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Difficulty: HardLaw of Contract: Definition, Essential Elements, and Types

A retail merchant displays a designer wristwatch in a window exhibition with a price label of ₦50,000. A customer enters the store, presents ₦50,000 in cash, and demands the item. The merchant refuses to sell, explaining that the price label was a typographical error and the actual price is ₦80,000. The customer insists that a binding contract was formed upon tendering the requested cash. Under the legal principles governing the law of contract, which of the following statements correctly evaluates the legal standing of the parties?

  1. The price label display is an invitation to treat; the customer made an offer by tendering cash, which the merchant was entitled to decline.Answer
  2. B
    The displayed price tag constitutes a binding unilateral offer to the public, which the customer accepted by tendering payment.
  3. C
    A binding contract was formed, but it becomes voidable at the merchant's option due to a unilateral mistake regarding price.
  4. D
    The contract is legally enforceable by the customer because the price tag represents a legal warranty guaranteed by commercial law.

Answer

The display of goods with a price label constitutes an invitation to treat; presenting payment represents an offer which the merchant retains the legal right to accept or refuse.
In commercial law, displaying goods with price tags in a store window or shelf is considered an invitation to treat rather than an offer. The customer makes an offer when tendering money to purchase the item, which the seller has the right to accept or decline. Since the shopkeeper declined the offer, no binding contract was created.

Step-by-Step Solution

1
Analyze the legal character of displaying goods with price tags in retail trade.
Under the law of contract (established in cases such as Fisher v Bell), goods displayed in shop windows or on shelves are invitations to treat, inviting prospective buyers to make offers.
An invitation to treat is an expression of willingness to negotiate and does not constitute a legally binding offer.
2
Determine who makes the legal offer and when acceptance occurs.
The customer makes the offer upon selecting the item and presenting payment at the counter. Acceptance occurs when the merchant agrees to receive payment and transfer ownership.
Contract formation requires mutual assent via offer and acceptance.
3
Evaluate the customer's legal claim of contract formation.
Since the merchant rejected the customer's offer, no contract was formed, and the merchant is not legally obligated to sell the watch at the mispriced amount.
An offer that is rejected cannot form a binding contract.

Key Concept

Distinction between an Offer and an Invitation to Treat
Estimated Time:1m 30s
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Topics

Law of Contract: Definition, Essential Elements, and Types

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