An invitation to treat is a way of attracting another party to make an offer. An invitation to treat is not legally binding, so it differs from other aspects of contract law such as offers which can be legally binding once they are accepted. 

It’s important to understand what an invitation to treat is in and how it is used in commercial contexts, as you don’t want to be bound to a promise you never intended to make. 

What Is An Invitation To Treat?

An invitation to treat is essentially when another party is given the opportunity to make an offer. There is no intent to be legally bound immediately and there is no contract. 

Rather,  it is the idea of potentially entering into a contract if the invitation to treat is successful. 

An invitation to treat is a common way of conducting businesses. Auctions, goods for sale at a store window and advertisements are all invitations to treat. 

Invitation To Treat Vs Offer

An offer differs from an invitation to treat as the acceptance of an offer usually makes it legally binding. An offer on its own is not necessarily legally binding, however, once an offer has been accepted, the two parties have entered into a contract which should be fulfilled. 

An invitation to treat allows the other party to make an offer. Whereas in an offer, there is usually only acceptance or rejection of it. Once the offer from the invitation to treat is accepted,, then the parties are bound by the respective promises to one another. 

When Is A Person Making An Invitation To Treat?

Usually, when a party is making an invitation to treat, they’ve given others the opportunity to make an offer. Then, it’s up to the party that has established the invitation to treat what they will do with any offers that come their way. 

Example
Ryan is at a house auction. The starting price for the house is $660,000 and Ryan makes an offer for $680,000. The auction is considered an invitation to treat as Ryan has the ability to make an offer which can then either be accepted or rejected. 

Is A Quotation An Offer Or Invitation To Treat?

Generally, a quotation sets a predicted amount for a good or service. A quotation by itself does not constitute an invitation to treat. It represents a certain price that reflects the value of the goods or services according to one of the parties. 

As such, it can be considered an offer. It is not legally binding until and unless the other party accepts this offer. 

Does An Invitation To Treat Apply To Online Stores?

Yes, online stores that post advertisements are bound to the same legal requirements and practices as stores that operate in person. Therefore, advertisements or quotations posted on the website of an online store are still applicable to the rules of an invitation to treat. 

Invitation To Treat Cases

If an invitation to treat ceases, the invitation to make an offer no longer stands. As an invitation to treat is not a legally binding promise, there is no legal duty to keep the invitation alive for a certain amount of time. 

Therefore, in most cases, the owner of the invitation to treat is reasonably free to create and take away their invitation to treat at will. 

Is A Letter Of Offer Legally Binding In Australia?

A letter of offer is legally binding once the party receiving the offer has accepted the letter.

For instance, letters of offer are common when recruiting new employees. An employer could send an employee a letter of offer detailing the requirements of the position, pay, leave, entitlements, length of the contract and other matters. 

However, the letter of offer alone is not enough to be legally binding. If the prospective employee chooses to accept the letter of offer, then a legally binding agreement is formed and the employer can be held to the promises they made in the letter of offer.

However, the employee is free to reject the letter of offer,  after which the offer likely no longer stands and the employer cannot be bound by it. 

What Makes A Contract Legally Binding?

In order for a contract to be legally binding, it must meet all the elements of a contract: 

  • Offer and acceptance – there needs to be an offer and then acceptance of that offer 
  • Consideration – the parties to the contract must receive something of value resulting from their agreement i.e. money in exchange for a product or service
  • Intention to be legally bound – all parties must be aware of the legal nature of the contract 
  • Legality – the contract should not break any laws
  • Capacity – the parties entering into the contract must legally be able to (for example, contracts with minors may not be enforceable in certain circumstances). 

What Does The Australian Consumer Law Say?

Simply because an invitation to treat does not amount to a legally binding promise, it does not mean it is not bound by the law. Australian Consumer Law (ACL) requires businesses to conduct themselves in accordance with consumer protection laws. Therefore, an invitation to treat should not be used to trick or mislead customers in any way. 

Consumer protection laws aim to protect consumers as there are common situations where they are placed in a position with lesser bargaining power. 

What Is Misleading And Deceptive Conduct?

Misleading and deceptive conduct includes acts, statements, omissions and any other conduct that lead a consumer to believe something that is not true about a product, resulting in them purchasing it based on false information. 

Misleading and deceptive conduct is strongly prohibited under the ACL. As a result, businesses that are putting out invitations to treat through mediums such as advertisements need to be aware of their obligations under the ACL. This means that any information provided needs to be accurate and clearly communicated to customers. 

Example 
A clothing store advertises that all items in the store are on sale for no more than $30. However, when customers go to check out, the store tags on additional fees which results in  customers totals adding up to more than $30. 

This is a form of deceptive and misleading conduct as consumers were lied to in order to induce a sale.  

Key Takeaways

It can be a little confusing when attempting to distinguish between an invitation to treat, offers and legally binding contracts. It’s always best to seek the advice of a legal professional so they can clear things up for you. 

To summarise what we’ve discussed: 

  • An invitation to treat is a way to get potential customers to make an offer
  • Invitations to treat are not legally binding agreements
  • Once an offer has been made, the party that has created the invitation to treat is at their own liberty to accept or reject the offer
  • Invitations to treat and offers are not the same. An offer can be accepted or rejected however, invitations to treat are open others others up to making an offer which can then be accepted or rejected 
  • Parties engaging in invitations to treat are still bound by the ACL and must ensure their practices are not misleading in any way

If you would like a consultation on an invitation to treat, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

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