As a small, medium, or large business owner, understanding the basics of contracts and contract formation will help protect your legal, commercial, and financial interests.
Well-drafted contracts, whether for employment, purchase, sale, leasing or for any other purpose, will allow you to avoid and more easily deal with any potential disputes with other parties in the future. This includes knowing what an ‘invitation to treat’ means and how this differs from an offer when forming a new contract.
What is an invitation to treat?
An invitation to treat means that one party is willing to invite an offer. It can also be viewed as an invitation to negotiate but is not an offer. The distinction between an invitation to treat and an offer is important in contract law.
Is an invitation to trest legally binding?
An invitation to treat is not legally binding in itself. It’s a preliminary stage in the negotiation process where one party expresses their willingness to receive offers or negotiate terms.
The difference between an offer and an invitation to treat
There are five requirements for a contract: offer, acceptance, consideration, intention to create legal relations and certainty of terms. ‘Invitation to treat’ concerns the first of these - offer.
Whereas a party making a contractual offer is willing to be legally bound by that contract, if there’s an ‘invitation to treat’, this means there’s an intention to negotiate but not to be legally bound yet. Instead, an invitation to treat means that there’s an invitation for the other party to make an offer.
When does an invitation to treat become an offer?
An offer is a commitment by one party to enter into a binding contract on certain terms. It must be:
- Capable of acceptance
- Made to be bound by the acceptance
In contrast to an invitation to treat, an offer will contain the basic terms of the agreement and illustrate clearly that no further bargaining is to be undertaken.
Are bilateral offers invitations to treat?
No, an invitation to treat is an invitation to negotiate or make an offer. In contrast, a bilateral offer is a specific proposal that can be accepted to form a legally binding contract.
The key distinction lies in the intent and level of commitment associated with each stage of the contract-forming process. An invitation to treat is usually (but not always) the first step towards a legal agreement (see examples below).
What are some examples of an invitation to treat?
Some examples of an invitation to treat include advertisements, the display of goods for sale in shops, and auctions. Goods on display in a shop mean the retailer is willing to enter into a ‘bi-lateral’ contract with the consumer.
In other words, there’s no obligation for the advertiser or retailer to sell the goods. Likewise, just because an auction advertises a ‘lot’ as available for sale, the bidder makes an offer that may or may not be accepted by the auctioneer.
In the case of auctions, there’s typically no automatic presumption that the highest bid will be necessarily successful, as this would effectively be an offer and not an invitation to treat.
Is a tender an offer or an invitation to treat?
In a tender process, the bidder usually makes the offer in response to the seller's invitation to treat. The seller should not bind itself unwittingly to a contract by stating in its invitation that the lowest bid (in a tender) shall be the successful bid, as this may transcend the realm of invitation to treat and become an actual offer.
As a seller, you must make clear that the lowest price will not necessarily win the tender.
Can an invitation to treat be revoked?
Absolutely, as a key characteristic of an invitation to treat is a lack of intention to be legally bound.
What about the concept of an invitation to treat in the context of online shopping?
The dynamics of offers and acceptances differ when conducting business through an online shop. In online clothing retail, prices are generally regarded as an 'invitation to treat,' akin to how things operate in physical brick-and-mortar stores.
Let's consider the following scenario where offers and acceptances are conducted online to elucidate the disparity between online shops and their traditional counterparts.
Suppose you are an internet-based retailer specialising in home appliances. One of your employees mistakenly listed a dishwasher on your website with a price tag of £9.99 instead of the intended £999. As a result, customers swiftly add the dishwasher to their shopping carts upon seeing this remarkably low price.
However, during checkout, they’re charged the correct price of £999 for the dishwasher. In this example, it’s highly likely that the vendor made an error while entering the price rather than intentionally attempting to mislead the customers.
To avoid any potential pitfalls, it’s crucial to incorporate a specific clause in your online website's terms and conditions. This clause should explicitly state that a customer's offer will only be accepted once you acknowledge it.
It’s possible that the acceptance of the customer's offer may solely occur through a confirmation email. By clearly articulating the precise moment when an offer is made and accepted within your terms and conditions, you can avert costly mistakes.
Get legal assistance from LawBite
Understanding what constitutes an ‘invitation to treat’ versus an offer is an essential element of running a business and entering into contracts. In some cases, there may be a belief that an offer exists when it’s only an invitation to treat (and vice versa).
Also, knowing how to respond to an invitation to treat and negotiate the best possible deal will ensure you enter into a contract that meets your best interests.
Our commercial lawyers can provide the legal advice you need to ensure agreements work in your favour, protecting you from potential legal disputes and expensive litigation. If you have any legal issues, you can book a free 15 minute consultation or call us on 020 3808 8314.