Invitation to Treat

Invitation to Treat. For an offer to be capable of becoming binding on acceptance, it must be definitely clear and final. If it is merely a preliminary move in negotiations which may lead to a contract, it is not an offer but an invitation to treat.

The offeror must not “merely have been feeling his way towards an agreement, not merely initiating negotiations from which an agreement might or might not in time result”. As Bowen, L.J., state in Carlill V. Carbolic Smoke Ball Co., a person making an offer becomes “liable to anyone who, before it is retracted, performs the condition…”whereas by contrast, in invitation to treat, …you (the offeror) offers to negotiate, or you issue advertisements that you have got a stock of books to sell, or houses to let, in which case there is no offer to be bound by any contract. Such advertisements are offers to negotiate-offers to receive offer to chafer…

However, the important point to note is that an invitation to treat not being an offer, but being a phenomenon preliminary to the offer, is not capable of an acceptance which will result in a contract.

Thus, in Berliet Nig Ltd. V. Francis, the respondents, who was the Benin City Branch manager of the appellant company, received a letter from the Managing Director of the company in Lagos informing him that in line with the policy of the company that 10% of all company shares should be owned by workers, the respondent and other Benin branch staff were invited to buy shares in the company. The respondent applied for ₦2, 500 shares at ₦2 per share, paid for the shares and was issued a receipt for the ₦5, 000 he had paid. The shares were never allotted to him and he sued the company for specific performance.

Reversing the decision of the High Court, the Court of appeal held that the managing directors letter to the respondent was not an offer, but an invitation to treat, and the respondent’s reply and payment of ₦5,000 was therefore, the original offer. In the event, the failure to allot shares to the respondent or to reply to his offer in company, meant that his offer was not accepted and that there was, therefore, no contract.

Whilst this decision is correct in principle, its unqualified application to this particular transaction is questionable. If the workers to the company are already entitled to 10% of its shares, it becomes a term in their contract of employment, and the Managing Directors letter can, therefore, be seen in the context of implementing an already existing legal obligation rather than being an independent invitation to treat.

The court ought to have considered the question of the number of shares the respondent was entitled to by virtue of his employment in the appellant company, instead of engaging in an analysis of the transaction in terms of offer and acceptance. The company had already made the offer in its conditions of service which the respondent accepted by entering the appellant’s service. The only question extant was the exact number of shares the respondent was entitled to as his proportion of the workers 10%.

There are numerous examples of situations involving invitations to treat:

  1. Auctions
  2. Display of goods in shelves in a shop, supermarket, self-service shops, etc.
  3. Invitation to tender
  4. Buses, taxies, train, etc.

Auctions – Invitation to Treat

An auctioneer’s request for a bid is not an offer but an invitation to treat. The bid itself is the offer, and acceptance occurs when the auctioneer’s hammer falls. See the celebrated case of Payne V. Cave, (1789)3 Term. Rep. 148
This common law position is confirmed by Section 58(2) of the Sale of Goods Act 1893, applicable to all the Northern and Eastern States of Nigeria as a pre-1900 English Statute of General Application.
From the above analysis of the auction, it is clear that until the fall of the harmer, any bid may be withdrawn. It was held equally that an advertisement that an auction sale will be held at a certain venue does not amount to an offer to hold it. Thus, an auctioneer is under no liability to anyone who comes to bid for the sale if the sale is cancelled or a particular lot is withdrawn. That was the decision of the English Court in the case of Harris V. Nickerson (1873)28 L.T. See also the case of Harvela Investments Ltd. V. Royal Trust Company of Canada. (1986)AC 207; (1985) 2 ALL E. R. 966.

Display of goods in shelves in a shop, supermarket, self-service shops, etc.

The issuing of a catalogue containing description of goods for sale at specific prices or any similar advertisement of sale of listed goods is not an offer of those goods for sale but an invitation to potential buyers to make offers to buy Spencer V. Harding (1870) L.R. 5 C. P. 561

It has been held that the display of goods in shelves in a shop, supermarket, self-service shops and similar instances and situations constitutes an invitation to treat, not an offer.
Thus, it is the customer or client who makes the offer by picking up the objects, or collecting the items in a tray and taking them to the sales clerk, the sales clerk accepts on behalf of the proprietor of the establishment by accepting money from the customer.

It therefore, follows that before money is accepted, any of the parties to the transaction can refuse to carry on with it, there being as yet no contract and no liability. The classical illustration of the application of this principle is the case of Pharmaceutical Society of Great Britain V. Boots Cash Chemists, (1953) 1 Q.B. 401.

Facts of the case are as follows:

The defendants owed a chemist shop organized in accordance with the self-service system. A customer selected a drug with poison in it which the law required to be sold under the supervision of a chemist. Although the shop had a resident chemist who was authorized to prevent customers from removing dangerous drugs without proper authority, the question arose whether the display of drugs on the shelves was not an offer, in which case acceptance took place when a customer put the drug in the shopping basket provided by the defendants shop. If this was the case, then it would be too late to prevent a customer from removing the drugs since the contract to buy and sell would have been concluded by the acceptance. The action was brought as a test case to determine whether there had been an acceptance in the above circumstances.

It was held by the Court of appeal, Queens Bench England, that goods are merely displayed to enable customers to choose what they want and that the contract is not completed until the shopkeeper or someone on his behalf accepts the offer after the customer has indicated the articles he needs. In other words, the display on the shelves constitutes an invitation to treat, the customer makes the offer by selecting particular goods, and the shopkeeper accepts by receiving payment from the customer.

Also in Lasky V. Economy Grocery Stores, (1946) 163 A.L.R. 235), the plaintiff picked a bottle labeled “tonic” in a self-service grocery store owned by the defendant. Whilst placing it in the carrier basket provided, it exploded and severely injured her. She brought an action for breach of an implied warranty of merchantability under contracts of sale of goods. The action was dismissed by the Massachusetts Supreme Judicial Court on the ground that there was neither a sale nor an agreement to sell at the time the bottle exploded.

Invitation to tender – Invitation to Treat

If a Local Government Area, a Government ministry, a company or individual asks or advertises that tradesmen, contractors or suppliers should send in tenders for a contract, the aforementioned parties would not be making an offer but invitation to treat. If this were offer, then all those who will submit tenders will automatically be successful. But this is not the case. Consequently it is not binding on the party who requests for tenders. The tenders (when submitted) are the offers which the company, government agency or individual may accept.

An invitation to tender is merely an invitation for tenders from interested parties and is not itself an offer. Therefore, the highest bid for any goods or property on tender, or the lowest tender in respect of tenders for the construction of buildings may be rejected without any legal consequences.
Since the invitation to treat, the bid or tender is merely an offer which may or may not be accepted by the advertiser. Only on acceptance of the offer by him does a contract come into existence between the parties.
See the case of Spencer V. Harding (1870) 5 C.P. 561; 39 L.J.C.P. 332.

Buses, Taxies, Trains, etc.

The point at which an offer is made in contracts of conveyance between bus owners, railway companies, taxi owners, etc., and passengers remains a continuing source of controversy. Take the bus for example.
Who makes the offer? Is it the passenger who waits at the bus stop, in which case the bus company accepts when it stops for the passenger to hop in?

Or is it the bus company that makes the offer by stopping at the bus stop, which the passenger accepts by stepping into the bus? The varieties and possibilities are numerous. It was held in the case of Wilkie V. London Passenger Transport Board (1947) L.J.R. 864. That by issuing advertisements, a bus company was making offers to intending passenger.

Although , the answers to this question may largely depend on the facts and circumstances of each case, one common principle can be applied to all such cases in an attempt to determine the point at which the acceptance was made, and, therefore, what could be regarded as the invitation to treat (before the offer) and the offer (before the acceptance).
The question at each case should be, at which point in time did it become practically impossible for the parties to withdraw from the transaction?

If we take the case of the bus, it must be after the passenger has entered the bus and certainly after the bus has started moving. Thus, the passenger’s entry into the bus is the acceptance and the offer must have been made by the bus company when its vehicle stopped at the bus stop. The passenger, by waiting at the bus stop, was inviting an offer from the bus company, i.e., he was making an invitation to treat.

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