Contracts/Invitation to deal

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Contracts Treatise
Table of Contents
Contracts Outline
Introduction and Definitions
Contract law in the United States
Contract formation
Intention to Bind
Formal requisites
Mailbox rule
Mirror image rule
Invitation to deal
Firm offer
Collateral contract
Uniform Commercial Code
Uniform Commercial Code
Course of dealing
Course of performance
UCC-1 financing statement
Uniform Commercial Code adoption
Defenses against formation
Lack of capacity
Undue influence
Illusory promise
Statute of frauds
Non est factum
Contract interpretation
Governing law
Construction and Operation
Parol evidence rule
Contract of adhesion
Integration clause
Contra proferentem
Excuses for non-performance
Frustration of purpose
Unclean hands
Accord and satisfaction
Rights of third parties
Privity of contract
Third-party beneficiary
Performance or Breach
Necessity of performance
Sufficiency of performance
Anticipatory repudiation
Exclusion clause
Efficient breach
Fundamental breach
Termination and rescission
Abrogation and rescission
Subsequent contract
Specific performance
Liquidated damages
Punitive damages
Quasi-contractual obligations
Quantum meruit
Actions in General
Parties to Action
Questions of Law and Fact
Trial and Judgment

An invitation to deal (or invitation to bargain) is a concept within contract law which comes from the Latin phrase invitatio ad offerendum, meaning "inviting an offer". According to Professor Andrew Burrows, an invitation to treat is:

" 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]

A contract is a legally binding voluntary agreement formed when one person makes an offer, and the other accepts it. There may be some preliminary discussion before an offer is formally made. Such pre-contractual representations are known variously as “invitations to treat”, “requests for information” or “statements of intention”.

True offers may be accepted to form a contract, whereas representations such as invitations to treat may not. However, although an invitation to treat cannot be accepted it should not be ignored, for it may nevertheless affect the offer. For example, where an offer is made in response to an invitation to treat, the offer may incorporate the terms of the invitation to treat (unless the offer expressly incorporates different terms). If, as in the Boots case (described below) the offer is made by an action without any negotiations—such as presenting goods to a cashier—the offer will be presumed to be on the terms of the invitation to treat.

Case law[edit | edit source]

Generally, advertisements are not offers but invitations to treat, so the person advertising is not compelled to sell. In Partridge v Crittenden [1968] 1 WLR 1204, a defendant who was charged with "offering for sale protected birds"—bramblefinch cocks and hens that he had advertised for sale in a newspaper—was not offering to sell them. Lord Parker CJ said 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 called 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 £100 to anyone who sniffed a smoke ball in the prescribed manner and yet caught influenza, 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 concerning 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, the display of a flick knife for sale in a shop did not contravene legislation which prohibited "offering for sale an offensive 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.

In England, auctions are governed by the Sale of Goods Act 1979 (as amended). Section 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 may 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 is obliged to sell to the highest bidder.[4][5] It is implicit from Payne v Cave (1789),[6] an early case concerning auctions, that each bid is deemed to expire when others make higher bids; but some auctioneers (such as eBay) have lawfully amended this presumption so that, should a higher bidder withdraw his bid, they may accept a lower one.

The tender process is a debated issue. In the case of Spencer v Harding,[7] the defendants offered to sell stock by tender, but the court held that there was no promise to sell to the highest bidder, merely an invitation for offers which they could then accept or reject at will. In exceptional circumstances, an invitation for tenders may be an offer, as in Harvela Investments v Royal Trust of Canada [1986],[8] where the court held that because 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. The Harvela case also made it clear that "referential bids" (e.g. “$2,100,000 or $101,000 in excess of any other offer which you may receive, whichever is the higher”, as in the Harvela case) are void as being "contrary to public policy and not cricket".

See also[edit | edit source]

Notes[edit | edit source]

  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 Bailii
  3.  Business: The Economy Argos - an invitation to 'treat',  (8 September 1999)
  4. Warlow v Harrison (1859) 1 E & E 309
  5. Barry v Davies (Heathcote Ball & Co.) [2000] 1 WLR 1962
  6. Payne v Cave (1789) 3 TR 148
  7. Spencer v Harding (1870) LR 5 CP 561
  8. Harvela Investments Ltd v Royal Trust of Canada (CI) Ltd [1986] AC 207

References[edit | edit source]

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