Offer and Invitation to Treat

What is an offer & what is an invitation to treat?

In contract law identifying whether something is an offer or an invitation to treat is crucial.

Why?

  • An invitation to treat is of no legal consequence. In law it is not possible for someone to accept an invitation to treat, therefore if there has what appears to be an invitation to treat followed by ‘acceptance’ there is unlikely to be a contract.
  • By contrast an offer has legal consequences. If an offer is accepted, a legally binding contract is created.

Key differences between an Invitation to treat and Offer

You have probably read definitions elsewhere, but the reason for you reading this is probably to get a better understanding. With this in mind, let’s focus initially on the practical differences between the two.

Essentially:

  • An invitation to treat is usually someone showing an interest in a product or service. It is the negotiation stage (or earlier). There is usually not enough certainty of terms. Further discussions are necessary before there is enough certainty of terms.
  • An offer by contrast requires certainty of terms. What I mean by this is further discussions are not necessary to establish what the agreed terms will be. This could include things like price, how payment is to be made, when payment is to be made, how the service or produce is to be delivered, etc. If a key term still needs to be discussed, it is unlikely that there is sufficient certainty of terms.
  • Caselaw heavily influences this area of law. Past decisions explain the relevant factors that are likely to be examined in different situations. It is inadequate just to say that any given situation involves an invitation to treat or an offer. It is necessary to weigh up the different possibilities, the different relevant factors before coming to a logical conclusion of what the likelihood is.
  • Remember that only the acceptance of an offer can lead to a binding contract. Acceptance of an invitation to treat is not recognised as leading to a binding contract.

Essentially:

  • An invitation to treat is an invitation to enter into negotiations with a view to creating an offer
  • An offer is communicated by one party to another to enter into a legally binding contract on certain specified terms

Caselaw on Offer v Invitation to Treat

Below is a brief introduction into some of the relevant caselaw on offer and invitation to treat.

Advertisements

Caselaw, such as Carlill v Carbolic Smoke Ball Co [1893] makes it clear that advertisements are normally invitations to treat. On the facts of Carlill however the advert was found to be an offer. The reason why is looking at the wording in the advert there was certainty of terms. There was also a clear expression of intention to be bound.

In Harvela Investments Ltd v Royal Trust of Canada (CI) Ltd [1986] the words “we bind ourselves to accept” were used. This coupled with the fact that there was certainty of terms meant that party was deemed to be intending to make an offer.

The caselaw above are just a couple of cases on this sometimes complicated area. One word of warning is simply saying that something is or is not an offer is not enough. Weighing up all relevant factors and considering both factors in factor and against there being an offer is essential.

Display of Goods, Price labels, etc.

Caselaw such as Pharmaceutical Society of GB v Boots Cash Chemists (Southern) Ltd [1953], as confirmed in Fisher v Bell [1961], confirm that displaying goods is usually an invitation to treat. What this means that simply because something is on display as ‘for sale’ does not automatically make it is an offer.

Harvey v Facey [1893] makes it clear that statements of price (i.e. price labels, etc.) are usually just invitations to treat. Be careful however. If the shop, for example, binds itself to accept a certain price by signs there may be an offer which is accepted by going to the counter. For example, in the very unlikely shop says “We will sell every item in our shop for 99p” this could be construed as i) containing all the terms, ii) sufficient certainty of all the terms and iii) capable of being accepted without further negotiations.

Be careful, as this is not the same as simply saying that every item is available for sale for 99p, as there is no expression of intention to be bound in this situation.

Can acceptance take place without further negotiations?

It is crucial not just to look at the form of the possible offer/invitation to treat. It is necessary to look at the situation as a whole.

Let’s take the case of Chapelton v Barry Urban District Council [1940]. In this case there was a display of deckchairs. On the face of it there would logically have been an invitation to treat. Afterall displaying goods is normally just an invitation to treat. On the facts however it was decided that the 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 here 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. Through conduct i.e. taking the chair, acceptance took place.

[If individuals could not take the deckchairs, for example, because they were locked away or padlocked, 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 could be either rejected or accepted].


Further help is available

I hope that the above has given you a feel for some of the key differences between invitation to treat and offer. Nonetheless I would love to help you with your law studies. I offer law tuition and would love to hear from you (Contact Form below).

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