GRAINGER v GOUGH

General Principle:

Because merchants have limited supply, the advertisement for their goods is considered an invitation to treat.

Name:

Grainger v Gough [1896] AC 325, HL

Facts:

The Agents were London agents (complainants) for a wine merchant based in France (defendants). They circulated catalogues and took orders, which they then forwarded to the defendants, who maintained the right to refuse any of them. The case’s issue was based on whether or not the defendants were liable to pay tax on legal contracts provided by their agents based in England.

Ratio:

The House of Lords in Grainger v Gough held the advertisement to ultimately be an invitation to treat. As such, it was not an offer. It was just a means of expressing a willingness to listen to offers as the beginning of further negotiations.

Application:

Lord Herschell said in this case that it would be incorrect to regard these kinds of advertisements as offers because: “the merchant might find himself involved in any number of contractual obligations to supply wine of a particular description which he would be quite unable to carry out,” because the merchant only keeps a finite supply.

Analysis:

On 10 September 2020, ELtd advertised in British Magazines for the sales of pens at £120 per pack. It is important to determine from the outset the legal status of the advertisement, i.e. whether it constitutes an offer or an invitation to treat (ITT). An offer may be described as a suggestion made by one party to another. This proposal is based on terms that are either fixed in stone and cannot be modified, or terms that can only be put in stone if the opposing party accepts them. In Grainger v Gough, representatives for a French wine merchant distributed catalogues and accepted orders, which they subsequently delivered to the defendants, who were free to reject any of them. The advertising was seen by the House of Lords as an ITT. As a result, it was not a proposal or offer. It was just a way of indicating a readiness to consider proposals as a starting point for future discussions.