What is an Invitation to Treat in Contract Law?

Everyday life and business involve an invitation to treat. You have likely participated in an invitation to treat more times than you can count, regardless of whether you have heard of this term. 

While it is similar to an offer, there are key differences to be aware of in case you encounter it. 

Our post will cover everything there is to know about what an invitation to treat is, examples of it and how it differs from an offer. 

Sound interesting? 

Read along!

Let’s go through some examples.

1. Advertisements 

Advertisements are typically an invitation to treat because they lack the important information that would make it an offer. An offer is made as soon as the customer approaches the seller with an offer to buy.  

Defining advertisements as invitations also allows sellers to refuse to sell products at mistakenly marked prices.

Advertising example

An advertisement is an invitation to treat because the supplier is making representations (giving information) to potential customers and inviting the customers to make offers to purchase the goods. 

Here is an example of advertising that would be considered an invitation to treat.  

Imagine if you see a product advertised for $20 (an invitation to treat) and decide to take it up to the counter and prepare to make an offer. As invitations to treat are not binding, if the shop employee says that it is actually $30, you aren’t able to demand it be sold for $20.

2. Auction sale

Typical auctions can also be invitations to treat. When an auctioneer puts up an item for sale, they are not making an offer to sell to the highest bidder but rather are inviting offers from the assembled bidders. 

When a bidder makes an offer, it can either be accepted or rejected by the auctioneer.

3.  Displays of goods

Items on displays, such as items in a shop window, advertisements, and catalogs, are all common examples of invitations to treat. 

Goods on display in a shop are invitations to treat where the shopkeeper is inviting the customer to make an offer for the goods, not an offer. The customer makes an offer for the goods, which the retailer either accepts or rejects.

4. Tenders 

If you receive a tender request, this will be considered an invitation to treat. 

A call for tenders is usually an invitation to treat, and the submitted tender is the offer. In some cases, the call for tenders may objectively amount to an offer. 

If the investor states that they will accept the best tender, they must do so, and a contract will arise with the best tenderer.

What is the difference between an offer and an invitation to treat?

It’s essential that you can distinguish between an acceptance of an offer and an invitation to treat. 

Offer and acceptance are two essential elements of a binding contract, also known as a binding agreement. An offer is a statement of terms upon which the offeror is prepared to be bound if acceptance is communicated while the offer remains alive.  

Acceptance is a clear indication by the offeree that they will enter into the agreement on the offeror’s terms. If you accept an offer, you create a binding contract and are legally bound. 

By contrast, if you accept an invitation to treat, you have only made an offer. An invitation to treat is not an offer until you clearly and directly approach another party to contract. 

For example, an offer occurs when you take the item to the register, communicating that you are making an offer. Acceptance is when the shop employee sells the item to you.

This is common in scenarios where you think you are accepting an offer, but actually, you are only responding to an invitation to treat. Here, you are only making an offer and not accepting the original offer.

What about an invitation to treat and online shopping?

Offers and acceptances look a bit different if you operate an online shop. Online clothing prices are generally considered an ‘invitation to treat,’ similar to brick-and-mortar stores. 

The following example illustrates the difficulty between online shops and brick-and-mortar stores where offers and acceptances are made online.

Imagine you are an online retailer of fridges. Your employee listed the fridges online and accidentally marked the price as $4.99 instead of the $499 price tag. Customers quickly add the fridge to their cart when they see this price. Through the checkout process, they can purchase the refrigerator for $499.

In this example, the vendor most likely made a mistake when listing the price rather than intentionally misleading the customer. 

You will need to include a clause in your online website terms and conditions that specifies that a customer’s offer will only be accepted after you accept it. 

A confirmation email may be the only way to accept the customer’s offer. A costly mistake can be avoided by clearly stating when the offer and acceptance are made in your terms and conditions.

What creates a valid contract?

To have a binding legal contract, the following elements must be met:

1. Agreement: Offer and Acceptance
2. Consideration
3. Intention to create legal relations
4. Certainty and completeness, and the role of formal requirements such as writing
5. Capacity

If you want to learn more about creating a binding unilateral contract, you can hire Lawpath’s contract lawyers to assist you.

Rejection may be expressed or by way of a counteroffer. A counter-offer terminates an original offer that is provided.

Conclusion

Knowing the differences between an invitation to treat and an offer as a consumer or a retailer is important as it can minimize any costly misunderstandings if an error is made with purchases. 

As a business owner, if you are selling products and services, you should have strong terms and conditions that outline when an offer and acceptance are made.

If you’re still unsure what an invitation to treat is or need legal advice with preparing terms and conditions for your website, you can hire a Lawpath lawyer.