Story Case

S. B. Somerby was about to put up a fireproof barn of the latest design and he inserted in the leading architectural magazines that bids would be now considered. The Portland Cement Company sent in a bid and blue prints, which so exactly suited Somerby that he mentioned to several people that he could not have been better satisfied. This bid was also the lowest received.

Before Somerby wrote to the cement company to begin building, he decided to invest in some Colorado land. This decision delayed his first plan. The company insisted that he allow them to build the barn since its bid was the lowest and since the specifications suited him. Somerby refused to begin the work and said that he had changed his mind as to building. The cement company began suit for breach of contract. They contended that a contract existed, consisting of an offer by Somerby through the magazines and an acceptance on their part.

Is this the case?

Ruling Court Case No.1. Spencer Vs. Harding, Law Reports, Volume 5 Common Pleas, Page 561

Harding, by an agent, issued to Spencer and other persons engaged in the wholesale trade, a circular letter which read as follows:

"We are instructed to offer to the wholesale trade for sale by tender the stock in trade of Messrs. Eilback & Co., amounting to 2503 pounds, and which will be sold at a discount in one lot, payment to be made in cash, at 12 o'clock noon precisely; the tenders will be received and opened at our offices".

Spencer made a tender which proved to be the highest bid for the stock in question. But it was rejected by Harding and the stock in trade was sold to another person. Suit was then brought by Spencer to recover damages. He claimed that this circular sent out by Harding was an offer, and that his highest bid was an acceptance.

In defense, it was contended by Harding that the circular was only an advertisement; a way of acquainting the public with the fact that the goods were for sale, and that offers from the public would be entertained and considered.

Mr. Justice Willes delivered the opinion of the court: "If the circular had gone on:'We undertake to sell to the highest bidder', the reward cases would have applied and there would have been a good contract. But the question is, whether there is here any offer, or whether the circular amounted to anything more than a mere proclamation that Harding is ready to chaffer for the sale of the goods, and to receive offers for the purchase of them. Here, there is a total absence of any words to intimate that the highest bidder is to be the purchaser. It is a mere attempt to ascertain whether an offer can be obtained within such a margin as the sellers are willing to adopt".

The court decided that judgment should be given to Harding.

Ruling Court Case No. 2. Anderson Vs. The Board Of Directors, Volume 122 Missouri Reports, Page 61; Volume 26 Lawyer's Reports Annotated, Page 707

Anderson was engaged in the business of building; the Board of Directors was a corporation having charge and control of the public school property in the City of St. Louis. They had a well known rule in regard to buildings, by which it was provided that all new buildings should be"let by contract to the lowest and best bidder." The Board of Directors, being desirous of erecting a new high school building, advertised for bids. The advertisement contained the provision that the board reserved the right to reject any and all bids. Anderson made a bid for the building. It developed that his bid was the lowest and best of all the bids which had been turned in; but the contract was not given to him, but to another. Thereupon, Anderson brought this action, claiming damages.

It was contended by the board that he had no right to sue because no contract had ever been made with him; this advertisement was a mere invitation to those who wished to bid; their bids constituted offers; and they were free to choose any bid they saw fit.

Mr. Justice Barclay said: "It is, indeed, asserted that the Board rejected Anderson's bid without cause, arbitrarily and capriciously, through favoritism and bias. But if the board had the absolute right to reject any and all bids, no cause of action would arise to Anderson because of the motive which led to the rejection of his bid. The right to reject was unconditional. The board was entitled to exercise that right for any cause it might have deemed necessary, or even without any assignable cause. That advertisement was not an offer of a contract, but an offer to reject proposals for a contract".

Judgment was given for the Board of Directors in accordance with the opinion of the Court.

Ruling Law. Story Case Answer

It frequently happens that a person will make a proposal to the public for bids or offers. Such an invitation to bid cannot be made the basis of a contract. In the Court Case of Spencer vs. Harding, Harding advertised that he was in a position to make or receive offers, but did not unconditionally state that he offered to sell anything; such a statement is not an offer, and cannot be accepted as such. Thus, in the Story Case, Somerby did not make an offer to accept the lowest bid; he merely advertised for bids to be made to him, which he might accept if he chose.

Judgment should be given for Somerby.