Babcock & Wilcox Company and Hitachi America, Ltd. disagreed about whether a purchase order for a Catalytic Reduction System constitutes an offer or acceptance.
An offer constitutes the will to enter into a contract and an acceptance is all that is required to enter into a contract.
Hitachi America, Ltd. (Hitachi) entered into a contract to build a Selective Catalytic Reduction System (SCR System) for Babcock & Wilcox Company (Babcock). Babcock sent a purchase order to Hitachi in 2000 that stated the purchase order should be considered an offer rather than an acceptance. Babcock experienced issues with the SCR System and sued Hitachi for breach of contract.
Whether an offer constitutes the will to enter into a contract and whether an acceptance is all that is needed to form the contract?
Yes. The purchase order explicitly stated that it was an offer that became an acceptance upon shipment of the SCR System. A buyer’s purchase order is usually considered to be an offer when sent in response to a price quote.
A price quotation is considered an invitation to offer, and the buyer’s purchase order is considered to be an offer.