Legal Issues

Elements of a valid contract
There are 4 main elements of a valid contract namely
Offer
Acceptance
Consideration
Intention to create legal relations.

The objective theory of contracts
The objective theory of contacts is to the effect that parties to a contract may be bound by terms which are not expressly spelt out by the contract. This is contrasted to the subjective theory of contract which holds that parties are to be limited to the terms expressed as agreed between them. The objective theory allows Courts of law and other persons to judge whether there exists a contract and the terms of such a contract by looking at the external acts of the parties rather than their express words. In other words the concern of the Court would not be on what the parties actually agreed on but rather what they apparently agreed on. Hughes the court emphasized that the important thing is not a partys real intentions but the intention as it appears to a reasonable person. Proponent of this theory argue that the existence or otherwise of a contract is a matter of common sense hence the need to apply the objective test of the proverbial reasonable man.


Application of objective theory of contracts to the facts of this case
The proposed auction of Bigtown by its mayor is clearly fanciful and a joke to the reasonable man. However, the express words of the intended advertisement are meant to present the auction as real. It would be absurd to suggest that parties to the contract i.e. the mayor and the potential bidders should be held responsible for, and confined to, their expressed intention. The objective theory will glide in to decipher the terms of the   contract from a reasonable mans point of view inevitably leading to the conclusion that there is no contractual intention in this case and therefore no contract existed.

Why the Court held there was no valid Agreement in this case
The Court applied the objective theory of contracts to hold that no reasonable man would consider the proposed contract valid. The Court may also have considered the advertisement by the mayor of Bigtown as an invitation to treat as opposed to an offer which would mean any purported acceptance by members of the public will not be sufficient to found a contact.

Are advertisements generally considered offers
Advertisements are generally not considered offers. Instead they are regarded as invitations to treat. The rationale behind this reasoning is that the advertisers intention is not to enter into contract at that juncture but rather to invite offers with a view to striking a bargain. It is only after an offer is placed on the table by the person who learns of the advertisement that the advertiser is able to accept.

Distinguishing this case from a reward situation
In a reward scheme such as an advertisement promising to pay a reward to any user of a carbolic smoke ball who caught influenza is an offer not an invitation to treat. The reasoning as alluded above is that in a reward scheme the intention of the advertiser is clearly to make an offer as no further bargaining is expected. The criterion therefore is clearly based on the intention of the advertiser as judged by a reasonable man. In this case a reasonable man could clearly see there was no way the mayor of Bigtown would suggest to auction the city in the manner suggested.