42 3: Formation of contract I Part B The law of obligations
Harvey v Facey 1893
The facts: The claimant telegraphed to the defendant 'Will you sell us Bumper Hall Pen? Telegraph lowest
cash price'. The defendant telegraphed in reply 'Lowest price for Bumper Hall Pen, £900'. The claimant
telegraphed to accept what he regarded as an offer; the defendant made no further reply.
Decision: The defendant's telegram was merely a statement of his minimum price if a sale were to be
agreed. It was not an offer which the claimant could accept.If in the course of negotiations for a sale, the vendor states the price at which they will sell, that
statement may be an offer which can be accepted.Bigg v Boyd Gibbons 1971
The facts: In the course of correspondence the defendant rejected an offer of £20,000 by the claimant and
added 'for a quick sale I would accept £26,000 .... if you are not interested in this price would you please
let me know immediately'. The claimant accepted this price of £26,000 and the defendant acknowledged
his acceptance.
Decision: In this context the defendant must be treated as making an offer which the claimant had
accepted.Reference to a more detailed document will not necessarily prevent a statement from being an offer – for
example where a consumer is directed to a booklet of terms and conditions.5.2 A statement of intention
Advertising that an event such as an auction will take place is not an offer to sell. Potential buyers may not
sue the auctioneer if the auction does not take place. This is an example of a statement of intention which
is not actionable.5.3 An invitation to treat
Where a party is initiating negotiations they are said to have made an invitation to treat. An invitation to
treat cannot be accepted to form a binding contract. Examples of invitations to treat include.
Auction sales
Advertisements (for example, price lists or newspaper advertisements)
Exhibition of goods for sale
An invitation for tendersAn invitation to treat can be defined as follows.
'An indication that a person is prepared to receive offers with a view to entering into a binding contract, for
example, an advertisement of goods for sale or a company prospectus inviting offers for shares. It must
be distinguished from an offer which requires only acceptance to conclude the contract.'
(Note that on the facts of a particular case, advertisements etc may be construed as an offer: the Carlill
case is an example. However, in most exam questions, advertisements are invitations to treat: read the
facts of the question carefully.)5.3.1 Auction sales
The bid itself is the offer, which the auctioneer is free to accept or reject. An auction is defined as a
contract for the sale of property under which offers are made by bidders stating the price at which they are
prepared to buy and acceptance takes place by the fall of the auctioneer's hammer. Where an auction is
stated to be 'without reserve' the auctioneer is offering goods for sale and the bid is the acceptance. A
reserve is a specified minimum price.Key term