Invitation to Deal:
The vast majority of contracts are formed by offers and acceptances of those offers. The offer is legally significant because it establishes the power of acceptance in the offeree. Therefore, if an offer is made, the offeree has the power to conclude a bargain and bind the offeror by accepting the offer in an appropriate manner. For example:
Michelangelo offers to sell Picasso a statue for $300. Michelangelo tells Picasso that he can accept either verbally or in writing within five days. Two days later, Picasso sends Michelangelo a letter accepting the statue for the price of $300. Michelangelo’s offer gave Picasso the power to conclude the bargain by accepting the offer either in words or in writing.
An offer is basically an expression of willingness to enter into a bargain made in a way so that the offeree understands that he can accept the offer and conclude a bargain. In order for an offer to be adequate, the offer must demonstrate intent to enter into a bargain and definiteness of terms.
Intent to enter into a bargain
It is important to be able to distinguish between an actual offer and an invitation to deal. The fact that an expression looks like an offer does not necessarily make it one if it is clear from the language or circumstances that the expression is merely an invitation to deal. Typically, words like “are you interested in . . .” “would you pay . . .” “I quote you a price of . . .” “I would consider . . .” are not statements of offer. Rather, they are invitations to deal. See
- Donald is looking for one hundred acres of land on which to build a new casino. Donald approaches Tony, a large landowner, and says “are you interested in selling me one hundred acres of property?” Donald’s statement is an invitation to deal.
- Tony, a large landowner, knows that Donald is in the market for a parcel of land. Tony approaches Donald and says, “I’ll quote you a price of $400 an acre.” Tony’s statement is only an invitation to deal. If Tony were to say “I would consider selling my land for $400 an acre” this is also only an invitation to deal. If Tony were to say “I will not sell the land for less than $400 an acre” this is also only an invitation to deal.
On the other hand, words like “I will sell . . .” or “I will buy . . .” are actual offers. Therefore, in our previous examples, if Donald were to approach Tony and say “I will buy your land from you for $400 an acre” Donald has made a valid offer. Alternatively, if Tony were to approach Donald and say “I will sell you my land for $400 an acre” Tony has made a valid offer.
Another way to determine if an expression constitutes an offer is to see whether or not the terms used in the discussion are definite. Although determining the definitiveness of terms is done on a case by case basis, the general rule is that an expression will not be considered an offer unless it makes clear the subject matter of the bargain, the price and the quantity involved. For example:
Orion and Artimus are planning a hunting trip. Orion goes to a local weapons dealer to buy guns for the trip. The weapons dealer tells Orion that he will sell him three shotguns and ten boxes of ammunition for $2,000. This represents a valid offer because the dealer’s statement includes the subject matter of the bargain (the weapons and ammunition), the price ($2,000) and the quantity involved (three guns and ten boxes of ammunition). Had the dealer said to Orion “I will sell you some guns and ammunition for fair value” this would not constitute an offer because the subject matter is not specific and there is no mention of price or quantity.
However, if one of the above terms is left out, the statement may still constitute a valid offer if it otherwise conveys an intent to conclude a bargain and the court can, by implication, fill in the left out statement. For example:
In preparation for his hunting trip, Orion goes to a weapons dealer to buy guns. The weapons dealer offers to sell Orion a shotgun for $2,000 with a $500 down payment and the remaining $1,500 to be paid in regular installments. Orion agrees. Although the size and frequency of the payment installments have been left out of the agreement, this is still an enforceable bargain. The dealer’s statement demonstrates intent to conclude a bargain and a court could fill in what the size and frequency of the installment payments should be. Therefore, the court would enforce this contract.
Some statements are governed by their own unique set of rules. For example, the general rule regarding advertisements is that they are invitations to deal, rather than offers. See
Bloomingdales advertises that on January 1st, all Nike shoes will be sold for $50 per pair. Jordan sees the ad but, by the time he gets to Bloomingdales, all of the shoes have been sold out. Jordan cannot claim that he accepted an offer from Bloomingdales and sue for damages because the ad was not an offer. It was only an invitation to deal.
The rationale underlying this rule is that, generally, advertisements are indefinite as to quantity and other terms. Further, advertisements are addressed to the general public and, if advertisements were considered to be offers, a seller might find that the number of people who accept the offer exceeds the number of items he has to sell. This would put the seller in the position of having to pay damages to any buyer who unsuccessfully tried to buy the advertised item.
Please note that certain advertisements may be considered real offers if the advertisement is definite in its terms and either:
- the circumstances clearly indicate an intention to make a bargain,
- the advertisement invites people to take specific action without further communication with the offeror, or
- over-acceptance is unlikely.
Babe’s Baseball Memorabilia Shop publishes an ad in Beckett’s baseball catalog saying, “Babe’s Baseball Memorabilia will pay $5,000 for every mint condition Mickey Mantle rookie card sent in by December 31, 2018” This ad will be considered a real offer. It is definite in its terms, it invites people to take specific action (mailing in the cards) without further communication with the offeror and, because Babe has indicated that he will buy any mint condition Mickey Mantle rookie card that is sent to him, over-acceptance is not a problem.
Advertisements stating that a reward will be paid are typically considered real offers because they are usually definite in their terms, it is clear that those who see the ads will rely on them and, since only one person can usually claim a reward, over-acceptance is not a problem. For example:
Brian posts signs all over his neighborhood advertising a reward of $50 to anybody who returns his lost cat Fudgie. This ad is considered a real offer. The act (returning the cat) is specified, Brian intends for the people who see the ad to rely on it and, because only one person will be able to return Fudgie and collect the reward, there is no threat of over-acceptance.
Auctions are also subject to special rules. Putting an item “on the block” is not considered an offer. Rather, it is an invitation to deal.
Because it is not an offer, the bids are not acceptances. Rather, the bids are the actual offers. Because the bids are the offers, the auctioneer can pull the item off the block even after bidding has begun.
However, once the auctioneer has “hammered down” he is no longer allowed to withdraw the item. Hammering down signifies acceptance of the last bid that was made.
Further, because an offer is normally revocable, as we will discuss later, a bid is also revocable and can be withdrawn until it is accepted by being hammered down.
Finally, each new bid eliminates all earlier bids. Therefore, if the leading bid is withdrawn before it is hammered down, the auctioneer cannot accept any earlier bids that were made.
A government agency or a private firm may put a contract out for bid. In other words, the agency or firm can publicize that it will attempt to enter into a contract for certain performance (ex. building a building). The agency or firm will usually publish the contract specifications and ask potential contractors to submit bids that state the price at which the contractor can do the job. Putting a contract out for bidding is not considered to be an offer. Rather, it is an invitation to deal. However, the bids submitted in response are considered to be offers. For example: