§ 2.3 Request for an Offer Is Not an Offer-Auctions and Solicited Offers

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In the process of negotiation, it is not uncommon for one party to request the other to make an offer.n1 Usually when such a request is made, the subject matter is already specific and most of the terms are already understood. In these cases the request must not itself be taken to be the operative offer, even though it is expressed in what may appear to be offering words. Thus at an auction specific goods are ''offered for sale,'' for immediate delivery and on advertised terms of cash or credit. Yet in the ordinary case the buyers are being requested to submit bids and are not being empowered to accept an offer to sell. The bid is an offer, not an acceptance.n2 The bidder is requested to state a willingness to pay a definite price, thus stating the terms of a bargain. This statement makes an offer that will create a power of acceptance in the auctioneer.

Frequently the same situation exists in the case of an advertisement for bids on some building or other construction, public or private, or on the furnishing of supplies. The advertisement is not an offer. It is a request for offers.n3 This is true even though it may be common practice to accept the best bid made. Such an advertisement may not even request an offer. It may request merely a reply that will further the negotiation in the direction of an offer. Even if it requests an offer, it may not induce one. There may be no reply at all, or the reply may be a mere quotation of price or an expression not yet indicating a readiness to close the deal.n4

Especially where a public entity is interested in contracting, where statutes or regulations may require it, a request for bids may be advertised. Frequently, the legal situation when someone advertises for bids is the same as that pertaining to auctions. The advertisement is not an offer. It is a request for offers.n5 This is so even if the common practice is to accept the best bid made. Occasionally, and especially in public bid-letting procedures, the best bidder will have a statutory right to be awarded the contract. This statutory right does not create a contract. The public entity may retain the option of not buying, building, or selling at all. It may have a statutory right to readvertise, if certain conditions are met. The public entity may, additionally, have the right to negotiate a contract instead of proceeding by bidding. The existence of these alternatives demonstrates that an invitation for bids is not an offer to contract and the best bidder cannot enforce as such even if the public entity is legally disabled from accepting the bid of anyone else. If the public body accepts the offer of the bidder who is not the best qualified bidder, the traditional rule was that because no contract existed, the disappointed bidder had no standing to sue. This traditional rule has been discarded, or at least eroded, so that the qualified bidder whose bid should have been accepted may have a remedy, perhaps an injunction against the award of the contract to another, or damages for its costs in preparing the bid.n6

Sometimes the expressions of a travelling salesman or soliciting agent amount to no more than an invitation to submit an offer. The solicitor may be authorized neither to make an offer nor to accept one. In such a case, an order for goods given by the solicited customer is a mere offer, even though it clearly states all the terms and even though it is on a printed form supplied by the solicitor's own principal. As a common law proposition it is revocable in spite of an express provision that it shall ''not be subject to countermand.''n7 The fact that the order is solicited and its terms largely dictated by the solicitor or his principal may have an important effect upon the mode of acceptance. An acceptance by the solicitor ''subject to the approval of the home office'' is no acceptance at all; but it does not prevent the principal from having power to accept. The circumstances may be such as to justify the customer in believing that the offer has been accepted, if the principal merely remains silent.n8 And the terms of the order signed by the customer may be such as to empower the principal to bind the customer without sending any notice of acceptance, a notation of approval on the written order or some other overt action or forbearance being sufficient.n9 In these cases, the solicitor submits a form of offer; this is inoperative and preliminary.n10 The customer signs an order, thereby making an offer. In this order the customer can specify or limit the power of acceptance. Finally, the principal represented by the solicitor must express acceptance in compliance with terms of the offer and the usual rules governing acceptance.

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For related research and practice materials, see the following legal topics:

Contracts LawSales of GoodsForm, Formation & ReadjustmentFormationOffer & AcceptanceContracts LawFormationOffersGeneral OverviewPublic Contracts LawBids & FormationOffer & AcceptanceGeneral OverviewContracts LawFormationAcceptanceMethods of AcceptanceGeneral OverviewContracts LawContract Conditions & ProvisionsGeneral OverviewPublic Contracts LawBids & FormationOffer & AcceptanceOffers

FOOTNOTES:

(n1)Footnote 1.

Okl. -An employee entered into an employment contract by long distance telephone. He argued that his request for a job was the offer and the employer's assent was the acceptance. It was held that the employee's request was for an offer and was not in itself the offer. Therefore acceptance took place in the state from which the employee telephoned. This state's worker's compensation program was held not to cover an accident occurring on the job in a third state. Sims v. United Bridge & Iron, 402 P.2d 911 (Okl.1965) .

Utah - Engineering Associates, Inc. v. Irving Place Associates, Inc., 622 P.2d 784 (Utah 1980) . Irving wanted a million dollar loan, and gave US Life a $10,000 deposit on the 3% commitment fee. Irving never got a commitment, and successfully sought the return of its $10,000. The court said there was no binding agreement for US Life to keep the deposit, because its writing required final approval and signature of its executive officers before there was a contract. Thus, it made no offer but only an invitation to submit an offer.

(n2)Footnote 2.

U.S. - United States ex rel. Goldberg v. Daniels, 231 U.S. 218, 34 S.Ct. 84, 58 L.Ed. 191 (1913) ; Ferry v. Udall, 336 F.2d 706 (9th Cir.1964) (request for bids on public land).

Alaska - Beirne v. Alaska State Housing Authority, 454 P.2d 262 (Alaska 1969) .

Colo. - O.C. Kinney, Inc. v. Paul Hardeman, Inc., 151 Colo. 571, 379 P.2d 628 (1963) . It was immaterial that the defendant in requesting bids did not reserve the right to reject any and all bids.

Ind. - Rice v. Scott County School Dist., 526 N.E.2d 1193 (Ind.App.1988) .

Ky. - Puckett v. Dunn, 529 S.W.2d 358 (Ky.1975) . Announcement that ''I will offer for sale to the highest and best bidder the farm owned by Rev. Noah Puckett at public auction....'' is not an offer.

La. -The same rule obtains under Louisiana's Civil Law system. Eames v. James, 452 So.2d 384 (La.App.1984) , where the court states: ''For any proposal to qualify as an offer, it must reflect the intent of the author to give to the other party the right of concluding the contract by assent. Where this intent is not present, the proposal cannot be considered an offer, but rather an invitation to negotiate or an expression of willingness to receive offers from others.'' North Central Util., Inc. v. Walker Community Water System, Inc., 506 So.2d 1325 (La.App.1987) .

Mass. - Hunt v. Rice, 25 Mass.App.Ct. 622, 521 N.E.2d 751 (1988) . By reserving the right to reject any and all offers, the executors of the estate did no more than to make express what the structure of their invitation to bid signified as a matter of law.

Minn. - Wm. Weisman Realty Co. v. Cohen, 157 Minn. 161, 195 N.W. 898 (1923) .

Or. - Maeder Steel Products Co. v. Zanello, 109 Or. 562, 220 P. 155 (1923) .

R.I. - Freeman v. Poole, 37 R.I. 489, 93 A. 786 (1915) , reh'g denied, 94 A. 152 .

Can. - Saltzberg & Rubin v. Hollis Securities, Ltd., 480 D.L.R. 344 (N.Scot.1964) . A request for bids on an apartment house stating that the highest bid would be accepted was held to be a request for offers and not an offer itself.

Eng. -Payne v. Cave, 3 T.R. 148 (1789).

See also:

Ill. - Thomas v. Pope, 380 Ill. 206, 43 N.E.2d 1004 (1942) , probably sustainable on this ground.

Compare Jenkins Towel Service, Inc. v. Fidelity-Philadelphia Trust Co., 400 Pa. 98, 161 A.2d 334 (1960) , noted herein at length under § 2.2.

A request for bids is not itself an offer. Bromley v. McHugh, 122 Wash. 361, 210 P. 809 (1922) .

Auctions are considered in greater depth in § 4.14 below.

(n3)Footnote 3.

Mo. - Anderson v. Public Schools, 122 Mo. 61, 27 S.W. 610 (1894) .

Pa. - Leskie v. Haseltine, 155 Pa. 98, 25 A. 886 (1893) .

Eng. - Spencer v. Harding, 5 L.R.C.P. 561 (1870) .

Even though a statute requires the letting of a contract to the lowest bidder, there is no contract with the lowest bidder if the only acceptance is of a higher bid. Kelly v. Board of Freeholders, 90 N.J.L. 411, 101 A. 422 (1917) .

It must be borne in mind that an advertisement may be so worded that readers are reasonable in understanding it to be an offer to sell or to buy. In R. E. Crummer & Co. v. Nuveen, 147 F.2d 3, 157 A.L.R. 739 (7th Cir.1945) , a published notice by a County Board to bondholders was held to be an offer to buy, at par, all bonds tendered and not a mere request to submit bonds for acceptance by the Board. Other advertisement cases are considered in § 2.4 below.

So also, an auction that is advertised to be ''without reserve,'' is an offer to sell to the highest bidder. Golfinopoulos v. Padula, 218 N.J.Super. 38, 526 A.2d 1107 (App.Div.1987) (real property). Accord, U.C.C. § 2-328(3) (goods); Restatement (Second) of Contracts § 28(1)(b). The mere fact that an auction announcement states that property will be sold to the highest bidder does not convert the auction process to a commitment to sell to the highest bidder. Puckett v. Dunn, 529 S.W.2d 358 (Ky.1975) ; Weinstein v. Green, 347 Mass. 580, 199 N.E.2d 310 (1964) .

(n4)Footnote 4.

U.S. -In Williams v. Favret, 161 F.2d 822 (5th Cir.1947) , in preparation for making a bid for government construction, a general contractor asked the plaintiff-a sub-contractor-to submit a quotation for the electrical work. The plaintiff submitted such a quotation, expressly adding the following: ''If our estimate used wire us collect prior to June 6 or else same is withdrawn.'' The general contractor (defendant) wired on June 6 ''We used your bid for wiring on barracks and dispensary Gulfport.'' Another bidder on the general contract had similarly wired the plaintiff. After being awarded the general contract as the lowest bidder, the defendant made a sub-contract for the electrical work with a person other than the plaintiff; this resulted in the present action for damages. In spite of a vigorous dissent, it is believed that the court's decision that the defendant had committed no breach of contract was correct. If the plaintiff's ''quotation'' of a price was in fact an offer, the defendant's ''use'' of it in making his own bid was not an acceptance. It was not so in express terms, and such an implication is not reasonable. The defendant's ''use'' of the estimate in making its own bid did no more than to prevent its being ''withdrawn.'' Such action in reliance, in view of the plaintiff's express words, might well be held to make an offer irrevocable, in accordance with Restatement, Contracts, § 90. Doubtless it should also have weight in interpreting the plaintiff's submission of an estimate as a firm offer and not a mere ''quotation'' of a price. Seacoast Elec. Co. v. Franchi Bros. Constr. Corp., 437 F.2d 1247 (1st Cir.1971) .

Cal. - Southern California Acoustics Co. v. C.V. Holder, Inc., 71 Cal.2d 719, 79 Cal.Rptr. 319, 456 P.2d 975 (1969) . Holder asked for subcontractor bids to be used in its prime bid to a school district. Southern California's bid was lowest. Holder used it in its prime bid, but thereafter negotiated a lower price with another supplier and obtained the school district's permission to use the services of this other supplier. In the meantime Southern California had seen in a trade paper Holder's proposed subcontractors listed in its successful bid, and refrained from bidding on other construction projects. It was held that Holder's silence was not an acceptance where there had been no prior dealings to that effect. It also held that because Holder had made no promise it could not be held liable on a theory of promissory estoppel. Nonetheless, Holder was liable for violating a statutory provision restricting the substitution of subcontractors on public projects.

Md. - Chesapeake Supply & Equip. Co. v. Manitowoc Engineering Corp., 232 Md. 555, 194 A.2d 624 (1963) . The defendant sold a mobile truck crane to Linder and the place of formation of the contract was in issue. The Defendant had a rule that all purchase orders must be accepted in Manitowoc, Wisconsin. Linder sent his purchase order to Manitowoc, but it was not accepted. Further negotiations followed, the terms of sale being communicated to Linder through the dealer, Chesapeake. Linder then ordered the crane on these terms. The court held that Manitowoc had not empowered Chesapeake to make an offer to Linder and that his assent was itself an offer and was accepted in Manitowoc. Two judges dissented, holding that Manitowoc made an offer through Chesapeake and that Linder accepted it in Maryland, thus giving the Maryland court jurisdiction.

N.Y. - Cortland Asbestos Prods., Inc. v. J. & K. Plumbing and Heating Co., 33 A.D.2d 11, 304 N.Y.S.2d 694 (1969) .

Minn. - Holman Erection Co. v. Orville E. Madsen & Sons, Inc., 330 N.W.2d 693 (1983) .

This section is cited in Poorvu Constr. Co. v. Nelson Electrical Co., 335 Mass. 545, 140 N.E.2d 891, 896 (1957) , where the court said: ''Accordingly the subbids in the case at bar on this record must be taken to have been offers by the defendant to enter into bilateral contracts with the plaintiff for the work specified in their respective subbids.'' But the agreement contained no provision requiring the subcontractor to give a surety bond. See also § 2.31; § 534.

In Milone & Tucci, Inc. v. Bona Fide Builders, Inc., 49 Wash.2d 363, 301 P.2d 759 (1956) , the plaintiff at request of defendant submitted a bid on certain work so that the defendant could use it in determining its bid on a larger contract. The defendant did so use it and obtained the larger contract, but it awarded the subcontract to another bidder. The court held that the defendant's use of the plaintiff's bid was not an acceptance of it. The plaintiff's action for damages failed. See also § 2.31, 200.

In Rubin v. Equitable Life Assur. Soc. of the U.S., 297 F.2d 167 (3d Cir.1961) , the plaintiff, a broker, received the following letter: ''If you can get a written proposal to sell the building for one million dollars, I am sure that it will have favorable consideration here at that price, but we are not interested in discussing a price in excess of that.'' In a suit by the broker for services, the court held that the letter did not constitute an operative offer. ''The language is not language of promise.''

See Franklin M. Schultz, The Firm Offer Puzzle, 19 U. of Chi.L.Rev. 237 (1952) quoting this note.

(n5)Footnote 5. Chevalier v. Sanford, 475 A.2d 1148 (Me.1984) . The Town of Sanford advertised a parcel of real estate for sale. The Chevaliers submitted the highest bid. The town did not accept it, and the Chevaliers sued, losing below. The Supreme court cited this treatise, among other authorities, to show that the rules governing bidding are analogous to the rules governing auction sales. The court also applied U.C.C. § 2-328 by analogy, treating the advertisement of the real estate as having been ''with reserve'' so that there was no binding obligation to sell it.

(n6)Footnote 6. See § 4.14 below.

(n7)Footnote 7.

La. - AA Home Improvement Co. v. Casem, 145 So.2d 624 (La.App.1962) .

Mich. - Challenge Wind & Feed Mill Co. v. Kerr, 93 Mich. 328, 53 N.W. 555 (1892) .

Eng. - Dickinson v. Dodds, 2 Ch. 463 (1863) .

Under Uniform Commercial Code § 2-205 a merchant's offer to buy or sell goods may be made irrevocable by the use of appropriate language and the meeting of certain formal requisites. See § 2.26 below. Under the statutes of several states the same result can be accomplished as to offers for the purchase or sale of services or real property. See, e.g., McKinney's-N.Y. General Oblig. Law § 5-1109.

(n8)Footnote 8. See § 3.18, Silence as Acceptance.

(n9)Footnote 9.

Ind. - High Wheel Auto Parts Co. v. Journal Co., 50 Ind.App. 396, 98 N.E. 442 (1912) .

In International Filter Co. v. Conroe Gin, Ice & Light Co., 277 S.W. 631 (Tex.Com.App.1925) , the plaintiff submitted a written form of order for a machine, stating all terms, and providing that if promptly assented to by defendant it should become a contract on approval by the plaintiff at its office in Chicago. The defendant signed it, marking it ''accepted.'' It was sent to Chicago. There the plaintiff's vice-president signed it, marking it ''O.K.'' The court held that a contract was made, without any further notice by the plaintiff. When the defendant marked the order ''accepted'' in this case, defendant was making an offer, not accepting one. But in Iacono v. Toll Bros., 217 N.J.Super. 475, 526 A.2d 256 (1987) , appeal after remand, 225 N.J.Super. 87, 541 A.2d 1085 , no contract was formed where the solicited offer provided that ''This agreement shall not be binding upon Seller unless signed by Seller within thirty (30) calendar days.'' Seller did not sign. Silence was not an implied acceptance.

It has been realistically held that where the formalities of acceptance are specified on the offeree's own pre-printed form, the offeree can waive the formalities that had been printed on the form to safeguard itself. Neal--Cooper Grain Co. v. Texas Gulf Sulphur Co., 508 F.2d 283 (7th Cir.1974) (''Contract shall not be binding ... until duly accepted at its New York office''). To the contrary is O'Daniel Motors, Inc. v. Handy, 390 S.W.2d 453 (Ky.1965) , which under any view of the matter is to be disapproved. A used car dealer's order form bore this conspicuous language: ''THIS ORDER IS NOT BINDING UNTIL ACCEPTED BY DEALER AND APPROVED BY HIS CREDIT DEPARTMENT.'' Although the dealer delivered the car and the buyer paid for it, the court ruled that no contract had been made because the dealer had not signed the document. This holding was made although the form said nothing about signing and, on the reported facts, the conduct of the dealer unequivocally indicated acceptance.

(n10)Footnote 10. Caveat: there may be a fine line between soliciting an offer and making one. In Manchester Pipeline Corp. v. Peoples Natural Gas Co., 862 F.2d 1439 (10th Cir.1988) , a gas buyer sent unsigned ''contracts'' to gas producer for signature. They were signed and returned. It was held to be a question of fact for the jury whether or not the dispatch of the form contracts was an offer. A better explanation would appear to be that the purchaser manifested assent when the seller began building a connecting pipeline with the acquiescence and cooperation of the buyer.