Offer Versus Invitation to Treat

An offer is an invitation that is communicated by someone to another party to create a binding agreement with specific terms. The acceptance must result in a valid contract and is legally binding on all parties.

An invitation to treat is essentially an invitation to start negotiations with the intent to create an offer. Examples include a recruitment company inviting applicants or a restaurant's menu card that displays prices.

Advertisements

Advertisements are all around us — online, print billboards, magazines, newspapers, and television. Ads claim to sell the best products with lowest prices and great service. But, do they represent the commencement of a contract? In most cases, the answer is no. However, advertisers may be held accountable for any untruthful messages that are communicated in their advertisements. Although they may make certain claims about their products, and these claims must be provable, they are not being offered in the legal sense of a contract.

Advertisements are typically an invitation to treat because they lack the important information that would make it an offer. There are circumstances where an advertisement would be an offer.

If descriptive words are used to intend to bind someone and there is confidence in all the applicable terms, the advertisement is likely to be deemed an offer instead of an invitation to treat. Stating a price by itself is ordinarily an invitation to treat, but if the store binds itself to take a certain price by placing tags, there could be an offer which is accepted when the customer goes to the counter. An example would be if the store says, “We sell this item for $1.25,” This statement could be construed as having all the elements of an offer:

  • Contains all the terms
  • There is sufficient certainty regarding the terms
  • Ability to be accepted without any additional negotiations

Auction Sales

There is normally an agreement with auction sales that every seller and bidder must sell and discuss whether bids can be withdrawn. There are several cases that have addressed auction sales directly. Dating back as early as the late 1700's, some courts have determined that a call for bids is usually an invitation to treat. The bidder is making an offer, which the auctioneer can either accept or reject. In recent years, some judges have held a bid is an offer where there is no reserve. The reason is that the auctioneer is binding him- or herself to accept the highest bid.

Acceptance of an Offer

It's important to differentiate because if a person thinks they are accepting an offer, but they are merely responding to an invitation to treat, acceptance would mean they are making an offer, not accepting the original one. All key terms as offered must be accepted and also communicated to the offeror by the offeree. If the offeree responds with a variation of any of the original terms, this is considered a counter offer, which essentially has the effect of ending the original offer.

Acceptance can be a bit tricky and confusing as it can raise a series of questions:

  • How does acceptance of a unilateral offer take place? In this situation, acceptance by conduct is satisfactory.
  • What about acceptance of a bilateral offer? The offeror must communicate acceptance.
  • What if the offeree specifies a method but uses another for communicating acceptance? Means of delivery can be flexible, provided acceptance occurs within the same stated timeframe.
  • How does simultaneous communication work? If acceptance is delivered through electronic means, it is accepted when deemed received.
  • Is postal acceptance an option? Acceptance is deemed accepted when it's posted.
  • What is the consequence of accepting an offer? Provided all other elements of a contract are present, this will create a valid and enforceable binding contract.

Offer Termination

There are several ways you may be able to terminate an offer:

  • Death of offeree
  • Acceptance of the offer
  • Counteroffer
  • Failure of a condition precedent
  • Revocation before acceptance
  • Lapse of time

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