Formation of a valid contract

Issue. The issue is whether the laptop displayed in the shop window with a price tag amounted to an offer that Megan could accept, or merely an invitation to treat, so that no contract was formed.

Rule. A valid contract requires offer, acceptance, intention to create legal relations and consideration. An offer is a clear statement of terms which the offeror intends to be binding the moment it is accepted, whereas an invitation to treat is only an invitation to others to make offers and cannot itself be accepted into a contract. The law is settled that goods displayed in a shop, whether in the window or on the shelves, are an invitation to treat and not an offer. In Fisher v Bell [1961] a flick-knife displayed in a shop window with a price ticket was held to be an invitation to treat, not an offer for sale. Similarly, in Pharmaceutical Society of GB v Boots [1953] goods on a self-service shelf were an invitation to treat; the customer makes the offer at the till, which the shop is then free to accept or reject.

Application. Applying Fisher v Bell, the laptop in PC World's window with its £200 price tag is an invitation to treat, not an offer. It follows that there was no offer for Megan to 'accept'. When Megan said 'I accept your offer', she was in law making the offer to buy, which the shop (following Boots) was entitled to refuse. The manager's refusal to sell is therefore the rejection of Megan's offer, not the breach of a concluded contract.

Conclusion. No contract has been formed. The window display was an invitation to treat (Fisher v Bell), Megan's words amounted to an offer to buy, and the shop validly declined that offer (Boots). PC World is not bound to sell the laptop at £200, and Megan has no claim.

For a contract to be formed, acceptance must generally be communicated to the offeror; the postal rule is an important exception to this rule.

The general rule and the exception. The ordinary rule is that acceptance is effective only when it is received by the offeror. The postal rule, however, provides that where acceptance is sent by post, it takes effect at the moment the letter is properly posted, not when it is received. The rule was established in Adams v Lindsell, where the court held that a contract was formed when the letter of acceptance was posted, even though it was delayed in the post. It was confirmed in Household Fire Insurance v Grant, where acceptance was held to be binding even though the letter of allotment was lost in the post and never arrived — the offeror was still bound.

When the postal rule applies. The rule is limited. It applies only where:

• the post is a reasonable and contemplated means of acceptance between the parties;
• the letter is properly addressed and stamped and actually posted; and
• the offeror has not excluded the rule by requiring actual receipt (an offeror can always stipulate that acceptance must reach them).

Limits and significance. The postal rule does not apply to revocation of an offer, which is effective only when actually communicated — Byrne v Van Tienhoven. Nor does it generally apply to instantaneous communications. The rule matters because it can determine the precise moment, and even the existence, of a contract: an acceptance is binding the instant it is posted, so a contract can exist before the offeror even knows of it, and before any attempted revocation that has not yet reached the offeree.

Issue. The issue is whether Bola's letter of 3 May was a counter-offer that destroyed Aziz's original offer, so that Bola's purported acceptance on 6 May was ineffective, or whether the original offer survived and a contract was formed.

Rule. A valid contract requires a matching offer and acceptance. An offer may be accepted only while it is still open. A counter-offer — a reply that introduces new terms or varies the price — operates as a rejection of the original offer and destroys it, so that the original offer can no longer be accepted: Hyde v Wrench (an offer to sell for £1,000 was met by a counter-offer of £950; the original offer was destroyed and could not later be accepted). This must be distinguished from a mere request for information, which does not destroy the offer: in Stevenson v McLean an enquiry asking whether the seller would accept payment by instalments was held to be a request for information, leaving the offer open for acceptance.

Application. On 3 May Bola wrote, 'I will buy your car for £4,500.' This is not a question about the terms; it proposes a different price and so introduces a new term. Applying Hyde v Wrench, it is a counter-offer which rejected and destroyed Aziz's original offer of £5,000. It is plainly distinguishable from the situation in Stevenson v McLean, because Bola is not merely seeking information — she is proposing fresh terms. Consequently, when Bola wrote on 6 May purporting to 'accept' the original £5,000 offer, there was no offer left to accept. Aziz's silence does not help Bola either: silence cannot amount to acceptance (Felthouse v Bindley), and in any event there was nothing for Aziz to accept, as Bola's own counter-offer of £4,500 had not been accepted by him.

Conclusion. No binding contract exists. Bola's letter of 3 May was a counter-offer that destroyed the original offer (Hyde v Wrench), and there was therefore no offer capable of acceptance on 6 May. If Bola now wants the car at £5,000 she must make a fresh offer, which Aziz is free to accept or reject.

Introduction. Intention to create legal relations (ITLR) is an essential ingredient of a valid contract. The courts use two rebuttable presumptions to decide it: against intention in social and domestic agreements, and for intention in commercial agreements. This essay argues that the presumptions are a sensible and largely fair starting point, but that their application — especially in family cases — can produce uncertain and occasionally harsh results.

The domestic presumption. In social and domestic agreements the law presumes the parties did not intend to be legally bound. In Balfour v Balfour a husband's promise to pay his wife a monthly allowance was held unenforceable because the parties did not intend legal consequences while living together amicably. This is a fair starting point: it keeps the courts out of ordinary family arrangements and avoids a flood of trivial litigation over domestic promises.

Rebutting the domestic presumption. The presumption is rebuttable, and the courts have shown sensible flexibility. In Merritt v Merritt a similar promise between a separating couple WAS enforceable, because where spouses are no longer living in amity their arrangement is intended to have legal force. In Jones v Padavatton, however, a mother's arrangement to support her daughter while she studied was held not legally binding — illustrating that the line can be difficult to draw and that outcomes may turn on fine factual distinctions, creating uncertainty.

The commercial presumption. In commercial agreements the law presumes the parties did intend legal relations. In Esso v Commissioners a promotional 'free' World Cup coin given with petrol was held to be supplied in a commercial context with intention to be bound. This presumption reflects commercial reality and promotes certainty in business. It too is rebuttable: parties may exclude intention by an 'honour clause' stating the agreement is 'binding in honour only', as in Rose & Frank.

Evaluation and conclusion. The presumptions work well in the commercial sphere, where they give businesses certainty while respecting clear honour clauses. In the domestic sphere they sensibly protect family life, but the contrast between Merritt and Jones v Padavatton shows the outcome can be hard to predict and may leave a deserving claimant without a remedy. On balance the presumptions are a fair and workable mechanism, but their domestic application would benefit from clearer guidance to reduce the uncertainty that fine factual distinctions produce.

This problem raises four issues: (1) offer or invitation to treat; (2) acceptance and the validity of Carla's attempted withdrawal; (3) intention and consideration; and (4) the capacity of a minor, Eli.

Issue 1 — Offer or invitation to treat. The first issue is whether Carla's newspaper advertisement was an offer or an invitation to treat. Rule: an advertisement of goods for sale is generally an invitation to treat, not an offer — Partridge v Crittenden (an advert of birds for sale was an ITT). Application: Carla's advert 'Vintage guitar, £800' is therefore an invitation to treat. It follows that Dev's email of 2 June, 'I'll take it for £800', is the offer to buy. Conclusion: Dev made the offer; Carla had not yet made any binding offer by advertising.

Issue 2 — Acceptance and revocation. The next issue is whether Carla accepted Dev's offer and, if so, whether she could withdraw. Rule: acceptance must be communicated; once a contract is formed it cannot be unilaterally undone, and revocation is only relevant before acceptance — Byrne v Van Tienhoven. Application: Carla's reply on 2 June, 'Great — it's yours', is a clear, communicated acceptance of Dev's offer. A binding contract was therefore formed on 2 June. Carla's email on 3 June, 'deal off', is not a revocation of an offer (the offer had already been accepted) but an attempt to escape an existing contract, which she cannot do unilaterally. The postal rule is not needed here: Dev's posted cheque is merely performance of a contract already concluded by the exchange of emails, not the acceptance itself. Conclusion: a binding contract for the guitar was formed on 2 June, and Carla's later change of mind is ineffective; she is in breach if she refuses to deliver.

Issue 3 — Intention and consideration. Rule: in a commercial-style sale there is a presumption of intention to create legal relations — Esso v Commissioners — and consideration must be present and sufficient, though it need not be adequate — Thomas v Thomas. Application: this is a straightforward sale between strangers, so intention is presumed and not rebutted; Dev's promise to pay £800 and Carla's promise to transfer the guitar are mutual consideration. Conclusion: both intention and consideration are satisfied, confirming a valid contract.

Issue 4 — Eli's capacity as a minor. Rule: contracts made by minors (under 18) are generally voidable, but a contract for necessaries is binding on the minor — Nash v Inman (necessaries are goods suitable to the minor's condition in life and actual requirements). The Minors' Contracts Act 1987 (ss2-3) allows a court to order a minor to return goods acquired under an unenforceable contract. Application: a school uniform is a classic example of a necessary — it is suitable to Eli's condition in life and his actual needs. Following Nash v Inman, the contract for the uniform is therefore binding on Eli, even though he is 16, provided the uniform was genuinely required. Conclusion: Eli is bound to pay for the school uniform as a contract for necessaries.

Overall conclusion. Carla is bound to sell the guitar to Dev (contract formed 2 June; her withdrawal is ineffective), and Eli is bound to pay for his school uniform as a contract for necessaries under the principle in Nash v Inman.

Introduction. Consideration is the requirement that each party to a contract must give something of value in exchange for the other's promise; it distinguishes an enforceable bargain from a bare gratuitous promise. This essay argues that, while the doctrine has real weaknesses that the courts have repeatedly had to soften, it still performs a useful gatekeeping function, so the statement that it is 'outdated and should be abolished' is overstated — reform, not abolition, is the better answer.

The strengths of consideration. The doctrine provides a clear and certain test of which promises the law will enforce: only bargains, not generous but unsupported promises, are binding. The rule that consideration must be sufficient but need not be adequate (Thomas v Thomas, where £1 rent was good consideration) wisely keeps the courts out of judging whether parties struck a fair price, and Chappell v Nestlé confirmed that even chocolate-bar wrappers can form part of the consideration — showing the doctrine's flexibility about what counts as value. The requirement that consideration move from the promisee also sensibly limits who can sue.

The weaknesses and the courts' responses. The doctrine's rigidity has, however, produced results the courts have had to correct. The past consideration rule (Re McArdle — a promise to pay for work already done was unenforceable) can defeat reasonable expectations, which is why the Lampleigh v Brathwait exception exists for acts done at the promisor's request. More seriously, the existing-duty rule in Stilk v Myrick (doing only what one is already bound to do is no consideration) sits uneasily beside the practical-benefit exception in Williams v Roffey Bros [1991], which many argue has so widened the rule as to undermine it. The part-payment rule in Pinnel's Case and Foakes v Beer (accepting less than the full debt is not binding) is widely criticised as commercially unrealistic, and equity has had to step in through promissory estoppel (Central London Property Trust v High Trees House [1947]) to prevent injustice — though estoppel remains only a shield, not a sword and is itself limited by the requirement of equitable conduct (D&C Builders v Rees).

Evaluation. The case for abolition rests on these inconsistencies: if practical benefit and estoppel are constantly needed to escape the strict rules, perhaps the doctrine is doing more harm than good, and some jurisdictions manage without it. Yet abolition would remove the clear line between enforceable bargains and gratuitous promises, creating uncertainty about which promises bind. The more measured view is that the developments in Williams v Roffey and High Trees show a doctrine adapting, not failing.

Conclusion. The doctrine of consideration is flawed and has needed repeated judicial and equitable patching, particularly in the existing-duty and part-payment areas. But it still performs a valuable gatekeeping role, and the better course is targeted reform — for instance clarifying the relationship between practical benefit and the existing-duty rule — rather than outright abolition. The statement therefore goes too far.