Invitations to treat

Question 1

What is an invitation to treat?

Answer 1

• An invitation to treat is the first step in negotiations which may or may not lead to a firm offer by one of the parties.
• It usually takes the form of an invitation to make an offer.
• A invitation to treat cannot be accepted to form a binding contract.

Question 2

What is the general rule for advertisements regarding offers/invitations to treat?

Answer 2

• Advertisements generally are regarded as statements inviting further negotiation or invitations to treat (Partridge v Crittenden [1968] 1 WLR 1204].
• One reason for this is that the advertiser may have limited supplies in question. If it were an offer, the advertiser may not be able to supply everyone who accepts it and be in breach of contract(s).

Question 3

Name the exception to this rule and outline a related piece of case law.

Answer 3

• An exception to the general rule is when an advertisement amounts to a unilateral offer.
• Carlill v Carbolic Ball Co (1893) 1 QB 256.
• An advertisement in this case was held to be a unilateral offer because there was a clear prescribed act (using the smoke balls in a specified manner for a specified period but nevertheless contracting influenza) performance of which constituted acceptance.
• Furthermore, the defendant showed a clear intention to be bound by the certainty of the language used in the advertisement and by depositing £1,000 in a bank account to show their commitment to paying anyone £100 who performed the prescribed act.
• In this case, note the twin requirements of a unilateral offer – a prescribed act and a clear intention to be bound.

Question 4

What is the general rule for goods for sale regarding invitations to treat/offers?

Answer 4

• The general rule is that price-marked goods displayed in a shop window / shelves are not an offer for sale but an invitation to treat (Fisher v Bell [1961] 1 QB 394].
• A reason for this is that trader would be obliged to sell the goods to anyone who accepted the offer before any judgement could be made in relation to the particular customer. This is problematic in the case of age-restricted goods.
• This rule applies to goods in a self-service store (Pharmaceutical Society of GB v Boots Cash Chemists [1953] 1 QB 401.
• Websites are regarded as equivalent to a display of goods.

Question 5

What is an invitation to tender and what is its general rule?

Answer 5

• An invitation to tender is used where a party, wishing to purchase a major item or service, invites tenders (offers) from those interested in supplying the goods required (think of a military contract).
• Inviting parties to tender is as a general rule deemed an invitation to treat (Spencer v Harding (1870) LR 5 CP 561).

Question 6

What is an exception to the general rule regarding invitation to tender?

Answer 6

• An exception firmly recognised is where the invitation to tender expressly contains an undertaking to accept the highest or the lowest bid.
• In Harvela Investments Ltd v Royal Trust Co. of Canada (CI) Ltd [1985] Ch 103, the party requesting tenders had made an offer to enter into a contract with the party submitting the highest / lowest bid. This is a form of unilateral contract: the required act is making the highest / lowest bid, and when this is carried out, the other party is bound.

Question 7

What does Blackpool v Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195 contribute to the general rules of invitations to tender?

Answer 7

• An invitation to tender could give rise to a binding contractual obligation to consider tenders in circumstances where:
  1. the tenders had been solicited from specified parties who were known to the requesting party.
  2. There was an absolute deadline for submission.
  3. The party requesting tenders had laid down absolute and non-negotiable conditions for submission.
• On this basis, Bingham LJ held that there was a contractual duty to consider tenders which had complied with the conditions.

Question 8

What is the general rule concerning auctions?

Answer 8

• That an auctioneer’s request for bids is an invitation to treat (Payne v Cave (1789) 3 Durn & E 148).
• the bidder makes an offer which the auctioneer is then free to accept or reject; acceptance of the offer is indicated by the fall of the auctioneer’s hammer; the bidder may revoke their offer at any time before the hammer falls.
• This is consistent with the provisions in s 57 of the Sale of Goods Act 1979.

Question 9

Auctions ‘without reserve’ – special consideration.

Answer 9

• In an auction without reserve, the seller promises to sell to the highest bidder whatever that bid turns out to be.
• The auctioneer may be sued for breach of contract if they refuse to sell to the highest bona fide bidder.
• ^ Expressed obiter dicta in Warlow v Harrison (1859) 1 E & E 309. Analysis of this cases suggests that there are two contracts: (1) a bilateral contract on the usual basis of an auction sale, which determines who is entitled to the goods; (2) a unilateral contract based on the promise that the auction is without reserve. If the reserve is not applied and the goods are withdrawn from sale there is a breach of contract and the highest bona fide bidder is entitled to be compensated by the payment of damages. But they are not entitled to the goods since this is dictated by (1).
• The above approach has been approved by the Court of Appeal in Barry v Davies [2000] 1 WLR 1962.