B. The Offer
| Author | John D. McCamus |
| Profession | Professor of Law. Osgoode Hall Law School, York University |
| Pages | 33-52 |
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An offer is a communication by the offeror to the offeree indicating a willingness to enter into an agreement with the offeree on certain terms. If properly characterized as an offer, the communication will signal to a reasonable offeree that the offeree may create an agreement by simply accepting those terms. An offer thus creates a power of acceptance in an offeree. A threshold issue in determining whether a particular communication is an offer is to distinguish mere preliminary negotiations from an actual offer. A distinction is drawn between mere invitations to commence bargaining or so-called invitations to treat and actual offers. As we shall see, the application of this traditional distinction to relatively commonplace factual situations may become a matter of some difficulty. Second, it must be determined whether it is necessary to communicate a particular offer to the offeree and, assuming this to be the case, how that communication must occur. These two sets of issues will be explored below.
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An "invitation to treat" is an invitation to commence bargaining. It is typically understood as an invitation to the other party to make an offer of some kind. The critical distinction between an invitation to treat and an actual offer is drawn on the basis that an offer communicates a willingness to be bound by the next communication of the offeree. Application of the distinction obviously depends on the circumstances of the particular case and may be difficult to apply in many circumstances. Two similar cases dealing with the purchase and sale of land illustrate the difficulty of the line-drawing exercise.
In Harvey v. Facey,4an intending purchaser, Harvey, sent a telegram inquiry to the owner of Bumper Hall Pen in the following form: "Will you sell us Bumper Hall Pen? Telegraph lowest cash price - answer paid." On the same day, the owner, Facey, telegraphed back the following reply: "Lowest price for Bumper Hall Pen £900." Harvey replied immediately: "We agree to buy Bumper Hall Pen for the sum of nine hundred pounds asked by you. Please send us your title deed in order that we might get early possession." Facey denied the existence of an agreement, however, on the basis that he had merely answered the second question as to price and had not replied to the first question relating to willingness. The House of Lords agreed and held that "the mere statement of the lowest price at which the vendor would sell contains no implied contract to sell at that price to the persons making the inquiry."5
One might be tempted to explain the result in Harvey v. Facey by noting that although the parties had indicated they agreed with respect to the subject matter of the sale and the price, many of the terms of the actual sale had not been the subject of agreement.6In a Canadian case, however, Canadian Dyers Association Ltd. v. Burton,7an agreement was found in circumstances where, similarly, the parties had essentially agreed only to the price of the property to be sold. In Burton, the intending purchaser made an initial inquiry to the owner of the property indicating an interest in purchasing the property and asking for the owner’s "lowest price." The defendant owner responded: "The lowest price I would care to sell at for cash would be $1,650, as anything else would not bring me in as good a return on my money as my present rental...." No deal was struck at that time but a year and a half later the plaintiff
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made a further inquiry: "We would be pleased to have your very lowest price for 25 Hanna Avenue. Perhaps we could get closer together than the last figure given us." The defendant wrote in reply: "I beg to acknowledge receipt of your favour of the 16th instant, and in reply would say that the last price I gave you is the lowest that I am prepared to accept. In fact I feel that under present conditions that this is exceptionally low and if it were to any other party I would ask more." The plaintiff, purporting to accept this offer, forwarded a cheque for $500 and invited the defendant to prepare a deed. The defendant instructed his solicitor to prepare a draft deed. A few weeks later, however, the defendant returned the cheque and advised the plaintiff that there was no agreement between them. Middleton J. distinguished Harvey v. Facey, placing particular emphasis on the defendant’s statement that "the price ... is the lowest I am prepared to accept ... if it were to any other party I would ask more." "Surely," Middleton J. observed, "unless language is used to conceal thought, this is an offer."8Perhaps the communications in Burton do more clearly indicate a willingness to sell than those in Harvey v. Facey. It is not surprising, however, that where the defendant’s conduct immediately after receiving the purported acceptance from the plaintiff plainly indicated that he understood that a contract had been formed then the communications were construed as an offer.
Consistently with Harvey v. Facey, courts have held that mere quotations of prices9do not constitute offers. There is, however, no magic in the word "quotation." A quotation followed by an indication that the supplier would be pleased to have an order from the potential customer has been held to constitute an offer.10In each case, as Middleton J. observed in the Burton case, "it is a question to be determined upon the language used, in the light of the circumstances in which it is used, whether what is said by the vendor is a mere quotation of price or in truth an offer to sell."11
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Similarly, courts have held that price lists12and advertisements of items for sale13are mere invitations to treat. Underlying these decisions is the courts’ awareness of the practical difficulties that would ensue if such suppliers, who have a limited stock of items for sale, could be held to have entered into a binding contract with anyone who might respond to communications of this kind.14Where the advertisement indicates the limited nature of the supply available, however, and offers the goods to those who first perform a particular condition, it may be that the advertisement will be held to constitute an offer. In the well-known American case of Lefkowitz v. Great Minneapolis Surplus Store15a retailer published an advertisement indicating that a Black Lapin stole, worth $139.50 would be sold for $1.00 on "a first come, first served basis" the next Saturday morning at 9 a.m. This was held to constitute an offer of a unilateral contract that was accepted when the plaintiff met the condition. The retailer had turned down the plaintiff’s attempt to purchase the stole on the basis of a "house rule" that such offers were intended for women only. The court rejected this argument on the basis that it constituted an attempt to modify the offer after it had been accepted. The problem of limited supply could perhaps be addressed in a more general way by implying, in appropriate cases, an obligation on the part of the offeror to supply only a reasonable quantity or to be bound only to the extent that limited supplies remain available. Courts have applied this analysis in a limited number of cases dealing with quotations16and train schedules17and it could be applied, for example, to cases involving mail-order catalogues.18As Burton illustrates, the fact that the parties expect to execute a further written instrument - in this case, a deed of conveyance - does not preclude a finding that a binding agreement has been created prior to its execution. Nor is an agreement precluded by the anticipation of further steps in the formalization or recording of the agreement. In
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Storer v. Manchester City Council,19for example, the defendant municipality had embarked on a scheme of selling units of public housing to existing tenants who wished to purchase them. The plaintiff indicated his wish to do so and received a letter from the defendant enclosing a draft agreement that he was asked to sign and return. The letter further indicated that if he did so, the defendant would execute the agreement and return a copy to him. The plaintiff executed and returned the draft agreement. With a change in government, the scheme was abandoned. The defendant, not having returned an executed copy to the plaintiff, adopted the position that no agreement had been entered as this final step in the formalization of the agreement had not taken place. The Court of Appeal held that the defendant’s letter constituted an offer that the plaintiff had accepted by execution and return of the draft agreement.
Application of the principles of offer and acceptance to the sale of goods in retail establishments open to the public gives rise to similar points of difficulty. For example, it may be considered whether the display of goods in the shop window, perhaps with price and terms of payment attached, constitutes an offer that may be accepted by entering the store and indicating to the salesclerk, "I will have one of those." The traditional view is that the display does not constitute an offer.20
Some, but not all,21such cases may be explained on the basis of the problem of limited supply. The more general explanation offered by one commentator22is that the retailer should be presumed to retain a discretion to deal with only such customers as he or she finds suitable. Another view is possible, however, and it may be that, in appropriate cases, courts will find that an implied "while quantities last" term in the offer together with an absence of any understanding that such a discretion is preserved provides a basis for a holding that the display constitutes an offer.
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The proper characterization of the...
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