An offer is a legally binding contract, an invitation to treat is not.
It is important to know the difference between offers and invitations to treat before engaging in any business transactions. As the law makes very clear distinctions between the two, it is up to the buyer and seller to ensure that they follow the correct protocol. While offers are legally binding upon acceptance, invitations to treat are only the prelude to an offer being made or accepted.
Definition Of An Offer
An offer is a direct, unequivocal approach from one party to another to contract. The offer becomes a legally binding contract as soon as both parties agree to the terms and conditions of the proposed offer. The person who has accepted the offer is now legally bound to fulfil the terms and conditions of the offer. Apart from accepting an offer, a party can also counter it by making a new offer. It is up to the person making the offer to ensure that all the terms of the offer are clear.
Example Of An Offer
Advertisements, store flyers or catalogues do not count as offers, as these are not direct approaches to contract. A bid made on an auction, for example, is an offer. Upon winning the bid, the offer is accepted and becomes legally binding. Both parties then have to honor the terms of the offer. Both parties receive something of value out of the deal.
Definition Of An Invitation To Treat
An invitation to treat is a process whereby the seller extends an invitation for other people to make an offer. An invitation to treat on its own is not legally binding and merely allows potential buyers to propose offers which the seller can then evaluate. The seller is not allowed to mislead potential buyers with false information or prices, as consumer protection laws prohibit such actions.
Examples Of An Invitation To Treat
Merchandise that is either displayed in a shop or promoted via an advertisement are examples of an invitation to treat. Because it is not an offer, the seller can still refuse to sell the items if there are changes or mistakes with the advertised price. The process only becomes legally binding once the buyer offers to pay for the item and the seller accepts.
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