Gibson v Manchester City Council [1979] UKHL 6
Citation:Gibson v Manchester City Council [1979] UKHL 6
Rule of thumb:Can an advertisement ever be considered a binding contract offer? Yes. If an advertisement is clear with all the fundamental terms of the contract in it, then this can be deemed to be an offer, but if the advertisement only gives some of the fundamental terms or is vague with words like, ‘subject to negotiation’ etc., then this is not an offer.
Background facts:
The basic facts of this case were that the Council were offering houses for sale. The basic terms were outlined and the advertisement letter stated that they may be willing to negotiate a mortgage from something along those terms. Indeed this drew people into thinking they could get a house for 20% below its true market value. Gibson sought to obtain this but due to one reason or another Gibson then was not offered the best case deal as advertised by the Council. Gibson demanded that the Council offer him the terms he had seen in the advertisement for his mortgage. The Council refused to do this. The matter went to Court with Gibson seeking a Court order to force the Council to offer him a mortgage on these terms.
Parties argued:
The Council argued that this advertisement was an invitation to treat and that it clearly said subject to negotiation as well. Gibson argued that this was not an invitation to treat with the usual jazz and advertising puffs, and instead constituted the basic elements of a contract making this an offer.
Judgment:
The Court held that this did not constitute an offer and was an invitation to treat - the Court held that the 'subject to negotiation' line meant that it lacked the certainty for an offer. The Court did nonetheless affirm that if adverts have the basic terms there and say 'subject to standard terms and conditions' then these adverts could be deemed to be legal offers that would have to upheld, thereby making this something of a landmark case and ensuring that people did need to be more careful with the advertisements that they put out.
Ratio-decidendi:
‘My Lords, there may be certain types of contract, though I think they are exceptional, which do not fit easily into the normal analysis of a contract as being constituted by offer and acceptance; but a contract alleged to have been made by an exchange of correspondence between the parties in which the successive communications other than the first are in reply to one another, is not one of these. I can see no reason in the instant case for departing from the conventional approach of looking at the handful of documents relied upon as constituting the contract sued upon and seeing whether upon their true construction there is to be found in them a contractual offer by the corporation to sell the house to Mr. Gibson and an acceptance of that offer by Mr. Gibson. I venture to think that it was by departing from this conventional approach that the majority of the Court of Appeal was led into error. My Lords, the words I have italicised seem to me, as they seemed to Geoffrey Lane LJ, to make it quite impossible to construe this letter as a contractual offer capable of being converted into a legally enforceable open contract for the sale of land by Mr. Gibson's written acceptance of it. The words "may be prepared to sell" are fatal to this; so is the invitation, not, be it noted, to accept the offer, but "to make formal application to buy" upon the enclosed application form. It is, to quote Geoffrey Lane LJ, a letter setting out the financial terms on which it may be the council will be prepared to consider a sale and purchase in due course. I therefore feel compelled to allow the appeal. One can sympathise with Mr Gibson's disappointment on finding that his expectations that he would be able to buy his council house at 20 per cent below its market value in the autumn of 1970 cannot be realised. Whether one thinks this makes it a hard case perhaps depends upon the political views that one holds about council housing policy. But hard cases offer a strong temptation to let them have their proverbial consequences. It is a temptation that the judicial mind must be vigilant to resist’, Lord Diplock
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.