Offer and Invitation to treat

An offer should be distinguished from an invitation to treat. Unlike an offer, an invitation to treat is a
statement which is not intended to be binding at law. An invitation to treat merely invites interested
parties to make an offer. Invitations to treat often appear in the form of advertisements, display of
goods and tenders. Other aspects considered are auctions and applications for club membership.

1. Advertisements

Whether an advertisement is an offer or an invitation to treat is a question of the intention of the

party placing the advertisement. In most cases, advertisements are treated as attempts to induce
offers unless on exceptional facts situations as in Carlill’s case (example of advertisements of
unilateral contracts which will usually be held as offers).

Carlill v Carbolic Smoke Ball Co [1892] 2 QB 484,QB; [1893] 1 QB 256, CA

Facts : The defendant issued an advertisement offering to pay £100 to any person who contracted
influenza after using the smoke ball in a specified manner for a specified period. The advertisement
stated that the defendants had deposited £1,000 with bankers to show their sincerity. The plaintiff,
after seeing the advertisement, bought and used the ball in the manner prescribed caught influenza.
The plaintiff sued the defendants for £100.

The Court of Appeal held that an offer can be made to the world. In this case, there was an
acceptance of the offer by the plaintiff's conduct.

Partridge v Crittenden [1968] 1 WLR 1204

Facts : In this case, the appellant inserted in a magazine an advertisement containing the sale of
cocks and hens and was inserted under the general heading of "Classified Advertisements" and
nowhere was any direct use of the words "offers for sale". The respondent answered the
advertisement and enclosed a cheque. The issue was whether the advertisement he inserted was an
offer for sale or an invitation to treat.

The court held that it was an invitation to treat.

Ashworth J : “…in my judgment the law of the country is equally plain as it was in regard to articles in
a shop window, namely that the insertion of an advertisement in the form adopted here under the
title "Classified Advertisements" is simply an invitation to treat.”

Coelho v The Public Services Commission [1964] MLJ 12

Facts : the appellant applied for the post of Assistant Passport Officer advertised in the newspaper.
Subsequently, he was informed that he was accepted and after being posted to the Immigration
Office, he was informed that his appointment was terminated forthwith by payment of one month’s
salary in lieu of notice. He applied for a certiorari to quash the decision.

The Court held that the resulting applications were an invitation to qualified persons. The resulting
applications were offers. The information conveyed to the appellant was an unqualified acceptance.
Therefore, the respondent had acted ultra vires in purporting to terminate his appointment.

MN Guha Majumder v RE Donough [1974] 2 MLJ 114

Facts : An advertisement appeared in the Sarawak Tribune for the sale of the defendant’s house. The
plaintiff inspected the house twice and a number of telephone conversations took place between the
plaintiff and the defendant's agent. The plaintiff alleged that the defendant had accepted his offer to
purchase the house, but the defendant denied it.

The Court held that there was no contract in existence between the parties at the material time as
there was no clear intention of the parties to enter into a formal legal relationship from the evidence
adduced.

2. Display of Goods

The reason behind this rule is that to hold otherwise would require a seller to sell whatever quantity
of the item displayed even if he has insufficient supplies; while the buyer cannot also change his
mind once an item is chosen and is taken off the display shelf.

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401, CA,

Facts : the defendants carried business in the retail sale of drugs. On entering the shop, the customer
was provided with a wire basket; and having selected the items which he wished to buy, would put
them in the basket and take them to the cashier's desk at the exit, where the cashier would state
total price and receive payment.

The Court of Appeal held that the display of goods on the shelves was only an invitation to treat. It
was for the customer to offer to buy the goods. The contract of sale was completed when the
customer's offer to buy was accepted by the seller in receiving the payment at the cashier's desk.

Fisher v Bell [1961] 1 QB 394

Facts: The issue in this case is whether the shopkeeper's display in his shop window of a "flick knife
amounted to an offer of the knife for sale contrary to s 1(1) of the Restriction of Offensive Weapons
Act 1959.

The Court held that it is perfectly clear that according to the ordinary law of contract the display of
an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer
for sale the acceptance of which constitutes a contract.

3. Tenders

Invitations to tender are not normally considered to be offers unless accompanied by words that the
highest tender will be accepted.

Spencer & Ors v Harding & Ors (1869-1870) LR 5 CP 561

Facts: the defendants issued to the plaintiffs and other persons in the wholesale trade a circular
regarding the wholesale trade for sale by tender. The plaintiffs sent in a tender which turned out to
be the highest tender; but it was not accepted.

The Court held that the circular was only an attempt to ascertain whether an offer could be obtained.
Further, there was a total absence of any words to the effect that the highest bidder would be the
purchaser.

Willes J: “...Here there is a total absence of any words intimate that the highest bidder is to be the
purchaser. It is a mere attempt to ascertain whether an offer can be obtained within such a margin as
the sellers are willing to adopt.”
Blackpool and Fylde Aero Club v Blackpool BC [1990] 3 All ER 25, CA

Facts: In this case the defendant council owned an airport. It granted concessions to operate flights.
It sent an invitation to tender to the plaintiff and six other parties all of whom were connected to the
airport. The invitation to tender stated that the tenders were to be submitted in the envelope
provided and before the deadline and that late tender would not be considered. The plaintiff sent
the tender in time to the post box but the post box was not cleared. The tender was marked late
when it reached the defendant was not considered. The issue was whether there was a contract
between the parties.

The Court of Appeal held that in the circumstances, an invitation to tender can give rise to a binding
obligation to consider tenders which conform with the conditions of the tender. It was only right that
the tenderer who submitted a tender conforming to the deadline should have it considered.

Bingham LJ: “...if he submits a conforming tender before the deadline he is entitled, not as a matter
of mere expectation but of contractual right, to be sure that his tender will after the deadline be
opened and considered in conjunction with all other conforming tenders or at least that his tender
will be considered if others are.”

Cheng Keng Hong v Government of the Federation of Malaya [1966] 2 MLJ 33

Facts: In this case, the respondent issued a notice inviting tenders to build a school. The appellant
tendered for the work and his tender was accepted and a contract was entered into.

High Court held that the unconditional acceptance of the tender by the respondent bound both
parties and a contract was formed.

Azlan J: “The law with regard to acceptance of a tender is perfectly clear. The unconditional
acceptance of a tender by the employer binds the parties, and a contract is thereby formed, the
terms of which ascertainable from the invitation to tender, the tender, the acceptance, and any other
relevant documents...”

See also:

Harvela Investments v Royal Trust Co of Canada (CI) Ltd & Ors, All ER 65, CA; [1985] 2 All ER 966,
HL.

4. Auction

i) Auctioneer's request for bids

The first principle is that an auctioneer's request for bids is considered to be an invitation to treat.
The bid itself is an offer which the vendor is free to accept or reject.

Payne v Cave (1789) 3 Term Rep 148

Lord Kenyon CJ: “The auctioneer is the agent of the vendor and the assent of both parties is
necessary to make the contract binding. That is signified on the part of the seller by knocking down
the hammer which was not done here till the defendant had retracted ... Every bidding is nothing
more than an offer on one side which is not binding on either side till it is assented to”

M & J Frozen Food Sdn Bhd & Anor v Siland Sdn Bhd & Anor[1994] 1 MLJ 294, SC
Supreme Court held that at the fall of the hammer, an agreement is concluded between the vendor
and the highest bidder. Thereafter, the vendor cannot offer the goods to other prospective buyers
and the bidder cannot retract his acceptance.

Wan Yahya SCJ: “So a reference to a sale being concluded at the fall of the auctioneer's hammer
could only refer to that stage of the transaction of sale when there is concluded an agreement
between the vendor and the highest bidder, the former to sell and the latter to purchase the goods.”

ii) Notice of Auction

Harris v Nickerson (1873) LR 8 QB 286

Facts: the defendant advertised in the London papers that certain items would be sold by him on a
certain day and the following two days. The plaintiff attended the sale but on the third day, on which
the furniture was advertised for sale, all the furniture were withdrawn.

Court held that an advertisement that goods will be sold on auction on a certain day does not
constitute a promise to potential bidders that the sale will be actually held. To hold otherwise or to
require an auctioneer to give notice of withdrawal of the sale would be excessively inconvenient and
costly.

iii) Auction without reserve

Warlow v Harrison (1859) 1 E & E 309

Facts: the defendant and a Mr Bretherton were auctioneers in a partnership who advertised a sale by
auction without reserve. The plaintiff attended the sale and made a bid of 60 guineas for one of the
horses. The owner of the horse, immediately made bid of 61 guineas. The defendant entered the
owner’s name as the purchaser.

The Court held that the sale should be without reserve: the auctioneer in his advertisement had
made a definite offer to this effect, and the plaintiff, by making his bid in reliance upon it had
accepted the offer.

Martin B: “...neither the vendor nor any person in his behalf shall bid at the auction, and that the
property shall be sold to the highest bidder, whether the sum bid be equivalent to the real value or
not...