The transmission of such a price-list does not amount to an offer to supply an unlimited quantity of the wine described at the price named, so that as soon as an order is given there is a binding contract to supply that quantity. If it were so, the merchant might find himself involved in any number of contractual obligations to supply wine of a particular description which he would be quite unable to carry out, his stock of wine of that description being necessarily limited. I entertain, I confess, a very clear opinion that the Solicitor-General was quite right in arguing the case on the assumption that no sales were made in this country.” Lord Herschell Just over one hundred years ago the above ratio-decendi was given in what was at the time a case concerned with alleged back taxes owed by Grainger & Son. Grainger & Son (henceforth referred to as G&S) were British wine merchants who as a side venture passed on the price lists of a French wine producer to their customers. G&S received a commission on any orders placed with said producer and paid tax on this commission. Gough claimed that tax was payable on the whole value of these sales not just the commission element. Monsieur Roederer (henceforth Mr R) was a wine producer located in France.
He decided whether to accept orders the orders gathered by G&S or not. The reason for this being that the wine was shipped out ahead of any payment being received and Mr R wanted to vett his customers credit worthiness. The wine was shipped directly to the customer in the UK from France. Most customers settled their accounts directly with Mr R. A few customers instead made payment to G&S who would pass on to Mr R any amounts in excess of the commission they happened to be owed. In summary the flows of events are: Mr R, located in France, sends price list to G&S in Britain G&S distribute price list Customer places, for want a better word, an order with G&S for wine produced by Mr R G&S forward order to Mr R Mr R dispatches wine to customer Mr R dispatches bill for said customers wine to G&S for onwards transmission G&S forward bill to customer Customer sends payment to Mr R occasionally made to G&S who forward this to Mr R Mr R sends receipt to customer G&S pay tax on commission received G&S maintained that they entered no contracts regarding Mr Rs wine. Gough held the converse view that G&S entered contracts themselves and thus sold Mr Rs wine.
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Our starting point must be to define what a contract under English law is. The Jurists Bentham and Austin have laid down that the “two main essentials of a contract are these: first, a signification by the promising party of his intention to do the acts or to observe the forbearances which he promises to do or to observe. Secondly, a signification by the promise that he expects the promising party will fulfil the proffered promise.” More precisely to form a contract under English law the following elements are required (i) a valid offer has been proffered by the first party to another party or parties (ii) the offer has been accepted unchanged by the second party or parties and this has been communicated to the offerer . (iii) there is an intention by all parties to create legal relations when they entered into the contract and the parties have the capacity to contract (iv) the promises made within the contract are for valuable executive consideration and (v) the terms of the contract are certain. Did Mr R make an offer through the medium of his price list. Looking in Mozley and Whiteley’s Law dictionary an offer is “An expression of readiness to do something (e.g. to purchase or sell)”.
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Mr R is saying that he is willing to sell wine. Based on this definition initial opinion would say that the price list does constitute an offer. Continuing with this line of thought G&S acted in an agency capacity for Mr R making an offer to the customers they approached and receiving the acceptance of any order. If the customers accepted G&Ss offer made via the medium of the price list then Mr R merely shipped directly from France. The bills for said wine were sent to G&S who would then forward them on to the British customer. These points all suggest that the sale was made in the UK by G&S.
The listing of Mr R, in the Post Office London Directory, as trading from G&Ss establishment further hints at an agency type arrangement. Much of the argument supporting the invitation to treat viewpoint is by drawing analogies with cases involving auctions such as Payne v. Cave (1789) and Harris v. Nickerson (1873) in which both concluded that bidders make an offer which the auctioneer is free to accept or not. The bidders offer being retractable until accepted by the auctioneer . The pricelist could be seen as statement of the minimum price at which Mr R would bewilling to sell wine drawing analogies with Harvey v Facey (1893).
Mr Rs supply of wine in any year is finite and demand could outstrip supply leaving an impossible back log of orders all demanding specific performance.
Mr R could possibly, though extremely doubtfully, claim the defence of frustration as the things contracted for no longer exist. Add to this Mr Rs option to reject any order makes it appear that his price list is an invitation to treat as otherwise it would be an offer that is subject to revocation without notice. Acceptance of an offer has to be communicated. At the time of this case, 1896, the only readily available methods of communication for distant parties were the postal system or telegram. The postal rule would apply to any customers acceptance sent via these mediums and hence any revocation of the offer would be impossible The final item to consider is the peculiar concept of consideration to be found in the English legal system and those derived from it The 1677 Statute of Frauds made consideration vital in any contracts not made under seal. G&S received no consideration for the wine therefore they could not be a party to the contract. [Transfer of title occurred only between Mr R and the customer].
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That occasionally the payments for the wine were made to G&S instead of directly to Mr R was held to be equivalent to Mr R, for the sole convenience of his customers, operating a British bank account to receive payments. Graiger v. Gough was one of the major cases in the creation of the principle of invitation to treat. In order to explore this principle more fully the case will be re-examined as it occurred today. Once again the starting point is was the price list an offer or merely a willingness to deal. There are a number of variants on an invitation to treat these are: pre-contractional negotiations , shop displays and finally advertisements. G&Ss supply of the price list to potential customers is a form of direct marketing and falls under the last of these three categories. To be classed as a unilateral offer the price list would have to show some intention to be bound by pro-offering a tangible benefit, in excess of sales puff, that could be accepted by performance rather than communication . Is there any similarity to Bowerman v.
ABTA (1995) or Carhill v. Carbolic Smokeball Company (1892).
If the answer to this is a negative then the next step is to determine where the act of offer & acceptance occurs. In a face to face situation such as a shop the customer offers to buy goods by presenting them at the till and the shop either accepts or rejects this offer to buy. The goods on the shelves are merely invitations to treat in keeping with the findings of Fisher v. Bell and Pharmaceutical Society of GB v.
Boots Cash Chemists. The views of this in America and the European ….