Distinguish between offer and invitation to treat

Introduction

For a legally binding contract to exist in England and Wales, there must be an agreement, which consists of a clear offer and a corresponding acceptance. However, not every communication that seems to initiate a transaction is a legal offer. The law makes a crucial distinction between an offer and an invitation to treat. An offer is a definite promise to be bound on specific terms, whereas an invitation to treat is merely an invitation for others to make offers. This distinction is fundamental as it determines the point at which parties become legally obligated. This essay will distinguish between these two concepts by examining the governing principles and key case law in different commercial contexts.

The Nature of an Offer

An offer is an expression of willingness to contract on specified terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed.¹ The key element is the intention to be bound. If the person making the statement intends for an affirmative response to create a binding contract without further negotiation, their statement is an offer. The courts look for this intention objectively. For instance, in Storer v Manchester City Council,² the Court of Appeal held that the council’s letter stating, “If you will sign the Agreement and return it to me, I will send you the Agreement signed on behalf of the [council] in exchange,” constituted an offer which the claimant had accepted by signing and returning the document. The language used was sufficiently clear and certain to demonstrate an intention to be bound.

Distinguishing the Invitation to Treat

In contrast, an invitation to treat (ITT) is a preliminary step in negotiations, not capable of being accepted to form a contract. It is an expression of willingness to receive offers. The party making the ITT does not intend to be bound by any response; instead, they are inviting the other party to make an offer, which they are then free to accept or reject. This principle protects parties from being contractually bound against their will. The distinction is largely based on judicial precedent in common situations, such as the display of goods in a shop and advertisements.

The general rule for advertisements is that they are invitations to treat, not offers. This was established in Partridge v Crittenden,³ where an advertisement for the sale of wild birds was held to be an ITT. The court reasoned that if it were an offer, the advertiser might find themselves contractually obliged to sell more goods than they actually had in stock. It is the potential buyer who makes an offer by responding to the advertisement, which the advertiser can then accept or reject. However, there is an important exception. If an advertisement is unilateral, meaning it asks the offeree to perform an act rather than make a promise, it may be construed as an offer. The classic example is Carlill v Carbolic Smoke Ball Co,⁴ where an advertisement promising £100 to anyone who caught influenza after using the smoke ball was held to be a unilateral offer to the world at large. The company’s deposit of £1,000 in a bank showed a clear intention to be bound, and acceptance was completed through the performance of the required conditions.

Similarly, the display of goods in a shop is generally considered an invitation to treat. In Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd,⁵ the Court of Appeal held that goods on a shelf in a self-service store constituted an ITT. The customer makes the offer when they present the goods at the till, and the cashier accepts that offer on behalf of the shop. This reasoning allows the shopkeeper to refuse a sale and gives the customer the freedom to change their mind and return goods to the shelf before reaching the till. This principle was also applied in Fisher v Bell,⁶ where the display of a flick knife in a shop window was an ITT and not an offer for sale, meaning no offence had been committed under the relevant statute.

Conclusion

In conclusion, the distinction between an offer and an invitation to treat is based on the intention of the party making the statement. An offer demonstrates a clear and certain intention to be legally bound upon acceptance, whereas an invitation to treat is simply a first step in negotiations, inviting offers from others. While general rules have developed for common situations like advertisements and the display of goods, the categorisation of a statement is not always straightforward. The courts will examine the specific facts, language, and context of a communication to determine objectively whether the maker intended to make an offer or merely to open negotiations. The principles laid down in cases like Partridge v Crittenden and Carlill v Carbolic Smoke Ball Co show that while the general presumption for advertisements is that they are invitations to treat, this can be rebutted where a clear intention to be bound is evident.

Footnotes

1. McKendrick, E. (2020) Contract Law: Text, Cases, and Materials. 9th edn. Oxford University Press.
2. Storer v Manchester City Council [1974] 1 WLR 1403.
3. Partridge v Crittenden [1968] 1 WLR 1204.
4. Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256.
5. Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401.
6. Fisher v Bell [1961] 1 QB 394.

References

Cases

• Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
• Fisher v Bell [1961] 1 QB 394
• Partridge v Crittenden [1968] 1 WLR 1204
• Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401
• Storer v Manchester City Council [1974] 1 WLR 1403

Books

• McKendrick, E. (2020) Contract Law: Text, Cases, and Materials. 9th edn. Oxford University Press.