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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 is meant by an ‘invitation to treat’ and how this differs from an offer when it comes to forming a new contract.

Invitation to treat meaning

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, itself, an offer as there is no immediate intention to legally bound. 

How does an invitation to treat differ from an offer?

There are five requirements for a contract to exist, including 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 is an ‘invitation to treat’, this means there is an intention to negotiate but not to be legally bound yet. Rather an invitation to treat means that there is an invitation for the other party to make an offer.

What are some examples of an ‘invitation to treat’?

Some examples of an invitation to treat include advertisements, the display of goods in shops, and auctions. Goods on display in a shop mean that the retailer is willing to enter into a ‘bi-lateral’ contract with the consumer. In other words, there is no obligation for the advertiser or retailer to sell the goods. Likewise, just because an auction advertises a ‘lot’ as available for sale, it is the bidder that makes an offer that may or may not be accepted by the auctioneer. In the case of auctions, there is 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. 

Final words

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 is only an invitation to treat (and vice versa). Also, knowing how to respond to an invitation to treat, and therefore, negotiating the best possible deal will ensure you enter into a contract that meets your best interests.

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In closing

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