The distinction between an Offer and an Invitation to Treat - Essay Example

Distinction between an Offer and an Invitation to Treat In law, there is clear distinction between an offer and an invitation to treat. Both terms relates to the law of contract. Contract is defined to as an agreement between two or more persons which is intended to create a legally binding obligation. The word binding is used for there are some contracts which are valid but are not enforceable. For a contract to be valid, it must fulfil the following elements. There must be an offer and acceptance There must be an intention to create legal relations. There must be a consideration or the contract must be under deed. There must be contractual capacity There must be genuine consent i.e. the consent must be obtained through mistake, misrepresentation, duress or undue influence and lastly, The object of the contract must be lawful Our subject of discussion is the distinction between an offer and an invitation to treat. Since an offer and acceptance is one of the essential element that must be fulfilled for a contract to be valid, we will discuss the law of contract in detail and then compare and contrast between an offer and an invitation to treat. For a contract to be enforceable contract, certain basic requirements must be presented. There must an agreement based upon genuine consent of the parties, supported by a consideration and made for a lawful object between competent parties. This paper will start by discussing what an offer is and later on compare and contrast between an offer and an invitation to treat. (Hussein, 1993) An offer is usually based on the following rules: a) An offer may be made to a specific person or to any member of a group or to the world at large, but it cannot form the basis of a contract until it has been accepted by an ascertained person or group of persons. For example if A makes an offer to B, it is a specific offer and B is the only person who can accept it. But in many cases, it is immaterial to whom the offer is made. Offers made by advertisement are the commonest form of offers made to the world at large, and can be accepted by anyone just by acting on them. For example in the following case studied. Carlill v Carbolic Smoke Ball Co, 1893 The defendants offered a reward of £100 to anyone who contracted influenza after using their smoke ball for a fortnight. The plaintiff, relying on the advertisement, bought the smoke ball and used it as prescribed, but still contracted influenza. She sued for the advertised reward. It was held that the advertisement was a true offer, and not a mere advertising puff, and the defendants were held liable to pay the reward. b) An offer may be made by a word of mouth, in writing or by conduct. The person making this offer is called the offeror, and the person to whom the offer is made is called the offeree. For example an offer made by conduct may be of a bus playing on a certain route. This is usually an offer by the owner of the bus to carry passengers at the published fare for various stages. The offer is accepted by conduct when the passenger boards the bus with the intention of becoming a passenger. c) An offer must contemplate giving rise to legal consequences if accepted. d) The terms of the offer must be certain and free from vagueness in expression. For example in case studied. Cuthing v Lynn, 1831 L bought a horse from G and offered to pay another £5 for the horse if it proved lucky to him. It was held that the term ‘lucky’ was too vague to form the basis of legally enforceable agreement. e) Every offer must be communicated. For a contract to arise, two parties must be of the same mind, and so it cannot be accepted by a person who does not know that it has been made. This implies to both specific and general offers. Thus, where A, without knowing that a reward is offered, finds B’s dog and brings it to B, he cannot recover the reward if he learns of the reward after returning the dog. For example in a case studied. R v Clarke, 1927 A reward was advertised for information leading to the arrest of the murderers of two police officers, and a free pardon if the person giving the information was an accomplice. Clarke gave the information and it was held that Clarke was not entitled to a government reward since at the time the information was given by him, he had forgotten about the reward. f) The offeror cannot bind the other party without his consent. g) The offeror may attach any condition to his offer, but must communicate them to the offeree, before they bind him by his acceptance of the offer. (Saleemi, 1992) On the other hand, an invitation to treat is when something has been displayed in a shop window or a catalogue mentioning prices of goods. This is not constitute to an offer and hence does not compel the shopkeeper to sell those goods at the marked prices. The prospective buyer, by offering that price is himself the offeror and his offer, if accepted, create a binding agreement. For example in a case studied; Pharmaceutical Society of Britain v Boots Chemists, 1953 Goods were sold in B’s shop under the self service system. Customers selected their purchases from the shelves, put them into a baskets supplied by B and took them to the cash desk where they paid for them. It was held that the customer made the offer when he presented them at the cash desk, and not when he removed them from the shelves. Another case studied on the same is that of; Fisher v Bell, 1961 B, a shopkeeper, displayed a flick knife priced at four shillings in his shop window. He was charged with offering for sale an offensive weapon contrary to the restriction of Offensive Weapon Act. It was held that merely displaying of goods in a shop window is not by itself an offer for sale. B was not bound to sell the knife to any one entering his shop and offering him four shillings. When it comes to comparing between an offer and invitation to a treat we can start by looking at the similarities and then the differences. Similarities between an Offer and an Invitation to Treat In both offer and invitation to treat there is acceptance. For example in an offer, there must be an offeror and an offeree while on the hand in invitation to treat there must be a place or a shop where goods have been displayed together with their prices and a customer makes an offer when he present them at the cash desk. In both offer and invitation to treat there is an intention to create a legal relation. In both, offer and invitation to treat, they cannot bind the other parties without his or her consent. An offer may be terminated by revocation by the person who made it ant any time before it has been accepted and at the same time, an invitation to a treat can be revoked before someone enters a supermarket and places the item displayed on it on the counter for payment. In an offer, it may be made by a word of mouth, in writing or by conduct while on the other had, an invitation to treat, an offer is made when one picks an item from the shelf of a supermarket and he makes an offer when he places it on the top of the counter. An offer never remain open for acceptance longer that the time it is prescribed in it and at the same time an invitation to a treat also remains open only for time prescribed in it. For example, in one months time, two months and so on. When it comes to an offer, the offeror may attach any condition to his offer, but must communicate them to the offeree before they bind him by his acceptance of the offer. This implies also to an invitation to treat. All the conditions are attached in the good when displayed in a supermarket, and one knows its price and other terms before he places it on the counter for payment. (Hussain, 1993) Differences between an Offer and Invitation to a Treat In an offer, it can be made to a specific person or the whole world at large in case of an advertisement, but in an invitation to treat, it does not specify who can take the offer but anyone who enter a shop and give some money, make the offer. An offer must be communicated for a contract to arise, hence tow parties must be of the same mind and so it cannot be accepted by a person who has no knowledge that an offer has been made. On the other hand, an invitation to treat does not have to be communicated. All what happens in an offer is that the item being displayed in a supper market, one just enter and make an offer when he places it on the counter and not necessary that he had knowledge that an offer had had been made. In conclusion, we have seen the differences and similarities between an offer and an invitation to treat and how both relate to each other in the law of contract. Bibliography Bardach, E. and R. A. Kagan (1982). Going By the Book: The Problem of Regulatory Unreasonableness. Philadelphia: Temple University Press. Becker, G. S. (1968). Crime and Punishment: An Economic Approach. Journal of Political Bohnet, I., S. Huck and B. S. Frey (1999). More Order With Less Law: On Contract Enforcement and Crowding. Mimeo. Kennedy School of Law. Harvard University. Bohnet, I., S. Huck and B. S. Frey (1999). More Order With Less Law: On Contract Enforcement and Crowding. Mimeo. Kennedy School of Law. Harvard University. Bolton, G. E. and E. Katok (1998). An Experimental Test of the Crowding Hypothesis: The Nature of Beneficent Behaviour. Journal of Economic Behaviour and Organization 37: 315- Brickley, J. A (1999); Incentive Conflicts and Contractual Restraints: Evidence from Franchising, Journal of Law and Economics, Vol. 42, No. 2 (Oct., 1999), pp. 745-774 Bayles, M. D. (1990), Procedural Justice. Allocating to Individual, Dordrecht, Kluwer Academic Publisher Dhanrajlal, M and Ratanlal, N, (1999), Code of Criminal Procedures, 12th Edn New Delhi, Wadhwa Emerson R. W, (2003), Business Law, 5th Edn, Sydney, Educational Publisher Fama, E. F. and M. C. Jensen (1983). Separation of Ownership and Control. Journal of Law and Economics 26: 301-351. Fehr, E. and S. Gächter (1997). How Effective are Trust- and Reciprocity-Based Incentives? In A. Ben-Ner and L. Putterman (eds.) Economics, Values, and Organization. Cambridge: Cambridge University Press. Fehr, E., S. Gächter and G. Kirchsteiger (1997). Reciprocity as a Contract Enforcement Device. Econometrica 65: 833-860. Gneezy, U. and A. Rustichini (1999). A Fine is a Price. Journal of Legal Studies. Forthcoming. Gneezy, U, and A. Rustichini (1999). Pay Enough or Dont Pay At All. Unpublished Manuscript. Jertz, A, Miller L. R, (2004), Fundamentals of Business Law, 3rd Edn, Nairobi, Macmillan Publisher Hussain, A, (1993), General Principles and Commercial Law, 1st Edn, Nairobi, East Africa Educational Publishers Langhan, A. S, (1999), Maxwell on Interpretation of Statutes 12th Edn, New Delhi, Gopas Publishers Fehr, E., S. Gächter and G. Kirchsteiger (1997). Reciprocity as Contract Enforcement Device. Econometrica 65: 833-860. Gneezy, U. and A. Rustichini (1999). A Fine is a Price. Journal of Legal Studies. Forthcoming. Holmström, B. and P. Milgrom (1991). Multi-Task Principal Agent Analysis: Incentive Contracts, Asset Ownership and Job Design. Journal of Law, Economics and Organization 7: 24-52. Kronman, A.T (1985); Contract Law and the State of Nature, Journal of Law, Economics, & Organization, Vol. 1, No. 1 (spring, 1985), pp. 5-32 Emanuel, S. L, (2004), Fundamental of Business Law, 4th Edn, Sydney, Educational Publisher Güth, W. (1998). Do Banks Crowd in or out Business Ethics? Mimeo. Institute for Economic Theory. Humboldt-University of Berlin. Holmström, B. and P. Milgrom (1991). Multi-Task Principal Agent Analysis: Incentive Contracts, Asset Ownership and Job Design. Journal of Law, Economics and Organization 7:24-52. Lepper, M. R., D. Greene and R. E. Nisbett (1973). Undermining Childrens Intrinsic Interest With Extrinsic Rewards: A Test of the Over justification Hypothesis. Journal of Personality and Social Psychology 23: 129-137. Morrison, E. W. and S. L. Robinson (1997). When Employees feel Betrayed: A Model of How Psychological Contract Violation Develops. Academy of Management Review 22 (1): 226-256. Oberholzer-Gee, F. and H. Kunreuther (1999). Social Pressure in Local Politics. A Case Study of Sitting a Radioactive Waste Repository in Pennsylvania. Mimeo. Wharton School. University of Pennsylvania. Ogola, J. J, (1999), Business Law, 1st Edn, Nairobi, Focus Publications ltd Penrose, R, (2005), Road to Reality: A Complete Guide to the Laws of the Universe, Nairobi, Longman Publisher Saleemi, N. A, (1992), Elements of Law, 2nd Edn, Nairobi, N.A, Saleemi Publishers Rogerson, W. P. (1984); Efficient Reliance and Damage Measures for Breach of Contract, Rand Journal of Economics, Vol. 15, No. 1 (spring, 1984), pp. 39-53 Roth, J. A. and J. T. Scholz and Ann Dryden Witte (Eds) (1989). Taxpayer Compliance. Philadelphia: University of Pennsylvania Press. Rotter, J. B. (1966). Generalized Expectancies for Internal versus External Control of Reinforcement. Psychological Monographs 80 (1): whole No. 609. Rousseau, D. M. (1995). Psychological Contracts in Organizations. Thousand Oaks: Sage. Rummel, A. and R. Feinberg (1988). Cognitive Evaluation Theory: A Meta-Analytic Review of the Literature. Social Behaviour and Personality 16: 147-164. Salamon, L. M. and H. K. Anheier (1997). Defining the Non profit Sector. A Cross-National Analysis. Manchester and New York: Manchester University Press. Schultz, K. A. and B. R. Weingast (1994). The Democratic Advantage: The Institutional Sources of State Power in International Competition. Mimeo, Stanford University. Schwartz, R. D. and S. Orleans (1967). On Legal Sanctions. University of Chicago Law Review 34: 282-300. Slemrod, J. (ed.) (1992). Why People Pay Taxes. Tax Compliance and Enforcement. Ann Arbor: University of Michigan Press. Solow, R. S. (1971). Blood and Thunder. Yale Law Journal 80: 170-083. Stigler, G. J. (1984). The Intellectual and the Marketplace. Cambridge, MA: Harvard University Press. Tang, H. S. and V.C. Hall (1995). The Over justification Effect: A Meta Analysis. Applied Cognitive Psychology 9: 365-404. Solow, R. S. (1971). Blood and Thunder. Yale Law Journal 80: 170-083. Thibaut, J. W. and L. Walker (1976). Procedural Justice: A Psychological Analysis. Hillsdale, NJ: Erlbaum. Tyler, T. R. (1990). Why People Obey the Law. Hew Haven: Yale. Tyler, Tom R. and Kathleen M. McGraw (1986). Ideology and the Interpretation of Personal Experience: Procedural Justice and Political Quiescence. Journal of Social Issues 42 (2): 115-128. Venti, S. F. and D. A. Wise (1990). Have IRAs Increased U. S. Saving? Evidence from Consumer Expenditure Surveys. Quarterly Journal of Economics 105: 661-698. Wiersma, U. J. (1992). The Effects of Extrinsic Rewards on Intrinsic Motivation: A Meta- Analysis. Journal of Occupational and Organizational Psychology 65: 101-114. Read More