Invitation to treat
Encyclopedia
Invitation to treat is a contract law term. It comes from the Latin phrase invitatio ad offerendum and means "inviting an offer". Or as Andrew Burrows writes, an invitation to treat is
Contract lawyers distinguish this from a binding offer, which can be accepted to form a contract (subject to other conditions being met). The distinction between an offer and invitation to treat is best understood through the categories that the courts create. Invitations to treat include the display of goods; the advertisement of a price or an auction; and an invitation for tenders (or competitive bids). There may however be statutory or complementary obligations, so consumer protection
laws prohibit misleading advertising and at auctions without reserve there is always a duty to sell to the highest bona fide
bidder.
[1986] AC 207, where the defendants had made it clear that they were going to accept the highest tender; the court held that this was an offer which was accepted by the person who made the highest tender and that the defendants were in breach of contract by not doing so.
An auction
may be more ambiguous. Generally an auction may be seen as an invitation to treat, with the property owner asking for offers of a certain amount and then selecting which to accept as illustrated in Payne v Cave
(1789) 3 TR 148. However, if it is stated by the owner that there is no reserve price or that there is a reserve price beyond which offers will be accepted then the auction is most likely a contractual offer which is accepted by the highest bidder; this was affirmed in the Court of Appeal
in Barry v Davies
[2000] 1 WLR 1962.
A shop owner displaying their goods for sale
is generally making an invitation to treat (Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401). They are not obliged to sell the goods to anyone who is willing to pay for them, even if additional signage such as "special offer" accompanies the display of the goods. (But see bait and switch
.) This distinction was legally relevant in Fisher v Bell [1961] 1 QB 394, where it was held that displaying a flick knife for sale in a shop did not contravene legislation which prohibited offering for sale such a weapon. The distinction also means that if a shop mistakenly displays an item for sale at a very low price it is not obliged to sell it for that amount.
Generally, advertisements are invitations to treat, so the person advertising is not compelled to sell to every customer. In Partridge v Crittenden [1968] 1 WLR 1204, it was held that where the appellant advertised to sell wild birds, was not offering to sell them. Lord Parker CJ commented that it did not make "business sense" for advertisements to be offers, as the person making the advertisement may find himself in a situation where he would be contractually obliged to sell more goods than he actually owned. In certain circumstances however, an advertisement can be an offer, a well known example being the case of Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256, where it was held that the defendants, who advertised that they would pay anyone who used their product in the prescribed manner and caught influenza £100 and said that they had deposited £1,000 in the bank to show their good faith, has made an offer to the whole world and were contractually obliged to pay £100 to whoever accepted it by performing the requested acts.
For an offer to be capable of becoming binding on acceptance, the offer must be definite, clear, and final. If it is a mere preliminary move into negotiation which may lead to a contract, it is not an offer but an invitation to treat. The offerer must have been initiating negotiations from which an agreement may or may not in time result. The important point to note is that, since an invitation to treat is not an offer, but rather a phenomenal preliminary to an offer, an invitation to treat is not capable of an acceptance which will result in a contract.
"an expression of willingness to negotiate. A person making an invitation to treat does not intend to be bound as soon as it is accepted by the person to whom the statement is addressed."
Contract lawyers distinguish this from a binding offer, which can be accepted to form a contract (subject to other conditions being met). The distinction between an offer and invitation to treat is best understood through the categories that the courts create. Invitations to treat include the display of goods; the advertisement of a price or an auction; and an invitation for tenders (or competitive bids). There may however be statutory or complementary obligations, so consumer protection
Consumer protection
Consumer protection laws designed to ensure fair trade competition and the free flow of truthful information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors and may provide additional...
laws prohibit misleading advertising and at auctions without reserve there is always a duty to sell to the highest bona fide
Bona Fide
Bona Fide is a studio album from rock band Wishbone Ash. It is the first studio album in six years and is the only studio album to feature guitarist Ben Granfelt...
bidder.
Case law
The clearest example of an invitation to treat is a tender (or bidding in the U.S.) process. This was illustrated in the case of Spencer v Harding (1870) LR 5 CP 561, where the defendants offered to sell by tender their stock and the court held that they had not undertaken to sell to the person who made the highest tender, but were inviting offers which they could then accept or reject as they saw appropriate. In certain circumstances though, an invitation for tenders may be an offer. The clearest example of this was seen in Harvela Investments Ltd v Royal Trust of Canada (CI) LtdHarvela Investments Ltd v Royal Trust of Canada (CI) Ltd
Harvela Investments Ltd v. Royal Trust of Canada Ltd [1986] AC 207 is an English contract law case, concerning the validity of referential bids in competitive tenders.-Facts:The Royal Trust Co. owned shares in a company, and invited bids for them...
[1986] AC 207, where the defendants had made it clear that they were going to accept the highest tender; the court held that this was an offer which was accepted by the person who made the highest tender and that the defendants were in breach of contract by not doing so.
An auction
Auction
An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder...
may be more ambiguous. Generally an auction may be seen as an invitation to treat, with the property owner asking for offers of a certain amount and then selecting which to accept as illustrated in Payne v Cave
Payne v Cave
Payne v Cave 3 TR 148 is an old English contract law case, which stands for the proposition that an auctioneer's request for bids is not an offer which can be accepted by the highest bidder.-Facts:...
(1789) 3 TR 148. However, if it is stated by the owner that there is no reserve price or that there is a reserve price beyond which offers will be accepted then the auction is most likely a contractual offer which is accepted by the highest bidder; this was affirmed in the Court of Appeal
Court of Appeal of England and Wales
The Court of Appeal of England and Wales is the second most senior court in the English legal system, with only the Supreme Court of the United Kingdom above it...
in Barry v Davies
Barry v Davies
Barry v Davies [2000] , [2000] 1 WLR 1962 is an English contract law case concerning an auction.-Facts:The auctioneer withdrew goods from an auction when a bona fide bid of £200 was effective...
[2000] 1 WLR 1962.
A shop owner displaying their goods for sale
Contract of sale
A contract of sale is a legal contract an exchange of goods, services or property to be exchanged from seller to buyer for an agreed upon value in money paid or the promise to pay same...
is generally making an invitation to treat (Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401). They are not obliged to sell the goods to anyone who is willing to pay for them, even if additional signage such as "special offer" accompanies the display of the goods. (But see bait and switch
Bait and switch
Bait-and-switch is a form of fraud, most commonly used in retail sales but also applicable to other contexts. First, customers are "baited" by advertising for a product or service at a low price; second, the customers discover that the advertised good is not available and are "switched" to a...
.) This distinction was legally relevant in Fisher v Bell [1961] 1 QB 394, where it was held that displaying a flick knife for sale in a shop did not contravene legislation which prohibited offering for sale such a weapon. The distinction also means that if a shop mistakenly displays an item for sale at a very low price it is not obliged to sell it for that amount.
Generally, advertisements are invitations to treat, so the person advertising is not compelled to sell to every customer. In Partridge v Crittenden [1968] 1 WLR 1204, it was held that where the appellant advertised to sell wild birds, was not offering to sell them. Lord Parker CJ commented that it did not make "business sense" for advertisements to be offers, as the person making the advertisement may find himself in a situation where he would be contractually obliged to sell more goods than he actually owned. In certain circumstances however, an advertisement can be an offer, a well known example being the case of Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256, where it was held that the defendants, who advertised that they would pay anyone who used their product in the prescribed manner and caught influenza £100 and said that they had deposited £1,000 in the bank to show their good faith, has made an offer to the whole world and were contractually obliged to pay £100 to whoever accepted it by performing the requested acts.
For an offer to be capable of becoming binding on acceptance, the offer must be definite, clear, and final. If it is a mere preliminary move into negotiation which may lead to a contract, it is not an offer but an invitation to treat. The offerer must have been initiating negotiations from which an agreement may or may not in time result. The important point to note is that, since an invitation to treat is not an offer, but rather a phenomenal preliminary to an offer, an invitation to treat is not capable of an acceptance which will result in a contract.