Contract Law – Invitation to Treat and Offer

Over my next few blog posts, we will be focusing on the area of contract law. This is a considerable section of law that gives rise to a lot of possibilities and different outcomes. To understand this better, we will be looking at all the stages and conditions needed to create a valid contract that legally binds all the parties to it. This blog post will focus on what an invitation to treat is, what an offer is, and the differences between the two. Later blog posts will look at the acceptance of this offer, the intention behind the offer and acceptance, the consideration given by both parties and the capacity of the parties to enter a contract.

Invitation to Treat

Firstly, what is an invitation to treat? This simply means an invitation to make an offer, which can be done verbally or in writing. Sometimes, it can be as simple as a price tag attached to goods or a sign at a market stall. In a supermarket, the prices on the shelves or goods are the invitation to treat, so they invite the customer to make that offer to the cashier at the checkout. Similarly, adverts are usually just an invitation to treat, although they can be offers. An invitation to treat is not legally binding.

Offer

On the other hand, an offer does come with the intent to be legally bound by the resulting contract. In fact, it must be shown that the party making the offer intended to be bound by it for any contract to be legally valid. As with invitations to treat, offers can be made verbally or in writing, such as offering to buy something for a particular amount. The party receiving the offer is then free to accept or reject it. To go back to the supermarket example, the customer makes the offer for the goods that they have chosen, which the cashier can then accept on behalf of the supermarket.

Offers can also be made in other ways. For example, at an auction, if there is a reserve price, every bid made is an offer which can be accepted by the auctioneer. If there isn’t a reserve price, the auctioneer makes a unilateral offer that can be accepted by placing a bid. With machines such as vending machines and parking meters, the machine being there is the offer.

Advertisements are usually an invitation to treat, not an offer, but an exception may be made if they clearly outline the terms and make it obvious that the advertisers intend to enter into a contract with anyone who fulfils these terms. In the case of contracts by tender, the initial call for tenders is an invitation to treat and each tender made is an offer. The exception to this is where the request for tenders states that they will accept the highest or lowest, in which case the request is a unilateral offer that can be accepted by anyone meeting the required condition.

Termination of Offer

In some circumstances, an offer will be terminated. There are a few ways in which this can happen. Firstly, if the party making the offer dies, the offer is treated as terminated at their death, as there is no way they can enter into a contract or be bound to any terms and conditions imposed. An offer may also lapse due to the passing of time. This is to be a reasonable amount of time, but what is reasonable will depend on the exact facts of the case, such as the value of the offer, type of goods or service and anything else mentioned in the initial offer.

An offer can also be revoked at any point prior to acceptance. However, this does require that no consideration has yet been given on either side. For example, a simple promise to hold an offer does not give rise to a legal obligation. It may well create a moral or ethical one, but this will not be legally enforceable. On the other hand, if there has been some consideration (such as a deposit), then this will be legally binding. In addition, if a unilateral offer is made that requires full performance for acceptance and the other party is carrying out this full performance as stated in the offer, the offer cannot be revoked.

Finally, an offer can be revoked by the other party making a counter-offer. If they respond to the original by making another offer with different terms, this has the effect of destroying the original offer. This means that if the counter-offer is rejected, the party making it can’t just go back to the original offer.

If an offer is made, the next step is then acceptance from the other party. This must also meet certain conditions to be valid, as well as a few other requirements for contracts, which we will be looking at more in the rest of this series.

Wrapping Up

I hope that this helps you to understand how contracts start off and the difference between an offer and an invitation to treat. In my next blog post, we will be looking at how an offer is accepted and the intention to create a legally binding contract, so come back in two weeks for that!

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