Monday, 1 July 2013

[Contract] Offers and Invitations to Treat

Difficulties of understanding the two concepts 

Some students (including me) sometimes get confused as to what constitutes an offer. However, there are cases which suggest a clear drawing line between the two.

A simple way to understand the difference is to think that invitation to treat is a process right before the offer takes place. This means, invitation to treat provides an opportunity to make offers or enter into negotiations.

In the case Harvey v Facey [1], the appellant argued that there was an offer when the seller supplied information regarding the price of a product. However, the court held that it was merely a supply of information, not an offer. From this case it can be said that "an indication by the owner of property that he or she might be interested in selling at a certain price, for example, has been regarded as an invitation to treat." [2]

Definition of invitation to treat 

An invitation to others to make offers or enter into negotiations. 

Examples of invitation to treat 

Shop sales

Fisher v Bell          
Whether the display of goods for sale is ordinarily treated as an invitation to treat or an offer
Not an offer but an invitation to treat 
Wallace v Brodribb    
Whether it would be an offence of ‘bait advertising’ not to sell to a particular purchaser under a reasonable belief that to do so would be unlawful
Genuine intent to offer the advertised product to a class of purchases would not violate ‘bait advertising’ laws.
Per Spender J: unnecessary difficulties were introduced by drawing distinctions between offers and invitations to treat and the expression “offer to supply” should be given its ordinary meaning.
Pharmaceutical Society of Great Britain v Boots Cash Chemists

Whether the sale took place under the supervision of a registered pharmacist

(Favoring defendant) Acceptance would not be effective until communicated to the offeror; so sale must take place at checkout
In Fisher and Boots Cash, the issue was whether a statutory offence had been committed.
Partridge v Crittendon

Reardon v Morley Ford

Blackpool and Fylde Aero Club v Blackpool Borough Council
Whether contractual obligations are owed by governments calling for tenders to tenderers under preliminary contracts governing the tender process
The Council was under an implied contractual obligation to give consideration to complying tenders.
Hughes Aircraft Systems International v Airservices Australia
Tender process was governed by two “process contracts”
1) First contract was formed by signature of a letter in which the CAA and the two tenderers committed themselves to participate in a tender process
2) The terms of the second contract were set out in a request for tenders, which amounted to an offer accepted by each tenderer’s lodgments of a tender.
The CAA was obliged to conduct the tender process in accordance with those process contracts.
IPEX v State of Victoria
Process contract was found, but not breached.
Ticket cases
MacRobertson Miller Airline Services v Commissioner of State Taxation (WA)
Whether an airline  ticket issued by MacRobertson Miller was chargeable with stamp duty as an “agreement” or a “memorandum of agreement”.
Issuing is offer
Acceptance is by conduct in keeping and boarding, having had time to read conditions
Thornton v Shoe Lane Parking
Use of word “offer” is not conclusive. Lord Denning provided some dicta on automatic ticket machines
Harris v Nickerson
No contractual claim can arise if the auction is cancelled.
Sale of Goods Act 1896 s. 59
Normal rule for bidding is that the buyer makes an offer; the call for an auction is merely an invitation to ‘treat’
It is binding when it is accepted by the seller
AGC v McWhirter
(1) Whether auction without reserve is same as the general rule
#sellwithoutreserve (you will not have a basic minimum price and therefore, highest bidder will be accepted.)
Announcement that an auction was to be held without reserve did not alter the general rule. The holding of an auction without reserve did not constitute an offer and did not bind the vendor to sell to the highest bidder.
(2) Then can buyer sue the auctioneer?

The auctioneer is an agent of the seller. The case law says that if you have an auction without reserve, it may be that we can create obligation.
See Warlaw v Harrison
Collateral contract- where the auctioneer promises that there will be no reserves (a process contract where)

[1] [1893] AC 552. 
[2] Paterson, Robertson & Duke (2012) Principles of Contract Law (4th ed.), Thomson Reuters (Professional) Australia Ltd, NSW. at p. 58. 

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