What is an Invitation to Treat?

If you run a business where you enter into contracts with customers, you may want to know the point at which a contract exists. This is important because a legally binding contract obliges parties to do certain things. One key part of having a binding contract is forming an ‘invitation to treat’. This article will explain what this concept is and will also discuss other issues to keep in mind about entering into contracts.

What is an Invitation to Treat?

If you invite someone to look at your product or service and to make an offer, this is likely an invitation to treat. For example, imagine that you are presenting information about the product that you are selling. This constitutes an invitation to treat. 

What is an Offer?

An offer is one of the five requirements of forming a contract.

The requirements of a valid contract are:

• offer;
• acceptance;
• consideration;
• intention to create legal relations; and
• certainty of the terms of the contract. 

An offer, in comparison to an invitation to treat, carries a definite intention to be bound by a contract. This means that if the other party accepts the offer you made, a binding contract will result. As a result, it is important to be sure that you are making an invitation to treat rather than an offer in some instances. This is especially the case where you do not necessarily want to be bound by the other party’s acceptance immediately.

What are Some Examples of an Invitation to Treat?

Display Goods

A typical example of an invitation to treat is when you display goods within a shop. When goods are on display in a shop, it usually means that the shop owner is willing to accept an offer. However, it does not mean that the shop owner has made an offer to the potential buyer. 

What this means for your business is that a customer cannot require you to sell a good for the amount that you advertised it for. For example, imagine that you mistakenly put ‘£10’ on the price tag of a t-shirt when you meant to put ‘£100’. In that case, the customer cannot insist that you sell it to him for ‘£10’ if you do not want to. As the display only amounts to an invitation to treat, you will not be legally bound by the price that you show on a price tag. 

Keeping this in mind, however, it is a good idea to double-check any price tags on your shop window, for example. Even though you may not have entered into a legally binding agreement from your advertisement, it will still be important for your business to manage customer expectations well. As a result, you should try to avoid disappointing your customers where possible, even if it does not lead to legal consequences.

Auctions

In addition, an auction is also usually only an invitation to treat. For instance, auctioneers advertise goods as part of the auction. Consequently, when people bid for the good, the process constitutes an invitation to treat. This is as opposed to a definitive offer and acceptance.

Tenders

Furthermore, as a guiding rule, it is generally the case that an offer is only made when you express an intention to create a legally binding agreement. For example, when you deliver a written document as part of a tender, that is usually treated as an offer. 

What if a Customer Insists There is a Contract?

In some cases, customer disputes can arise over whether a contract exists. You may be able to successfully argue that you did not intend to create legal relations, or that you were merely making an invitation to treat rather than an offer. 

Key Takeaways

The rules on invitation to treat are important to know if you are frequently entering into contracts with customers. This is because it will determine whether you are entering into contracts or not. If there is no invitation to treat, your contract is likely to be voided. Invitation to treat is different from an offer. Importantly, an invitation to treat does not carry the legal implication of being bound by a contract, which means you cannot be found to have breached the terms of the contract if there is only an invitation to treat. 

As a result, if you are frequently engaging with customers, it is a good idea to make sure that your advertisements amount to an invitation to treat rather than a potentially legally binding offer. If you find yourself in a dispute with a customer on the existence of a contract, it is a good idea to think about your position as to whether you made an offer or not. Additionally, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.

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