Offer and invitation to treat

How to tell an offer from an invitation to treat, and how an offer comes to an end.

Where this fits

A contract needs agreement, consideration, intention to create legal relations and certainty of terms. Agreement is usually found by asking whether one party made an offer and the other accepted it. This lesson covers the offer. The next covers acceptance.

The test is objective. Courts ask what a reasonable person in the other party's position would have understood, not what the speaker privately meant.

What counts as an offer

An offer is a definite statement of the terms on which the offeror is willing to be bound, made with the intention that it becomes binding as soon as the offeree accepts. It can be made to one person, to a group or to the world at large.

• It must be firm. Words that only start a negotiation do not count.
• It must be communicated to the offeree.
• It must be specific enough that acceptance alone could create a contract.

Offer or invitation to treat

An invitation to treat only invites other people to make offers. No one can accept it, so no contract forms. This is the most tested point in the topic, and the usual examples are worth knowing well.

• Goods displayed in a shop, with a price. The display is an invitation to treat. The customer makes the offer at the till and the shop accepts by taking payment (Pharmaceutical Society v Boots, 1953).
• Goods in a shop window. Also an invitation to treat (Fisher v Bell, 1961).
• Most advertisements. They invite offers (Partridge v Crittenden, 1968).
• Auctions. The lot being put up is an invitation to treat. A bid is the offer, and the fall of the hammer is the acceptance (Payne v Cave, 1789). If the sale is without reserve, the auctioneer is taken to promise to sell to the highest bidder (Barry v Davies, 2000).
• Supplying information. Saying what you would take for something, in answer to a question, is not an offer (Harvey v Facey, 1893). The same goes for statements such as 'I may be prepared to sell' (Gibson v Manchester CC, 1979).

An advertisement can be an offer if it is clear, definite and shows an intention to be bound. In Carlill v Carbolic Smoke Ball Co (1893), the company promised a reward to anyone who used its product as directed and still caught flu. It had also deposited money at a bank to show it meant it. That was a unilateral offer to the world, accepted by anyone who performed the conditions.

Invitations to tender usually work the same way as other invitations to treat, so each tender is an offer that the inviting party can accept or ignore (Spencer v Harding, 1870). The exception is where the inviting party commits itself to accept the highest or lowest bid. Then it has made an offer and must follow its own process (Harvela v Royal Trust of Canada, 1986).

How an offer ends

An offer can only be accepted while it is still open. It stops being open in these ways.

• Rejection. A flat refusal ends the offer. So does a counter-offer, which replaces the original with a new offer on different terms (Hyde v Wrench, 1840). A mere request for information does not (Stevenson, Jaques v McLean, 1880).
• Revocation. The offeror can withdraw at any time before acceptance, even if they promised to keep the offer open, unless the offeree gave something in return for that promise (Routledge v Grant, 1828). Revocation only works once it has been communicated to the offeree. A letter of revocation takes effect when it arrives, not when it is posted (Byrne v Van Tienhoven, 1880). It can be communicated by a reliable third party (Dickinson v Dodds, 1876).
• Lapse of time. An offer ends at any stated deadline. If none is stated, it ends after a reasonable time, which depends on the subject matter (Ramsgate Victoria Hotel v Montefiore, 1866).
• Failure of a condition the offer depended on, and in some cases the death of a party.

Unilateral offers need a note. If the offeree has started performing, courts are reluctant to allow revocation. The offeror is treated as promising not to revoke while the offeree is genuinely carrying out the act (Errington v Errington, 1952; Daulia v Four Millbank Nominees, 1978).

Using this in an SQE question

• Find the first statement that could be an offer. Ask whether it was firm and specific, or just an invitation or a piece of information.
• Trace the chain. If a reply changes the terms, it is a counter-offer and the earlier offer is gone.
• Check the timing. Was the offer still open when the other party responded?

Key cases

• Pharmaceutical Society v Boots (1953)Shop display is an invitation to treat.
• Carlill v Carbolic Smoke Ball Co (1893)An advertisement can be a unilateral offer to the world.
• Hyde v Wrench (1840)A counter-offer destroys the original offer.
• Byrne v Van Tienhoven (1880)Revocation takes effect only when it is communicated.

Check yourself

Answer out loud before you open each one.

An original summary written for Head Start from the SRA specification and the law. Check the detail against your course materials. This is not legal advice.