What is an ‘invitation to treat’ in contract law?
The concept of a ‘contract’ is well known to most people, and not simply those who work in business. It is essential that a contract is legally valid if ever one party involved intends to enforce its terms.
What makes a contract?
In extremely simple terms, the elements that a court will look for when deciding if a contract is legally binding are an offer, acceptance, the intention to create legal relations, and consideration.
An offer is generally viewed as one party being prepared to enter a contract on certain terms, and acceptance being a clear agreement to those terms. There is a need for both parties to intend for this to be a formal agreement (as opposed to, for example, an agreement between a parent and child over pocket money). The final element of a contract is the need for consideration. Consideration is essentially something given or promised by one of the parties for the completion of the goods or services passing under the contract. A simple example would be when buying some milk from the supermarket, the consideration would be the money given in exchange for the milk.
As mentioned, an offer takes place when one party indicates they are prepared to contract with another party or parties on a certain set of terms. During a contract dispute, a court will always look to see if the set of circumstances show that one party indicated willingness to contract. An example would be the words, “I will sell you this car right now for £500”.
An invitation to treat
What then is an example of when an offer is not deemed to have been made? The key question would appear to be whether one party should be bound by his ‘offer’. This is essential for contract law as if an offer is deemed to have been accepted then it may well be that a contract has been formed. The courts therefore distinguish an offer from what is known as an ‘invitation to treat’ by objectively asking if the party intended to be bound by their statement.
A good example of when an invitation to treat is likely to be inferred by a court as opposed to an offer is if one party is merely hoping to commence negotiations. Therefore, the courts will always look at the language used or the inferred intention of the parties when deciding between an offer and an invitation to treat.
The classic example of an invitation to treat is when a shop owner puts a very low price on a product in the shop window. If you take the item to the counter the shopkeeper does not have to sell it to you. In strict legal terms it is you that makes the offer by offering to buy the product with your money. A shopkeeper who has mistakenly priced a product too cheaply is therefore not obliged to sell at that price.
An invitation to treat is a tool to get negotiations going and show the terms which one party may be willing to accept, as opposed to an offer in which one party is prepared to be legally bound by upon acceptance.