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  • Scope and validity of an offer (or bid)

     
     

    The scope and validity of an offer (or bid) must be specified - when does acceptance constitute a firm commitment for both parties?

    An exporter wishing only to publicize a potential availability at an approximate price uses terminology such as price idea or we offer/quote subject to availability or subject unsold. To the buyer this suggests there is a good chance of obtaining the coffee in question if the indicated price is agreed to. Although the exporter is not bound to sell, the buyer has some reason to be annoyed if the exporter refuses to do so for no obvious reason (e.g. was simply fishing for price information).

    A firm offer, however, does commit the seller if the buyer accepts the offer within a reasonable time. Reasonable is open to interpretation, so sellers must stipulate a time after which the offer lapses. The same applies to bids from buyers: these too must be specific. Subject to immediate reply says that the reply should be immediate, but even immediate is not precise. It is always better to say, for example, subject to reply here by 3 p.m. our time. The choice of time limit depends on the situation of the exporter and the type of buyer to whom the offer is addressed. An exporter who is keen to sell may wish to try various markets at the same time. If they have only limited stocks of the coffee in question they cannot make multiple firm offers and will instead offer subject to availability or subject unsold. Alternatively, they can make firm offers for short periods to individual buyers by telephone or, increasingly, by email. Conversely, they can give a buyer or, more probably, an agent an entire day to work an offer, but the exact time at which the offer expires should always be stated.

    Modern communications offer almost instantaneous exchanges, especially through email and electronic commerce, enabling exporters to contact many potential buyers within short periods of time. It is not only the face of trade that is changing, but also the methodology and terminology. (See chapter 6, E-commerce and supply chain management.) But what will not change is that acceptance, verbal or otherwise, within the time limit of a firm offer or bid constitutes a firm and binding contract. Disputes can be submitted to arbitration but the best approach is to ensure that the wording of offers or bids is clear and precise.

    For example: We offer firm for reply here today by 5 p.m. our time 1,000 bags XYZ arabica grade one as per sample 101 at United States cents 100/lb, FOB [port], NSW (net shipping weight), shipment November/December 2002 our option, payment NCAD first presentation.
    This assumes that the applicable standard form of contract has previously been agreed; for a new buyer the contract should therefore be mentioned as well.

    Counter offers: if a buyer counter bids a lower price against a firm offer this automatically releases the seller. The offer is no longer binding, because the buyer has rejected it by counter offering. If the seller rejects the counter offer the buyer cannot subsequently revert to the original offer: when they countered, that firm offer lapsed unless of course the seller agrees to reinstate it.

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