Offer and Invitation to Treat

Distinguishing between what is an Offer and Invitation to treat is essential for any contract law student, because an offer can lead to a binding contract whereas an invitation to treat cannot do so.

Although this law area is not limited to advertisements, this post looks at advertisements in detail, setting out when an advertisement is more likely to be an invitation to treat and when an offer.

This post also discusses other common areas of dispute, such as whether a display of goods or price label amounts to an invitation to treat or an offer.

Why is the difference between an offer and invitation to treat important?

The difference between an offer an invitation to treat is important because:

  • If you wish to prove that a contract exists, you need to prove that an offer was made and that offer was accepted.
  • If there is no offer, there can not be valid acceptance. No valid acceptance would mean that there is no legally binding contract.
  • Consequently, if that there is an invitation to treat which is followed by acceptance, there is no legally binding agreement. In law it is not possible to accept an invitation to treat.

With the above in mind let’s look at some common areas of dispute on this area of law:

Advertisements are not usually offers

  • TV advertisements and advertisements in general are usually not offers. Adverts are usually known as invitations to treat.
    • An invitation to treat is more or less an expression of interest that does not amount to an offer, because:
      • 1. There is objectively no intention to be contractually bound; and
      • 2. Further negotiations would be necessary before all necessary terms have been discussed. The reason for this is there is a lack of certainty of terms.
        • In essence there is no offer that is capable of acceptance without further negotiations or questions on the terms being offered.
    • Let’s look at it from a practical point of view. If normally TV advertisements were ‘offers’, it would mean that every single viewer could accept the ‘offer’. This would lead to binding contracts. When the company could not supply the goods or perform the service (due to being overwhelmed by the number of orders), thousands if not millions of people could sue the company for breach of contract. For this reason, there is usually no intention to be contractually bound.
    • If we look at advertisements in newspapers, etc. the same arguments apply. Advertisements in newspapers, magazines, etc. are usually only invitations to treats (not offers) in law, because:
      • Most advertisements are vague and do not tell you all necessary terms. This means there is too much uncertainty for there to be a valid offer.
      • Additionally, advertisements usually ask you to visit your local store or phone a number to place an order. They are essentially saying that you cannot make an order there and then. This points to the fact there is no intention on their part to make an offer. They are asking you to approach them (or a third party) to negotiate. As you have to discuss terms further before knowing what is being offered and whether the item, etc. is available, there is usually no offer at that point.
    • Advertisements of all kinds usually do not say that they will definitely accept your order if you phone, etc. If unusually they did say that they will definitely take your order and there was certainty of terms, possibly they could be making an offer. This is partially why ‘while stocks last’ is written, to ensure that they are not obliged to accept any orders they cannot fulfill.

When an advertisement can be an offer

  • As discussed above, an advertisement is not normally an offer. This is usually because of lack of certainty of terms.
  • However, if there is certainty of terms, there can be an ‘offer’. Consider whether the terms of the advertisement are capable of acceptance without further negotiation.
  • In most situations however there will not be enough certainty for the reasons discussed above.
  • It is possible however in limited circumstances for an advertisement to amount to an offer. One important legal case to look at is Carlill v Carbolic Smoke Ball Company [1892]:
    • Carlill v Carbolic Smoke Ball Company [1892] is a case when an advertisement amounted to an offer. The key factor was there were clear and certain terms, which were capable of acceptance without further negotiations.
    • In addition, the company used wording that supported the argument that they intended to be bound by their statement (i.e. offer). Depositing money into an account confirmed this intention.
      • See also the case of Harvela Investments Ltd v Royal Trust of Canada (CI) Ltd [1986], in which it was said “we bind ourselves to accept”. This wording indicated that an offer was intended, rather than an invitation to treat.
    • Have a read of the Carlill case for a detailed discussion of why the advertisement in this case was an offer, rather than an invitation to treat.

Displays of price are not usually offers

  • Price labels in shops, supermarkets, etc. are not usually offers. They are usually known in law as invitations to treat. Arguably, when the cashier scans the item and asks for payment for the price an offer is made, which you can either accept or reject.
  • The case of Harvey v Facey [1893] makes it clear that displays of price by themselves do not make an offer.
  • The key difference between an offer and invitation to treat as regards price labels can be explained by the fact that displaying a price is simply saying ‘I may be interested in selling’. This is just an expression of interest and therefore an invitation to treat.
  • However, once you take the item to the till and the cashier asks for payment, the cashier is effectively saying ‘I am definitely happy to sell you this item for £….’. At this point there is an offer, which can be accepted or rejected.
  • The case of Pharmaceutical Society of GB v Boots Cash Chemists (Southern) Ltd [1953] made it clear that simply displaying goods is normally an invitation to treat, rather than an offer.

Displays of goods are not usually offers

  • Simply displaying an item in a shop, etc. is not usually an offer even if it has a price label. It is usually at the till when the cashier asks for payment that an offer is made.
  • The difference between an offer and invitation to treat here is explained in that displaying goods is effectively saying ‘I might be interested in selling this item £….’.

When is there an offer?

In brief an offer has certainty of terms and is capable of being accepted without the need for further negotiations/discussions on the terms being offered.

Let’s consider the following scenario:

  • Imagine that you see a advertisement on TV for an item.
  • You go to a local shop, see the item on sale with the price tag.
  • You go up to the cashdesk with the item.
  • The item is scanned. You are told the price and are asked to pay.
    • Arguably there is no offer until the time when you are told the price and asked to pay, because:
      • The advertisement was probably an invitation to treat (for the reasons discussed previously).
      • The price tag is probably an invitation to treat (again for the reasons discussed previously).
      • You going up to the till with the item is probably still an invitation to treat. Arguably at this stage you do not yet have confirmation of the price and whether the shop is willing to sell the item.
      • At the point when the price is confirmed and the willingness to sell is shown by the cashier is the offer is made. (You could then accept or reject the offer to sell).

One key point is an offer must be capable of acceptance without the need for further negotiations. If further negotiations are necessary to agree terms, it would normally be illogical to argue that there is an offer.

Consider the difference between the following scenarios:

  • You go to the seaside and see some deckchairs tied up. There is a big sign saying ‘See an attendant for a deckchair. Charges apply’.
    • The sign is probably not an offer, because the terms are at this stage uncertain. Further discussions/negotiations would be needed in this scenario to know the relevant terms on offer.
  • Another day you go to the seaside and see a deckchair. There is a big sign saying ‘Feel free to use a deckchair for up to 2 hours (£5 fee)’. You sit down in a deckchair.
    • The sign is probably an offer, because it tells you all necessary terms. There is no need to ask further questions on the terms. You accept the offer by sitting down in a deckchair.
  • You go to the seaside and see a deckchair. Again you see a big sign, but this time it says ‘Deckchairs available. See attendant for details’.
    • Clearly there is no certainty of terms, so there can be no offer at this stage. You need to discuss terms with the attendant.
    • If you later speak to the attendant who then gives you all the relevant terms, only at that point could an offer be made, which you can either accept or reject.

The case of Chapelton v Barry Urban District Council [1940] is a useful case on the points above. It concerned the display of deckchairs. On the face of it displaying deckchairs at the seaside would normally be an invitation to treat. However, in this case the display of deckchairs for hire on the beach constituted an offer which could be accepted by taking a chair and sitting on it.

The key factor in the Chapelton case was that there was that all the terms of the offer were clear before/at the time of taking the chair, so no further discussions were required, and by conduct i.e. taking the chair, acceptance took place.

Imagine the situation however where individuals could not take the deckchairs, for example, because they were locked away or padlocked. In this scenario there would likely only be an invitation to treat by the deckchair attendant and a customer would have to make an offer to the attendant to gain access to the chairs, which he could either reject or accept.

Generally:

  • There is usually no offer at the discussion/negotiation stage
  • Only when there is certainty of terms and the ‘offer’ can be accepted without further questions being asked on the terms being offered can there usually be an offer

I hope that the above has given you an insight into some of the differences between an offer and invitation to treat. It is intended just for general information. Consequently I have outlined some of the main points, rather than all relevant details, caselaw, etc. There are some more detailed rules on offer, which have not been included.

The above is subject to copyright, so please do not copy or adapt the above.

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