In Gibson v Manchester City Council [1979] 1 WLR 294 (HL), the case revolved around the Council’s policy of selling council houses to tenants. The respondent tenant applied for details regarding the price and mortgage terms using a printed form. In response, the city treasurer sent a letter indicating that the Council “may be prepared to sell the house” at a specified price after a discount. The letter also outlined mortgage details and requested the completion of a formal application form for purchasing.
The respondent duly completed and returned the application form. However, before contracts could be finalized, there was a change in political control of the Council. As a result, the Council decided to proceed only with sales where contracts had already been exchanged. The respondent then sought specific performance, claiming that a binding contract had been formed based on the city treasurer’s letter.
HOLDING:
The court held that no binding contract existed because the Council had not made a clear offer capable of acceptance. The language used in the city treasurer’s letter, stating that the Council “may be prepared to sell” and inviting the respondent to apply formally, amounted to an invitation to treat rather than a firm offer to sell. Therefore, the respondent’s acceptance of the invitation did not create a legally binding agreement for the purchase of the council house.
LORD DIPLOCK:
My Lords, the words I have italicised seem to me, as they seemed to Geoffrey Lane LJ, to make it quite impossible to construe this letter as a contractual offer capable of being converted into a legally enforceable open contract for the sale of land by Mr Gibson’s written acceptance of it. The words ‘may be prepared to sell’ are fatal to this; so is the invitation, not, be it noted, to accept the offer, but ‘to make formal application to buy’ upon the enclosed application form. It is, to quote Geoffrey Lane LJ, a letter setting out the financial terms on which it may be the council will be prepared to consider a sale and purchase in due course.
