My students are well aware that I like to use stories which appear in the media to illustrate legal points or issues. Today, I have been reviewing some old media stories which I have distributed to students over the past few years.
One such story which caught my eye, and is always a topical issue, concerns contract law. When I begin to teach students about the basics of contract law, we often spend a bit of time discussing the difference between genuine offers and invitations to treat.
Invitation to treat
The phrase “invitation to treat” often causes puzzled expressions to appear on the faces of the individuals attending the lecture. I’ll say to them that it’s probably an expression that they have not previously heard. Even if they work in a retail environment or a customer facing role, it’s not something that they are likely to have encountered.
After all, when was the last time you walked around a supermarket or department store and heard over the PA system something like this:
“Hello shoppers, we’d like to make you aware that we have a great range of invitations to treat in the store today.”
I can just imagine the reaction from most of the customers: utter and total bemusement.
What you’re much more likely to hear is the disembodied voice saying something like this:
“Hello shoppers, we’d like to make you aware that we have a great range of offers in the store today.”
Now, the content of the above announcement isn’t strictly correct. The store or the retailer isn’t making you (the potential customer) an offer; they are making you an invitation to treat.
What is an invitation to treat?
This area is especially relevant for retailers and their pricing policies. Customers might think that a price ticket or indication is a firm offer issued by the retailer.
Very simply, it’s a basic form of marketing or advertising by the retailer or the trader. They wish to alert you to the fact that they have goods or services available that might be of interest. It is then up to you to go and make the offer to the appropriate representative of the trader. This offer will be considered (perhaps extremely quickly and without much in the way of negotiation) and accepted leading to a contractual agreement between the parties. An invitation to treat is a willingness by the trader/retailer to enter into negotiations with a potential customer. The trader or retailer is effectively saying: ‘I’m open to offers or make me an offer‘.
It’s been well established law for some time that goods displayed on shelves or in shop windows are not offers to the general public capable of acceptance, but rather they should be seen for what they are: invitations to treat (see Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953) and Fisher v Bell (1961)) .
Misleading price indications
What if the retailer or trader applies the wrong prices to a product? Does the customer have the right to hold the seller to this price – even if it’s a mistake?
This can be a particularly acute problem for retailers and traders which use the internet or other digital platforms to advertise and sell goods. You only have to think about some of the big internet traders to realise that keeping track of the prices on every product sold by them must represent a really tough operational challenge.
- What if prices are not kept up to date?
- What about data input error where someone keys in the wrong price and is totally unaware of this?
- What if the promotion (e.g. a discount) applies to only a small group of products or a particular geographical area?
These have all been known to happen to retailers and traders who use the internet or other digital media.
We’re now living in a more hi-tech age where lots of traders will advertise goods and services on the internet, but these platforms should be seen as the virtual equivalent of the high street trader’s shelves or shop window. Even if prices are affixed to certain products or services, the customer should always be wary. These are merely an indication of what the trader would like to achieve. There is nothing, in theory, to stop the customer haggling or negotiating over the goods or services.
In traditional retail or sales environments i.e. face to face situations, the customer sales representative could quickly deal with the problem of wrongly mispriced goods. The customer might huff and puff and threaten legal action, but usually to no avail. Quite simply, the goods which were on display were invitations to treat (not offers). The customer was, in fact, making the offer which the customer sales representative was refusing to accept.
True, many retailers might choose to go ahead and sell the goods at the wrongly marked price as a gesture of goodwill because this was seen as a sensible customer relations tactic, but legally the store was not obliged to do this. Obviously, if there was a really big price discrepancy, even the most customer centred business might choose to draw the line somewhere (I suppose all organisations have their bottom line).
In sales generated using the internet or other digital media, there is a lack of a traditional gate-keeper (a sales assistant). Transactions are processed electronically and remotely and contracts for wrongly (i.e. lower) priced goods may slip through.
Usually, but not always, the virtual retailer or trader will have an explicit term in their general contractual conditions which states that the transaction will not be binding until such time as the customer receives a confirmatory email or other form of message.
Legal consequences
Although a store might not be liable to a customer for misleading price indications or statements under the law of contract, there are potential criminal consequences. The store could be prosecuted under criminal law and fined for misleading consumers. These laws are now contained in the Consumer Protection from Unfair Trading Regulations 2008.
Please see link to the story about the Co-op getting its pricing policy wrong:
Co-op chain accidentally introduces 20% discount at stores
A supermarket chain accidentally introduces a 20% discount at 140 stores instead of just at one branch – costing it thousands in lost revenue.
Conclusion
Contrary to popular opinion, advertisements displayed in newspapers, magazines, trade journals and on the internet are not offers, but are regarded as invitations to treat. The offer is to be made by the consumer in response to the advertisement. The advertiser is at liberty to accept or decline any offers potential customers might choose to make.
An invitation to treat can take the following forms: goods in a shop window display, on a shop shelf or in a catalogue, goods exposed for sale at an auction or via the internet. The offer can be made by taking goods to the checkout (real or virtual) or requesting them from the shop assistant, it is then up to the advertiser or the shop assistant to decide whether to accept or refuse the offer. A shop assistant does not have to give a customer a reason for refusing to accept an offer and is not bound by the marked price on the goods. If, for instance, you happen to be under 18 years of age and you attempt to purchase alcohol from your local supermarket, the assistant will be well within her rights to refuse to accept your offer to purchase these goods.
Questions
1. For a contract to exist, the agreement must also be legally binding/legally enforceable. What does this mean?
2. What are the two elements of any contract?
3. What is an invitation to treat?
4. Provide FIVE examples of an invitation to treat.
5. Why must an invitation to treat be distinguished from a distinct and definite offer?
6. Where is the point of sale in a supermarket and what, in terms of offer and acceptance, happens there?
7. What is a misleading price indication?
8. Does a retailer have to sell a consumer the goods with the wrong price on the ticket or label?
9. What other legal consequences arise as a result of misleading price indications by a retailer?
See link to find answers to the above questions:
https://seancrossansscotslaw.com/questions-answers/
Copyright Seán J Crossan, 27 March 2019
Seán Crossan's Scots Law 