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Most Common Business Law Issues:

Are Advertisements Contracts?

Generally, advertisements, catalogs, brochures, and announcements to the public related to the sale of merchandise at a specified price are not considered offers to enter into a binding contract. Rather, they are considered invitations to make a deal. As such, it will usually not be a breach of contract when the advertiser refuses to sell an item at a price he/she advertised.

When Can an Advertisement Be Considered an Offer?

An advertisement may be considered a valid offer if it has the following three elements:

  1. It is sufficiently definite in its terms (e.g. descriptions, quality, quantity, & price);
  2. It is communicated to a specific person or persons (usually limited group of people);
  3. The circumstances surrounding the publication show that the advertiser has the intent to enter into a contract.

The main factor that most courts look at is whether the parties had the intent to assume legal responsibility of entering into a contract. However, different courts have different ways in dealing with this issue.

When Can an Advertisement’s Offer Be Legally Enforceable? 

Many courts will look at the objective manifestation of the advertiser’s intent. In other words, the court will consider whether a reasonable person would read the advertisement and believe that the advertiser intended to form an agreement. The circumstances of the case are also considered. For example, an advertisement which offers a cow to farmers in exchange for fifty dollars won’t be taken seriously in a major city. The same advertisement in a rural area, however, might be a legal offer.

Other courts might consider whether the plaintiff, the party bringing the lawsuit, had actually accepted the offer made by the advertiser. A party accepts an offer when the party acts in a manner intended to fulfill his or her end of the bargain. For example, Joe sees an advertisement which asks college students to send in their used books in exchange for cash. Joe, a college student, accepts the offer if Joe sends his used books to the advertiser.

However, some offers require a specific method of accepting an offer, a method which excludes all other methods of accepting an offer. For example, if Joe sees an advertisement which asks college students to register so that they can send their used books in exchange for cash, Joe must register in order to accept the offer. Sending in the books will not be a valid form of acceptance. 

If The Advertisement Contains A Pricing Error To My Advantage, Can I Make The Advertiser Sell The Item To Me At The Erroneous Price?

Most likely not. Unless the advertisement meets the above elements of an offer, it will be doubtful that you can benefit from the erroneous advertisement. The advertiser will usually assert that he/she either did not intend to sell at the erroneous price or the terms of the advertisement were not definite enough.

Can The Advertiser Choose To Sell The Item At The Erroneous Price?

Yes. The advertisers might want to preserve business goodwill with its customers and affirm the contract even though the price was wrong. However, one needs to be cautious of the fact that if the advertiser voluntarily chooses to accept the erroneous advertisement as an offer, it may bar him/her from recovering damages from the printer/publisher of the advertisement who is responsible for the error.

An advertiser may also want to sell the item if he/she used bait and switch selling tactics in violation of consumer protection laws.

Can The Advertiser Withdraw an Offer If An Advertisement Is Considered An Offer?

An offer is revocable unless the advertiser has already received a benefit or unless the other party has already acted in reliance upon the offer. For example, an advertisement which promises medical treatment for cancer patients will be revocable unless the advertiser has already received payment from the patient. Alternatively, the offer cannot be revoked if the patient has moved in from across the country in order to take advantage of the offer.

What Types of Advertisements Are Forbidden By Law?

Advertisements cannot carry false or misleading information. False advertising is prohibited by federal and state law, including the Latham Act. The goal of false advertising laws is to outlaw deceptive business practices. A common false advertising practice is to claim that a product is “on sale” and then raise the price of the item.  

Advertisements cannot discriminate against protected classes. This is particularly true for job and real estate advertisements, which are specifically regulated by the Civil Rights Act and the Fair Housing Act, respectively. State laws may also restrict discriminatory advertisements. If a business invites the public, the business cannot be selective about who it invites unless the person would pose a danger to the business or to others.

Should I Consult an Attorney for my Contract Issues?

Contract law is complicated, and the applicable rules and standards may vary from state to state. If you desire to enter into a contract, an attorney can help with proper drafting to provide you with protection later on.

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Last Modified: 11-21-2013 04:55 PM PST

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