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Contract | Formation

Offer: Overview

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A contract is formed when the following four elements are present: offer, acceptance, consideration (except if in the form of a deed) and contractual intention. If the required elements are present then a legally binding agreement is formed. If a party breaches the contract they may be sued. The claimant (previously the plaintiff) must prove on the balance of probabilities that there has been a breach of contract. If he does so the defendant must prove his defence on the balance of probabilities.


Professor Treitel provides a leading definition of offer: .. an expression of willingness to contract on specified terms, made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed... (The Law of Contract).

One party must make an offer, the offeror, and the other, the offeree, must accept. An expression can be written, verbal or through conduct. The intention is determined objectively by the courts.

Objective test

A subjective approach would take account of the offeror's intention at the time of making the offer. However, this is impractical as it would require the courts to determine the state of mind of the parties at the time of alleged agreement or to rely upon what the parties later claim they intended. Therefore, the courts have preferred to take an objective approach. This involves the court considering what happened at the time the alleged agreement was made and deciding what a reasonable man would conclude.


The case involved a dispute over the type of oats the defendant had contracted to buy. The plaintiff sold the defendant some oats in a transaction which was sale by sample. The defendant thought he was buying old oats, for his racehorses to eat, but they were in fact new oats. The plaintiff knew that the oats were new, however, it was uncertain whether he realised the defendant wished to buy old oats. The defendant bought the oats but upon discovering that they were new oats he refused to pay for them.


Was there a contract to buy the new oats?


Blackburn J: If, whatever a man's real intentions may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms....

The case established the objective approach.

Objective interpretation creates certainty by following what a reasonable man would conclude. The inability to escape contractual obligations by subjectively arguing intention makes a more certain environment for business agreements.

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