Law for Accounting assignment Essay Example | Topics and Well Written Essays - 4000 words

Law for Accounting assignment - Essay Example Formation of Contract is based on firstly, an ‘offer’, which must be followed by an acceptance. Secondly, there must be consideration, intention to create legal relations and sufficient certainty. The main starting point for the conclusion of a contract can be found in Smith v Hughes1, where both a subjective as well as objective test was laid down in order to determine the existence of a contract. The subjective test determines the actual intention of the contracting parties, whereas the objective test ascertains what had been said by the parties, what they did and not and what their actual intention of saying or doing was. As per Professor Atiyah, the issue of offer and acceptance has been determined by courts in two ways, that is ‘reason forwards’ and ‘reason backwards’, the former is where existence of offer and acceptance are determined first and then the conclusion on the dispute is made; the latter is where the courts can reason from the appropriate solution back to the legal concepts of offer and acceptance. An offer has been defined as an expression of willingness by one party known as the offeror, to contract or be bound on stated terms, provided that such terms are accepted by the party to whom the offer is made that is the offeree. The courts have drawn a distinction between an offer and an invitation to treat, as the latter is merely an expression of willingness by one party to enter into negotiations and is not unconditional and there is a lack of intention to create legal relations. The most important and land mark cases which distinguished between an offer and invitation to treat are of Gibson v Manchester City Council2 and Storer v Manchester City Council3. In Gibson, where treasurer had sent a letter to Mr. Gibson, stating that council may be prepared to sell the house, was held to be an invitation to treat, which was further confirmed by the fact that Mr. Gibson was asked to make a formal application to purchase the house. The courts therefore took into account the correspondence between the parties. However, in Storer the courts found that a contract had come into existence as negotiations had moved beyond what had happened in Gibson but an exchange of contracts had not taken place. These cases clearly point out that fact that judges can interpret and differ in the results and so the decision would be said to be based on its own facts. An offer should be differentiated from a mere statement of price that is an enquiry as to the price. (Harvey v. Facey)4 Invitation to treat has been defined as an expression of willingness of a party to enter into negotiations with another with the hope that a contract would be reached at the end of such negotiations. (Fisher v Bell)5. As for advertisements, it has been strictly said to be an invitation to treat (Partridge v Crittenden)6, however, the courts have interpreted advertisements in a manner which allows for certain exceptions to be create d and the main reasons for that has been cited to be intention to be bound and certainty (Carlill v Carbolic Smoke Ball Co.)7. Further, the advertisement of an auction sale is generally only an invitation to treat (Harris v Nickerson)8. The opinions as to when an offer is made have differed. In respect of the advertisement that had been placed by Serena in the Sunday Times Style, the first and foremost question is whether such advertisement was an invitation to