Gibson v Manchester City Council

📄 Case Summary󠁝 󠀠󠁝ㅤㅤㅤㅤㅤㅤ

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The general rule is that in order to establish a contract the acceptance must be a mirror image of the offer. Agreement must be reached on all material terms. It may well be that even the council’s formal application form, when completed and returned by the tenant, would not amount to an acceptance of any offer by the council, but would still be no more than an offer by the tenant. But that is not the point at which the parties have arrived in this case.

The tenant has not returned the formal application form; he has returned the informal application form, and this, in my view, does not amount to an acceptance of any offer by the council. It is no more than a step in the negotiations for a contract which, owing to the change in the political complexion of the council, never reached fruition.

UK Law Case Summary

Case Citation: Gibson v Manchester City Council [1979] 1 WLR 294
Jurisdiction Tags: Contract Law, Offer and Acceptance, Invitation to Treat
Short Case Name: Gibson v MCC
Court/Level: House of Lords

Facts

The defendant City Council had adopted a policy of selling council houses to its tenants.

The claimant was a tenant of such a council house, who had applied for details of the house he was renting and applicable mortgage terms, using the printed form designated and supplied by the defendant for this purpose.

In February 1971, the city treasurer responded to this application stating that ‘The council may be prepared to sell you the house at the purchase price…’, and providing details of the mortgage.

This letter also stated that it did not amount to a ‘firm offer’ of a mortgage, and invited the claimant to make a formal application using an enclosed form.

In March 1971, the claimant returned the completed form to the defendant. Following local elections in May of the same year, control of the Council passed from the Conservatives to Labour.

The new Labour Council policy was that council houses would not be sold under the previous Conservative policy unless a legally binding contract was already in place.

The defendant refused to sell to the claimant, who brought an action against them in breach of contract.

This action was successful at first instance and the Court of Appeal, upon which the defendant appealed to the House of Lords.

Issues

The main legal issues in the case were:

Whether the defendant’s letter of February 1971 was properly construed as an offer or as an invitation to treat.

Whether there was a concluded contract between the claimant and the defendant.

Holding

The House of Lords decided that there was no contract and the council did not have to sell the house, because the council’s letter did not state the price and was not an offer but an invitation to treat.

Rationale

The House of Lords followed the conventional approach of looking for an offer and a corresponding acceptance to establish a contract.

They rejected the view of Lord Denning MR in the Court of Appeal, who suggested that the court could look at the correspondence and conduct of the parties as a whole and see whether they had agreed on everything that was material.

They found that the words ‘may be prepared to sell’ and the invitation to ‘make formal application to buy’ indicated that the council was not making a definite offer, but rather inviting the claimant to make an offer himself.

They also noted that the letter did not specify the exact purchase price, which was an essential term of the contract.

Rule/Principle Established

The case affirmed the conventional approach to contract formation, which requires an offer and a corresponding acceptance before a contract can be established.

It also illustrated the distinction between an offer and an invitation to treat, and the importance of identifying the essential terms of the contract.

Introduction

The case relates to the legal concept of contract formation, which is the process by which a legally binding agreement is created between two or more parties.

Contract formation involves two main elements: an offer and an acceptance.

An offer is a clear and definite statement of the terms on which one party is willing to be bound, while an acceptance is a clear and definite expression of agreement to those terms.

An offer can be distinguished from an invitation to treat, which is a preliminary communication that invites the other party to make an offer or to negotiate.

Requirements

The requirements for contract formation are as follows:

There must be an offer and a corresponding acceptance that mirror each other in terms of the essential terms of the contract.

The offer and acceptance must be communicated by words or conduct, and there must be a mutual understanding of the meaning and intention of the parties.

The offer and acceptance must be made with the intention to create legal relations, and not merely as a social or moral obligation.

The offer and acceptance must be supported by consideration, which is something of value given or promised by each party in exchange for the other party’s promise or performance.

Remedies

The remedies for breach of contract are as follows:

Damages, which are monetary compensation for the loss or injury caused by the breach. ㅤDamages can be classified into different types, such as expectation damages, reliance damages, restitutionary damages, nominal damages, and liquidated damages.

Specific performance, which is an equitable remedy that orders the breaching party to perform their contractual obligations as agreed. ㅤSpecific performance is only granted when damages are inadequate or impracticable, and when the contract is for a unique or specific subject matter.

Injunction, which is another equitable remedy that orders the breaching party to refrain from doing something that would violate the contract or harm the other party’s rights. ㅤInjunctions can be classified into different types, such as prohibitory injunctions, mandatory injunctions, interim injunctions, and final injunctions.

Defences

The defences for contract formation are as follows:

Lack of capacity, which means that one or both parties did not have the legal ability to enter into a contract, such as minors, mentally incapacitated persons, or intoxicated persons.

Lack of consent, which means that one or both parties did not freely and voluntarily agree to the contract, due to factors such as mistake, misrepresentation, duress, undue influence, or unconscionability.

Illegality, which means that the contract or its purpose is contrary to law, public policy, or morality, such as contracts involving fraud, crime, or immoral acts.

Information for Journalists

The case is relevant and important for journalists because it demonstrates the legal principles and issues involved in contract formation, which is a common and essential aspect of many transactions and relationships in society.

The case also shows the role and function of the courts in interpreting and applying the law to the facts and circumstances of each case, and the possible outcomes and consequences of different judicial decisions.

The case also illustrates the political and social factors that may influence or affect the formation and enforcement of contracts, such as the change of government policy and the public interest.

Subsequent Applications

The case has been applied and followed by subsequent courts in similar cases involving contract formation, offer and acceptance, and invitation to treat.

For example, in Storer v Manchester City Council [1974] 1 WLR 1403, the Court of Appeal distinguished Gibson v MCC and held that there was a binding contract between a tenant and the council, as the council’s letter stated the exact purchase price and was an offer that was accepted by the tenant.

In Fisher v Bell [1961] 1 QB 394, the Court of Appeal applied Gibson v MCC and held that there was no contract between a shopkeeper and a customer, as the display of a flick knife in the shop window was an invitation to treat and not an offer.

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Gibson v Manchester City Council - Case Summary