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As a business owner entering into numerous deals, there are circumstances where the agreements you make are not actually legally binding. This may arise where instead of making an offer, your business makes an invitation to treat. It is essential that you understand the difference between these two concepts so that you can avoid situations where there is no enforceable contract the other party must follow. This article will help explain the key differences between invitations to treat and offers so you can identify the two and understand the appropriate action to take.
What Makes a Binding Contract?
When you make a contract with another party, such as a customer, there are certain elements it must have for it to be legally binding. That means that without all of these factors, it is unlikely you can successfully take legal action against the other party if they do not fulfil their obligations. The four main elements of a binding contract are:
- an offer;
- acceptance;
- consideration;
- intention to create legal relations.
The contract is then usually made binding by signing a written document.
Importantly, an offer by either you or the other party is the first step to making a contract. The offer usually includes a promise you will undertake if it is accepted. This can be to, for example, provide a good or service to the other party.
What is an Invitation to Treat?
An invitation to treat is a situation in which someone invites another person to make them an offer for an item, service or goods. It is akin to asking someone to ‘make you their best offer’. Importantly, you are not bound to accept the sum they suggest.
This is usually an excellent strategy to get a potential customer or fellow company to initiate negotiations. In doing so, you may obtain an offer to consider.
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How Are Offers and Invitations to Treat Different?
An offer allows the consumer to assess the offer and accept, creating a contract. On the other hand, an invitation to treat is much more informal. It allows the consumer to assess the product and provide you with the offer, which you may choose to accept. Here, the agreement is not complete until you, the seller, has confirmed. Businesses might use invitations to treat to allow the consumer to determine the value of the product.
So, for example, your business may try to sell a vehicle through an online car auction. You believe the car has a value of £8,000, so your company makes this the reserve price. The highest offer made during the online car auction is £7,900.
In listing the car in the auction, you are not guaranteeing that you will accept the highest bid. Instead, you are making an invitation to treat to all potential bidders. In effect, you are inviting others to lodge offers to you (rather than you to them), so you can accept or reject the highest bid later on.
Similarly, consider an advertisement for a singing competition. The poster may say, ‘Can you sing? Take part in our show!’ to encourage individuals to audition. But even if you can sing beautifully, the post is not a guarantee that you will be in the show, merely that you can turn up and audition for it. It is not a true offer but rather the organiser willing to consider agreeing to future terms.
What is an Example of an Offer?
An auction may occasionally involve the seller making an offer that the buyer may immediately accept.
For example, some companies sell excess equipment (such as monitors, old electrical equipment and printers) through online auction sites, such as eBay. eBay allows sellers to set a ‘Buy It Now’ price. In this way, your organisation could list an old printer for a ‘Buy It Now’ price of £200. This constitutes an offer. If a bid for £200 comes in, your offer to sell at £200 is now accepted. Thus, your offer would bind your company to sell that printer at £200.
Key Takeaways
A court will only enforce deals where one party clearly intends to accept a specific price for a particular item. If your company can persuade a judge that it was only inviting an offer (not making one), that court is likely to treat your comments as a mere non-binding invitation to treat. As is common within UK law, your organisation’s legal obligations depend on the exact situation and the words used.
If you need assistance with an invitation to treat or negotiation involving potential offers between parties, 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 on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
No, albeit some will use the phrase ‘offers invited’ instead. This contrasts with when an individual makes an offer with a more obvious intention.
Sometimes, yes. If you find yourself in this situation, it is worth obtaining swift legal advice and considering whether to argue that the other party made an original offer on specific terms.
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