Before attempting to discuss on the main topic it is important to discuss on the contract and the essential elements of a valid contract. Offer and acceptance, intention and consideration are the basic elements of a valid contract.
Consensus ad idem is the maxim on the offer and acceptance, which means meeting of minds. A contract is made out of an agreement and an agreement is made out of offer and acceptance that means in an agreement one party makes an offer and the other party accepts it. An offer may be an advertisement or a definite offer either to a particular person or to public at large. The law is settled in this respect in Carlill v Carbolic Smoke Ball Co4 in which the company made an offer through an advertisement offering £100 to any person who is affected with influenza after using smoke balls. The plaintiff Carlill has claimed for £100 from the company since she was effected influenza. The company defended that (i) the transaction was only a bet with in the meaning of gaming acts (ii) the advertisement was not intended to create a binding obligation (iii) there was no offer to any particular person (iv) no acceptance is notified by the plaintiff.
The court of appeal has rejected the grounds taken by the defendant and allowed in favour of the plaintiff. The court while allowing held that there was an offer to the world at large, an offer can be made to the world at large and it also held that by making an offer to the world a contract is made with a limited parties who perform the conditions.
Offer and an invitation to treat:
The law of contract makes a distinction between offer and an invitation to treat. An invitation to treat does not make a binding contract. When a person responds to an invitation to treat makes an offer. The courts have made distinction between offer and an invitation to treat in auction sale and advertisements.
Harris v Nickerson5
In this case it was held that an advertisement specifying that goods will be sold by auction do not constitute a promise that sale will be held. It is settled law that an advertisement without further qualification is not an offer to sell the goods but it is only an invitation to treat. An advertisement becomes an offer if it added by the words " without reserve".
Gibson v Manchester City of Council6
In this case the distinction betwe