An invitation to treat is a common scenario that occurs in everyday life and business. Whether you have heard of this term, there is a high chance you have participated in an invitation to treat more times than you can count. This article will explore:
An invitation to treat is when you invite someone to make an offer. It is described as merely delivering information to tempt the other party to make an offer.
The most common example of an invitation to treat is a shop that has price tags on their goods, in-store or online.
You have a clothing store and have marked sale prices on the jumper rack. You accidentally put ‘$10.00’ on the price tag, when it should have been ‘$100.00′. A customer picks up the jumper and is excited to get a great bargain. So, they bring it over to your checkout to purchase. Then you realise the mistake and tell the customer that the price is $100.00. The customer can then agree or disagree to purchase the jumper at that price. You do not have to honour the marked price, as this was an ‘invitation to treat’. The customer made the offer to purchase when they brought the jumper to the counter. You can accept or decline this offer. However, there are exceptions to this, discussed later in this article.
You are driving down the highway when you see a sign for a stall selling mangoes. The sign states ‘MANGO TRAYS $10.’ You decide to pull over and purchase a tray of mangoes. You greet the stall owner and go to pull $10 out of your wallet. The stall owner states that they are out of their usual $10 trays. However, they have premium mangoes available for $20 per tray. You are upset that they have advertised mangoes at $10 and now they want you to pay double this price. However, the stall owner does not have to give you the mangoes at $10 per tray, since this was merely an invitation to treat.
Other examples of an invitation to treat include auction sales and tenders. In an auction, when the auctioneer calls for a bid, the law considers this to be an invitation to treat. Furthermore, a request to tender is also an invitation to treat. This is because an offer is not made until the tender document is submitted.
Two of the important elements of a binding contract are offer and acceptance. An offer is a definite intention to be bound by a contract, whether that be for the sale of goods or services.
The key elements of a binding contract are:
By contrast, an invitation to treat is where you display information about a good or service to entice people to make a purchase. You are essentially inviting the other party to make an offer, which you can then accept or decline. The key factor will be whether the advertisement or statement was intended to be an offer.
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If you operate an online shop, the process of offer and acceptance looks a little bit different. It is generally held that prices for your clothing online are an ‘invitation to treat,’ similarly to brick and mortar stores. The below example shows the difficulty between online shops and brick and mortar stores, where the offer and acceptance is conducted online.
In this example, you and the customer would most likely be aware that a mistake was made when you listed the price, rather than the vendor being purposely misleading or deceptive. It is important that your terms and conditions specify that the customer’s offer is not accepted until you accept the customer’s offer. For example you may only accept the customer’s offer once you send them an email confirming their order. By clearly outlining when offer and acceptance is made in your terms and conditions, you can avoid a costly mistake.
Despite the current stance in courts on advertising and marked prices being ‘invitations to treat’, vendors are still obliged to comply with the Australian Consumer Law. As a vendor, you are required to ensure that you do not engage in misleading or deceptive conduct, or conduct which is likely to mislead or deceive your customers. You must therefore be careful that your advertising does not mislead or deceive customers, as this is illegal.
It is also important to consider whether not accepting an invitation to treat as a result of your advertisement creates goodwill for your business. It is unlikely that you will have many happy customers if you consistently could not honour your advertised price.
When listing goods and services for sale online or in store, this will generally be construed as an invitation to treat. A formal offer will be made by the customer when they come to the checkout of your physical store or process payment from the online store’s cart. You should have strong terms and conditions which outline when offer and acceptance is made. This will avoid any confusion and mitigate the risk of any costly mistakes made when listing prices. If you need assistance with preparing sales terms and conditions for your website, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page for legal advice.
It is when you invite someone to make an offer. You can then accept or decline this offer.
The most common example is a shop that has price tags on their goods. This includes physical or online stores.
Your terms and conditions should specify that the customer’s offer is not accepted until you accept the customer’s offer. Clearly outlining when offer and acceptance is made will help avoid a costly mistake.
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