DISTINGUISH to sell the company’s houses being occupied

DISTINGUISH
BETWEEN AN OFFER AND INVITATION TO TREAT

An offer can be defined as willingness to
contract made with the intention that it shall become binding on the offeror as
soon as it is accepted by the offeree. An offer may be made to a person, a
group of people or to the world at large. To qualify as an offer, the statement
or conduct must indicate in the offer what the offeror requires of the offeree
by way of acceptance in return for the promise.

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In the case of NTHC Ltd v. Antwi, Antwi worked for the company.
During the period of her employment, the Board of Directors of the company
decided to sell the company’s houses being occupied by their staff, by giving
their staff the first option of purchase. Antwi received a letter dated 17
January 2005 signed by the board secretary. The letter stated that the she
should reply in writing if she was interested in the house at the price stated.
She wrote back to them by 31 January indicating her interest in buying the property
at the price stated and requested that the company provide her with the bank
account into which payment is to made. She did not receive any letter from the
company. Antwi receives a letter dated 7 November 2005, stating that the Board
of Directors had decided to withdraw their earlier decision of selling the
house to her. She instituted an action in the High Court which was dismissed.
An appeal was made to the Court of Appeal where the judgment of the trial court
was reversed. The company then brought an action to the Supreme Court. The
Supreme Court per Date-Bah JSC, did state that … “an offer is an indication in
words or by conduct by an offeror that he or she is prepared to be bound by a
contract in terms expressed in the offer, if the offeree communicates to the
offeror his or her acceptance of those terms… the offer has to be definite and
final and must not leave significant terms open for further negotiations”. The
Court further stated that if a communication during negotiations is not a final
expression of an alleged offeror’s willingness to be bound, it may be
interpreted as an invitation to the other party to use it as a basis. It was held
that there was an intention to create legal relations and the respondent’s
undertaking to pay the price was consideration enough to result in the
formation a contract.

This case was contrasted with the case of Gibson
v. Manchester City Council. In this case there was a policy by the council
to sell council houses to tenants. The council then wrote to the tenants
including the plaintiff in this case that the council “may be prepared to sell”
the houses to each tenant at a specified price under some specific terms. The
plaintiff was invited to make a formal application if he was interested in
buying the property which the plaintiff did. The Council later rescinded its
decision to sell the house to the plaintiff and the plaintiff sued for a breach
of contract. The plaintiff contended that the ‘formal application’ he made
constituted an acceptance which brought the contract into existence. The House
of Lords rejected that argument that the council’s letter was not an offer but
an invitation to the plaintiff to make an offer.  An invitation to treat is an indication of
willingness to conduct business. It is an invitation to make an offer or simply
put it is an offer to make an offer. A seller of goods and services will
usually have to first solicit offer for possible bargains through the display
of goods, circulation of brochures or catalogues. Such statements of intention
or conduct are merely invitation to the public to make offers and attempts to
initiate the bargaining process. The distinction between an offer and an
invitation to treat can be explained on the basis of the following;

ADVERTISMENT

Generally, advertisements are invitation
to treat. In the case of Partridge v. Crittenden, the plaintiff
advertised in a periodical which read Bamblefinch cocks, Bamblefinch hens 25s
each. The plaintiff was charged with unlawfully offering for sale wild live
bird contrary to the protection of Birds Act 1954, the court held that the
advertisement was an invitation to treat and therefore the plaintiff could not
be guilty of the offence charged.

In the case of Carlill v. Carbolic
Smokeball Co., where the defendant manufactured smokeballs. A large
advertising campaign stated that if anyone used the smokeball correctly, but
still caught flu, they would be paid £100 reward. The advertisement also stated
that the defendants had deposited £1000 in the bank to show they meant what
they said. The claimant, Mrs. Carlill despite using the smokeball properly,
still caught flu. When she claimed the £100 reward, the defendant refused to pay,
arguing that their advertisement was not an offer. The court held that the defendant’s
advertisement constituted an offer. The wording converted the advertisement
into a unilateral offer requiring the performance of an act. Therefore, a
unilateral advertisement (requesting performance of an act as acceptance) is an
offer

DISPLAY OF GOODS

In the case of Pharmaceutical Society of
Great Britain v. Boots Cash Chemists Ltd (1953), the defendant operated a self-service
system and had a pharmacist at cash desk. The plaintiff alleged that defendants
had infringed the provisions of the Act which made it unlawful to sell any
listed poison “unless it was under the supervision of a Registered Pharmacist”.
It was held that Boots had not committed any offence. The display of goods on
shelves was merely an invitation to customers to make an offer. The customer
makes an offer to buy when he picks up the item (medicine). Until the buyer’s
offer is accepted by the seller by the acceptance of the price, there will be
no sale. Also, in the case of Fisher v. Bell, it was held that the
display of a flick knife by the shopkeeper in his shop with a price tag did not
constitute an offer, it was an invitation to treat. The reason being that the
seller can decide not to sell to a prospective buyer. The buyer on the other
hand can return the item before payment is made or after examining it.

TENDER

A request for tenders is an invitation
treat. The requestor is free to accept or reject any tender to purchase goods,
even if it is the highest bidder. In Spencer v. Harding, the defendant issued
a circular for the sale of a stock by tender. The plaintiff turned out to be
the highest bidder but was not accepted. It was decided that the circular or
tender notice was not an offer.

However, in the case of Harvela
Investment Ltd v. Royal Trust Co. of Canada ltd. (1985), the plaintiff and the second defendant were rivals
for some shares belonging to the first defendant. They both submitted their
offer. It was stated that the highest bidder will be accepted. The plaintiff
tendered a bid of £2,170,000 and the second defendant’s bid was £2,100,000 or
£101,000 in excess of any offer. The first defendant accepted the second
defendants offer. The court held that the plaintiff’s bid was the only valid
bid.

AUCTIONS

The auctioneers request for bids is an
invitation to treat. The bid is the offer which the auctioneer can accept or
reject. In Harris v.Nickerson,
the defendants auctioneer advertised that lots including certain office
furniture would be sold on a particular date and place. The plaintiff travelled
from London for the sale. However, the said furniture was withdrawn from the
sale. A court action was brought to the defendant, the court held that it was
only an invitation to treat and did not promise that all the articles would be
put up for sale.

Where the sale is subject to a reserve
price, the auctioneer is not bound to sell the goods to the highest bona fide
bidder where the highest bid is lesser than the reserved price. This principle
was applied in McManus v. Fortescue 

Where the auction sale is without reserve
price; In Warlow v. Harrison, the defendant, advertised the sale of a
horse by public auction, without a reserve price. The plaintiff bid 60 guineas.
The horse owner bid 61 guineas. No further bids were made and the defendant
knocked down the horse to its owner since he was the highest bona fide
purchaser. The court held the in an auction without reserve, the auctioneer
makes a contract with the highest bona fide bidder to sell the item at the
highest bid. Under such circumstances, neither the vendor or his authorised
agent shall bid at the auction. However, according to section 4(1)(d) of the
Sale of goods 1962 (Act 137), where the sale is expressed to be without
reserve, the higher bona fide bidder is entitled to buy the goods at the price
bid although the auctioneer refuses to accept the bid or complete the sale.
Paragraph (e) and (f) provides that the seller or any one person on behalf of
the seller may bid if a right to bid is expressly reserved, but, subject to
paragraph (f), not otherwise; where the sale is notified to be subject to a
reserve price, the seller may make one bid and no more; and that bid shall be
openly declared at the auction before any other bid is received.  

In sum an offer is an expression of
willingness to contract on certain terms. It must be made with the intention to
contract on certain terms. It must be made with the intention that it will
become binding upon acceptance. There must be no further negotiation or
discussions whereas an invitation to treat is an indication of willingness to
conduct business. It is simply an invitation to make an offer.