Larson Lexus, a new car dealer, runs the following newspaper ad during the fall

Question

Larson Lexus, a new car dealer, runs the following newspaper ad during the fall of 2005. “Three 2004 Lexus LS 400s must go! $55,000 each! The first three customers who arrive at our dealership on Saturday, October 8th with this ad can buy one of these cars for $55,000.” Knowing that this is a great price for this car, Mike is the first customer to appear at the Larson lot on Saturday, October 8th. He hands the ad to the Larson salesman and says that he’d like to buy one of the LS-400s for $55,000.

Is the dealership contractually bound to sell Mike the car at that price?

Define the legal issue and make an argument that there was a contract and make an argument that there was not a contract.

Please don't forget to answer these:

ISSUE:

ANALYSIS:

CONCLUSION:

Explanation / Answer

If we talk on general and common sense, when a seller gives an advertisement in a newspaper or any brochure to the public for sale of goods at price, this is what we called as Invitation to an offer or invitation to new deal. Therefore, it may not be a breach of contract when seller refuse to sell at price as there was no legal and binding contract so far.

ISSUE: Here the issue is whether the advertisement amounts to an offer made which the seller cannot deny and is binding on him.

ANALYSIS: If we talk in general and common sense, when a seller gives an advertisement in a newspaper or any brochure to the public for the sale of goods at certain price, this is what we called as Invitation to an offer or invitation to make a new deal. Therefore, it may not be a breach of contract when seller refuse to sell at price as there was no legal and binding contract so far.

But whenever the situation comes to decide an issue relating to legality of any contract, the court always refer to the intention of the parties to the Contract. If the intention of the parties is clear that they want to enter into binding contract, then it is a contract otherwise not.

To ascertain the intention of the parties, look at the advertisement first and its intention and contents, if it is clear in content so as to sure that there is no ambiguity such as description of the product, quantity, price etc., whether it is delivered to specific person or few individuals in a group or advertisement taken together shows the intention that seller wants to enter into the contract.

CONCLUSION:

Further to conclude, if the person with an intent to accept the offer has done something in return to the response of the newspaper, the seller would be bound to sell. If we the take in developed countries and urban area, lot of advertisement this kind is made to attract the customers and later to better negotiate on it. Whereas, for poor and rural areas, this advertisement would be taken rather seriously.

Argument in favour –

Yes, it is a contract as the Goods to sell is clearly defines and specified. There is no ambiguity as the date and place is also mentioned for the sale. Target is first three customers. Also, there is a specific way for acceptance of an offer like to handover the advertisement in the newspaper to the seller before acceptance of the same and hence the buyer fulfils all the obligations as required by the seller hence it is a valid offer and acceptance, intention and consideration as required for a valid element of a contract.

Argument against –

To conclude – It is not a contract – since an intention to make a valid contract is absent.

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