Offer and Acceptance

The formation of a contract is primarily based upon the existence of an agreement between the parties. Generally speaking, an agreement is reached when one party makes an offer, which is accepted by another party. This article examines the legal concepts of offer and acceptance in contract law, and how these principles work together to help create a legally enforceable agreement.

Formation of a contract 

A contract is an agreement that gives rise to rights and obligations enforceable by law. One of the first issues to consider when a contractual dispute arises is often whether or not there is a valid contract capable of being enforced. 

A valid contract is made up of the following essential ingredients: offer, acceptance, consideration and contractual intention. The concept of contractual intention refers to the intention of the parties to create legal relations, ie; to enter into a binding agreement, whereas consideration refers to the price that one party pays for the promise of the other.

For the formation of a contract, however, there must first be offer and acceptance, such that the parties can be said to have reached a legally binding agreement. So what exactly constitutes an offer capable of acceptance?

Offer contract law

In contract law, an offer is an expression of willingness to contract on a specified set of terms. An offer may be made expressly, either orally or in writing, or by conduct. It can be addressed to a single person, to a specified group of persons or to the world at large. 

An offer is essentially a proposal made with the intention that, if accepted by the person to whom it is addressed (the offeree), the person making the offer (the offeror) intends to be contractually bound by it.

Whether the offer is made with the requisite intention is assessed objectively. Accordingly, the offeror will be bound if his words or conduct are such as to induce a reasonable person to believe that he intends to be bound, even if in fact he has no such intention.

Distinguishing an offer from an invitation to treat

It is important here to draw a distinction between an offer and an invitation to treat, the latter being a communication by which a party is itself invited to make an offer and is not intended to be contractually binding.

The distinction between an offer and an invitation to treat depends primarily on the intention of the party making the statement. Accordingly, a statement will not be an offer if it makes clear that the offeror is not bound by the offeree’s acceptance. Common examples of invitations to treat include advertisements or displays of goods that customers can select in a self-service context.

 In the well known case of Carlill v Carbolic Smoke Ball Company (1893) the defendant company advertised that if its’ carbolic smoke ball failed to cure influenza, buyers would receive a reward of £100.

When sued by Mrs Carlill, the Smoke Ball Company argued that the advert was not to be construed as a legally binding offer, it was merely an invitation to treat or rather, a mere puff lacking true intent.

The Court of Appeal held that the advertisement was in fact an offer, where an intention to be bound could be inferred from the adverts own claim to sincerity in which it stated that £1,000 had been deposited in the company’s bank account.

How offers can be withdrawn

The general rule is that an offer can be withdrawn at any time before it is accepted. To be effective in law, the offeree must be informed that the offer no longer stands, although such communication need not come from the offeror, but rather can be made by a reliable third party. 

An offer may also come to an end through lapse of time or the occurrence of a condition. With lapse of time cases, where no timeframe is specified for the acceptance of an offer, the offer will remain open for a reasonable period. What constitutes a reasonable period depends on all the circumstances. If, on the other hand, the offer stipulates a time limit within which acceptance must occur, the offer will cease to be open for acceptance once that time limit has expired.

If an offer expressly provides that it is to determine on the happening of a prescribed condition or particular event, it cannot be accepted once that condition or event has been satisfied. Similarly, an offer may be construed as being subject to an implied condition, for example, an offer made at auction ceases when a higher bid is made.

Acceptance contract law

A contract will only be capable of being enforced if an offer has been accepted and an agreement reached between the parties. In contract law, acceptance is an unqualified expression of agreement to all the terms set out in the offer.

A mere acknowledgement of receipt of the offer or a request for further information in relation to its terms, will not generally be sufficient to constitute acceptance.

The terms in which the offer is made and accepted must also correspond. Accordingly, if a response to an offer seeks to vary a term or introduce a new term, it will not constitute an acceptance, but rather a counter-offer. A counter-offer has the effect of extinguishing the original offer, which the original offeror can either accept or reject. 

How offers can be accepted

The general rule is that an acceptance has no legal effect until it is communicated in some way to the offeror. This means that the acceptance must be brought to the attention of the offeror. Acceptance can take effect by words or by conduct. 

An offer that prescribes the mode of acceptance can generally only be accepted in that way. That said, an offeror is not permitted to stipulate that silence amounts to acceptance. An offeree who does nothing in response to an offer is not generally bound by its terms, not least because it would be unfair to impose on an offeree the inconvenience of rejecting an offer they had no wish to accept.

The ‘postal rule’ stipulates that a postal acceptance takes effect when the letter of acceptance is posted. However, this rule only applies if it is reasonable to use the post, for example, if the offer itself was made by post.

The postal rule is one of convenience, in particular to govern a situation where an offer is withdrawn by post, but the letter communicating the withdrawal does not reach the offeree before the offer is accepted by post. In these circumstances, the offeree’s posted acceptance prevails. The rule also applies where acceptance is lost or delayed in the post. Save except where the loss or delay is attributable to the offeree’s own error which, for example, causes the acceptance to be misdirected, a posted acceptance is effective even if it never reaches the offeror.

For an in-depth look at offer and acceptance 

The law relating to offer and acceptance can be complex. This article provides only an overview of some of the legal principles involved. For detailed guidance on this topic, students should refer to specific texts or analysis on the subject, with reference to all recent and leading case law. 

Legal disclaimer

The matters contained in this article are intended to be for information purposes only. This article does not constitute legal advice and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought. 

Contract Terms

A contract is a legally enforceable agreement between two or more parties. The terms of contract set out the rights and obligations of each party under that agreement. It is these terms that determine what the contracting parties are legally obligated to do in exchange for the promise of the other.

The following article provides an overview of the fundamentals of the terms of contract, including express and implied terms, classification of the different types of terms and the effect of their breach.

Express terms of contract

The terms of contract may be express or implied. Express terms are those explicitly agreed between the parties, either orally or in writing.

Even though these terms are, by definition, those openly expressed at the time a contract is made, issues often arise as to what constitutes an express term, whether a term has been incorporated into a contract or interpreting the meaning of an express term:

  • contractual terms or representations – not all statements made by the parties during negotiations are intended to have contractual force. Some are only representations, meaning they are intended to induce the other party to enter into the contract, but not to be capable of imposing liability for breach of contract.
  • incorporation of express terms – where terms are contained within different documents, or where a contract is made subject to standard terms, it is important to ascertain whether the party relying on the terms and conditions had taken reasonable steps to bring these to the attention of the other party.
  • interpretation of express terms – once express terms have been identified, there is still the question of interpretation. Where parties disagree on the meaning of an incorporated term, it will be for the court to objectively construe the meaning of the term having regard to the words expressed, the contract as a whole and the factual matrix reasonably available or known to the parties at the time the contract was made.

Implied terms of contract

Implied terms are not expressly stated but rather arise by implication, often to reflect the intention of the parties at the time the contract was made or because the contract doesn’t make commercial sense without that term. These terms may be implied into a contract by fact, by operation of law or by custom and usage:

  • implied by fact – terms of contract implied by fact are ones that are not expressly set out in the contract but which the parties must have intended to include. Whether such a term is implied depends on the wording of the contract and the surrounding circumstances known to both parties at the time of the contract. In particular, a term can only be implied if the officious bystander would consider inclusion of the term to be so obvious as to go without saying or, alternatively, the term is necessary to give business efficacy to the contract.
  • implied by law – terms of contract may be implied by law even where such terms were not intended by the parties. These are terms that arise as a legal incident from the nature of the particular contractual relationship. For certain contracts the law seeks to impose a standardised set of terms as a form of regulation, for example, as between landlord and tenant or employer and employee. 
  • implied by custom or usage – terms of contract may be implied by custom or usage where there is clear and sufficient factual evidence that a custom operates within a particular trade or industry. However, the practice must be so well defined and recognised that contracting parties must be assumed to have had it in their minds when they contracted. Further, no such term will be implied if the term is unreasonable or if the contract evidences a contrary written intention of the parties.

Classification of the terms of contract

Contractual terms are often classified into one of three types: a condition, a warranty or an intermediate term (also referred to as an innominate term). These can be broadly defined as follows:

  • condition – this is an important and fundamental term going to the very heart of the contract. In other words, the term is so essential to the very nature of the contract that its’ non-performance may fairly be considered by the other party as a substantial failure to perform the contract at all. A breach of a condition entitles the aggrieved party to terminate the contract and claim damages.
  • warranty –a warranty is a minor term, not critical to the performance of the contract, breach of which does not entitle the aggrieved party to terminate the contract, but does allow for a claim in damages.
  • intermediate term – this is a term that cannot be identified as amounting to either a condition or a warranty at the time of entering into the contract. Whether or not breach of an intermediate term will entitle the aggrieved party to terminate the contract will only be capable of being ascertained once the gravity of the breach has been considered. Here the court will look, in particular, to whether the aggrieved party was deprived of substantially the whole benefit of the contract. 

Since breach of a condition entitles the aggrieved party to terminate the contract and claim damages, contractual disputes can often centre on whether or not a particular term of the contract takes effect as a condition or a warranty.

Some conditions are implied by law, for example, under the Consumer Rights Act 2015, the supply goods is to be treated as including a condition that those goods are of satisfactory quality.  In other cases, the contract itself may seek to classify a term in a particular way. However, the labelling of a term does not necessarily resolve the issue as to how a term should be construed. This will be a matter of construction in each individual case.

Remedies for breach of the terms of contract 

Under the terms of contract, the remedies available for breach will, as previously discussed, depend upon the nature and extent of the breach. The most common contractual remedies include:

  • repudiation – if a condition of a contract is breached, the aggrieved party is entitled to terminate the contract and treat himself/herself as discharged from further performance under it. This is known as repudiation. The aggrieved party will also be able to claim damages. If a warranty is breached, the aggrieved party may claim damages but will not be able to repudiate the contract.
  • damages – this is compensation used to put the aggrieved party in the position they would have been had the contract been properly performed. Damages will only be recoverable for loss suffered as a result of the breach provided it is not too remote.  The aggrieved party is also under a duty to mitigate any loss.
  • specific performance – this is an alternative remedy for breach of contract in which the court can compel a party to perform its contractual obligations. Unlike damages, which are available as of right, specific performance is granted at the court’s discretion.

Discovering more about the terms of contract 

The law relating to terms of contract is complex. This article provides only an overview of some of the legal principles involved. For detailed guidance on terms of contract, students should refer to specific texts or critical analysis on the subject, with reference to any statutory provisions and all recent and leading case law. 

Legal disclaimer

The matters contained in this article are intended to be for information purposes only. This article does not constitute legal advice and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought. 

Contract Law

Contract law is a body of law regulating the making and enforcing of agreements. We all enter into hundreds of contracts throughout out lives, very often on a daily basis. This can range from simply buying a cup of coffee or booking a holiday, to entering into a contract of employment or selling our home.

This article provides an overview of the fundamentals of contract law, including how a contract is formed, what can invalidate a contract, as well as contractual terms, breach and legal remedies. 

What constitutes a legally enforceable agreement in contract law?

A contract is a legally enforceable agreement between two or more parties setting out their mutually binding obligations. There are several different types of contract, most typically associated with the sale of goods, the provision of services, or the exchange of interests and ownership.

A contract can be written or oral, or a combination of both, although by law some contracts must be in writing, for example, for the sale of land. 

To be legally enforceable, a contract must comprise of the following four essential elements:

  • Offer – an expression of willingness to contract on a specific set of terms. An offer is essentially a proposal made with the intention that, if accepted, the person making the offer intends to be contractually bound by it. It is important here to draw a distinction between an offer and an invitation to treat, the latter being simply an invitation to make an offer that is not intended to be contractually binding. An offer can be revoked at any time before it is accepted, so long as you inform the person you made the offer to that the offer no longer stands.
  • Acceptance – this is an expression of agreement to all the terms set out in the offer.  An offer must be accepted in accordance with its precise terms if it is to form an agreement. Communication of acceptance that seeks to vary the terms of an offer will be construed as a counter-offer.  A counter-offer extinguishes the original offer that the original offeror can either accept or reject.
  • Consideration – for a contract to be binding, the parties must exchange something of value. Consideration is essentially the price that one party pays for the promise of the other. The price is often money, but it can be anything that has value, even something intangible such as a promise to do or not to do something. Although a promise has no contractual force unless some value has been given for it, consideration need not be adequate. Accordingly, nominal consideration is sufficient.
  • Intention to create legal relations – this refers to the intention of the parties to enter into a legally enforceable agreement. Whether two parties have intention to enter into a binding agreement will depend on the particular circumstances. The law generally draws a distinction between commercial agreements, where the assumption is that the parties intend to be legally bound, and social or domestic agreements, where the parties may be under a moral but not legal duty to honour any agreement. Needless to say, these presumptions can always be rebutted in court by producing evidence to the contrary.

To be legally binding, all parties must also have the legal capacity to enter into a contract, ie; the ability to understand its terms and their contractual obligations under it. In contract law, special provision is made here for minors and those under a mental disability. 

Can an agreement be invalidated in contract law?

Assuming all essential elements of a valid contract are present, there are also various other factors that may affect the validity of a contract once formed. While certain vitiating factors will render a contract void, others will render the contract merely voidable. 

A void contract is one that is declared a nullity, such that it is wholly lacking in legal effect and no rights can be derived under it. A voidable contract is where the contract is still legally binding but allows a party to ask the court to rescind the contract, ie; set it aside, and seek restitution of any monies paid under it.

The four main vitiating factors in contract law are as follows:

  • Mistake – a common mistake is one shared by both parties, whereas a mutual mistake occurs when the parties to a contract are at cross-purposes. A unilateral mistake is where one party is mistaken but the other knows or ought to have known of the mistake. If the mistake is fundamental to the nature of the contract, this may result in the contract being rendered void.
  • Misrepresentation – misrepresentation is defined as the false statement of material facts that induces the creation of a contract. This may include innocent misrepresentation, negligent misrepresentation and fraudulent misrepresentation. The effect of an actionable misrepresentation is to render the contract voidable.
  • Duress – this is where a party has been forced or coerced into a contract. Duress can take many forms including threats of violence, threats to property, unlawful restraint or even economic duress. Subject to the nature and degree of the coercion used, this may either render a contract void or voidable.
  • Undue Influence – this is where a contract has been entered into as a result of pressure that falls short of amounting to duress. It operates where there exists a relationship between the parties that has been exploited by one party to gain an unfair advantage over another. Undue influence will render a contract voidable.

Further, where the purpose of an agreement is to achieve an illegal end, the contract cannot be enforced for illegality. However, the courts will differentiate between those contracts that are said to be illegal at their formation, and those that are subsequently performed in an illegal manner. 

What are the terms of an agreement and how are they defined under contract law?

The terms of the contract will set out the rights and obligations of each party. These terms may be express or implied. 

Express terms are those explicitly agreed between the parties, either orally or in writing. Implied terms are those implied by law or inferred through the conduct of the parties. The law may also imply a term into a contract if it is deemed necessary for the purposes of business efficacy or in accordance with normal practice and custom.

A contract will comprise of conditions and warranties, or in some cases what may be regarded as innominate terms. A condition is an important and fundamental term of the contract going to its’ root, whereas a warranty is a minor term and not central to the existence of the contract.

An innominate term is an intermediate term that cannot be defined as either a condition or a warranty, but rather the court will look to whether the aggrieved party was deprived of substantially the whole benefit of the contract in the event of breach of that term.

What constitutes a breach of an agreement under contract law?

The terms of the contract will dictate how the contract is to be performed. Performance that falls short of what is required under those terms will constitute a breach of contract. A breach can occur where, for example, a party refuses to perform their duties, their performance is substandard or they fail to perform their duties within a reasonable timeframe.

If a breach is serious or fundamental to the contract, this will be treated as a breach of condition. If the breach is minor and not critical to the performance of the contract, this will be treated as a breach of warranty. 

What remedies are available for breach of an agreement under contract law?

Under contract law, the remedies available for breach of contract will depend upon the nature and extent of the breach, but include:

  • Repudiation – if a condition of a contract is breached, the aggrieved party is entitled to repudiate, ie; bring the contract to an end and claim damages. If a warranty is breached, the aggrieved party may claim damages but will not be able to repudiate the contract.
  • Damages – this is compensation used to put the aggrieved party in the position they would have been had the contract been properly performed. Damages will only be recoverable for loss suffered as a result of the breach provided it is not too remote.  The aggrieved party is also under a duty to mitigate any loss.
  • Specific performance – this is an alternative less common remedy for breach of contract in which the court can compel a party to perform its contractual obligations. Unlike damages, which are available as of right, specific performance is granted at the court’s discretion.

For an in-depth look at contract law 

Contract law is a highly complex area of law. This article provides only an overview of some of the legal principles involved. For detailed guidance on contract law, students should refer to specific texts or analysis on the subject, with reference to any statutory provisions and all recent and leading case law. 

Legal disclaimer

The matters contained in this article are intended to be for information purposes only. This article does not constitute legal advice and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought. 

Law of Evidence – What is it?

The law of evidence encompasses the rules and legal principles that govern the proof of factual matters in both criminal and civil proceedings. It is the evidence that helps the parties prove or disprove their case and, in turn, assist the court in fairly determining the outcome of those proceedings.

Below we examine the different types of evidence that may be used in both criminal and civil proceedings, together with an overview of some of the legal principles that provide the foundations underpinning the law of evidence.

What constitutes evidence?

Under the law of evidence, there are several different types of evidence that may be used in both criminal and civil proceedings. These include:

  • oral evidence – this is the spoken testimony of a lay or expert witness given in open court, usually on oath or affirmation. For the lay witness, the evidence is limited to their own knowledge of the facts, rather than conjecture, and is put forward as the truth of its contents. The expert witness, on the other hand, may provide their professional opinion on a particular issue to assist the court in its determination of that issue.
  • written evidence – this is the written testimony of a lay witness, usually signed with a statement of truth. It can also include the written report of an expert, such as a medical, forensic or handwriting expert. Typically, oral evidence will be given to corroborate a written statement or report.
  • documentary evidence – this is any document or written record, such as a contract, letter, diary or incident report. It can also include transcripts of telephone calls, as well as digital records of communications, such as text messages or emails. Typically, documentary evidence will be exhibited to a written statement or report, either by the author of the document in question, or by an individual able to verify or explain its contents.
  • real evidence – this is tangible evidence in the form of some kind of material object. This includes DNA evidence, such as hair or blood samples, typically used in conjunction with an expert’s report. It can also include CCTV footage, still photographs, and voice or video recordings. It is produced before the court for inspection, either to prove that it exists, or so that the court can draw an inference as to its condition or value.

The legal principles of the law of evidence

In any legal proceedings, both criminal and civil, the parties must produce evidence in support of their case to prove or disprove the matters in dispute. Accordingly, in the absence of sufficient evidence their case is likely to fail.

However, there are various rules and legal principles within the law of evidence that govern, for example, which party bears the burden of proof and to what standard. There are also rules as to the admissibility and weight to be attached to the evidence. Below, we address each of these legal principles in turn.

Burden of proof 

The burden of proof refers to the obligation placed upon a party to prove or disprove a disputed matter. Generally speaking, the burden of proof lies with the party bringing the action. For example, in criminal proceedings, the duty is on the prosecution to prove the elements of any offence. In a civil case, it is typically the claimant who is charged with the burden of proving his/her claim.

The burden of proof may shift, however, depending on the particular defence raised. By way of example, the onus in proving a plea of insanity rests with the defendant charged with a criminal offence. In a civil context, the evidential burden, at the very least, may shift to the defendant when pleading and proving an allegation of fraud.

Standard of proof

The standard of proof refers to the strength of the evidence required to prove a disputed fact or issue. In a criminal trial, the prosecution must prove the elements of any offence “beyond a reasonable doubt”, ie; so that the jury is sure of the defendant’s guilt. In contrast, a claimant bringing a civil claim must only prove their case on a “balance of probabilities”, ie; so that the judge is satisfied that the matters in dispute are more likely than not.

In a criminal context, the higher standard of proof leans very much in favour of the defendant. Given the serious nature of any criminal conviction, it is deemed preferable that some guilty go free, rather than any innocents be convicted. Similarly in civil cases, the more serious the allegation, the stronger and more cogent the evidence should be before a court determines that, on the balance of probabilities, the matters in dispute are proven.

Admissibility of evidence

In both criminal and civil proceedings, under the law of evidence any statement, testimony, document, or other evidence that is relevant to an issue in dispute, is potentially admissible. This includes issues of fact, as well as any issues that may affect the reliability or credibility of a witness or the evidence.

However, the question of admissibility of evidence is also subject to any common law or statutory rules on exclusion. By way of example, evidence may be wholly excluded in criminal proceedings if it has been obtained illegally, improperly or unfairly, such as during an unlawful police search.

In criminal proceedings there are also special rules under the law of evidence relating to the admissibility of confessions, evidence of the defendant’s bad character and hearsay evidence (as defined below). This type of evidence can have an adverse effect on the fairness of proceedings such that, in many cases, it ought not to be admitted. In circumstances where such evidence is not ruled inadmissible, various procedural requirements will need to be satisfied as a means of redressing any imbalance.

Weight of evidence

Under the law of evidence, once a statement, testimony, document or other piece of evidence has been admitted, the court must then determine its’ probative value in determining the issues in dispute. Accordingly, the court will take into account a number of factors. These include the nature of the evidence and whether it can be corroborated, from where the evidence originates, and how credible and reliable that source can be regarded.

In both criminal and civil proceedings, hearsay evidence is typically regarded as inherently unreliable because it is evidence not given under oath and without any opportunity for this evidence to be tested under cross-examination. Hearsay evidence is where a witness in proceedings seeks to give evidence of a particular fact on the basis of what was said to him or her by a third party. Accordingly, very little weight will be attached to this type of evidence in determining whether the requisite standard of proof has been satisfied. 

Similarly, in the absence of direct or corroborative evidence, the court is unlikely to attach any weight to circumstantial evidence. This is evidence that tends to prove a factual matter by proving other events or circumstances from which the occurrence of the matter can be reasonably inferred.

For an in-depth look at the law of evidence 

The law of evidence is a highly complex and constantly evolving area of law. This article provides only an overview of some of the legal principles encompassed by the law of evidence in the context of both criminal and civil proceedings.  For more detailed guidance, students should refer to specific texts or analysis on the subject, with reference to current statutory provisions and recent case law. 

Legal disclaimer

The matters contained in this article are intended to be for information purposes only. This article does not constitute legal advice and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.