If that happens (it actually happens, sometimes though it just says it doesn't work but actually the offer still is sent through) nothing can be done to fix it (it might just eventually start to work again some days later).
However there is a workaround: Add him as a friend, then open chat with him and invite him to trade. Of course this way both need to be online at the same time, but it will work that way.
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Sorry, completely forgot to check back here. Glad you got it sorted eventually. :)
Side note: when I get that cannot trade error I normally find logging in and out fixes it most of the time (through the site, rather than steam client).
Enjoy the game!
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