to the plaintiff that the defendant was willing to accept the original offer. There were two statements in that telegram, one related to the cost of the land and the other stated that the price would not be reduced. In conjunction, these statements comprise a renewal of the original offer. Specifically, the statement that the price could not be reduced constituted a renewal of the original offer (Livingstone v. Evans). Thus Sarah’s electronic mail message to Kelly constitutes a counter offer, which terminates the original offer. Therefore there is no acceptance of Kelly’s offer and accordingly there is no binding agreement.

In respect of advertisements it has been the practice of the courts to apply the objective test. This is in order to deal with the claim that advertisements admit of a number of different interpretations. The objective test views the advertisement from the perspective of a reasonable person. For instance, in the Carlill v. Carbolic Smoke Ball case, the court held that despite the existence of several interpretations of the advertisements, Carlill’s behaviour had clearly adhered to the conditions of the advertisement and had fallen ill due to influenza, which was sufficient for the purpose.

Furthermore, the acceptance should correspond to the offer. In case the acceptance introduces a new element into the deal, then it is no longer an acceptance but a counter offer. Subsequently, if the offeror accepts this counter offer, then a valid contract is formed. When negotiations are long drawn out, then a seemingly never ending cycle of offers and counter offers comes into play.

There is a quirk some principle, which states that an original offer is rendered invalid by a counter offer. After a counter offer has been made the original offer cannot be accepted. The only manner in which the original offer can be revived is for the offeree to state that he is willing to accept it. These principles were elucidated in the RA Brierley case (Brierley (R.A.) Investments Ltd v Landmark Corp Ltd, 1966 ).

            In auction cases, there will be an unseen promise with regard to the bidding competition known as without reserve. This promise would serve as a means to sell to the highest bidder in fixed bid cases. In those cases the bidder makes an offer in compliance with that promise, thereby enforcing the promise. However, this is a unilateral offer in which the bidder responds to the bid. At this juncture, the seller bears a contractual responsibility to sell the goods to the bidder who quotes the highest amount. Therefore, the unilateral contract places a contractual obligation on the seller to make a contract.

            In Blackpool and Fylde Aero Club v Blackpool Borough Council, a tender was put aside mistakenly as having been submitted late even though it had been submitted in time and had complied with all the conditions of the advertisement for the tender. The plaintiff initiated legal action. The Court of Appeal held that the defendants were under an obligation to consider the tender applications that fulfilled the requirements specified by them. There was no explicit condition regarding the consideration to be given while complying with the tender offer. However, the Court pointed out that an implied promise was inherent in those terms (Blackpool And Fylde Aero Club v Blackpool Borough Council ).

            Without this finding of the Court, the defendant could have explicitly excluded his legal obligation. The defendant had reserved to himself the right to reject any tender. Furthermore, the tender was conducted as had been claimed by the defendant, in a clear, orderly and familiar manner. The Court had supported its finding of implied terms of promise on these facts.  From the defendant’s contention that they had followed an orderly and familiar procedure in the tender process it can be construed that the tender had been conducted properly. Moreover, the argument clearly established that the promises given by the government agencies and bodies in their advertisements of tenders should invariably enforce contractual obligations (Blackpool And Fylde Aero Club v Blackpool Borough Council ).

            The defendant in this case was Blackpool Borough Council which did not consider the plaintiff’s tender due to a mistake. The act of the Council was in breach of the contractual obligations. The plaintiff was a tenderer whose exclusion from the bidding resulted in his incurring losses in preparing the tender. The plaintiff was in a position to move the Court for damages (Blackpool And Fylde Aero Club v Blackpool Borough Council ).

            The nature of the promise in the contracts varies. There may be a preliminary contract made with only one bidder as in the case where a promise is made to award the contract to the highest bidder.

The foregoing analysis reveals that Kelley does not have any binding contract either Britney or John. This is because; an advertisement is an invitation to treat and not an offer. In respect of Sarah, Kelley sent her an electronic mail, wherein she offered to sell the limousines for a fixed price. However, Sarah made a counter offer by electronic mail. Therefore there is no contract between them.


Blackpool And Fylde Aero Club v Blackpool Borough Council , (1990) 1WLR 1195.

Blackpool and Fylde Aero Club v. Blackpool Borough Council , 1 WLR 1195 (Court of Appeal 1990).

Brierley (R.A.) Investments Ltd v Landmark Corp Ltd, HCA 82 (1966 ).

Carlill v. Carbolic Smoke Ball, (1893) 1 Q.B. 256 (C.A.).

Gibson v Manchester City Council , 1 WLR 294 (1979).

Harvela Investments Ltd v Royal Trust Co of Canada (CI), 1 AC 207 (1986 ).

Livingstone v. Evans, (1925) 3 W.W.R. 453 (Alta. S.C.).


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