Formation of contract: offer and acceptance (including the postal rule and revocation), consideration, and the intention to create legal relations.

What this dot point is asking

This dot point covers the formation of a valid contract, the foundation of WJEC's contract option. A contract requires agreement (offer and acceptance), consideration, and an intention to create legal relations. You need to explain each element with cases, including the postal rule, revocation, the rules of consideration, and the presumptions about intention. WJEC tests application to scenarios, advising whether a contract has been formed.

The answer

Offer and invitation to treat

Invitations to treat include goods on display (Fisher v Bell; Pharmaceutical Society v Boots), advertisements (Partridge v Crittenden), auctions and invitations to tender. By contrast, a unilateral offer, a promise in return for an act, can be made to the whole world (Carlill v Carbolic Smoke Ball Co).

Acceptance, the postal rule and revocation

Consideration

Consideration is the price each party pays for the other's promise: "some right, interest, profit or benefit" to one party, or "some forbearance, detriment, loss or responsibility" to the other (Currie v Misa). The rules are: consideration must be sufficient but need not be adequate (it must have some value but need not be a fair price, Chappell v Nestle); it must move from the promisee; and past consideration is not good consideration (Re McArdle), subject to narrow exceptions.

Intention to create legal relations

The law presumes that parties to a commercial agreement intend to create legal relations, and presumes the opposite for social and domestic agreements. The domestic presumption can be rebutted by evidence: in Balfour v Balfour a husband's promise to a still-cohabiting wife was not binding, but in Merritt v Merritt a written agreement made after the couple separated was intended to be legally binding.

Examples in context

The display and advertisement cases keep the moment of contract under the seller's control. In Fisher v Bell a flick knife in a shop window was only an invitation to treat, so the shopkeeper made no offer to sell, and in Pharmaceutical Society v Boots the contract for medicines was formed at the till, not the shelf, which mattered for supervision by a pharmacist. Carlill v Carbolic Smoke Ball is the great exception: the company's advertisement promising 100 pounds to anyone who used its product and still caught flu was a unilateral offer to the world, accepted by performance, and the deposit of money showed intention to be bound. The intention presumption then decides domestic disputes: Balfour v Balfour and Merritt v Merritt turn on whether the couple were living together amicably (no intention) or had separated and put their agreement in writing (intention), the very distinction used to advise on whether a family arrangement is a contract.

Try this

Q1. What is the difference between an offer and an invitation to treat? [2 marks]

• Cue. An offer is made with intention to be bound if accepted; an invitation to treat merely invites others to make an offer (Fisher v Bell).

Q2. When is a postal acceptance effective? [2 marks]

• Cue. When the letter of acceptance is posted (Adams v Lindsell), unless the postal rule is excluded.

Q3. Advise whether a valid contract has been formed on the facts. [20 marks]

• What the marker wants. Offer and acceptance (with the postal rule, counter-offers and revocation), consideration (sufficiency, moving from the promisee, not past), and the intention presumptions, applied to the facts with a conclusion.