What Is Invitation to Treat?
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Cyber Law: © Dr. Qais Faryadi (F.S.T) www.dr-qais.com WHAT IS INVITATION TO TREAT? Invitation to treat or simply speaking information to bargain means a person inviting others to make an offer in order to create a binding contract. An example of invitation to treat is found in window shop displays and product advertisement. Invitation to treat comes from the Latin phrase invitatio ad offerendum and it means inviting an offer. In another words it is a special expression showing a person’s willingness to negotiate. When a shopkeeper makes an invitation to treat may not accept any offer on his goods as soon as it is accepted by the person who makes an offer. There is a difference between an offer and invitation to treat. When A accepts an offer from B a contract is complete. When B accepts an advertisement in a shop window, he is actually making an offer. It is up to the advertiser to accept or to reject the offer. The issue of invitation to treat was discussed in the case of Fisher v Bell 1 by the English Court of Appeal: “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 in no sense an offer for sale the acceptance of which constitutes a contract.” As such when a person displays a good on his shop or advertises something in his shop window merely bargaining an offer on it. In other words, the seller is just promoting his goods for sale and asking the customers to make an offer. Once the customer picks up the item and goes to the counter to make payment he/she is making an offer. At this point, it is up to the cashier to accept or reject the payment. Once the cashier accepts the payment, a legally binding contract is formed. Similarly, when a person displays something in his/her website with a price on it, is actually asking customers to make an offer. So his/her display is only invitation to treat not an offer. Now look at this situation: Karim puts an advertisement in his web site to sell his Computer for RM 50. A customer by the name of Shamsul immediately puts an order and he gets an automated response confirming his order. Take note that the RM 50 price on the computer was a mistake. The actual price was RM 500. Karim refused to deliver the computer to Shamsul saying that it was just an invitation to treat. Advice him about his rights and responsibilities. 1 (1961) 1 Q.B. 394 1 Cyber Law: © Dr. Qais Faryadi (F.S.T) www.dr-qais.com Answer: 1. Computer at RM 50 is an invitation to treat. 2. Karim places an order: it equals to an offer. 3. Automated response is an acceptance. 4. A binding contract is formed. COUNTER OFFER Counter offer means A makes an offer to sell his computer to B and B instead of accepting or rejecting A’s offer makes another offer. B’s offer refers to a counter offer. In this situation unless an acceptance is rendered, there is no binding contract between A and B. Let say A offered his car to B for RM 20,000. B asked A if he sells his car for RM 15,000. A did not agree and B said Ok I buy your car for RM 20,000 as you mentioned earlier. A refused to sell his car. B argued that a binding contract is formed. Advice A. Answer: There is no binding contract between A and B. A offered his car for RM 20,000 and B rejected the offer by counter offer. There is no acceptance by B in the original offer. If A makes an offer for the second time, and B accepts the offer, a binding contract will be created among the parties. Read Hyde v Wrench2 Defendant offered his farm for £1,000. Plaintiff offered £950. Defendant refuses to accept his counter offer. Plaintiff agreed to buy in the original offered price. Defendant refused saying there is no acceptance in the first offer. The Court held that there was no binding contract. CLICK AND WRAP CONTRACT The traditional method of entering into legally binding contract is to sign a document agreeing all the terms and conditions on it. It is almost impossible and impractical to ask the purchaser to sign a traditional method based contract while making in online order in a cyberspace. 2 1840, 3 Beav 334 2 Cyber Law: © Dr. Qais Faryadi (F.S.T) www.dr-qais.com However, in cyberspace, companies have to protect themselves from claims and responsibilities while entering into any kind of e-business. This is done through a concept called click and wrap method of agreement. In this method a purchaser clicks in a button called “I agree” provided by the website to show his/her intention of binding themselves into a legal contract. As thus, Click and wrap mechanism is developed based on the massive growth of internet related e-business. Read Groff v America Online3: The above case explains how click and wrap system works. In this case there was a button stating that before any purchase a customer must click on I agree button to show his willingness to abide by the rules and regulation of American Online Company. The Court Held that the plaintiff has entered into legally binding contract when clicked on the button I agree. In this case the plaintiff clicked twice the button I agree. So it was presumed that he saw the button, understood it and read it. As such the plaintiff has entered into legally binding contract with the defendant. This case indicates that a valid contract is formed. Steven J. Caspi, et al. v The Microsoft Network L.L.C., et al. 4 The plaintiff subscribed to Microsoft Network. Clicked on the button I agree. The “I agree” click button was compulsory without that user cannot use the Microsoft network. So the plaintiffs indicated their intention of accepting the terms and conditions of agreement. The Appellate Division by upholding the earlier decision of the Superior Court of New Jersey held that the plaintiffs are bound by the terms and conditions of the Microsoft Network and a legal contract has formed between them. Specht v. Netscape Communication Corp: 5 In this case Netscape offered to customers a free copy of its software. Customers can download the software by clicking a button on the website. There was no specific agreement button to ask customers for intentionally binding terms and conditions. Only at the bottom of 3 (File No. C.A No Pc 97-0331, 1998 WL 307001 (R.1. Superior Ct., May 27 1998) 4 (1999 WL 462175, 323 N.J. Super 118 (N.J. App. Div. July 2 1999). 5 (2001 WL 755396 (S.D.N.Y., July 5 2001). 3 Cyber Law: © Dr. Qais Faryadi (F.S.T) www.dr-qais.com the page there was a notice stating that please review and agree to the terms and conditions… followed by few links stating license agreement conditions. It was argued by Netscape that users were bound by the terms and conditions of software licensing. The court however, ruled that there were no real preconditions set by Netscape. Users were not warned that they are about to enter into legally binding contract. As thus, there was an ambiguity in this case and users still were able to download the software for free. If we were to apply the concept of click and wrap system users should not be allowed to go further without affirming the “I agree” button first. Furthermore, it was only an invitation not a pre- condition for download. WHAT IS BROWSE AND WRAP AGREEMENT? Unlike click and wrap agreement, browse and wrap agreement means that customers still download from the site without clicking in the button “I agree” to create a legal contract. In browse and wrap there is no mandatory click forcing customer agreeing first before download and thus, there is no contract between the parties. In Ticketmaster Corp v Tickets.com6 . It was stated that mere conditions on the web site does not constitute to a legal contract. REVOCATION OF OFFER Offer and acceptance can be revoked when parties change their minds. Revocation means to take back what you promised. Although parties can revoke what they promise, however, they must do it in a proper ways. Parties cannot just simply say I revoke my offer. Read Section 6 of the Contract Act 19507 A proposal is revoked: (a) By the communication of notice of revocation by the proposer to the other party; (b) By the laps of time prescribed in the proposal........ (c) By the failure of the acceptor to fulfil conditions.......... (d) By the death or mental disorder of the proposer...... Offer cannot be revoked at anytime; it must follow certain rules and regulations as mentioned in the Contract Act 19508. 6 1095502 (W.D. Wash,. Dec. 1, 1999 7 S.6 (a) (b) (c) (d). Contract Act 1950 4 Cyber Law: © Dr. Qais Faryadi (F.S.T) www.dr-qais.com A proposal may be revoked at any time before the communication of its acceptance is complete against the proposer, but not afterwards9. The Communication of an acceptance is complete: (a) As against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; It means that the offeror who wishes to revoke his offer only can do so if the acceptor has not put his latter of acceptance in the post box.