FEDERAL UNIVERSITY, WUKARI
Faculty of Law
Law of Contract I: Law 205
FORMATION OF CONTRACT
Offer + Acceptance = Promise
+
Consideration
=
Agreement
+
Enforceability by Law
=
Contract
Reading Material
Prepared By
AWOGBEMI, Rotimi Charles
LLB (OAU), BL (ABUJA), LLM (ABU).
NOTE: This Material is not for sale.
0|Page
, FORMATION OF CONTRACT
OFFER
1. Introduction.
All agreements are contracts if they are made by free consent of parties, competent to contract, for
a lawful consideration and with a lawful object and are not hereby expressly declared to be void.”
Thus, the essential elements of a valid contract can be listed as follows: offer, acceptance, and
consideration. An intention to enter into legal relation can be added as a fourth, and lastly, capacity
to consummate the contract. A contract is formed when the parties have reached agreement—
consensus ad idem—on the essential terms of the contract always provided that they have intention
to create legal obligations2
Contracting is a juridical act and is therefore bound by juridical rules: the steps required to
conclude a contract are legal in nature, rather than commercial or social. The elements of contract
formation are, in law, ‘‘tools of analysis’’, to provide certainty and guidance. Therefore, there must
be a definite offer by one party called the offeror and communicated to the other party called the
offeree who accepts the offer and communicates the acceptance to the offeror unless the offeror
dispenses with such communication.3 The offer and acceptance constitute an agreement provided
that the two parties reached a consensus ad idem.4 Agreement between the parties is essential to
the formation of a contract, thus for a valid contract to be formed there must be mutuality of
purpose and intention. The two or more minds must meet at the same point, event and incident.
In Olaopa v Obafemi Awolowo University,5 the University invited the appellant, an architect, to a
meeting at which the development of one of its landed property at Ibadan was discussed. The
minutes of the meeting, the feasibility study on the commercial development of the property, and
the survey plan of the property were subsequently sent to the appellant, but no specific request for
any sketch or designs was made to him by the University. On this basis, the appellant prepared
designs and sketch drawings which he forwarded to the university. This was followed by a bill for
#159,875.00 as the appellant’s fees for the work done. The university refused to pay for the work,
and the appellant sued to recover his fees.
Confirming the decision of the trial court and the Court of Appeal, the Supreme Court held there
was no contract whatsoever between the parties, because there was no offer from the university
which the appellant was capable of accepting. It is obvious from the foregoing that the building
blocks on which a contract is build include the principle of offer and acceptance of the offer, as
made by the offeror. It is existence of the two that makes us to say that the parties have come to
2 M. Hogg and G. Lubbe, ‘‘Formation of Contract’’, in Reinhard Zimmermann, Daniel Visser and Kenneth G.C. Reid (eds), Mixed
Legal Systems in Comparative Perspective: Property and Obligations in Scotland and South Africa (Oxford: Oxford University
Press, 2004), p.61
3 Johnson Wax (Nig.) Ltd. v Sanmi (2010) 3 NWLR (Pt 1181) 235, 245 E-F
4 Ibid 245 F-G
5 (1997) 7 NWLR (Pt. 512) 204
1|Page
,an ad idem. Where no offer has been made there can be no acceptance, or where an offer is made
but it is not accepted, there can be no agreement or contract arising therefrom.6
1.1. Definition of Offer
The first step in reaching a contract is the making of an offer. There has to be an offer by one party
to another, and an acceptance by the person to whom the offer is addressed. An offer may be defined
as an indication by one person that he or she is prepared to contract with one or more others, on
certain terms, which are fixed, or capable of being fixed, at the time the offer is made. The offeror
must place at the doorsteps of the offeree, a clear intention and desire to enter into a contract with
the offeree on clearly defined terms.7 From this, it follows that offer should be unconditional and
unqualified, not requiring further discussion or negotiation to establish what degree of commitment
is being given.
The person making the offer is called the offeror while the person to whom it is addressed is called
the offeree or, if he accepts the offer, the acceptor.
1.2. Kinds of Offer:
i. Express offer - When the offeror expressly communicates the offer it is said to be an
express offer. The express communication of the offer may be made by spoken or
written words.
ii. Implied offer – when the offer is not communicates expressly. An offer may be implied
from the conduct of the parties or the circumstances of the case. In Brodgen V
Metropolitan Railway Co.8 the plaintiff made an offer to the defendant in writing,
requesting the latter to sign and return a form containing the terms of the offer. The
defendants never did this, but nevertheless they carried out the contract on those terms.
It was held that they were bound by the contract. They have accepted the contract by
conduct.
iii. Specific: - It means an offer made by:
(a) a particular person or
(b) a group of persons: It can be accepted only by that person to whom it is made.
Communication of acceptance is necessary in case of specific offer.
iv. General offer: - It means on offer which is made to the public in general.
• General offer can be accepted by anyone.
6 Bilante International Ltd v. Nigeria Deposit Insurance Corporation (2011) 15 NWLR (PT.1270) 407,429 G-H
7 Orient bank v Bilante Intl. (1997) 8 NWLR (Pt.515) 37 at 76 (per Niki Tobi JCA)
8 (1877) 2 A.C 666; see also the cases of, Nigerian National Supply Company Ltd. (NNSC) v Agricor Incorporation of USA (1994)
3 NWLR (Pt. 332) C.A; Major Oni v. Communication Association (Unreported High Court of Lagos, Lambo J Suit No; LD/^25/71
delivered on Jan. 8, 1973 Casebook p 1)
2|Page
, • If the offeree fulfills the terms and conditions which is given in the offer then offer is
accepted.
• Communication of acceptance is not necessary is case of general offer. This principle, first
declared in the famous case of Carbolic smoke Ball Co v Carlill by Bowen LJ., is now
expressed by stating that an offer can be made not only to an individual or a group of
persons, but also to the whole world.9 In that case, a company advertised that a reward of
$100 would be given to any person who would suffer from influenza after using the
medicine (Smoke balls) made by the company according to the printed directions. One
lady, Mrs. Carlill, purchased and used the medicine according to the printed directions of
the company but suffered from influenza. She filed a suit to recover the reward of $100.
The court held that there was a contract as she had accepted a general offer by using the
medicine in the prescribed manner and as such was entitled to recover the reward from the
company.
1.3. The rules of Offer.
An offer capable of being converted into an agreement by acceptance must consist of a definite
promise to be bound provided that certain specific terms are accepted. Once we know whether a
party is making an offer, and is then intending to contract, we must be satisfied that the offer
conforms to the rules to show whether it is a valid offer or no.
1. Offer must be communicated to the offeree: The offer is completed only
when it has been communicated to the offeree. Until the offer is communicated, it cannot
be accepted. Thus, an offer accepted without its knowledge, does not confer any legal rights
on the acceptor. Thus, in Taylor v Laird,10 Taylor gave up the captaincy of a ship and then
worked his passage back to Britain as an ordinary crew member. His claim for wages failed.
The ship owner had received no communication of Taylor’s offer to work in that capacity.
2. The offer must be certain, definite and not vague, ambiguous and uncertain:
in Guthing v Lynn,11 When a horse was purchased with a promise to pay £5 more ‘… if the horse
is lucky…’ could not be an offer. It was too vague.
3. The offer must be capable of creating legal relation. A social invitation/agreement does
not create legal relation. Thus, in Balfour v Balfour12 there was an agreement between
husband and wife, resulting from her inability (due to illness) to return with him to his
place of work, in Ceylon. He agreed to pay her £30 per month while they were apart. Later,
the marriage broke up and the wife sued the husband for his failure to make the promised
payments. The court of Appeal held that the agreement was not enforceable since there was
a general presumption that there is no intention to create legal relations between family
members. It was a purely domestic arrangement beyond the scope of the court.
9 (1893) Q. B. 256
10 (1856)
11(1831)
12 [1919] 2 KB 571
3|Page
Faculty of Law
Law of Contract I: Law 205
FORMATION OF CONTRACT
Offer + Acceptance = Promise
+
Consideration
=
Agreement
+
Enforceability by Law
=
Contract
Reading Material
Prepared By
AWOGBEMI, Rotimi Charles
LLB (OAU), BL (ABUJA), LLM (ABU).
NOTE: This Material is not for sale.
0|Page
, FORMATION OF CONTRACT
OFFER
1. Introduction.
All agreements are contracts if they are made by free consent of parties, competent to contract, for
a lawful consideration and with a lawful object and are not hereby expressly declared to be void.”
Thus, the essential elements of a valid contract can be listed as follows: offer, acceptance, and
consideration. An intention to enter into legal relation can be added as a fourth, and lastly, capacity
to consummate the contract. A contract is formed when the parties have reached agreement—
consensus ad idem—on the essential terms of the contract always provided that they have intention
to create legal obligations2
Contracting is a juridical act and is therefore bound by juridical rules: the steps required to
conclude a contract are legal in nature, rather than commercial or social. The elements of contract
formation are, in law, ‘‘tools of analysis’’, to provide certainty and guidance. Therefore, there must
be a definite offer by one party called the offeror and communicated to the other party called the
offeree who accepts the offer and communicates the acceptance to the offeror unless the offeror
dispenses with such communication.3 The offer and acceptance constitute an agreement provided
that the two parties reached a consensus ad idem.4 Agreement between the parties is essential to
the formation of a contract, thus for a valid contract to be formed there must be mutuality of
purpose and intention. The two or more minds must meet at the same point, event and incident.
In Olaopa v Obafemi Awolowo University,5 the University invited the appellant, an architect, to a
meeting at which the development of one of its landed property at Ibadan was discussed. The
minutes of the meeting, the feasibility study on the commercial development of the property, and
the survey plan of the property were subsequently sent to the appellant, but no specific request for
any sketch or designs was made to him by the University. On this basis, the appellant prepared
designs and sketch drawings which he forwarded to the university. This was followed by a bill for
#159,875.00 as the appellant’s fees for the work done. The university refused to pay for the work,
and the appellant sued to recover his fees.
Confirming the decision of the trial court and the Court of Appeal, the Supreme Court held there
was no contract whatsoever between the parties, because there was no offer from the university
which the appellant was capable of accepting. It is obvious from the foregoing that the building
blocks on which a contract is build include the principle of offer and acceptance of the offer, as
made by the offeror. It is existence of the two that makes us to say that the parties have come to
2 M. Hogg and G. Lubbe, ‘‘Formation of Contract’’, in Reinhard Zimmermann, Daniel Visser and Kenneth G.C. Reid (eds), Mixed
Legal Systems in Comparative Perspective: Property and Obligations in Scotland and South Africa (Oxford: Oxford University
Press, 2004), p.61
3 Johnson Wax (Nig.) Ltd. v Sanmi (2010) 3 NWLR (Pt 1181) 235, 245 E-F
4 Ibid 245 F-G
5 (1997) 7 NWLR (Pt. 512) 204
1|Page
,an ad idem. Where no offer has been made there can be no acceptance, or where an offer is made
but it is not accepted, there can be no agreement or contract arising therefrom.6
1.1. Definition of Offer
The first step in reaching a contract is the making of an offer. There has to be an offer by one party
to another, and an acceptance by the person to whom the offer is addressed. An offer may be defined
as an indication by one person that he or she is prepared to contract with one or more others, on
certain terms, which are fixed, or capable of being fixed, at the time the offer is made. The offeror
must place at the doorsteps of the offeree, a clear intention and desire to enter into a contract with
the offeree on clearly defined terms.7 From this, it follows that offer should be unconditional and
unqualified, not requiring further discussion or negotiation to establish what degree of commitment
is being given.
The person making the offer is called the offeror while the person to whom it is addressed is called
the offeree or, if he accepts the offer, the acceptor.
1.2. Kinds of Offer:
i. Express offer - When the offeror expressly communicates the offer it is said to be an
express offer. The express communication of the offer may be made by spoken or
written words.
ii. Implied offer – when the offer is not communicates expressly. An offer may be implied
from the conduct of the parties or the circumstances of the case. In Brodgen V
Metropolitan Railway Co.8 the plaintiff made an offer to the defendant in writing,
requesting the latter to sign and return a form containing the terms of the offer. The
defendants never did this, but nevertheless they carried out the contract on those terms.
It was held that they were bound by the contract. They have accepted the contract by
conduct.
iii. Specific: - It means an offer made by:
(a) a particular person or
(b) a group of persons: It can be accepted only by that person to whom it is made.
Communication of acceptance is necessary in case of specific offer.
iv. General offer: - It means on offer which is made to the public in general.
• General offer can be accepted by anyone.
6 Bilante International Ltd v. Nigeria Deposit Insurance Corporation (2011) 15 NWLR (PT.1270) 407,429 G-H
7 Orient bank v Bilante Intl. (1997) 8 NWLR (Pt.515) 37 at 76 (per Niki Tobi JCA)
8 (1877) 2 A.C 666; see also the cases of, Nigerian National Supply Company Ltd. (NNSC) v Agricor Incorporation of USA (1994)
3 NWLR (Pt. 332) C.A; Major Oni v. Communication Association (Unreported High Court of Lagos, Lambo J Suit No; LD/^25/71
delivered on Jan. 8, 1973 Casebook p 1)
2|Page
, • If the offeree fulfills the terms and conditions which is given in the offer then offer is
accepted.
• Communication of acceptance is not necessary is case of general offer. This principle, first
declared in the famous case of Carbolic smoke Ball Co v Carlill by Bowen LJ., is now
expressed by stating that an offer can be made not only to an individual or a group of
persons, but also to the whole world.9 In that case, a company advertised that a reward of
$100 would be given to any person who would suffer from influenza after using the
medicine (Smoke balls) made by the company according to the printed directions. One
lady, Mrs. Carlill, purchased and used the medicine according to the printed directions of
the company but suffered from influenza. She filed a suit to recover the reward of $100.
The court held that there was a contract as she had accepted a general offer by using the
medicine in the prescribed manner and as such was entitled to recover the reward from the
company.
1.3. The rules of Offer.
An offer capable of being converted into an agreement by acceptance must consist of a definite
promise to be bound provided that certain specific terms are accepted. Once we know whether a
party is making an offer, and is then intending to contract, we must be satisfied that the offer
conforms to the rules to show whether it is a valid offer or no.
1. Offer must be communicated to the offeree: The offer is completed only
when it has been communicated to the offeree. Until the offer is communicated, it cannot
be accepted. Thus, an offer accepted without its knowledge, does not confer any legal rights
on the acceptor. Thus, in Taylor v Laird,10 Taylor gave up the captaincy of a ship and then
worked his passage back to Britain as an ordinary crew member. His claim for wages failed.
The ship owner had received no communication of Taylor’s offer to work in that capacity.
2. The offer must be certain, definite and not vague, ambiguous and uncertain:
in Guthing v Lynn,11 When a horse was purchased with a promise to pay £5 more ‘… if the horse
is lucky…’ could not be an offer. It was too vague.
3. The offer must be capable of creating legal relation. A social invitation/agreement does
not create legal relation. Thus, in Balfour v Balfour12 there was an agreement between
husband and wife, resulting from her inability (due to illness) to return with him to his
place of work, in Ceylon. He agreed to pay her £30 per month while they were apart. Later,
the marriage broke up and the wife sued the husband for his failure to make the promised
payments. The court of Appeal held that the agreement was not enforceable since there was
a general presumption that there is no intention to create legal relations between family
members. It was a purely domestic arrangement beyond the scope of the court.
9 (1893) Q. B. 256
10 (1856)
11(1831)
12 [1919] 2 KB 571
3|Page
