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Grainger & Son v Gough [1896] AC 325 HL

FORMATION OF CONTRACT

Facts

The defendant wine merchant circulated a catalogue which contained a price list for its products. The claimant ordered a number of bottles of wine from the catalogue and, when the defendant refused to deliver these at the stated price, alleged that a contract had been formed.

Issue

The issue was whether the price list constituted an offer to sell wine at a certain price (in which case the contract was fully formed and the claimant had a valid claim), or an invitation to treat (in which case no contract had been formed).

Held

Rejecting the claim, the House of Lords held that the price list must be construed not as an offer, but as an invitation to treat. In reaching this conclusion, it reasoned that to interpret the list as an offer would mean that in theory the defendant would be obliged to deliver an unlimited quantity of wine at the stated price, upon receipt of an order. This would be unreasonable, and would not reflect the intentions of the parties as the merchant’s stock is necessarily limited, and it would not be possible for him to carry out such an order. Both reasonableness and objective intention are key to distinguishing between an offer and an invitation to treat. On this basis, the list was interpreted an invitation to customers to offer to buy wine at the stated price, which the merchant may then accept or reject. In this case, the defendant was not bound to deliver the wine ordered by the claimant.


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