Offer and Invitation to Treat

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Invitation to Treat

Invitation to treat

A contract is formed where there is an offer, acceptance, consideration and an intention to create a legal relation. An invitation to treat, on the other hand, is merely an invitation to submit an offer. Offer indicates a willingness to enter into a contract whereas an invitation to treat lacks an intention to create legal obligations. Invitations to treat is an invitation to bargain and it arises in pre-contractual negotiations, advertisements and store displays and an invitation to bid in the public procurement process.

Before making a definite offer, parties may make a statement of intention, in the course of negotiation on the terms of the contract, which it is not intended to require acceptance. If one person invites the other to express his willingness to do or not to do something, it would be an invitation to treat since for an offer the final expression of willingness to undertake a definite obligation, upon certain stipulated terms and obligation, by the other party’s notification of acceptance is required.

Whether a statement is an offer or an invitation to treat depends on the intention of the offeror. If the offeror expresses his willingness to be bound by it without further negotiations, on acceptance, then it will amount to offer. A Shopkeeper’s catalogue or list price is only an invitation to intending customer to make an offer to buy at the indicated price and is not an offer. Advertisements in newspapers or in any other media are invitations to treat, which allows vendors to refuse to sell products at list price.  They can also be considered offers in certain cases of unilateral contracts. If a shop mistakenly displays a good for sale at a very low price it is not obliged to sell it for that amount.[1]

An invitation to treat may be an invitation to tender, a request for bids, or a request for proposals.The invitation to treat is simply a solicitation and does not qualify to be an offer as the party making it does not wish to enter into a legally binding contract without further negotiations. The party making the invitation seeks bids or tenders for the specific commodities from prospective suppliers. Any subsequent bids are deemed to be an offer which the party who issued the invitation to bid may accept or reject.          
Another example of an invitation to treat is a tender process. The general rule is that an auction is a sale by public competition to a bidder who makes an offer to an auctioneer, an agent of the vendor who may accept or reject it. The contract is concluded when the auctioneer signifies his assent by knocking down the hammer or in any other customary manner. If the owner states that no reserve price or a reserve price beyond which offers shall be accepted then the auction is a contractual offer which is accepted by the highest bidder.[2]

Thus, an invitation to treat invites one party to make an offer of their own. It is a request for expressions of interest. A display of goods at a fixed price in a store is an invitation to treat, not an offer. An offer may be made by a prospective buyer and the retailer may accept or reject that offer.[3]

General or Specific Offer

When a proposal is addressed to a body of unascertained persons, it is a general offer which can be accepted even by an ascertained individual. Similarly, an offer may be made expressly or by conduct.

In Carlil v Carbolic Smoke Ball[4], the defendants published in various newspapers an advertisement to pay £100 to anyone who contracts influenza colds, after having used the ball three times daily for two weeks. Moreover, it was added that £ 1000 was deposited with the bank, showing the sincerity in the matter. The plaintiff bought the smoke ball and used it according to the prescription which was given in the advertisement. Nevertheless, she caused influenza and then sued the company for the advertised award.

The court held that the advertisement was not any puff as the statement in the advertisement that £1000 has been deposited by the plaintiff to for this purpose and this shows their sincerity. The offer was made to the whole world which matured into a contract when accepted by the plaintiff by performing the conditions stipulated in the advertisement. Therefore, the plaintiff was entitled to recover the compensation.   
The same ratio is reflected in Section 8 of the Indian Contract Act which states when the performance of the conditions of a proposal is fulfilled is an acceptance of the proposal.

If a proposal is made to a specific person or a body of persons, it will be said to be a specific offer. If the terms of the offer are uncertain, its acceptance cannot give rise to a contract.[5] When two parties choose to enter into a contract, the first thing is an offer. The offer can come in the form of a Letter, Newspaper, Website, Fax, Email, Behavior. Thus, the offer is not really an offer until it is received by the offeree.Goods sold on self-service basis are invitations to treat, the customer makes the offer to buy at the cash register.[6]

In the case of a time limit, the offeree must respond with acceptance of the offer prior to its expiration or the offer is no longer valid. An offer can be revoked by the offeror at any time prior to its acceptance. The offer can be terminated in the case of death of either party, insanity of either party, death or destruction of the person or the thing required to perform the contract terms. The offer can also be terminated if a counter-offer is made by changing the terms of the original offer.

Illustrations

  1. A has listed the price of the car ‘gama’ at ₹ 80,000. B visited his shop to buy the car at ₹ 80,000 but A refused to sell the car at any price below ₹ 1 lakh. B wants to sue A for not selling the car the printed price. A is not liable to sell the car at the listed price as it is only the invitation to treat and not the offer.Price-marked goods on display on the shelves or on windows or shops are normally considered invitations to treat and are not offers.[7]
  2. A few friends got together to sell off their old books. They the advertisement for the same in the newspaper. This is an invitation to treat. It is an offer to negotiate- offers to receive offers- offer to chaffer.Agreements to negotiate are invitations to treat and do not amount to a binding contract, instead they are regarded as pre-contractual negotiations.[8]
  3. A writes to B, “I want to sell my videogame at ₹ 30,000. Will you buy it?” This is an offer and not an invitation to treat.
  4. Scarlett offers to sell her house for Rs 1,50,000, to be paid in 60 days; Nate Stark receives the offer and gives Seller a counter offer of Rs 1,40,000, payable in 45 days. The offer made by Scarlett is an offer and not invitation to treat.

Frequently Asked Questions (FAQs)

  • How offer can be differentiated from an invitation of treat?

An invitation to treat and an offer can be differentiated on the basis of the intention of the parties while making an invitation to offer or an offer. When the promisor makes an offer, he intends to enter into the legal relationship with the acceptance of the offer by the promisee. Whereas, in invitation to treat the persons intends other party to make an offer and he/she shall accept the offer made. For example, A writes to B to quote the price at which he would like to purchase his watch. This is an invitation to offer made by A. B replies that he would like to purchase the watch at ₹ 2,000. This is an offer which stands subject to the acceptance by A for a valid contract. An offer is an expression of a willingness to contract on certain terms upon acceptance.[9]

  • Distinguish between counter offer and invitation to treat.

A counter offer is an offer made in response to a previous offer by the other party during negotiations for concluding a final contract. For a counter offer, an offer needs to be present prior to it and that offer stands rejected after the acceptance of the counter offer.The invitation to treat invites promisor to make an offer and further negotiate the terms of offer.

Online Sources

  • http://www.4lawschool.com/contracts101/invitation.htm
  • https://www.translegal.com/lesson/7073

Endnotes

[1]Fisher v Bell 1961 1 QB 394.

[2] Spencer v Harding (1870) LR 5 CP 561.

[3]Chitty on Contracts (2004).

[4]Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256.

[5]V. Kesava Rao, Contracts I: Cases and Materials (Lexis Nexis Butterworths 2004).

[6]Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] EWCA Civ 6.

[7]Fisher v Bell [1961] 1 QB 394.

[8]Walford v Miles [1992] 2 AC 128.

[9]Gibson v Manchester City Council [1979] UKHL 6.

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Sakshi Agarwal
I am Sakshi Agarwal from Dr. Ram Manohar Lohiya National Law University, Lucknow pursuing B.A. L.L.B. (Hons.). Having no legal background, the inspiration to study law came from the society and with the support of my parents I became the path breaker of my family. Being in my initial years of college, all the subjects at present like Law of Contracts attract me but I always keep reading Constitutional Law. The economics arena has always been my strength and in my career I would like to link economics with law. Apart from this, I do adjudicating and mooting. I love to listen to people and when it comes to debate, it’s the best opportunity to learn by listening. At law school, I have developed a keen interest in researching. At all the times, whether it’s working, studying or just sitting idle I aim to find happiness. Something I love a lot apart from reading books and watching movies, is travelling. I’m always excited about it and never miss a chance to explore new places and be adventurous.