Gibson v Manchester City Council [1979] UKHL 6 (08 March 1979)

Mr Gibson sought to buy his council house after the council wrote it 'may be prepared to sell' it to him. He applied, but the council halted the sale. The House of Lords held the letter was an invitation to treat, not a binding offer.

Facts

In 1970, Manchester City Council, then controlled by the Conservative Party, adopted a policy of selling council houses to their tenants. Mr Robert Gibson, a tenant, applied for details of his house price and mortgage terms. The city treasurer responded in a letter dated 10th February 1971, stating that the council ‘may be prepared to sell the house to you at the purchase price of £2,180’. The letter invited Mr Gibson ‘to make a formal application to buy’ by completing an enclosed form. Mr Gibson duly completed and returned the form. Before formal contracts were prepared, local elections resulted in the Labour Party taking control of the council. The new council abandoned the sale policy and refused to proceed with the sale to Mr Gibson, except where a legally binding contract had already been concluded. Mr Gibson claimed a contract had been formed and sued for specific performance.

Issues

The central legal issue was whether a legally binding contract for the sale of the house had been concluded between Mr Gibson and the council. This question depended on whether the council’s letter of 10th February 1971 constituted a contractual offer, which Mr Gibson had accepted by returning the application form, or whether it was merely an invitation to treat, meaning Mr Gibson’s application was an offer that the council had not accepted.

Judgment

The House of Lords unanimously reversed the Court of Appeal’s decision and held that no contract had been formed. Lord Diplock, giving the leading speech, found that the language of the council’s letter was not sufficiently definite to amount to an offer. He placed critical importance on the specific wording used.

Reasoning of the Court

Lord Diplock analysed the correspondence and rejected the more holistic approach favoured by Lord Denning in the court below, favouring a conventional offer-and-acceptance analysis. He found the council’s letter to be a crucial step in the negotiations, but not a firm offer. The specific wording ‘may be prepared to sell’ and the instruction ‘to make a formal application to buy’ were fatal to the argument that the letter was an offer capable of acceptance. He stated:

My Lords, in the light of the correspondence as a whole I find it impossible to construe this letter of 10th February 1971 as a contractual offer by the corporation to sell the house to Mr. Gibson… 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 a formal application to buy’ upon the enclosed application form. It is, to quote Geoffrey Lane L.J., 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.

Lord Diplock concluded that the correspondence represented negotiation, and Mr Gibson’s submitted form was an offer to buy, which the council never formally accepted. Therefore, the fundamental elements of a binding contract—a clear offer and a corresponding acceptance—were absent.

Implications

The decision in Gibson v Manchester City Council is a foundational authority in English contract law. Its primary significance lies in its clear affirmation of the traditional ‘offer and acceptance’ doctrine as the standard method for determining the existence of an agreement. It serves as a classic illustration of the distinction between an offer, which demonstrates an intention to be legally bound upon acceptance, and an invitation to treat, which is merely a preliminary step inviting others to make an offer. The case highlights that the court will closely scrutinise the language used by parties to determine their objective intentions. The House of Lords’ rejection of Lord Denning’s broader approach (of looking at the totality of conduct to see if an agreement was reached) solidified the orthodox analysis, providing certainty and predictability in contract formation.

Verdict: Appeal allowed. It was held that no binding contract for the sale of the house had been concluded between the parties.

Source: Gibson v Manchester City Council [1979] UKHL 6 (08 March 1979)