BetterLawNotes-5 (2)

CONTRACT LAW

A statement that goods are to be sold by tender is generally regarded as an invitation for bids to be made, in other words, it is an invitation to treat and not an offer to sell to the highest bidder.

Spencer v Harding (1870) LR 5 CP 561

D sent out a circular stating that it was instructed to offer for sale by tender certain stock.  C sent in a tender which turned out to be the highest bid.  D refused to sell the stock to C at the tender price.  The court held that the circular did not constitute an offer to sell to the highest bidder. Willes J said (at 564) that the circular was ‘a mere proclamation that the defendants are ready to chaffer for the sale of the goods, and to receive offers for the purchase of them.’

On the other hand, the seller may undertake to accept the highest bid, in which case the invitation for bids will amount to an offer.

Harvela v Royal Trust Company of Canada (CI) Ltd [1986] AC 207 HL

D1 invited D2 and C to submit offers to purchase D1’s shares in a company. D1 undertook to accept the highest offer.  C’s offer was C$2,175,000. D2 offered C$2,100,000 or C$ 101,000 in excess of any other offer. D1 purported to accept D2’s offer. C claimed it was entitled to the shares. The House of Lords held that a referential bid was not a valid bid under the terms of the invitation, and so D1 was bound to sell the shares to C.

Note that while an invitation to bid may not constitute an offer to sell, it may nevertheless be construed as an offer (to do something else) and so lead to contractual liability on the part of the seller.

Blackpool Aero Club v Blackpool Borough Council [1990] 3 All ER 25

The Council invited tenders for a concession to operate pleasure flights from Blackpool airport. The invitation set out a detailed process for the submission of tenders and stipulated that all tenders had to be received at the town hall by a ceratin date. The claimants submitted a tender within the deadline but due to an error on the Council’s part, the tender was marked as having been received late and was not considered. The concession was awarded to a third party. The claimants successfully argued before the Court of Appeal that the Council was in breach of a collateral agreement to the effect that if the claimants submitted a tender conforming with the requirements set out in the invitation it would be considered, at least if any other such tender were considered.

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