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Published: Fri, 02 Feb 2018
Offer rather than an invitation to treat
In considering this assignment, we note that whilst the text indicates particular circumstances, there are instances where outcomes may be subjective and open to interpretation. We have taken the decision not to make assumptions to the exclusion of alternative situations although we conclude that all parties have capacity to contract.
Detailed discussions between client and lawyer would remove ambiguity before advice was offered, e.g. by resolving the provenance of the lamp(s) and any underlying intention and motive attached.
Accordingly, we have considered and offered advice on all potential outcomes and will move through each element relating to Harry’s clients following the sequence within the assignment.
2 The Circular
2.1 An ‘Invitation to Treat’ or an ‘Offer’?
Has Harry made an offer or merely an ‘invitation to treat’ (i.e. negotiate)? The Stair Memorial Encyclopaedia states that an offer must be distinguished from an invitation to treat and that an offer is:
‘defined as a statement of terms which the offeror proposes to the offeree as the basis of the agreement, coupled with a promise, express or implied, to adhere to those terms if the offer is accepted. An invitation to treat may amount to a statement of terms, or of willingness to negotiate terms, for an agreement where no express or implied promise of adherence is made and where the person to whom the statement is made is himself invited to make an offer.’
Whilst advertisements, even though quoting prices, are generally considered as invitations to negotiate with no obligation to trade, Stair acknowledges that there are circumstances where a circular or quotation of prices may be held to be an offer capable of acceptance by the addressees’. In Philp & Co v Knoblauch a detailed letter quoting terms and asking if the addressee were buyers was considered to be an offer.
2..2 Communication of Offer
To be accepted, the offer must first be communicated by the offeror to the offeree. An un-posted offer is incapable of being accepted and actions of the offeree that might otherwise be considered as acceptance through conduct would not qualify.
We assume that ‘Harry sends’ indicates that the circulars were posted to his clients and that any response is indicative that they were received. It is not an invitation made to the general population, but a private communication to a specified class of persons, a small and select group of previous clients, containing a date by which they must accept.
2.3 Description of Goods
Under the Sale of Goods Act, goods must correspond to their description. It would be reasonable to presume that the circular, from an antiques dealer and specifying the lamps as ‘Victorian’ priced at £1,500 per lamp, refers to the Victorian period rather than a reproductive style and that they are genuine antiques.
2.4 Time-frame for Acceptance
By specifying a closing-date for acceptance Harry is committed to keeping his offer open until that time and cannot withdraw before the expiry of the deadline. (See Littlejohn v Hawden where the solicitor for the seller of an estate indicated by letter that the potential buyer had an option to purchase open for ten days).
Had Harry not specified a closing date for acceptance he could have revoked his offer by communicating this intention to the offerees provided this notice reached them before they had confirmed acceptance.
If he had not revoked his offer it would have remained open for a ‘reasonable’ period dictated by the individual circumstances of the case. In Wylie & Lochead v McElroy & Sons an offer to carry out iron-work was not accepted until five weeks had elapsed and the price of iron had risen substantially; in Murray v Rennie & Angus a quotation to carry out masonry work was open for acceptance eleven days later.
Under Postal Rules, where an offer is posted the offeree’s acceptance is deemed to be in the hands of the offeror’s agent when he posts this reply, thereby achieving consensus and forming the contract. Thus Harry would be unaware of acceptances posted on the 17th to which he could be obligated. It would have been better for clarity and certainty for Harry to have specified a date by which the acceptances must be received so leaving him in control of the process.
In specifying ‘first come, first serve’ Harry has moved beyond the condition of simply indicating a willingness to consider offers by expressly stating a promise and is thereby committed to dealing with those clients and in the order in which they respond.
His specific use of the phrase ‘open for acceptance’ clearly identifies this as an offer rather than an invitation to treat.
The scope of antiques is broad and although Harry is a dealer, how detailed and widespread is his knowledge and expertise expected to be? By admission he is not an expert in the Victorian era. What then gives him the right to pronounce on authenticity? The inference within the assignment text would seem to indicate that Harry has not intentionally misrepresented the item but in his desperation has erroneously provided a confirmation that his expertise does not permit him to give?
It must also be considered whether he is negligent or fraudulently motivated.
Lily responded to the circular within the time-frame specified for acceptance by both posting a letter of acceptance to Harry and faxing a copy of the letter on the same day. Harry had not expressly specified the form by which acceptance was to be made only that it must be made within the time-frame.
The issue of Lily’s letter being delayed in the post is irrelevant. Under the Postal Rules her acceptance is made at the time that the letter is posted as it is judged to be in the hands of the agent of the offeror. Regardless of delay, the letter arrived within the time-frame on April 16th the day before closure of the offer.
If the circular is considered an invitation to treat then Lily’s letter is an offer which is open for Harry to accept or decline. He is under no obligation to accept the lower offer and transact. If he did accept – Lily would be bound.
If the circular is considered an offer then Lily’s response is an acceptance. However, in proposing a reduced price of £1,250 per lamp she is altering the conditions and is deemed to be making a ‘counter-offer’ or ‘qualified acceptance’. Harry is not obliged to accept and can reject this offer without commitment – the original offer is nullified and cannot be resurrected by Lily subsequently accepting the original conditions and must be re-presented afresh, as demonstrated in Hyde v Wrench and Wolf & Wolf v Forfar Potato Co., – but it is also available for him to accept so placing the obligation on Lily to perform. Alternatively, either party could now present a new offer, at the full £1,500 per lamp, available for the other to accept.
We do not know on what date Harry responds to Lily; only that it is after April 17th. Under the Postal Rules, Harry’s acceptance of Lily’s offer is made when his letter is posted, therefore, despite her rejection (attempt to repudiate ) made when he telephones her to confirm, she is still compelled to meet her obligation to purchase two lamps if he does not accept. See White & Carter Councils v McGregor – forced performance as a result of repudiation.
If Lily did not specify/stipulate within her qualified acceptance/counter-offer that it was a condition that the lamps be delivered to her by April 14th it is for consideration what is a reasonable time-frame within which delivery should take place outside of which the offer lapses and will depend on the commercial environment within which the transaction is taking place. In Murray v Rennie & Angus a quotation for masonry-work dated June 10 was held to still be open on June 21.
Through Harry’s acceptance they have an agreement and Lily is contractually obliged to complete the sale.
As the self-help options of retention, lien, or rescission provide no remedy in these circumstances Harry’s options are to:
a) Accept Lily’s refusal as repudiation and end the contract immediately and sue for damages for any loss incurred to that point (minimal or none on this occasion)
b) i. Reject Lily’s attempt to repudiate and force performance by specific implement through the courts, i.e. supply the lamps and sue for full payment or
ii. Attempt to deliver the lamp and upon refusal to accept delivery claim damages for profit and delivery costs.
This pre-supposes that the lamps available for Lily are genuine.
Lacking knowledge in this area, Harry’s unequivocal assertion that the lamp is indeed Victorian and not a replica, is a judgement that he has no expertise or authority to make and goes beyond puffery (sales-talk) or a simple statement of opinion as evidenced in Bisset v Wilkinson where a vendor’s belief as to the number of sheep a farm could support was unfounded. Toby has reasonably relied upon this statement of confirmation (without seeing the lamp) to form the consensus in idem and consequently has been induced to make a purchase he would not otherwise have made.
In negotiating at arms length parties generally look to protect their own interests, however if one party asks the other a direct question there is an obligation to answer truthfully otherwise there is potential for action based on fraudulent misrepresentation. See Gillespie v Russell and Gibson v National Cash Register Co.
To evaluate the circumstances, we need to consider both the actual status of the lamp and Harry’s intentions and motives:
The text infers that the lamp is a replica but we might question on what authority Annabelle has pronounced it fake and it may be that an independent expert examination is required to validate it.
What is Harry’s intent? Is it genuine error resulting in innocent misrepresentation, negligent misrepresentation in failing to correctly identify the provenance or a fraudulent misrepresentation as an attempt to deceive?
Accepting it is a replica: a genuine error as to fact would lead to an Error as to the Quality of the Subject Matter, therefore an ‘essential error’ (which must be ‘in substantialibus’ as opposed to ‘de minimis non curat lex’ ) as the age of the lamp goes to the heart of the contract and is the main reason for the sale. This would make the contract void and unenforceable as shown by Petterson v Landsberg & Son where jewellery purchased by a jeweller from a dealer turned out to be reproductions. The contract of sale was void as there had been a crucial mistake as to the quality of the goods being bought.
Innocent misrepresentation occurs where a statement is made under the genuine belief that it is true and unaware that it is false so not negligent. The remedy is to make the contract void provided that the error is essential and that restitution in integrum can be achieved. If this is not possible the contract will generally have to stand. (Boyd & Forest v Glasgow & South Western Railway Co (No. 1) where an engineer changed figures without malicious motive making the job more expensive on completion; it was not possible to undo the work).
Here the contract should be reduced (ended) with Toby returning the lamp to Harry and Harry refunding the payment made.
Negligent misrepresentation occurs where someone fails to take reasonable care in making the representation and is under a legal duty to do so.
Under the Sale of Goods Act 1979 where there is a contract for the sale of goods by description, there is an implied [term] that the goods will correspond to the description. Within Scotland s15B provides remedies for such breaches of contract being to claim damages and if the breach is material, to reject any goods delivered under the contract and treat it as repudiated.
Fraudulent Misrepresentation occurs where the misrepresentation is deliberate and one party misstates to another for fraudulent purposes prior to the conclusion of the contract. This type of misrepresentation will lead to a contract being void and may lead to possible criminal convictions as it could be considered fraud. An example of a case in which fraudulent misrepresentation was found is the case of Bile Bean Manufacturing Co v Davidson where claims that a product was manufactured from secret ingredients previously known only to Australian Aborigines were deemed fictitious.
Harry would most likely have to give Toby his money back if the courts decide this to be innocent or fraudulent misrepresentation as both can make a contract void and therefore invalid.
In faxing Harry and asking the colour, Sophie merely requested additional information; she is not committed to making a purchase as she neither accepted the offer nor made a counter-offer. (See Harvey v Facey). Nothing in her conduct implies acceptance.
Although it may have been courteous to respond to Harry’s fax, if only to correct him, Harry cannot infer Sophie has an obligation to purchase by stating he is setting a lamp aside for her and taking her silence on the matter as acceptance. This generally requires a positive action by the offeree – see Felthouse v Bindley (where a letter with terms was sent commenting that if no more was heard it would be considered as accepted) – unless there had been previous dealings between them indicating that this was customary practice. In this event the offeree would be obliged to specifically communicate that they did not intend to contract. A contract is a bilateral agreement requiring the active consent of at least two parties: unless Sophie expressly communicates acceptance to Harry there is no contract. If ‘silence’ was a ‘normal’ way of conducting business between these parties there may be a contract between them. It would be for Harry to prove this, not for Sophie to disprove, however, how reasonable would it be to expect Sophie to make a purchase without seeing the lamp? Is it the ‘right shade’ of blue?
Harry has no rights with regards to Sophie to force a contract and she has no liability or obligation to him.
7.1 Force and Fear
Bargaining from a position of strength, whether financial or of knowledge (privy to Harry’s financial situation and personal life), is perfectly acceptable provided it is not accompanied by unlawful action. Here Annabelle would be entitled to make a low offer for Harry’s car (and it may be in Harry’s short-term interests to accept) but he also has free choice to reject the offer or negotiate a better price.
However, in threatening to defame Harry she has gone beyond what could be considered acceptable economic pressure or negotiation and in entering the arena of ‘Force and Fear’ (extortion or duress) is thereby committing extortion – in effect for £4000 (being the difference between offer and actual value).
The threat to expose Harry and damage his business is forcing him to enter an agreement that he would not otherwise have done and through this coercion his consensus is non-voluntary. It is acceptable to threaten to expose criminal activity in order to recover a debt that is owed, but not to force payment that is not due – see Hislop v Dickson Motors (Forres) Ltd.
We must consider whether a person of reasonable fortitude would have succumbed to this pressure. It is perhaps reasonable to assume that Harry’s financial predicament and issues with alcohol leave him more open and susceptible to this pressure. Certainly the possibility of further damage to his business and reputation could not be considered merely trivial, however the circumstances provided within the assignment do not lead us to consider or conclude that Harry was, in his dealings with Annabelle, so intoxicated (if at all) that he is unable to validly provide consent and contract and to be able to use this an excuse nor do we consider that Annabelle was circumventing his facility .
As a result of the undue pressure the contract can be annulled and will no longer have legal effect. Harry should seek a ‘decree of nullity’ pronouncing that the contract is void ab initio (as if it had never existed) to ensure that if Annabelle has subsequently sold the car the third party cannot acquire rights and must restore the vehicle to Harry and sue to recover
He should report to this matter to the police as Annabelle is likely to have committed extortion. It would be for her to show that her threats did not induce Harry to sell.
8 Summary Conclusion
Lily – although Harry may have rights to force the sale he needs to consider if it is worth pursuing. He would be using the Small Claims procedure in the Sheriff Court as the amount is under £3000.
Toby – There may be potential for an independent evaluation of the lamp to be paid by Toby as the party claiming the error. If found against, Harry would have to accept the lamps back plus the charge for the valuation.
Harry may himself face action via the Small Claims procedure. Is it worth litigating over the status of the lamp? He should refund the money and take back the lamp. There is potential for Harry to take action against his supplier if the item was misrepresented by him.
Sophie – there is no liability for either party.
Annabelle – as his loss is £4000 Harry would use Summary Cause in the Sheriff Court to pursue her. There is potentially criminal action against Annabelle and Harry should report this to the police, but he must also consider what proof is available of wrong-doing. £2000 is only 1/3rd of the value of the car and it may be too much to accept that 2/3rd of the value was given away during reasonable negotiations.
Although Harry has both legal rights and liabilities he must also be able to prove his case – can he prove the facts and occurrences in every instance?
He may consider a pragmatic approach with Lily and Sophie instead of trying to force an unwelcome outcome. Addressing business systems, his personal life and customer relations may be ultimately more productive than litigation.
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