A communication showing the terms on which the offeror will make the contract and the terms he will be bound by if the offeree accepts.

Formation of a Contract Blockbusters Quiz

In order for a contract to exist, one party, the offeror, must have made an offer and the other party, the offeree, must have accepted the offer.

Once this offer has been accepted both parties are usually bound and are obliged to fulfil their promises. The rules regarding offer and acceptance are used to determine this critical point in the negotiations.

To be treated as an offer, a communication should show the terms on which the offeror is prepared to make the contract, it must also show that he will be bound by those terms if the offeree accepts them. The terms typically refer to the price of goods for sale or services provided.

Offers can be express or implied.  An express offer would refer to one friend telling another that he will sell him a book for £5.00.  An implied offer would refer to the implied offer to buy an item in a shop by taking it from the shelf to the checkout.

An offer could be made to one specific person or to a group of people or to the public at large.

In the case of Carlill v Carbolic Smoke Ball Co (1893)  the manufacturers of this product claimed, in a public advert, that their smokeballs would stop you catching the flu as long as they were used over a specified period of time.  Mrs Carlill used the product but still caught the flu.  She claimed £100 as the advert said anyone catching the flu whilst using their product could. The manufacturers did not agree and said that their advert could not be referred to as a contract as it was not possible to make a contract with the whole world. The court agreed with the consumer and the contract was deemed to be enforceable and Mrs Carlill was therefore entitled to her £100.