to enter into a sale with the highest bidder. The result reached here by the German court is comparable to that reached in the English Harvela case, albeit that the German court expressed some doubt as to which party had made the offer and which the acceptance. That point did not require a specific ruling, given that the concepts of offer and acceptance are merely two manifestations of the more fundamental idea of a Willenserklärung (declaration of will).

More problematic for German law would be how to deal with a Blackpool type scenario, that is a case where the party making the complaint cannot convince a court that the breach of the condition complained of has deprived it of a contract which it ought to be awarded. If the condition is only, as in Blackpool, to consider a timely bid, but not to award the contract to any specific bidder, and consideration of such a timely bid has not occurred, does that failure constitute the breach of any contractual or other right possessed by the disgruntled bidder? One solution in German law would be to argue that, when parties submit bids on the basis of stated conditions, subsidiary contracts are being entered into between each bidder and the party inviting the bids, so that any bidder who suffers as a result of a breach of any of the conditions would be entitled to seek damages for its loss under the subsidiary contract. Alternatively, but less elegantly, the contractual bidding process might be described as a prize competition, and thus governed by §661 BGB, on the basis that each bidder could be said to be competing for the prize of being awarded the contract. On that basis, §661(2) would seem to oblige consideration of an ‘entry submitted within the period of time’ specified, failure to do so being a breach of this obligation. This second solution would, however, be to apply a section of the Code to circumstances which stretch the idea of a ‘prize competition‘ somewhat beyond the usual understanding of that term.136 Of the two suggestions, the better seems to be the concept of the subsidiary contract, the same approach used by the English court in the Blackpool case.

5.  The firm or irrevocable offer

(a)  Characterising the firm offer

A firm or irrevocable offer is one which the offeror has bound himself to keep open for a specified period of time. It is conceivable that, if such

136Though the §661 route is the natural solution for breach of conditions laid down in genuine prize competitions, such as the architectural prize competition which was at issue in BGH NJW 1983, 442.

undertaking is recognised as binding by a legal system, the binding effect could be conceived of as promissory in nature (though, as will be seen, that is not necessarily the view adopted by national legal systems). After all, it is the offeror alone who comes under any duty (not to revoke the offer during the stated time), the offeree remaining free to accept or reject the offer as he sees fit, circumstances which have a unilateral promissory aspect to them.

There is a variety of differing treatments of firm offers among legal systems. Some conceive of all offers, by default, as firm. It was discussed earlier how this is the position of German law.137 The justification for the default position given by the framers of the BGB at the end of the nineteenth-century was that, if offers were not deemed irrevocable, commerce would become more difficult and the economy contract.138 This seems fanciful in retrospect, given the thriving economy of a late nineteenth-century England in which binding offers were almost unknown. Whether the rationale is convincing or not, the default German position places a higher promissory value on the proposal of an offeror. Such a party is held at least to have promised to keep the offer open for acceptance for a certain time, even if he has not absolutely promised to perform the contract but merely conditionally promised to do so if an acceptance is forthcoming. Though the relevant provision of the BGB (§145) does not expressly use the language of promise in describing the default binding effect of an offer, a promissory interpretation of the nature of a binding offer is supported by the background to the adoption of §145.139

At the other end of the scale in terms of the default position regarding binding offers is the Common law approach, which refuses to give effect to a party’s clearly expressed wish to bind itself to keep an offer open unless some consideration is provided for such an undertaking.140 The offeror in Common law is thus able, in most cases, to revoke his offer freely, and will not even need to do that if there has been a fundamental change in circumstances since the offer was made: such a change is held to annul the offer without the offeror even having to withdraw it.141 The harshness of

137See above at p. 217.

138‘Motive’, pp. 165–6 (in Mugdan, Die gesammten Materialien).

139See above at p. 217.

140Dickinson v. Dodds [1876] 2 Ch D 463. The Law Revision Committee’s Sixth Interim Report (1937, Cmnd 5449) recommended (see para. 38) that firm offers made without mutual consideration should be enforceable, but this recommendation was not acted upon.

141Nielsen v. Dysart Timbers Ltd [2009] NZSC 43.

the English unwillingness to hold offers irrevocable is somewhat softened by the rule that a revocation of an offer is not effective until communicated to the offeree.142 An offeree thus knows that until he receives definite notice of withdrawal he is free to accept the offer, albeit not to rely upon it in other ways.

The Common law has developed in the US, under the doctrine of promissory estoppel, to allow a binding offer to have effect so long as the offeree has placed some reliance on it. Where that is so, the offeror is deemed to have made a subsidiary promise not to revoke the offer of the bilateral contract. Even this improved Common law position is far from ideal though, requiring as it does some proof by an offeree of reliance, a requirement which seems both unnecessary and likely to be difficult to prove in some cases. Moreover, the promissory estoppel approach founds only a right to damages for wasted expenditure if the offer is revoked, but does not render the offer irrevocable as such.143 Though the damages route has been argued to be the likely course of action even in German law,144 it is surely preferable to give the offeree the right to hold the offeror to his offer if the offeree so wishes, even if the offeree may not choose to exercise that right in cases where trust between the parties has broken down. The promissory estoppel solution has often been applied in the US to cases where main contractors have relied on offers by subcontractors to do work for a certain price. The main contractor, pricing its own work in accordance with the subcontractor’s bid, is entitled to rely on that bid, and can sue the subcontractor in damages if the bid is withdrawn and the main contractor is obliged to hire someone else at greater cost.145

142For application of the English rule, see Byrne & Co. v. Leon van Tienhoven (1880) 5 CPD 344. A similar rule was established in Scots law in Thomson v. James (1855) 18 D 1. The DCFR is somewhat vague on the time when the revocation of an offer takes effect: Art. II.-4:203 states that an offer may be revoked if the revocation reaches the offeree before acceptance is despatched, but this does not tell us whether, in such a case, the revocation takes effect when it was posted or when it arrives, though presumably the latter was the intention of the drafters.

143The damages route was considered by the drafters of the BGB, but rejected as being not in the interests of commerce, given that it is more cumbersome and less certain than making the offer irrevocable: see ‘Motive’, pp. 165–6 (in Mugdan, Die gesammten Materialien).

144Markesinis et al., German Law of Contract, pp. 66–7.

145See Drennan v. Star Paving Co. 51 Cal 2d 409, 333 P 2d 757 (Cal. 1958). Under §87(2) of the Restatement (Second) of Contracts, these circumstances would now be treated as giving rise to an option contract, so that recourse to promissory estoppel would no longer be necessary. The Uniform Commercial Code contains a provision (§2–205) making firm offers by merchants to buy or sell goods enforceable for the stated period of time (not exceeding three months).

Lying between the German and English positions, Scots law takes the view that, while offers by default are revocable at will, an offeror may bind himself to keep an offer open for a specific period of time. Such an undertaking is seen as a unilateral promise separate from, but attached to, the offer itself.146 No consideration is required for the giving of such an undertaking. The offeree, as the recipient of such a promise by the offeror to keep the offer open, can enforce this promise by accepting the offer within the time limit, any attempted withdrawal of the offer being ineffective. Scots law thus gives effect to the intention of an offeror to bind himself unilaterally, doing so not by changing the default nature of the offer from a mere proposal of terms to something itself binding, but by attaching to the offer an additional obligation constituted by way of unilateral promise. This has the desired effect of making the offer binding, though those from outside the Scottish legal system might find the analysis of a separate promise to keep the offer open a somewhat convoluted approach.

Like Scotland, the mixed legal system of Louisiana also gives effect to a binding offer,147 but it does so simply by virtue of a provision of the Civil Code stating that an ‘offer that specifies a period of time for acceptance is irrevocable during that time’.148 Like the provision from the BGB on the binding effect of offers, this provision gives no clue as to how the irrevocable effect of an offer is to be characterised, but, given the absence from Louisiana law of a category of unilateral promise, it is hard to see how a promissory analysis of this provision might be argued for. The general view is that the provision is also not to be seen as giving rise to an option.149 Given the codal status of the provision, there may perhaps be no need to enquire further as to the nature of the binding effect of irrevocable offers.

In some systems, however, the firm offer is indeed treated as a type of option. South Africa is one example of a jurisdiction which has adopted the option analysis, an option in South African law being a type of contract.150 Given this settled view that an offer can only be made firm by embodying it in an option contract subsidiary to the intended main

146Littlejohn v. Hadwen (1882) 20 SLR 5; Paterson v. Highland Railway Co. 1927 SC (HL) 32, 38, per Lord Dunedin.

147For a comparative analysis of the Louisiana rules on offer and acceptance, see Litvinoff, ‘Offer and Acceptance in Louisiana Law’.

148CC Art. 1928. 149 See Litvinoff, and Scalise, Law of Obligations, pp. 64–5.

150See Anglo Carpets (Pty) Ltd. v. Snyman 1978 (3) SA 582 (T); Kotze v. Newmont SA Ltd 1977 (3) SA 368 (NC); Oos-Vrystaat Kaap Bedryf Bpk. v. Van Aswegen 2005 (4) SA 417.

contract, the decision in the South African Labour appeal court case University of the North v. Franks151 that a unilateral undertaking not to revoke an offer might ‘in its context contain a waiver of the normal requirement of acceptance by the offeree’152 must be considered suspect. This suggestion that a firm offer might be undertaken unilaterally is contradicted by other decisions supporting the view that a unilateral statement that an offer is irrevocable or held open for a certain time is of no effect.153 While some have tried to argue the contrary view in favour of unilaterally binding firm offers,154 this position is unsupported by the cases. Others have tried to argue for a watered-down version of the necessary acceptance of an option contract,155 but again this is not convincing.156 A final suggestion has been that a unilateral declaration that an offer will be kept open for a certain time might give rise to expectations on the part of the offeree, the doctrine of estoppel allowing the offeree to argue that the offeror cannot withdraw during that period of time.157

The DCFR makes provision both for revocable and irrevocable offers.158 The default position is that an offer is revocable until the point the offeree despatches the acceptance.159 However, an offer may be stated to be irrevocable or open for acceptance for a fixed time, in which case the offer is irrevocable.160 Mirroring somewhat the US position, an offer is also irrevocable if ‘it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer’.161 Unlike the US Common law approach however, this rule does not simply give rise to a right to damages if it is broken, but ensures that the offeror will be bound to the offer by virtue of the offeree’s entitlement to accept it should he wish. However, in stating none of this is the term promise or unilateral promise used. So, as with the German law on offers, these provisions of the DCFR are not expressly promissory in nature, though they achieve a unilateral binding effect. This is consistent with the DCFR’s conception that there are unilateral undertakings other than unilateral promises.162

151 [2002] 8 BLLR 701 (LAC).    152  Ibid., paras. 47–8.

153Garnier & Co. v. Wright 20 SC 421.

154See R. H. Christie, The Law of Contract in South Africa, pp. 52–3.

155  See Zeffertt, ‘Some Thoughts on Options’; Kritzinger, ‘The Irrevocable Offer’.

156See Hogg and Lubbe, ‘Formation of Contract’, p. 55.

157Christie, The Law of Contract in South Africa, p. 53.