In this Business Kitz blog, we will define an invitation to treat, provide examples, and explain how it differs from an offer. It is essential to understand what an invitation to treat is and how it is employed in business since treat invitations are used in everyday life and business.
What is an invitation to treat?
In contract law, an invitation to treat is when you request that someone makes an offer. There is no intent to be legally bound instantly, therefore no contract exists. An invitation to treat is a common business practice to obtain an offer from a potential buyer.
Although an invitation to treat does not constitute a legally binding commitment, it is not immune from legal consequences. Parties engaged in an invitation to treat are still subject to Australian Consumer Law and must ensure that their methods are not misleading in any manner.
What is the difference between an invitation to treat and an offer?
An offer differs from an invitation to treat in that acceptance of an offer makes it legally binding. Although an offer is not legally binding on its own, if accepted, the two parties have entered into a legally binding contract that must be fulfilled. In contrast, accepting an invitation to treat is only an offer. An invitation to treat is not an offer until you approach another party to contract clearly and transparently.
To summarise, offers and invitations to treat are not the same things. An offer can be accepted or refused, but invitations to treat allow others to make an offer that can then be accepted or rejected.
What is an example of an invitation to treat?
Imagine you’re at a real estate auction where the starting price for a house is $720,000 and you decide to offer $750,000. In this situation, the auction is considered an invitation to treat since you have made an offer that can be accepted or declined.
Consider the following scenario: you are strolling down the street and see a “$200 COAT” advertisement; you decide to enter the shop and obtain that bargain, but when you go to pay for it, the person at the counter demands $300 for the coat that was advertised for $200. However, the business owner is not required to give you the product at $200 because this was only an offer to treat.
What is Australian Consumer Law?
Consumer protection laws strive to safeguard consumers since they are frequently placed in circumstances where they have less negotiating power. As previously mentioned, the Australian Consumer Law (ACL) requires businesses to conduct themselves in compliance with consumer protection regulations, including their invitation to trade.
Business owners must ensure that their methods are not deceptive, misleading, or they do not otherwise induce a consumer to believe anything that is not true about a product, causing them to purchase it based on false information. Terms and conditions of purchase are an excellent method to avoid making an unfortunate and costly mistake.
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It can be a little confusing to distinguish between an invitation to treat and an offer, but knowing the difference between them is critical since it can prevent expensive misunderstandings while making purchases. If you own a business and sell items or services, you should have clear terms and conditions that explain when an offer and acceptance are made. If you still have some questions about the invitation to treat or any legal advice, give our sister company, Legal Kitz, a call at 1300 988 954. You can book a free 30-minute consultation with our experienced and highly qualified team via our website now!