Counter-Offer, Apparent Authority and an Obvious Invoice Error
On 3 February Golden Grain Ltd, a rice miller in Kebbi, emailed Chidi Stores offering 600 bags of rice at ₦8,000 a bag, delivery within 14 days, the offer to remain open for seven days. On 5 February Chidi replied by email: 'We will take the 600 bags at ₦7,600 a bag, delivery included, payment in 30 days.'
Golden Grain sent no reply, but on 13 February delivered 600 bags to Chidi's warehouse with an invoice for ₦4,560,000 on 30-day terms. Chidi's storekeeper signed for the goods and Chidi resold 200 bags before his lawyer queried the position.
Separately, Bola, whose business card reads 'Regional Sales Manager, Golden Grain Ltd', signed a ₦3,500,000 supply contract with a retailer. Bola's appointment letter, which the retailer never saw, limits him to orders of ₦2,000,000.
Chidi has now spotted that while the invoice charges ₦7,600 a bag, the total is stated as ₦3,800,000. He proposes to pay that figure and says the supplier's mistake is 'their problem'.
1. Has a binding contract been formed between Golden Grain and Chidi, on what terms, and at what price?
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Offer The 3 February email is a clear offer: 600 bags, ₦8,000 a bag, delivery within 14 days, open for seven days.
Counter-offer destroys the original offer Chidi's 5 February reply does not accept - it varies the price (₦7,600), adds free delivery and imposes 30-day credit. It is a counter-offer and, as a rejection, destroys the original offer (Hyde v Wrench). Golden Grain could not afterwards bind Chidi at ₦8,000 merely by saying 'we accept'.
Silence is not acceptance An offeror cannot impose a contract by silence (Felthouse v Bindley), so Golden Grain's failure to reply settles nothing on its own.
Acceptance by conduct Acceptance may be by performance where the offeree knows the terms and acts on them. Golden Grain delivered exactly what Chidi's counter-offer specified (600 bags, delivery included, 30-day terms), and Chidi took delivery and dealt with the goods by reselling 200 bags - unequivocal conduct showing acceptance (Brogden v Metropolitan Railway). The performance itself communicates the acceptance; no further email was needed.
Result A contract was concluded on or about 13 February on Chidi's terms: 600 bags at ₦7,600 = ₦4,560,000, payable within 30 days. The invoice is a demand for payment, not an offer, and cannot vary the agreed price. Property passed on delivery, which is why Chidi could pass good title to the 200 bags he resold.
2. Is Golden Grain bound by the ₦3,500,000 contract Bola signed?
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Actual authority - no Bola's appointment letter caps him at ₦2,000,000, so he had neither express nor implied actual authority to commit ₦3,500,000. Internally he acted outside his mandate.
Apparent (ostensible) authority - yes The test (Freeman & Lockyer v Buckhurst Park Properties) is:
- A representation by the principal that the agent has authority - here the job title 'Regional Sales Manager' on company-issued business cards and, presumably, letterhead and email signature.
- The agent acted within the ordinary scope of that described authority - a regional sales manager signing a supply contract is squarely in the ordinary course of a rice miller's business.
- The third party relied on the representation and had no notice of the internal limit - the retailer never saw the appointment letter and nothing alerted it to the cap.
All three are satisfied, so Golden Grain is bound to supply at ₦3,500,000, and an internal instruction to Bola cannot defeat the retailer's claim.
Recourse and remedy Golden Grain's claim lies against Bola - disciplinary action and recovery of any loss, and potentially breach of the implied duty to act within authority; the retailer may also be able to sue Bola for breach of warranty of authority if the company had refused. To prevent recurrence: publish written authority limits, route orders above a threshold through a central approval step, confirm authority in every order acknowledgement, and stop issuing titles that overstate authority.
3. Chidi says he will pay only ₦3,800,000 because the invoice total is wrong. Advise on the legal and ethical position of both parties.
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Legal position The contract price is 600 × ₦7,600 = ₦4,560,000. An invoice is a demand for payment, not the contract, so an arithmetical slip in it does not alter the agreed sum. The balance of ₦760,000 is a debt due.
Payment of a lesser sum in satisfaction of a larger undisputed debt is not good consideration (Pinnel's case, applied in Foakes v Beer), so Chidi cannot make the ₦3,800,000 operate as a discharge unless Golden Grain genuinely agrees a compromise supported by consideration (for example earlier payment, payment in a different form, or an agreement by deed).
Where one party makes a unilateral mistake as to the amount that is obvious on the face of the document and known to the recipient, the court may rectify the document and the supplier can recover the shortfall. Retaining the benefit would be unjust enrichment.
Ethical position The ICAN Code requires integrity, objectivity and professional behaviour. A member must not take deliberate advantage of another party's clerical error, even where a legal argument might be available, and must not advise a client to do so. Confidentiality does not license sharp practice.
Advice Pay ₦4,560,000 within the 30-day term, notify Golden Grain of the error in writing and keep a copy of the invoice and the 5 February email as evidence of the agreed terms. If cash flow is the real difficulty, negotiate a documented instalment arrangement rather than pocketing an error. The answer is the same even if the client would prefer the other one.