What makes something an offer in contract law?
1 Answer
See AlumaSafway Inc. v The International Association of Heat & Frost Insulators and Asbestos Workers, Local 119, 2022 SKCA 99, at paras. 50-51 (citations omitted):
[50] An offer, in the contractual sense, is a “communication by the offeror to the offeree indicating a willingness to enter into an agreement with the offeree on certain terms”. Not all communications between two parties involved in a transaction are appropriately characterized as offers. Determining whether something is an offer requires attention to the existing context. The central question is whether there was an intention to create a binding legal relationship on certain specified terms, or merely an intention to start a discussion. In that respect, a distinction must be drawn between preliminary negotiations, or mere invitations to treat, and actual offers. It has been held, for example, that a mere expression of a willingness to contract on certain terms, or the creation of a draft agreement for discussion purposes, does not constitute an offer. As McCamus notes, “[t]he critical distinction between an invitation to treat and an actual offer is drawn on the basis that an offer communicates a willingness to be bound by the next communication of the offeree”.
[51] The test for determining whether a party intended to communicate an offer for acceptance is objective in nature. In that respect, the “question to ask is whether the offeree reasonably understood the communications, by words or conduct, of the offeror to constitute an offer. … The fact that the offeror may not have subjectively intended to enter an agreement is irrelevant”.
See also Carlill v. Carbolic Smoke Ball Company [1892] EWCA Civ 1. What mattered was whether the communication, assessed objectively "was intended to be understood by the public as an offer which was to be acted upon." The offer in that case was distinguished from pre-offer communications:
It is not like cases in which you offer to negotiate, or you issue advertisements that you have got a stock of books to sell, or houses to let, in which case there is no offer to be bound by any contract. Such advertisements are offers to negotiate — offers to receive offers — offers to chaffer, as, I think, some learned judge in one of the cases has said.
See also John D. McCamus, The Law of Contracts, 3rd ed (2020), p. 32 and following:
The test for determining whether either party intended to communicate an offer or an acceptance is objective and does not rest on the subjective intentions of the parties. Thus, in determining whether the offeror has communicated an offer to the offeree, the question to ask is whether the offeree reasonably understood the communications, by word or conduct, of the offeror to constitute an offer.
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An offer is a communication by the offeror to the offeree indicating a willingness to enter into an agreement with the offeree on certain terms. If properly characterized as an offer, the communication will signal to a reasonable offeree that the offeree may create an agreement by simply accepting those terms. An offer thus creates a power of acceptance in an offeree.
There are no magic words or formulas to distinguish an offer from mere preparatory discussions. Every case is assessed in its own context. Certain categories of communications have tended to be recognized as being on one side of the line or the other, of course always subject to exceptional circumstances in a particular case. Typically, "price lists and advertisements of items for sale are mere invitations to treat" (McCamus, p. 36). But, in special circumstances, "[w]here the advertisement indicates the limited nature of the supply available... and offers the goods to those who first perform a particular condiction, it may be that the advertisement will be held to constitute an offer" (McCamus, p. 37).
The Supreme Court of Canada has said (Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp., 2020 SCC 29, at para. 33, citations removed):
The test is objective. It requires an examination of how each party’s conduct would appear to a reasonable person in the position of the other party. Thus, a court should determine whether a reasonable person in the position of one party would consider that the other party’s conduct constituted an offer.
The question is whether a party manifested an intention, by way of objective conduct, to be bound.