§ 2.4 N1 Offer by Publication or Advertisement

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It is quite possible to make a definite and operative offer to buy or sell goods by advertisement, in a newspaper, by a handbill, a catalog or circular or on a placard in a store window.n2 It is not customary to do this, however; and the presumption is the other way. Usually, neither the advertiser nor the reader of the notice understands that the reader is empowered to close the deal without further expression by the advertiser. Such advertisements are understood to be mere requests to consider and examine and negotiate; and no one can reasonably regard them otherwise unless the circumstances are exceptional and the words used are very plain and clear.n3 For example, in Craft v. Elder & Johnston Co., n4 the defendant advertised a specific model of sewing machine as a ''Thursday Only Special'' for $26. This ad was held not to be an offer. This holding could have been based on the ground that the advertised price was an obvious misprint.n5 The intended price was doubtless $126 and the plaintiff may well have been aware of this.n6 Instead, the ruling was based on the broader ground that advertisements that describe goods for sale at a given price are not reasonably to be understood as offers. A good reason for such a holding is that there is no quantity term in the offer. If it were an offer, could Craft have demanded 1,000 machines? Could 5,000 customers have demanded the ''Thursday Special.'' A possible answer is to treat such advertisements as offers, subject to reasonable conditions, such as implied quantity limitations.n7

Consumer protection legislation, although not changing directly, points the way to a change in contract law by requiring merchants to indicate in their advertising whether specially priced items are limited in supply. If not, the merchant must stock sufficient quantity of the advertised goods to meet foreseeable demand. Although some of these statutes provide for a private right of action, others merely prescribe criminal or administrative penalties.n8 These statutes may in the long run affect consumer expectations so that the reasonable person may regard the typical retail ad for the sale of goods to be an offer to close a deal. Such an approach appears to have been taken in Izadi v. Machado (Gus) Ford, Inc.,n9 where the dealer advertised, ''BUY A NEW FORD & GET $3000 MINIMUM TRADE-IN ALLOWANCE.'' Elsewhere in the ad new Ford Ranger pick-ups were advertised for $7095, minus a factory rebate and minus ''Any Trade Worth $3000.'' Plaintiff sought to buy a Ranger, tendering a trade-in of low market value and the balance of the advertised price in cash. The dealer refused to sell on these terms pointing out that the trade-in allowance only applied to two expensive models mentioned in the ad, but, according to the court, the ad's limiting language was in ''infinitesimally small print,'' ''superfine print'' and ''sub-microscopic print.'' The court ruled that the plaintiff had stated a cause of action for breach of contract. It did not ''decide what the ultimate construction of the offer may be....''n10 Clearly, the ad does not commit the dealer to have Rangers in stock or otherwise available for sale. But inasmuch as it is willing to sell, but not on terms it reasonably led the public to believe were available, the ad could be deemed to be an offer subject to reasonable quantity limitations.

Even within the classical approach it may be that an offer has been made in an advertisement for the sale of goods. In Leftkowitz v. Great Minneapolis Surplus Store,n11 the defendant's advertisement for the sale of furs stated: ''Out they go Saturday, ... 1 Black Lapin Stole Beautiful, Worth $139.50 ... $1.00 First Come First Served.'' The plaintiff was first in time and tendered payment of the dollar. Defendant refused to sell, saying that the proposal was for women only. The court held that the advertisement was an operative offer and that plaintiff had accepted before any notice of revocation or modification of the offer. Note that the ad contained a specific quantity, a specific quantity per person and identified the person who could accept. There was no question that the ad was an offer.

It is very common, where one desires to induce many people to action, to offer a reward for such action by general publication in some form. A statement that plausibly makes an offer of this kind must be reasonably interpreted according to its terms and the surrounding circumstances. If the statement, properly interpreted, calls for the performance or commencement of performance of specific acts, action in accordance with such an interpretation will close a contract or make the offer irrevocable. There are many cases of an offer of a reward for the capture of a person charged with crime, for desired information, for the return of a lost article,n12 for the winning of a contest,n13 or for the redemption of coupons.n14 In addition, advertisements placed by buyers inviting sellers to ship goods without prior communication are clear cases of offers.n15 The contracts so made are almost always unilateral.n16

Although a dealer's advertisements of goods, in circulars and periodicals or by electronic media, are seldom to be interpreted as, in themselves, offers creating a power of acceptance, the descriptive statements made therein as to quality of the goods may sometimes be reasonably understood to be warranties that become a part of a contract for sale of such goods.n17 This is not so if the advertised statements would be taken by a reasonable person to be mere ''puffing'' or expressions of opinion. The question depends upon the usual principles of interpretation and upon the expressions of the parties in their negotiations subsequent to the advertisement.

This section is cited in Johnson v. Capital City Ford Co., n18 and is also quoted in the opinion of the dissenting judge. The court interpreted an advertisement issued by a dealer and held it to be an operative offer to deliver a 1955 Ford in exchange for a 1954 Ford purchased by any customer during a limited period. Induced by that offer, the plaintiff purchased a 1954 Ford, the advertisement not being mentioned by either party; and he later tendered it in exchange for a 1955 Ford. The court held that the plaintiff's act of purchasing was an operative acceptance, consummating a valid unilateral contract. The dissenting judge thought that the advertisement, even though it used the word ''offer,'' should be interpreted as a mere invitation to bargain. The court does not advert to the questions of whether the defendant could have prevented formation of a contract by refusing to sell a 1954 Ford to the plaintiff or by telling him that the advertisement was not an ''offer.'' Under the classical approach to ads of this kind, the dealer could have refused to sell. Nevertheless, even under the classical approach, the majority of the court was correct in result, despite the fact that the advertisement was not an offer, and only an invitation to deal. When the customer came to the defendant's dealership to do business, the customer implicitly was offering to do business on the terms of the invitation. The sale carried with it the collateral obligations and rights described in the ad, unless these were removed from the bargaining table by the seller prior to closing the deal. This point is expressly recognized in Steinberg v. Chicago Medical School. n19 A medical school catalog stated:

Students are selected on the basis of scholarship, character, and motivation... The student's potential for the study and practice of medicine will be evaluated on the basis of academic achievement, Medical College Admission Test results, personal appraisals by a pre-professional advisory committee or individual instructors, and the personal interview, if requested...

The plaintiff alleged that the defendant's primary criterion for admission was the ability of the applicant or the applicant's family to pledge large gifts of money to the school. A cause of action was stated. The catalog made no offer. Any application could have been returned unopened. However, once the application was accepted for evaluation by the taking of the application fee, the terms described in the catalog as to the criteria for acceptance became binding.

Dealers in goods, whether wholesale or retail, are in the habit of sending out catalogs, price lists, and circulars advertising their wares, quoting prices, and soliciting business. Generally they are happy to receive offers so induced, and generally they accept them and supply the goods. Sometime, however, the quantity ordered is too great, or the goods are out of stock, or a mistaken price has been given or a rival attempts to take an unfair advantage. These cases test the operation of the document that has been circulated. The result commonly reached is that the document did not contain an operative offer and that there is no contract.n20 Unless the words used are unusually clear to the contrary, the circular is a mere preliminary invitation that creates no power.n21 Operative offers have been found in circulars promising a rewardn22 and ostensibly in school and university catalogs.n23 A more accurate analysis is that the catalog states the terms of the contract in the event the student is admitted, or the student's application is considered.n24

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

Contracts LawSales of GoodsGeneral OverviewContracts LawSales of GoodsForm, Formation & ReadjustmentFormationOffer & AcceptanceContracts LawFormationOffersGeneral Overview

FOOTNOTES:

(n1)Footnote 1. Consolidated with this section is former § 28, ''Catalogs and Circulars.''

(n2)Footnote 2.

U.S. - R. E. Crummer & Co. v. Nuveen, 147 F.2d 3, 157 A.L.R. 739 (7th Cir.1945) , published offer to buy at par all bonds tendered within a reasonable time.

Mass. -In Sears v. Eastern R. Co., 96 Mass. (14 Allen) 433 (1867) , a published time table was held to be operative as an offer to transport; but this is contrary to law and custom of today.

Va. - Chang v. First Colonial Sav. Bank, 242 Va. 388, 410 S.E.2d 928 (1991) .

In Carlill v. Carbolic Smoke Ball Co., (1893) 1 Q.B. 256, the words were plain and clear, and a deposit was placed in a bank as evidence of ''good faith''. The advertisement was of a reward of Ј 100 to any one who caught the influenza after using a smoke ball.

In Seymour v. Armstrong, 62 Kan. 720, 64 P. 612 (1901) , the defendants, commission merchants, inserted the following advertisement in a newspaper, ''We will pay 101/2 cents, net Topeka, for all fresh eggs shipped us to arrive here by February 22. Acceptance of our bid with number of cases stated to be sent by February 20.'' The court assumed this to be an operative offer; but it nevertheless held that the attempted acceptance was conditional and that no contract was made.

(n3)Footnote 3. In Lovett v. Frederick Loeser & Co., 124 Misc. 81, 207 N.Y.S. 753 (1924) , a department store advertised well-known makes or radio receivers at a specified reduction from list prices, and it was held not to be an offer, in part because the goods were insufficiently described. In People v. Gimbel Bros., 202 Misc. 229, 115 N.Y.S.2d 857 (Spec.Sess.1952) , the defendant did not violate the Sunday law that forbade the sale of merchandise by having college students at the phones taking orders on Sunday.

In Crocker v. New London, W. & P.R. Co., 24 Conn. 249 (1855) , it was stated: ''Such advertisements, it is believed, are not considered, or treated, as proposed contracts, to the performance of which the advertisers may be held by a mere acceptance, without further negotiation.'' In accord is Restatement (Second) of Contracts § 26 comment b.

See also:

U.S. - Hall v. Kimbark, 11 Fed.Cas. 234 (E.D.Mo.1900) .

In Chicago Joint Bd. v. Chicago Tribune Co., 307 F.Supp. 422 (N.D.Ill.1969) , the Tribune publishes a booklet called ''General Advertising Rates'' which lists its charges for advertisements and another booklet called ''The Chicago Tribune Advertising Acceptability Guide'' which indicates that the Tribune will refuse advertising which is dishonest, indecent or illegal. The plaintiff, a labor union, tendered to the Tribune an advertisement urging readers not to patronize a certain department store because of its policy of featuring imported clothing made by low wage foreign labor. The tendered advertisement was concededly not dishonest, illegal or indecent. The union also tendered sufficient funds in accordance with the ''General Advertising Rates.'' The Tribune's refusal to print the advertisement was no breach of contract. A statement of what the newspaper will not print is not a promise to print everything else.

In Gay v. United States, 356 F.2d 516 (Ct.Cl.1986) , cert. denied, 385 U.S. 898 , a uranium producer unsuccessfully argued that the Atomic Energy Commission's published regulations and circulars stating the general circumstances under which it would purchase uranium ore, together with desultory negotiations between the parties constituted an offer to purchase which had been accepted by the producer.

Conn. - Lane v. Hopfeld, 160 Conn. 53, 273 A.2d 721 (1970) .

Ga. - Georgian Co. v. Bloom, 27 Ga.App. 468, 108 S.E. 813 (1921) , three day sale of furs at specified prices but no definite amount.

Ill. - O'Keefe v. Lee Calan Imports, Inc., 128 Ill.App.2d 410, 262 N.E.2d 758, 43 A.L.R.3d 1097 (1970) .

Mo. - Pearce v. Spalding, 12 Mo.App. 141 (1882) ; Osage Homestead, Inc. v. Sutphin, 657 S.W.2d 346 (Mo.App.1983) .

Neb. - Rhen Marshall, Inc. v. Purolator Filter Div., 211 Neb. 306, 318 N.W.2d 284 (1982) . An advertising circular is not an offer. Moreover, plaintiff's purported acceptance introduced new discount terms.

Tex. -Possibly contrary to many of the cases here cited is Oliver v. Henley, 21 S.W.2d 576 (Civ.App.1929) .

Eng. -Spencer v. Harding, L.R. 5C.P. 561 (1830).

(n4)Footnote 4. 38 N.E.2d 416 (Ohio App.1941) .

(n5)Footnote 5. In accord with Craft, is Ehrlich v. Willis Music Co., 93 Ohio App. 246, 113 N.E.2d 252 (1952), where the advertised price was one-tenth of the intended price.

(n6)Footnote 6. An offeree is not entitled to take advantage of an obvious mistake in communication by the offeror. Izadi v. Machado (Gus) Ford, 550 So.2d 1135, 1139 n. 6 (Fla.App.1989) ; Germain Fruit Co. v. Western Union Tel. Co., 137 Cal. 598, 70 P. 658 (1902) .

If the misprint is not obvious, see Woods v. Morgan City Lions Club, 588 So.2d 1196 (La.App.1991) ; Chang v. First Colonial Sav. Bank, 242 Va. 388, 410 S.E.2d 928 (1991) .

(n7)Footnote 7. See 1 Formation of Contracts: A Study of the Common Core of Legal Systems 359, 361-63 (Rudolph B. Schlesinger ed. 1968); Barry Nicholas, French Law of Contract 59-62 (1982).

(n8)Footnote 8. The legislation varies and is on a federal, state and local level. See Richard F. Dole, The Uniform Deceptive Trade Practices Act, 76 Yale L.J. 485 (1967); Stewart Macauley, Bambi Meets Godzilla: Reflections on Contracts Scholarship and Teaching vs. State Unfair and Deceptive Trade Practices and Consumer Protection Statutes, 26 Houston L.Rev. 575 (1989).

(n9)Footnote 9. 550 So.2d 1135 (Fla.App.1989) .

(n10)Footnote 10. 550 So.2d at 1139 n. 5 .

(n11)Footnote 11. 251 Minn. 188, 86 N.W.2d 689 (1957) .

(n12)Footnote 12.

U.S. - Shuey v. United States, 92 U.S. (2 Otto) 73, 23 L.Ed. 697 (1875) , reward for capture of suspected accomplice of the murderer of Lincoln, also for information leading to capture.

Iowa - Scott v. People's Monthly Co., 209 Iowa 503, 228 N.W. 263, 67 A.L.R. 413 (1929) , prize in a word contest.

N.Y. - Pierson v. Morch, 82 N.Y. 503 (1880) .

Wis. - Reif v. Paige, 55 Wis. 496, 13 N.W. 473 (1882) , reward for making a rescue.

See further § 2.21, Revocation by Publication, and § 3.10, Acceptance by Overt Acts-rewards.

(n13)Footnote 13. For example, Las Vegas Hacienda v. Gibson, 77 Nev. 25, 359 P.2d 85, 87 A.L.R.2d 645 (1961) , where $5,000 was offered by defendant to anyone who paid fifty cents and shot a hole-in-one on its golf course.

(n14)Footnote 14. Payne v. Lautz Bros. & Co., 166 N.Y.S. 844 (City Ct. 1916) , aff'd, 168 N.Y.S. 369 (Sup.Ct. 1918) , aff'd, 185 A.D. 904, 171 N.Y.S. 1094 (1918) . An advertisement that coupons on soap wrappers, placed in commerce by defendant, would be redeemed for tickets to Crystal Beach constitutes an offer.

(n15)Footnote 15.

Ga. - Robinson v. Leatherbee Tie & Lumber Co., 120 Ga. 901, 48 S.E. 380 (1904) .

Ill. - Schmidt v. Marine Milk Condensing Co., 197 Ill.App. 279 (1915) .

Kan. - Seymour v. Armstrong, 62 Kan. 720, 64 P. 612 (1901) .

N.Y. - Muhr v. Kalmanson, 124 Misc. 514, 208 N.Y.S. 447 (App.Term 1925) . This holding is unclear. That a contract existed seems clear. The issue was the price.

(n16)Footnote 16. Harris v. Time, Inc., 191 Cal.App.3d 449, 237 Cal.Rptr. 584 (1987) . Time sent a piece of junk mail to a three-year-old boy. The window revealed the following statement ''JOSHUA A GNAIZDA, I'LL GIVE YOU THIS VERSATILE NEW CALCULATOR WATCH FREE Just for Opening this Envelope Before Feb. 15, 1985.'' The message was deceptive, as the full message, legible after opening the letter, required that a subscription to Fortune Magazine be purchased as a condition to receiving the watch. The court ruled that Time had made an offer to a unilateral contract, the acceptance being the act of opening the envelope. Although it regarded Time as guilty of a shameless breach of contract, it dismissed Joshua's $15,000,000 class action as a shameless waste of the court's resources. The court failed to note that since the envelope had been opened by Joshua's mother, it had not been accepted by the offeree.

(n17)Footnote 17. Sample cases are Carlill v. Carbolic Smoke Ball Co., 1 Q.B. 256 (C.A.1893); Turner v. Central Hardware Co., 353 Mo. 1182, 186 S.W.2d 603, 158 A.L.R. 1402 (1945) ; Rinkmasters v. Utica, 75 Misc.2d 941, 348 N.Y.S.2d 940 (Civ.Ct.1973) ; Baxter v. Ford Motor Co., 168 Wash. 456, 12 P.2d 409 (1932) .

(n18)Footnote 18. 85 So.2d 75 (La.App.1955) . Willis v. Allied Insulation, 174 So.2d 858 (La.App.1965) , was a similar case. A newspaper advertisement for sales agents guaranteed a monthly salary to qualified agents. Plaintiff answered, was hired and worked for two months during which his commissions failed to reach the monthly figures. He sued and recovered the difference, the court stating that the advertisement was an offer. The reasoning, but not the result, is dubious. The employer could have refused to hire plaintiff when he applied for the position. However, his application implicitly carried with it the terms of the invitation contained in the ad. The advertised terms were part of the basis of the bargain and not an offer to employ.

(n19)Footnote 19. 69 Ill.2d 320, 13 Ill.Dec. 699, 371 N.E.2d 634 (1977) .

(n20)Footnote 20. In Montgomery Ward & Co. v. Johnson, 209 Mass. 89, 95 N.E. 290 (1911) , the defendant sent out a circular letter to jobbers, stating the terms on which revolvers would be sold. The plaintiff at once ordered a specified quantity. The court held that there was no contract, saying, ''An invitation to prospective buyers to negotiate for a license, and to trade with the defendant, even when confined to a definite class, imposes no obligation on the sender of accepting any offer which thereafter might be received. The order of the prospective buyer does not ripen into a contract of sale until the defendant's acceptance, and then only as to goods specifically ordered.''

With Montgomery Ward & Co. v. Johnson, compare Packard Englewood Motors v. Packard Motor Car Co., 215 F.2d 503 (3d Cir.1954) , in which a general letter to dealers was so worded as to be an operative offer promising to allot an additional car to any dealer in return for each ton of scrap iron that the dealer would ship to the promisor. Shipment of the iron consummated a unilateral contract, although the offeror also promised to pay for the iron and the dealer would have to pay for any cars ordered under the allotment.

In the case of In re Hilliard's Estate, 383 Pa. 63, 117 A.2d 728 (1955) , the owner of land sent a circular letter to 28 persons, saying that the land was for sale ''at an asking price of $60,000, subject to a reasonable offer. All offers are subject to the approval of the Co-Executors.'' It stated further that recognition would be given to the broker who first submitted an offer ''provided said offer is acceptable to the Co-Executors, a satisfactory agreement of sale executed, and the sale closed in accordance with the terms of the agreement.'' This was held to be a mere invitation for bids, and that the first party who agreed to pay $60,000 had no right to specific performance. However, the form of this circular was not well advised.

(n21)Footnote 21.

N.Y. - Schenectady Stove v. Holbrook, 101 N.Y. 45, 4 N.E. 4 (1885) .

Wis. - Moulton v. Kershaw, 59 Wis. 316, 18 N.W. 172 (1884) .

(n22)Footnote 22.

Eng. - Carlill v. Carbolic Smoke Ball Co., (1893) 1 Q.B. 256 ; Williams v. Carwardine, 4 B. & Ald. 621 (1833).

(n23)Footnote 23.

Mo. - Niedermeyer v. Curators of State University, 61 Mo.App. 654 (1895) .

N.C. - Horner School v. Wescott, 124 N.C. 518, 32 S.E. 885 (1899) .

(n24)Footnote 24. See Steinberg v. Chicago Medical School, 69 Ill.2d 320, 13 Ill.Dec. 699, 371 N.E.2d 634 (1977), note 19 , supra.