Contract | Formation
Offer: Invitation to Treat
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Introduction
It is necessary to distinguish between an offer and an invitation to treat. An invitation to treat is a preliminary statement, merely supply of information and often inducing negotiation. There is no commitment to sell or offer which could be accepted.
Distinction between offer and invitation to treat
Harvey v Facey [1893] AC 552
Facts:
The case involved a dispute over the sale of a property (in Jamaica) and an alleged agreement made via telegram correspondence.
Plaintiff: Will you sell us Bumper Hall Pen? Telegraph lowest cash price
Defendant: Lowest price for Bumper Hall Pen £900
Plaintiff: We agree to buy Bumper Hall Pen for the sum of nine hundred pounds asked by you
Issue:
The court had to determine whether there had been an offer and acceptance of that offer.
Held:
The Privy Council decided that in the initial exchange of telgrams: the plaintiff was asking questions about the property and clearly not making an offer to buy the property and defendant was simply answering the second part of the plaintiff's question. The defendant entered into a discussion but did not commit, so the defendnat's first telegram contained an invitation to treat not an offer.
The plaintiff's final telegram is the first unequivocal statement. However, because the defendant's statement was not viewed as an offer the plaintiff was unable to answer by accepting. Therefore, this telegram is essentially the plaintiff making an offer, which the defendant has chosen not to accept.
The case has been criticised as some argue that the defendant's telegram implied a promise to sell for £900.
Today, the Law of Property (Miscellaneous Provisions) Act 1989 s2(1), requires contracts for the sale of land to be writing and signed by both parties.
Gibson v Manchester City Council [1979] 1 WLR 294
Facts:
The plaintiff was a council tenant. The council, the defendant, had sent the plaintiff a letter inviting an application to buy the council house he was living in. The defendant's letter stated: .. The Corporation may be prepared to sell the house to you at the purchase price of £2,725... If you would like to make formal application to buy your Council house, please complete the enclosed application form...
.
The plaintiff completed and returned the application. There was a change of Government and the plans to allow tenants to buy their council properties were dropped. Therefore, the defendant refused to accept the plaintiff's application.
Issue:
Was the council in a breach of a contract?
Held:
The court held that the defendant's letter was not a contractual offer, which the plaintiff could accept. The formal application by the plaintiff was an offer, that the defendant did not accept.
Lord Diplock: The words 'may be prepared to sell' are fatal... [the defendant's letter is] setting out the financial terms on which it may be the council will be prepared to consider a sale and purchase in due course...
.
Storer v Manchester City Council [1974] 3 All ER 824
Facts:
An earlier case also involving a council tenant's right to buy his property. The defendant sent the plaintiff a document titled Agreement for Sale
and a letter which stated: If you will sign the Agreement and return it, I will send you the Agreement signed on behalf of the council in exchange
.
The plaintiff signed and returned the Agreement for Sale
. After the Labour party took control of the council, the defendant did not return a signed copy and refused to sell the property.
Issue:
Did an offer exist, which the plaintiff accepted?
Held:
The court held that there was a binding obligation on the defendant to sell.
Lord Denning: In contracts you do not look into the actual intent in a man's mind. You look to what he said and did. A contract is formed when there is, to all outward appearances, contract. A man cannot get out of a contract by saying 'I did not intend to contract' if by his words he has done so...
.
Objectively, the letter appeared to commit the council to selling the property if the plaintiff returned the documents. The defendant's subjective argument that it was not their intention to be bound was not sufficient.
Shops
Issues arise in determining whether items on display in a shop constitute an offer or an invitation to treat. The timing of the acceptance is a central factor. A contract is concluded and becomes binding on the parties once the offeree accepts the offer (in full and to all the terms).
After a customer selects a product from the shelf he can change his mind until he takes the item to a checkout. At this point the customer is making an offer to pay for the goods and the store accepts when payment is taken.
Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB 401
Facts:
Regulations required a registered pharmacist to supervise the sale of certain drugs. Customers could select the items from the shelves and take them to specific pay point to purchase. The defendant had suitably qualified persons at the pay point in stores.
Issue:
When was the contract of sale was concluded? If it was before the pay point then the defendant would be committing an offence.
Held:
Somervell LJ stated that the system was: .. a convenient method of enabling customers to see what there is and choose articles which they wish to have and then to go up to the cashier and offer to buy what they have chosen so far...
. Therefore, the contract was not concluded until the sale at the pay point.
Self-service in a shop is classified simply as an invitation to treat. By taking goods to a pay point the customer is making an offer to buy and it is up to the vendor to accept that offer by taking payment.
Fisher v Bell [1967] 1 QB 394
Facts:
A criminal case involving the sale of restricted weapons.
The defendant had a knife displayed in his shop window with a sale price. Sale of that type of flick knife was prohibited under the Restriction of Offensive Weapons Act 1959.
Issue:
Was the defendant guilty of offering for sale a restricted knife?
Held:
The court found that the knife in the window was an invitation to treat not an offer. Therefore, the defendant was acquitted.
Advertisements
The general rule is that advertisements are invitations to treat not offers. It is important to note that generally, an offer should be made to a particular person or class of persons.
Partridge v Crittenden [1968] 2 All ER 421
Facts:
The defendant placed an advertisement in a periodical, Classified Advertisements
section stating: Bramblefinch cocks, Bramblefinch hens 25s each
.
Issue:
Was the defendant offering for sale
a wild bird contrary to the Protection of Birds Act 1954?
Held:
The court found that the advertisement was an invitation to treat not an offer. Therefore, the defendant was acquitted.
It is reasoned that if an advertisement was considered an offer then anyone responding and asking for the items would be accepting. This would mean the seller would be bound and could cause difficulties if, for example, the stock had run out.
Cases are determined on the objective intention behind the advertisement. The courts will consider whether: the wording is sufficiently clear to be an offer, the advertiser intended to be bound and there are issues of limited supply.
Rewards
Rewards are an interesting aspect of advertising and tend to be treated differently by the courts.
-
For information
Advertisements of rewards for information have generally been treated as offers not invitations to treat.
Williams v Carwardine [1833] EWHC KB J44
Facts:
The defendant placed advertisements stating that:
.. whosoever would give such information as might lead to a discovery of the murder of the said Walter Carwardine, should, on conviction, receive a reward of £20...
.The plaintiff gave information but was refused the reward.
Issue:
Was the defendant obliged to pay the reward advertised?
Held:
The advertisement was sufficiently precise, with no negotiation required so constituted an offer. The supply of information was an acceptance and the money should be paid.
-
For consumers
Rewards advertised to encourage consumers also raise the question of whether they should be considered offers or invitations to treat.
Lefkowitz v Great Minneapolis Surplus Stores (1957)
Facts:
An American case which is not binding English courts, however the reasoning is interesting.
The defendant placed the following advertisement in a newspaper:
Saturday 9 A.M. Sharp 3 Brand New Fur Coats Worth to $100.00. First Come First Served $1 Each
.The plaintiff was the person to come into the store but the owner refused to sell to him.
Issue:
Was the defendant's advertisement an offer?
Held:
The court decided that the wording was sufficiently precise and there would be no issues of limited supply, as only three coats were advertised as available. Therefore, the advertisement was found to be an offer not an invitation to treat. The plaintiff had accepted the offer by being the first person to come into the store, as specified.
Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256
Facts:
The defendant placed an advertisement stating:
£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball... £1000 is deposited with the Alliance Bank, showing our sincerity in the matter...
.The plaintiff made a claim for the reward but it was refused. The defendant argued that the advertisement: was
mere puff
, had not been addressed to specific persons and that the plaintiff had not communicated notice of her acceptance.Issue:
Had the plaintiff accepted the offer?
Held:
The court dismissed the defendant's pleas.
It found that the advertisement was not
mere puff
as the defendant had explicitly stated money had been set aside to make such payments. A reasonable person reading the advertisement would take it to be a serious offer which amounted to a binding obligation. Although, an offer must usually be addressed to specific person or class of persons, the advertisement was being made to anyone who met the criteria set out and this was sufficient. Furthermore, the court held that the wording of the advertisement meant the plaintiff did not have to communicate acceptance, as clearly the defendant did not expect every customer to contact them on purchasing the item, rather only those who used the product as directed and then caught influenza.Therefore, the case established that advertisements can constitute an offer to the public at large and can be worded to waive the need to communicate acceptance prior to a claim.
Rewards are unilateral contracts. A unilateral contract binds the promisor to perform his promise if the other party performs the required act. This is in contrast to a bilateral contract where one party offers a promise in return for the promise of the other.