Invitation to Treat: Legal Definition, Formation of Contract and Exceptions
What is an Invitation to Treat?
An Invitation to Treat is a preliminary step in contract formation, signalling a willingness to negotiate or receive offers rather than constituting a binding offer. An invitation to treat (sometimes known as an ‘invitation to bargain’ in the US) invites other parties to make an offer to form a contract.
Why is the distinction between an Offer and an Invitation to Treat Important?
The significance lies in understanding who is making the commitment. If A makes an offer and B accepts it, A is bound by that commitment. However, if A only extends an invitation to treat, B can make an offer in response, and A is not bound until they accept B’s offer.
An Invitation to Treat is not an offer but is preliminary to potential offers. It’s like saying, “I’m willing to negotiate!” but not presenting a definitive proposal.
Examples of an Invitation to Treat
To clarify the distinction, let’s explore some common scenarios:
- Goods on Display in a Shop: Items displayed in a shop window or on a shelf are invitations to treat. The customer makes an offer to purchase by choosing to buy an item. The shop then decides whether to accept this offer. This explains why shopkeepers can refuse sales, even if you’re willing to pay the displayed price.
- Advertisements: Generally, advertisements are invitations to treat, inviting others to offer to buy. Consider a situation where a company advertises a product at a discounted price. If the stock runs out, they are not obligated to provide for every potential customer since the advertisement wasn’t an offer in the legal sense.
- Auctions: At an auction, when an auctioneer invites bids on an item, it’s an invitation to treat. The bidders make offers by placing their bids. The auctioneer can then decide whether or not to accept the highest bid.
- Tender Processes: If a company or government agency needs a particular service or product, they might invite tenders or bids. This invitation is an invitation to treat. Each tender submitted is an offer, which the inviting party can either accept or reject.
Exceptions and Nuances in Invitation to Treat
Like all legal principles, there are exceptions and nuances to this rule:
- Advertisements: Though typically considered invitations to treat, there are exceptions. For instance, if an advertisement specifies a reward for a particular action (e.g., “Reward of $500 for return of lost cat”), this is considered an offer. Once the action is completed (someone returns the cat), the offer is deemed accepted, and the reward is owed.
- Unilateral Contracts: Sometimes, an act can be an invitation to treat and an offer. In unilateral contracts, one party promises something in return for the act of another. For example, a reward for lost property is a unilateral contract.
Difference between an Invitation to Treat and an Offer
| Aspect | Invitation to Treat | Offer |
|---|---|---|
| Definition | A signal of willingness to negotiate or receive offers. | A clear proposal that can be accepted to form a binding contract. |
| Binding Nature | Not binding. | Becomes binding when accepted. |
| Examples | Goods displayed in a store, general advertisements, auctioneer calls for bids. | Specific terms given for a sale, proposal with specific terms. |
| Acceptance | Does not result in a contract when “accepted”. Instead, leads to an offer. | Results in a binding contract when accepted. |
| Commitment Level | Indicates a desire to negotiate. | Indicates a readiness to be contractually bound upon acceptance. |
Is An Advertisement In A Magazine or On Television Typically Considered An Offer or An Invitation To Treat?
Advertisements in magazines or on television are typically considered an invitation to treat rather than a binding offer in contract law. This distinction means the advertiser is willing to negotiate or receive offers but isn’t making a definitive proposal that can be immediately accepted to form a contract.
There are exceptions, like specific reward advertisements, but generally, such ads invite potential buyers to make offers, which the seller can accept or reject. This approach allows advertisers flexibility and prevents them from being contractually obligated to supply goods or services in unforeseeable demand situations.
How Does An ‘Invitation To Treat’ Lead To The Formation of A Contract?
When a party responds to an invitation to treat, they typically make an offer. A binding contract is formed if the party who initiated the invitation to treat accepts this offer.
For instance, in a store, displayed goods invite customers to make offers. When customers bring an item to the counter, they offer to buy it. If the cashier accepts and processes the transaction, a contract is established between the buyer and the seller.
Can A Shopkeeper Refuse To Sell An Item At The Displayed Price If Items In A Shop Are Invitations To Treat?
When customers present an item for purchase, they effectively offer to buy. The shopkeeper can then accept or reject this offer, even if the rejection is due to an error in the displayed price. This legal distinction gives shopkeepers flexibility and discretion in their sales, protecting them from unforeseen circumstances or honest mistakes.
