Offer as an Element of Contract Formation
Published on 8th March, 2016 by Benjamin Li Yong Le
Offer is one of the essential elements to the formation of a contract under Singapore law
It is settled law that offer and acceptance as concepts of contract formation constitute the objective manifestations of an intention to contract.
Justice Quentin Loh in Ong Hong Kiat v RIQ Pte Ltd
What is an offer?
It is simply an indication from one party ("Offeror") to another party ("Offeree") of his willingness to do something and is a definite promise to be bound provided that certain specified terms are accepted.
If the offer is accepted by the Offeree, then a contract is formed provided that all the other elements are met.
Offers can be made verbally, in writing or conduct.
There must be an intention to be bound. This is an objective test i.e. the Courts will look at whether an objective person looking would consider that there is an intention to be bound, NOT what YOU think.
Further, under Singapore law, offeree must actually know that the offeror intended to make the offer (Singapore Courts follow Hannah Blumenthal)
An offer must be communicated to offeree otherwise it cannot be accepted.
An offer can be terminated any time before acceptance by communication to offeree or a counteroffer from offeree. But once accepted, any termination becomes a breach of contract.
Under the Electronic Transactions Act, electronic records may be used in expressing an offer or acceptance of an offer in contract formation. Therefore when negotiating with other parties via email, it is always to state "subject to contract" otherwise a contract may inadvertently form.
One should note the distinction between an offer and an invitation to treat. An invitation to treat is simply an invitation from a person to enter into negotiations which ultimately lead to an offer. Example of invitation to treat are advertisements to the world at large and auctions. Unless someone comes along to make an offer to buy the goods / services advertised which is then accepted by the merchant, no contract is formed.
Therefore, an acceptance of an advertisements does not usually lead to a contract.
In a similar vein, the display of goods and prices in a store is usually not considered an offer by the shopkeeper. An offer is said to arise when the customer brings the item to the cashier to pay which is the accepted by the shopkeeper when he accepts the money.