What is an invitation to treat?

An invitation to treat is:

A step in the negotiations which may lead to one party making an offer; or a  method of encouraging someone to make an offer which can either be accepted or refused.

Noticing the difference between an offer and an invitation to treat.

Not everything described as an ‘offer’ will be considered an offer in law. Remember: the courts apply the objective test, so the individual facts of each case and the language used is often key.

To constitute an offer, a communication must be both:

Sufficiently specific in terms of the obligation(s) and price to be capable of immediate acceptance, with no further details to be agreed, and made with the intention to be bound by the mere fact of acceptance (i.e. a definite promise to be bound.

Storer v Manchester City Council [1974] 3 All ER 824 (CA)

In Storer v Manchester City Council [1974] 3 All ER 824 (CA), the claimant applied to the Council to buy his rented house and subsequently received a letter from the Council which stated ‘I understand you wish to purchase your Council house and enclose the Agreement for Sale. If you will sign the Agreement and return it to me I will send you the Agreement signed on behalf of the [council] in exchange.’ The claimant signed the agreement and returned it to the Council.

Gibson v Manchester City Council [1979] 1 All ER 972 (HL)

In Gibson v Manchester City Council [1979] 1 All ER 972 (HL), the claimant applied for details of the scheme and subsequently received a reply from the Council stating ‘The [Council] may be prepared to sell the house to you at the purchase price of £2,725 less 20 percent £2,180... if you would like to make a formal application to buy your council house, please complete the enclosed application form and return it to me as soon as possible’. The claimant completed and returned the form.

The courts will often use certain presumptions to clarify the intentions of the parties. The following are presumed to be invitations to treat and not offers:

Recognised instances of invitations to treat:

• Advertisements, brochures, and price lists

• Display goods/shop displays

• Websites

• Auctions

• Tenders

NOTE: there are exceptions in case law, presumptions are merely starting points that can be rebutted!

Adverts are normally treated as invitations to treat:

Partridge v Crittenden (1968) 2 AII ER 421

The defendant placed an advert in the classified section of a magazine offering some bramblefinch cocks and hens for sale. Because it was an offence to sell them under s6(1) of the Protection of Birds Act 1954 he was charged and convicted of the offence.

Issue: The issue on appeal was whether the advertisement was properly construed as an offer of sale (in which case the defendant was guilty) or an invitation to treat (in which case he had committed no offence).

Held: The court held that the advertisement was not an offer but an invitation to treat, and as such the defendant was not guilty and the conviction was quashed. Goods advertised in newspapers, on the TV, radio, and magazines are likely to be invitations to treat. But there are important exceptions to this and we will return to this later in the lecture and in your tutorial.

Grainger & Sons v Gough [1896] AC 325 HL

The defendant wine merchant circulated a catalogue which contained a price list for a number of different bottles of wine. The claimant ordered a number of bottles of wine from the catalogue. When the wine wasn’t delivered at the stated price it was alleged that a contract had been formed.

What was the issue? Was the price list an offer to sell the wine at the advertised price. (in which case the contract was fully formed) or an invitation to treat (in which case no contract had been formed).

Held: The House of Lords found that this was an invitation to treat. Should this had been an offer it would have meant in theory the defendant would have been obliged to deliver unlimited wine at that price because as soon as an order was received there would have been a binding contract. Whereas, in reality, the stock of wine is not unlimited and it would be impossible for the merchant to fulfil every possible order – there is a business reasoning in this judgment.

Shop displays - invitations to treat.

Fisher v Bell [1961] 1 QB 394

Pharmaceutical Society v Boots [1953] 1 QB 401

Freedom of contract: Retailers do not have to sell you the goods on display (subject to anti-discrimination law). You can not make retailers sell you any item in their shop.

Auctions.

The Auctioneer invites bids (the bids are offers)

Acceptance only occurs when the gavel falls.

Payne v Cave [1789] 3 TR 148

s57(2) Sale of Goods Act 1979

Note: Auctions ‘without reserve’ constitute an exception.

Request for tenders?

What is a tender? As the quotations (i.e. by those who submit a tender) in response to a request for a tender are merely offers, there is no obligation to accept the most competitive bid – Spencer v Harding (1870) LR 5 CP 561

...unless this has been promised – Harvela Investments Ltd. v Royal Trust Co. of Canada (CI) Ltd. [1986] AC 207.

What are the types of offers?

Bilateral offer

An offer or promise in exchange for an offer or promise

Unilateral offer

An offer in exchange for a specified act, made either to a specific person, or to a wider group of persons, including to the public

Exception to the general rule that advert are invitations to treat:

Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 (CA), this case demonstrates the exception to the rule that adverts are invitations to treat.

How to identify an offer:

Three things which are not offers but which may look like offers:

• Invitations to treat – we have already discussed these

• A declaration of intention

•  A supply of information

Use of language: ‘Subject to contract’.