Contracts in Brief: The key elements – Part 1: An Offer or an Invitation to Treat

For a contract to be legally enforceable as an agreement it must have been formed through 4 key elements. Now this could be considered to some people as being obvious however this is not always apparent. I have split these into different articles.

This Part 1 will consider the offer which is made to the other party which commences the formation of the contract. Note it cannot be bound without all of the key elements. There must however be an offer on the table from one party to another.

The offer is made which is a promise to perform on certain terms. The offer must be specific and complete and more importantly it must be capable of being accepted by another party. This is then made with the intention of actually being bound by the acceptance from the other party.

You may have come across the terms Invitation to Treat which is essentially the dangling of a carrot that induces the other party to enter negotiations that may or may not result in formal acceptance to the formal offer which then ensues. It is the invitation to the other party to negotiate only and cannot be considered as n intention to be bound to the terms at that particular moment while ‘negotiations’ are carrying on.

The reason for this explanation is that we receive a number of enquiries which from clients who claim to have accepted an offer to enter into a contract and are no longer happy or feel they were misled by the offer. In fact, in certain circumstances, the ‘offer’ was merely an invitation to negotiate such as an offer from a shop window that is priced at £5.00 and when the buyer walks in, it appears that the shop owner had made a mistake so corrected it immediately to read £50.00. The discussions are still in the negotiation stage and the shop owner has simply invited the buyer to show its intent to buy before making the ‘offer’ formal and is not bound by this mistaken price. It is at the time where a formal offer is made that the price is absolute, and until such time, it is just an invitation to treat.

There is not just one type of person or entity that an offer can be made to or accepted from. An offer can be made to an individual such as a consumer that walks into a shop or visits a website, a group of persons, corporate entity or even to everyone in the world as a whole. For a bit of bedtime reading, you can see this further in the case of Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256.

If you have a dispute or concern over a contract which you have entered and would either like to settle your mind or need to address the dispute more formally, do not hesitate to contact us.

The next part to consider is the acceptance of this offer which will be briefly explored in Part 2.

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