§ 26 PRELIMINARY NEGOTIATIONS

A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.

COMMENTS & ILLUSTRATIONS:

Comment:

a. Interpretation of proposals for exchange. The rule stated in this Section is a special application of the definition in § 24 and of the principles governing the interpretation of manifestations of assent. See § 20 and Chapter 9. Conduct which resembles an offer may not be so intended either because there is an intent not to affect legal relations (see § 18), or because the actor does not intend to engage in the conduct (see § 19), or because the proposal is not addressed to the recipient or is not received by the addressee (see § 23), or because the proposal contemplates a gift rather than a bargain (see Comment b to § 24). This Section deals rather with the case where the actor intends to make a bargain in the future, but only if he makes some further manifestation of assent. If the addressee of a proposal has reason to know that no offer is intended, there is no offer even though he understands it to be an offer. "Reason to know" depends not only on the words or other conduct, but also on the circumstances, including previous communications of the parties and the usages of their community or line of business.

b. Advertising. Business enterprises commonly secure general publicity for the goods or services they supply or purchase. Advertisements of goods by display, sign, handbill, newspaper, radio or television are not ordinarily intended or understood as offers to sell. The same is true of catalogues, price lists and circulars, even though the terms of suggested bargains may be stated in some detail. It is of course possible to make an offer by an advertisement directed to the general public (see § 29), but there must ordinarily be some language of commitment or some invitation to take action without further communication.

Illustrations:

1. A, a clothing merchant, advertises overcoats of a certain kind for sale at $ 50. This is not an offer, but an invitation to the public to come and purchase. The addition of the words "Out they go Saturday; First Come First Served" might make the advertisement an offer.

2. A advertises that he will pay $ 5 for every copy of a certain book that may be sent to him. This is an offer, and A is bound to pay $ 5 for every copy sent while the offer is unrevoked.

c. Quotation of price. A "quotation" of price is usually a statement of price per unit of quantity; it may omit the quantity to be sold, time and place of delivery, terms of payment, and other terms. It is sometimes associated with a price list or circular, but the word "quote" is commonly understood as inviting an offer rather than as making one, even when directed to a particular customer. But just as the word "offer" does not necessarily mean that an offer is intended, so the word "quote" may be used in an offer. In determining whether an offer is made relevant factors include the terms of any previous inquiry, the completeness of the terms of the suggested bargain, and the number of persons to whom a communication is addressed.

Illustration:

3. A writes to B, "I can quote you flour at $ 5 a barrel in carload lots." This is not an offer, in view of the word "quote" and incompleteness of the terms. The same words, in response to an inquiry specifying detailed terms, would probably be an offer; and if A added "for immediate acceptance" the intent to make an offer would be unmistakable.

d. Invitation of bids or other offers. Even though terms are specified in detail, it is common for one party to request the other to make an offer. The words "Make me an offer" would normally indicate that no offer is being made, and other conduct such as the announcement of an auction may have similar effect. See § 28. A request for bids on a construction project is similar, even though the practice may be to accept the lowest bid conforming to specifications and other requirements. And forms used or statements made by a traveling salesman may make it clear that the customer is making an offer to be accepted at the salesman's home office. See § 69.

Illustration:

4. A writes B, "I am eager to sell my house. I would consider $ 20,000 for it." B promptly answers, "I will buy your house for $ 20,000 cash." There is no contract. A's letter is a request or suggestion that an offer be made to him. B has made an offer.

e. Written contract documents. A standard method of making an offer is to submit to the offeree a written agreement signed by the offeror and to invite the offeree to sign on a line provided for that purpose. See § 27. But the signature even in such a case is not conclusive if the other party has reason to know that no offer is intended. More common is the use of promissory expressions or words of assent in unsigned documents or letters where the document is intended not as an offer but only as a step in the preliminary negotiation of terms, or as a specimen for use in other transactions, or as something to be shown to a third person to influence his action. Reason to know that such is the intention may exist even though the document on its face seems to be clear and unambiguous.

f. Preliminary manifestations as terms of later offer. Even though a communication is not an offer, it may contain promises or representations which are incorporated in a subsequent offer and hence become part of the contract made when the offer is accepted. Indeed, the preliminary communication may thus form part of a written contract, or of a memorandum satisfying the Statute of Frauds, or of an integrated contract. See Comment c to § 20, §§ 132, 202.