Contracts/Invitation to deal: Difference between revisions

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==Case law==
==Case law==
{{Contract law}}
{{Contract law}}
The clearest example of an invitation to treat is a [[Call for bids|tender]] (or bidding in the US) process. This was illustrated in the case of ''[[Spencer v Harding]]'' (1870) LR 5 CP 561, where the defendants offered to sell by tender their stock and the court held that they had not undertaken to sell to the person who made the highest tender, but were ''inviting'' offers which they could then accept or reject as they saw appropriate. In certain circumstances though, an invitation for tenders may be an offer. The clearest example of this was seen in ''[[Harvela Investments Ltd v Royal Trust of Canada (CI) Ltd]]'' [1986] AC 207, where the defendants had made it clear that they were going to accept the highest tender; the court held that this was an offer that was accepted by the person who made the highest tender; and that the defendants were in breach of contract by not doing so.
Generally, [[advertisements]] are invitations to treat, so the person advertising is not compelled to sell to every customer. In ''[[Partridge v Crittenden]]'' [1968] 1 WLR 1204, it was held that where the appellant advertised to sell wild birds, was not offering to sell them. Lord Parker CJ commented that it did not make "business sense" for advertisements to be offers, as the person making the advertisement may find himself in a situation where he would be contractually obliged to sell more goods than he actually owned. In certain circumstances such as [[unilateral contract]]s, an advertisement can be an offer, as in ''[[Carlill v Carbolic Smoke Ball Company]]'' [1893] 1 QB 256, where it was held that the defendants, who advertised that they would pay anyone who sniffed a smoke ball in the prescribed manner and caught influenza would be paid.£100, were contractually obliged to pay £100 to whoever accepted it by performing the required acts.


An [[auction]] can be more ambiguous. Generally, an auction may be seen as an invitation to treat, with the property owner asking for offers of a certain amount and then selecting which to accept, as illustrated in ''[[Payne v Cave]]'' (1789) 3 TR 148. However, if the owner states that there is no reserve price or that there is a reserve price beyond which offers will be accepted, then the auction is most likely a contractual offer which is accepted by the highest bidder; this was affirmed in the [[Court of Appeal of England and Wales|Court of Appeal]] in [[Barry v Davies]] [2000] 1 WLR 1962.
A display of goods for [[contract of sale|sale]] in a shop window, or within a shop, is  an invitation to treat, as in the ''Boots'' case, <ref>[Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd]]'' [1953] 1 QB 401)</ref> a leading case on supermarkets. The shop owner is thus not obliged to sell the goods, even if signage, such as "special offer", accompanies the display. Also, in ''[[Fisher v Bell]]'' [1961] 1 QB 394, it was held that displaying a [[flick knife]] for sale in a shop did not contravene legislation which prohibited "offering for sale anoffensive weapon". If a shop mistakenly displays an item for sale at a very low price it is not obliged to sell it for that amount.<ref name="BBC News - 08Sep1999 - The Economy  Argos ">{{cite news|url=http://news.bbc.co.uk/2/hi/business/441740.stm|title=Business: The Economy  Argos - an invitation to 'treat' |date=September 8, 1999 |publisher=[[BBC News]]|accessdate=8 July 2011}}</ref>
For an offer to be capable of becoming binding on acceptance, the offer must be definite, clear, and objectively intended to be capable of acceptance. If it is a mere preliminary move into negotiation which may lead to a contract, it is not an offer but an '''invitation to treat'''. The offerer must have been initiating negotiations from which an agreement may or may not in time result. The important point to note is that, since an invitation to treat is not an offer, but rather a phenomenal preliminary to an offer, an invitation to treat is not capable of an acceptance which will result in a contract.


A shop owner displaying goods for [[contract of sale|sale]] is generally making an invitation to treat (''[[Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd]]'' [1953] 1 QB 401). The shop owner is not obliged to sell the goods to anyone who is willing to pay for them, even if additional signage, such as "special offer", accompanies the display of the goods (compare [[bait and switch]].) This distinction was legally relevant in ''[[Fisher v Bell]]'' [1961] 1 QB 394, where it was held that displaying a [[flick knife]] for sale in a shop did not contravene legislation which prohibited offering for sale such a weapon. The distinction also means that if a shop mistakenly displays an item for sale at a very low price it is not obliged to sell it for that amount.<ref name="BBC News - 08Sep1999 - The Economy Argos ">{{cite news|url=http://news.bbc.co.uk/2/hi/business/441740.stm|title=Business: The Economy  Argos - an invitation to 'treat' |date=September 8, 1999 |publisher=[[BBC News]]|accessdate=8 July 2011}}</ref>
In England, auctions are governed by the Sale of Goods Act 1979 (as amended). 57(2) provides: “A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner. Until the announcement is made any bidder any retract his bid”.  s. 57(3) provides further: “An auction sale may be subject to a reserve price” However, if the auction is held ''"without reserve"'' then the auctioneer obliged to sell to the highest bidder.<ref>Warlow v Harrison 1859</ref><ref>HEATHCOTE BALL V BARRY [2000] EWCA Civ 235</ref> the highest bidder; this was affirmed in the [[Court of Appeal of England and Wales|Court of Appeal]] in [[Barry v Davies]] [2000] 1 WLR 1962.  '[[Payne v Cave]]'' (1789) 3 TR 148 


Generally, [[advertisements]] are invitations to treat, so the person advertising is not compelled to sell to every customer. In ''[[Partridge v Crittenden]]'' [1968] 1 WLR 1204, it was held that where the appellant advertised to sell wild birds, was not offering to sell them. Lord Parker CJ commented that it did not make "business sense" for advertisements to be offers, as the person making the advertisement may find himself in a situation where he would be contractually obliged to sell more goods than he actually owned. In certain circumstances however, an advertisement can be an offer, a well-known example being the case of ''[[Carlill v Carbolic Smoke Ball Company]]'' [1893] 1 QB 256, where it was held that the defendants, who advertised that they would pay anyone who used their product in the prescribed manner and caught influenza £100 and said that they had deposited £1,000 in the bank to show their good faith, has made an offer to the whole world and were contractually obliged to pay £100 to whoever accepted it by performing the requested acts.
An example of an invitation to treat is a [[Call for bids|tender]] process. In the case of ''[[Spencer v Harding]]'' <ref>''[[Spencer v Harding]]'' (1870) LR 5 CP 561</ref>, the defendants offered to sell by tender their stock, but the court held that they had not undertaken to sell to the person who made the highest tender, but were ''inviting'' offers which they could then accept or reject as they saw appropriate. In '''exceptional''' circumstances, an invitation for tenders may be an offer, as in in ''Harvela Investments v Royal Trust of Canada'' [1986]<ref>''[[Harvela Investments Ltd v Royal Trust of Canada (CI) Ltd]]'' [1986] AC 207</ref>, where the court held that since defendants had made clear an intention to accept the highest tender, then the invitation to tender was an offer accepted by the person making the highest tender.
 
For an offer to be capable of becoming binding on acceptance, the offer must be definite, clear, and final. If it is a mere preliminary move into negotiation which may lead to a contract, it is not an offer but an '''invitation to treat'''. The offerer must have been initiating negotiations from which an agreement may or may not in time result. The important point to note is that, since an invitation to treat is not an offer, but rather a phenomenal preliminary to an offer, an invitation to treat is not capable of an acceptance which will result in a contract.


==See also==
==See also==

Revision as of 10:52, January 2, 2016

Template:Citations missing


Invitation to treat (or invitation to bargain in the United States) is a contract law term. It comes from the Latin phrase invitatio ad offerendum and means "inviting an offer". Or as Andrew Burrows writes, an invitation to treat is

"an expression of willingness to negotiate. A person making an invitation to treat does not intend to be bound as soon as it is accepted by the person to whom the statement is addressed."[1]

Contract lawyers distinguish this from a binding offer, which can be accepted to form a contract (subject to other conditions being met). The distinction between an offer and invitation to treat is best understood through the categories that the courts create. Invitations to treat include the display of goods; the advertisement of a price or an auction; and an invitation for tenders (or competitive bids). There may however be statutory or complementary obligations, so consumer protection laws prohibit misleading advertising and at auctions without reserve there is always a duty to sell to the highest bona fide bidder.

Case law

Template:Contract law Generally, advertisements are invitations to treat, so the person advertising is not compelled to sell to every customer. In Partridge v Crittenden [1968] 1 WLR 1204, it was held that where the appellant advertised to sell wild birds, was not offering to sell them. Lord Parker CJ commented that it did not make "business sense" for advertisements to be offers, as the person making the advertisement may find himself in a situation where he would be contractually obliged to sell more goods than he actually owned. In certain circumstances such as unilateral contracts, an advertisement can be an offer, as in Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256, where it was held that the defendants, who advertised that they would pay anyone who sniffed a smoke ball in the prescribed manner and caught influenza would be paid.£100, were contractually obliged to pay £100 to whoever accepted it by performing the required acts.

A display of goods for sale in a shop window, or within a shop, is an invitation to treat, as in the Boots case, [2] a leading case on supermarkets. The shop owner is thus not obliged to sell the goods, even if signage, such as "special offer", accompanies the display. Also, in Fisher v Bell [1961] 1 QB 394, it was held that displaying a flick knife for sale in a shop did not contravene legislation which prohibited "offering for sale anoffensive weapon". If a shop mistakenly displays an item for sale at a very low price it is not obliged to sell it for that amount.[3] For an offer to be capable of becoming binding on acceptance, the offer must be definite, clear, and objectively intended to be capable of acceptance. If it is a mere preliminary move into negotiation which may lead to a contract, it is not an offer but an invitation to treat. The offerer must have been initiating negotiations from which an agreement may or may not in time result. The important point to note is that, since an invitation to treat is not an offer, but rather a phenomenal preliminary to an offer, an invitation to treat is not capable of an acceptance which will result in a contract.

In England, auctions are governed by the Sale of Goods Act 1979 (as amended). 57(2) provides: “A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner. Until the announcement is made any bidder any retract his bid”. s. 57(3) provides further: “An auction sale may be subject to a reserve price” However, if the auction is held "without reserve" then the auctioneer obliged to sell to the highest bidder.[4][5] the highest bidder; this was affirmed in the Court of Appeal in Barry v Davies [2000] 1 WLR 1962. 'Payne v Cave (1789) 3 TR 148

An example of an invitation to treat is a tender process. In the case of Spencer v Harding [6], the defendants offered to sell by tender their stock, but the court held that they had not undertaken to sell to the person who made the highest tender, but were inviting offers which they could then accept or reject as they saw appropriate. In exceptional circumstances, an invitation for tenders may be an offer, as in in Harvela Investments v Royal Trust of Canada [1986][7], where the court held that since defendants had made clear an intention to accept the highest tender, then the invitation to tender was an offer accepted by the person making the highest tender.

See also

Notes

  1. ↑ Burrows, A. (2009). Offer and Acceptance. A Casebook on Contract (2nd ed., pp. 5). Portland, OR, North America: Hart Publishing. (Original work published 2007).
  2. ↑ [Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd]] [1953] 1 QB 401)
  3. ↑  Business: The Economy Argos - an invitation to 'treat',  (September 8, 1999)
  4. ↑ Warlow v Harrison 1859
  5. ↑ HEATHCOTE BALL V BARRY [2000] EWCA Civ 235
  6. ↑ Spencer v Harding (1870) LR 5 CP 561
  7. ↑ Harvela Investments Ltd v Royal Trust of Canada (CI) Ltd [1986] AC 207

References

  • Andrew Burrows, Casebook on Contract (Hart Publishing, 2007) Ed.
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