Invitation to Treat vs Offer Q6

Discuss the importance to differentiate between invitation to treat and offer in law of contract.

(20 marks, 2011 Q6)

An invitation to treat is a term used in the context of contract law to distinguish between an offer which is open for acceptance (which would lead to a legally binding contract) and a representation whereby another person is invited to make an offer. One of the legal issues which arises from time to time when deciding whether a legally binding contract has been formed, is whether or not an offer said to have been accepted by the opposing party was, in law an offer, or an invitation to treat. If it is the case that the alleged offer was in law an invitation to treat, it cannot be said that an offer has been accepted to firm a legally binding contract.

Invitations to Treat
The key difference between an offer and an invitation to treat is that an invitation to treat is not made with the intention that it is immediately open to acceptance by the other person. Use of the word ‘offer’ in a statement is not conclusive of the legal status of the representation; it will depend upon the nature and intended effect of the statement made. When deciding the status of any particular representation Courts will have regard for evidence setting out (1) the precise words or conduct of each of the parties; and (2) the background circumstances to the statements being made. If there is no evidence in this regard, the court is left to reach its decision without reference to the intentions of the parties and objectively construe the statements alleged to determine their legal effect.

Statements may accompany representations to evince the intention of the person seeking offers, such as “I may be prepared to offer to sell at [price]” or “the lowest price we sell at is [price]”.

Categories of Cases
There are established categories of case where makers of statements are presumed to be making invitations to treat and on the other hand offers. In retail over the counter sales (whether the goods are on display or the customer is able to pick up goods and present them to a cashier), it has long been the case that mere display of products for sale at listed prices are invitations to treat – it is the customer that makes an offer to purchase when the customer hands the product or requests the product over the counter. It is likely that the same principles apply to online sales, however much will depend upon the terms of business of the online retailer.

Other situations include:


  • Advertisements for products and services are simply invitations to treat, and are intended to lead in due course to binding contracts of sale after further bargaining and potentially enquiries by the potential seller in respect to the capability of paying.
  • Rewards for the return of lost or stolen property are presumed to be invitations to treat.
  • Common law auctions (ie rather than auction processes established by contract, such as Ebay auctions), it is the bidder that makes the offer to the auctioneer, rather than the auctioneer when he makes calls for bids. The auctioneer makes an invitation to treat when he calls for bids to be made – it is open to the auctioneer to accept or reject any offer made by a bidder. The Sale of Goods Act provides that the price is determined upon the falling of the auctioneer’s hammer or other custom to conclude the sale. Up until that time, the auctioneer is free to reject any bid.
  • Tenders to sell goods at common law are generally considered to be offers to sell to the highest bidder, although conditions may attach to the tender to alter the position.
  • Offers to the public for allotments of new shares in companies are usually invitations to treat, with the company retaining the power to select from applicants (if any) and to allot shares to applicants as they see fit.



Presumptions are likely to be found to extend to similar categories of case.

Over the Counter Sales
In retail sales over the counter, an exception to the usual rule of offer and acceptance applies in the interests of public policy. The usual rule applied in over the counter sales would dictate that a customer, interested that in purchasing a product, would be offered that product by a retailer displaying the product for a fixed price. In these circumstances, the rule of law is that the shop offering good and products for sale by placing those items on display, is actually making an “invitation to treat” rather than a firm offer to sell the goods.

The rationale for the rule of law is that should a retail store list products for sale, and a person were to ‘accept’ the ‘offer’ of the retailer by displaying the item, would be bound by contract upon a request by a person to purchase the product. This would potentially place retailer in a difficult position, as retailer may be out of stock of the particular item, and a request by a customer to purchase the item would place a retailer in breach of contract if they were out of stock, as the retailer would not be in a position to supply under the contract.

For this reason, the exception exists to the general rule in retailing whereby it is the customer who makes an offer by requesting to purchase a product, and it is the retailer who accepts the offer to purchase. The display or listing of the item in a retailer then is simply an invitation to treat, that may be progressed to the next stage of the transaction by a potential purchaser making an offer.

Online Sales
These same issues arise in the context of online sales. If it is the case that online businesses are not in a position to guarantee supply in all circumstances, online traders would be well advised to set out in their terms and conditions of sale that goods and services promoted on the website are listed as invitations to treat rather what is likely to be presumed – that the listing of the product is an offer. For example, a website offering downloads of software for a price will rarely find itself in a position where it cannot make a copy of the software and make it available for download to a purchaser. A trader dealing in plasma televisions or other products which it needs to buy in, in order to sell is not in the same position to guarantee supply to purchasers. Placing provisions such as these in terms of business minimise doubt from the status of the listing on a website.

Please refer to post here for further discussion on online e-marketing by Nuraisyah Chua Abdullah, in her book "Question & Answers on Malaysian Courts, Statutes, Cases & Contract, Tort and Criminal Law".

When in business, it is prudent to ensure that disappointed consumers are aware at the time of sale that the goods or services which they would like to procure may not be available. Terms and conditions of business used by businesses should canvass legal issues including those such as the foregoing to avoid distraction from usual trading activities and minimise the disputes that may be raised.