Introduction
Harvey v. Facey (1893) is a leading decision by the Privy Council that clarified a fundamental principle of contract law: the distinction between an offer and an invitation to treat. The case is frequently cited to explain that a response to a query about price does not constitute an offer. The court held that unless there is a clear expression of willingness to be bound, no contract is formed, even if the communication appears definite.
Bench
- Lord Watson
- Lord Fitzgerald
- Lord Hobhouse
Court: Judicial Committee of the Privy Council
Facts
In Harvey v. Facey (1893), the dispute arose in the context of negotiations over the sale of a property known as “Bumper Hall Pen” in Jamaica. The appellants, Harvey and another party, were interested in purchasing the property owned by the respondent, Facey.
The sequence of telegrams exchanged between the parties is crucial to understanding the facts:
- Harvey sent a telegram to Facey stating: “Will you sell us Bumper Hall Pen? Telegraph lowest cash price.”
- Facey responded by telegram: “Lowest price for Bumper Hall Pen £900.”
- Harvey immediately replied: “We agree to buy Bumper Hall Pen for £900 asked by you.”
Facey, however, did not respond to this last message. When Harvey sought to enforce what he believed was a contract, Facey denied that any binding agreement had been made. Harvey then brought an action against Facey, claiming that a valid contract had been formed when he accepted the quoted price.
The central issue revolved around whether Facey’s response constituted a legal offer or merely a statement of price. Harvey assumed that quoting the lowest price amounted to an offer, and that his response created a binding contract. Facey contended otherwise.
Issues
- Whether Facey’s reply, quoting the lowest price, constituted a legal offer to sell the property.
- Whether Harvey’s acceptance of that quoted price created a binding contract under contract law.
Arguments
Harvey argued that Facey’s telegram stating the lowest price of £900 was a clear and specific offer. Since he immediately accepted the price, he believed that a valid contract had been formed. He relied on the communication sequence to support his claim of agreement.
Facey, on the other hand, argued that he never made an offer to sell. He maintained that he merely responded to a question about price and had not expressed any intention to be bound. He pointed out that he never agreed to sell the property or accepted any offer.
Ratio Decidendi
The Privy Council held that there was no valid contract between Harvey and Facey. The Court ruled that quoting a lowest price in response to a query does not, in itself, constitute a legal offer. In contract law, an offer must demonstrate a clear willingness to be bound upon acceptance.
In this case, Facey’s statement was merely a response to a question asking for his minimum acceptable price. He never expressed a willingness to sell the property to Harvey or to anyone else for that price. Therefore, his reply was considered an invitation to treat, not an offer.
The decision in Harvey v. Facey (1893) clarified that an essential requirement of contract formation is an unequivocal offer that can be accepted. A price quote, without more, does not indicate intent to form a contract.
Observation
The Court observed that mere communication of the minimum price at which a person might be willing to sell does not amount to a contractual offer. The communication must include a clear and definitive expression of willingness to enter into a contract on specified terms.
This case also demonstrates the importance of precise communication in contractual negotiations. A response to a query about price, even if direct, is not binding unless it is accompanied by an offer.
In Harvey v. Facey (1893), the judges emphasized that a contract cannot arise from a misunderstanding of statements that were never intended to form a binding agreement.
Decision
The Privy Council held that no contract had been formed between Harvey and Facey. The first telegram from Harvey was an inquiry, not an offer. The second telegram from Facey was a reply to that inquiry, stating the lowest price but not offering to sell. The third telegram from Harvey was an attempted acceptance, but it was of an offer that never existed.
Since there was never a complete offer, there could be no valid acceptance, and therefore, no binding contract was formed. The Court concluded that Facey was not legally bound to sell the property to Harvey.
The appeal was dismissed, and judgment was given in favor of Facey. The Court reaffirmed that clear communication of intention is necessary for a contract to arise.
Conclusion
Harvey v. Facey (1893) is a foundational case in contract law that teaches the critical distinction between an offer and a statement of price. It established that responding to a request for price information does not amount to making a legal offer. For a binding contract to be formed, there must be a clear offer followed by acceptance.
This case remains essential for law students and legal professionals in understanding contract formation, offer, and invitation to treat. It highlights that not every communication in a negotiation leads to a contract, and that intention must be evident.
Important Terms
- Offer: A proposal showing readiness to form a contract upon acceptance.
- Invitation to Treat: An invitation to negotiate or make offers, not binding by itself.
- Acceptance: Agreement to the terms of an offer, creating a binding contract.
- Price Quote: A communication of possible sale terms, not necessarily an offer.
- Contract Formation: The legal process requiring offer, acceptance, and intent to create legal relations.
