Facts
- Mr. Gibson, a tenant of Manchester City Council, sought to purchase his council house under a then-existing sales policy.
- The council treasurer responded, stating the council "may be prepared to sell" the property at a specific price and on certain mortgage terms, but indicated the reply was not a firm offer and required Mr. Gibson to make a formal application.
- Mr. Gibson completed and returned the application form.
- After a change in the council’s political leadership, the new council discontinued the policy of selling council houses and refused to proceed with Mr. Gibson’s purchase.
- Mr. Gibson brought a claim alleging the council’s refusal constituted a breach of contract.
- The central question was whether the council’s initial correspondence amounted to a valid offer that Mr. Gibson could accept.
Issues
- Whether the council’s letter stating it "may be prepared to sell" and inviting a formal application constituted a legally binding offer.
- Whether the exchange established a binding contract through valid offer and acceptance.
- Whether the council was contractually obligated to sell the property following Mr. Gibson’s application.
Decision
- The House of Lords found that the council’s letter was not a firm offer but merely an invitation to treat.
- The communication’s wording, especially "may be prepared to sell" and the invitation for a formal application, demonstrated that the council intended to invite negotiations, not make a binding promise.
- As there was no binding offer, there could be no valid acceptance or contract between Mr. Gibson and the council.
- The earlier decision in favour of Mr. Gibson was overturned, and judgment entered for Manchester City Council.
Legal Principles
- An offer is a clear, unequivocal expression of willingness to be bound by specific terms, capable of acceptance.
- An invitation to treat is a preliminary communication inviting negotiations or offers, not amounting to an offer itself.
- The objective construction of communication, not subjective intention, determines whether an offer exists.
- Applications in response to invitations to treat are offers, not acceptances capable of binding the inviting party.
- Public sector parties are bound by the same contractual rules regarding offer and acceptance as private parties.
Conclusion
Gibson v Manchester City Council established that preliminary correspondence phrased as an invitation to further negotiate does not constitute a contractual offer; clear and unequivocal intention to be bound is required for contract formation, an approach reaffirmed by the House of Lords in this case.