Answer to Scenario 1

Scenario 1

Company A advertised a conference table for sale for $50,000 in a local daily newspaper. They received one telephone call in response to the advertisement, and the manager of Company A arranged to meet the caller, the representative of Company B, at the showroom of Company A. Having inspected the conference table, the representative of Company B said that Company B would buy it but that they would need time to arrange the payment. Before leaving the showroom, the manager of Company A and the representative shook hands and exchanged business cards. Three days later, the representative of Company B telephoned the manager of Company A to say that he would deliver the cash to Company A the next day. The manager of Company A said nothing in response. Can the manager of Company A refuse to sell the conference table to Company B when the representative of Company B arrives at the showroom of Company A with the $50,000?

Answer

In contract law, an advertisement is only an invitation to treat (an invitation requesting the other party to make an offer, see the relevant question and answer) unless there is other evidence to the contrary. Therefore, the advertisement of Company A was not an offer, and no contract can be invoked at this stage.

The gesture of Company B's representative that was made at the showroom probably did not constitute an offer to buy the table, as there was still some doubt as to when or whether payment could be arranged. The second telephone call from the representative of Company B constituted an offer, but the silence of the manager of Company A cannot be construed as an acceptance of that offer. As Company A has not made a valid acceptance, no contract has been created. The manager of Company A can thus refuse to sell the conference table to Company B.