An invitation to treat is an action inviting other parties to make an offer to form a contract. These actions may sometimes appear to be offers them, and the difference can sometimes be difficult to determine. The distinction is important because accepting an offer creates a binding contract while “accepting” an invitation to treat is actually making an offer.
Advertisements are usually invitations to treat, which allows sellers to refuse to sell products at prices mistakenly marked. Advertisements can also be considered offers in some specific cases.
A proposal or an offer must be distinguished from an invitation to treat. It is provided in section 2(a) of the Contracts Act 1950 which states that a proposal is made when “one person signifies to another his willingness to do or abstain from doing something with a view to obtaining the assent to that other for such an act or abstinence”. A proposal can be accepted and it amounts to an agreement. If the agreement is breached, it can be a breached of contract.
A proposal can either be made to a particular person or to the general public.
The person who is making the offer is the offeror whereas the person who is accepting the offer is the offeree. As for invitation to treat, the Contracts Act does not provide any provision respecting this aspect of contract. An invitation to treat is not a proposal but it is a preliminary communication between the parties at the stage of negotiation, for instance, a price display of goods with price tags in the self-service supermarket or an advertisement.
This is applied in Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd  1 QB 401 HELD: that the display was only an invitation to treat and a proposal to buy was made when the customer placed the article in the basket and takes them to the cashier’s desk. Therefore, the shop owners had not made an unlawful sale. An invitation to treat cannot be accepted because it is not an offer therefore it does not amount to an agreement and there cannot be a breached of contract.
Whenever there is a unilateral arrangement, there will be an offer and where there is a bilateral arrangement, that situation will give rise to an invitation to treat.
An advertisement could be either an offer or an invitation to treat, depends on the intention of the parties in the case. In the case of Majumder v Attorney General of Sarawak (1967) 1 MLJ 101. HELD: That an advertisement in the newspaper for the post of a doctor was not an offer but merely an invitation to treat.
Auctions are sometimes invitations to treat which allows the seller to accept bids and choose which to accept. However, if the seller states that there is no reserve price or the reserve price has been met, the auction will be considered an offer accepted by the highest bidder. An Invitation to treat will be anything that is displayed to a large number of people with an undefined way of choosing who can accept. An offer will be directed at a specific person with specified terms. So if an item is displayed saying it will be sold to the highest bidder or to the first to accept the labeled price, it will be considered an offer. As per Payne v Cave case (1789) 3 Term Rep 148; 100 ER:-
The defendant made the highest bid and withdrew it before the fall of the hammer. HELD: That the bid itself constituted the proposal or the offer which the auctioneer was free to accept by the fall of the hammer or to reject it. Since the bid was withdrawn before the fall of the hammer there was no contract between parties.
Offer’s can sometimes get confused with an Invitation to treat’. It is important not to get the two confused as there are different rules regarding both. An example of an invitation to treat would be an item on display with a price label in a shop window. This is an invitation to open negotiations with a view to forming a contract; in other words, it can be seen by anyone that happens to walk past the shop at the time of the window display. As per related case Fisher v Bell (1961) 1 QB 394 CA.
The defendant was charged with offering for sale a flick knife in his shop-window which against the law. HELD: 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 no sense an offer for sale the acceptance of which constitutes a contract.