1.0 Introduction
Contract–This term, in its more extensive sense, includes every description of agreement, or obligation, whereby one party becomes bound to another to pay a sum of money, or to do or omit to do a certain act; or, a contract is an act which contains a perfect obligation. In its more confined sense, it is an agreement between two or more persons, concerning something to be, done, whereby both parties are hound to each other, or one is bound to the other. After learning the law of contract, we know more about the basic principles of the law governing contracts and use it to solve problems. This assignment includes the explanations of two questions:
Question 1: In this passage, I describe the differences between offer (proposal) an invitation to treat under common law and Malaysian Contracts Act by using several typical examples.
Question 2: Here have a case of invitation to treat, and I need to be able to analysis the case by using relevant provisions and case law and evidence my opinion.
2.0 QUESTION
Explain and distinguish between an offer (proposal) and an invitation to treat under common law and Malaysian Contracts Act, 1950. Support your discussion with relevant provisions and decided cases. 2.1 Brief Intro
It is important to know the difference between offers and invitations to treat before engaging in any business transactions. As the law makes very clear distinctions between the two, it is up to the buyer and seller to ensure that they follow the correct protocol. While offers are legally binding upon acceptance, invitations to treat are only the prelude to an offer being made or accepted. 2.2 Definitions
What is an offer (proposal)?
An intimation (viewed from an objective standpoint) by words or conduct of a willingness to enter into a legally binding contract, specifying the terms of the binding agreement which will be formed should the offer be accepted by the party to whom it is addressed. An offer is a statement of the terms which the client (the offeror) is prepared to be contractually bound. The offer must be complete, specific and capable of being accepted.
It must include the fundamental terms of the agreement with the intention that no further negotiations are to take place. Client offer contractor the work and therefore the contractor must carry out the work under the client’s terms and conditions. It is possible to make a conditional offer. The effect of this is that an offer cannot be accepted if the condition has not been satisfied. For example the client requires the contractor to have a specific tool or machine before an offer can be made. Explanation
Advertisements, store flyers or catalogues do not count as offers, as these are not direct approaches to contract. A bid made on an auction, for example, is an offer.Upon winning the bid, the offer is accepted and becomes legally binding. Both parties then have to honor the terms of the offer. Both parties receive something of value out of the deal. The person making the offer is called the ‘offerer’ and the person to whom the offer is made is called the ‘offeree’. An offer to be valid must satisfy the following conditions. They are the essentials of a valid offer or essentials of valid Acceptance:
An offer may be made to a specific person, a group of persons or an individual. Well, let’s look at this example– Carlill v Carbolic Smokeball Co Ltd [1893] 1 QB 256, The Carbolic Smoke Ball Company made a product called the “smoke ball”. It claimed to be a cure for influenza and a number of other diseases.
The Company published advertisements in the press claiming that it would pay £100 to anyone who became sick with influenza after using its product according to the instructions set out in the advertisement. £100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks, according to the printed directions supplied with each ball. £1000 is deposited with the Alliance Bank showing our sincerity in the matter. Mrs Carlill saw the advertisement, bought one of the balls and used it in accordance with the instructions. l She contracted the flu She claimed £100 from the Carbolic Smoke Ball Company. Mrs Carlill brought a claim to court. She contended that the advertisement and her reliance on it was a contract between her and the company, and so they ought to pay.
The company argued it was not a serious contract. The Court of Appeal rejected the company’s arguments and held that there was a fully binding contract for £100 with Mrs Carlill. Offer may be express or implied: An offer may be made either by words or by conduct. When an offer is made by words, written or spoken, it is called an express offer. When the intention to make an offer is gathered from the conduct of the person, it is called an implied offer. Offer must contemplate of giving rise to legal consequences If the offer does not intend to give rise to legal consequences, it is not a valid offer in the eyes of law. An offer made jocularly or in jest is not a valid offer. It must be the intention of the person making the offer that if the offer is accepted, it should give rise to a binding contract between them. Offer may be general or specific:
An offer is said to be general when it is made to an unascertained body of individuals. It is made to the public at large and anyone may accept the same. A specific offer is made to a definite person or persons and hence can be accepted only by the same person or persons. Where A offers to B to sell his scooter for Rs.10, 000/-, it is a case of specific offer. When A offers a reward of Rs. 500/- to whosoever finds his lost scooter, it is a general offer. Every offer must be communicated:
Offer must be communicated to the offeree; otherwise it is not effective in the eyes of law. There cannot be any acceptance without the knowledge of offer. Thus, where A finds an article lying on a street and restores it to the owner without any knowledge about the reward offered by the owner, he cannot claim the reward from the owner because there was no communication of offer to him. 2.2.2 Invitation to treat (ITT)
What is ITT?
Invitation to treat (or invitation to bargain in the United States) is a contract law term. It comes from the Latin phrase invitatio ad offerendum and means “inviting an offer”. Or as Andrew Burrows writes, an invitation to treat is “an expression of willingness to negotiate. A person making an invitation to treat does not intend to be bound as soon as it is accepted by the person to whom the statement is addressed.” Explanation
A good example of when an invitation to treat is likely to be inferred by a court as opposed to an offer is if one party is merely hoping to commence negotiations. Therefore, the courts will always look at the language used or the inferred intention of the parties when deciding between an offer and an invitation to treat. The classic example of an invitation to treat is when a shop owner puts a very low price on a product in the shop window. If you take the item to the counter the shopkeeper does not have to sell it to you. In strict legal terms it is you that makes the offer by offering to buy the product with your money. A shopkeeper who has mistakenly priced a product too cheaply is therefore not obliged to sell at that price. Advertisements are also generally invitations to treat: From the case of Partridge v Critenden (1968) 2 All ER 425, the defendant placed an advert in a classified section of a magazine offering some bramble finches for sale. S.6 of the Protection of Birds Act 1954 made it an offence to offer such birds for sale. He was charged and convicted of the offence and appealed against his conviction. Held: The defendant’s conviction was quashed. The advert was an invitation to treat not an offer.
The literal rule of statutory interpretation was applied. 2.3 The differences between offer (proposal) and invitation to treat The distinction between an offer and an invitation to treat is often hard to draw as it depends on the elusive criterion of intention. But there are certain stereotyped situations that the distinction is determined by rules of law” Introduction an offer is made when a person shows a willingness to enter into a legally binding contract. An invitation to treat (I.T.T) is not only a supply of information to interest a person into making an offer. However the distinction between the two can often be misleading and misunderstand. When misinterpretations and complications occur then it is down to the courts to decide and to distinguish between the two terms, so a person is not led into a binding contract of which he does not want to be a part of, (Harvey V Facey [1893] A.C 552.) but is merely supplying information to which an offer is to be made.
