What Is Invitation to Treat?

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).

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

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. Once the revocation is communicated to other party becomes binding among them10.

(a)..... (b) as against the person to whom it is made, when it comes to his knowledge.

REVOCATION OF ACCEPTANCE

An acceptor can revoke his acceptance at any time when it comes to the knowledge of the offeror.11 12 s.5 (2) reads: An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. s.4 (2) (b) reads: (a)... (b) as against the acceptor, when it comes to the knowledge of the proposer. So the acceptor can revoke his acceptance only when his acceptance is received by the proposer.

TYPES OF CONTRACT

Valid Contract: It is a contract that is legal and enforceable in the court of law. A valid contract has al the requirement of a valid contract such as offer, acceptance, consideration, capacity and the contract must be legal by nature.

8 S, 5(1) Contract Act 1950 9 s.4 (2) (a) Contract Act 1950 10 s.4 (3) (b) Contract Act 1950 11 S,5(2) Contract Act 1950 12 S.4(2)(b) Contract Act 1950

Void Contract: It is a kind of contract that the court refuses to honour because it has violated statute or it is against public policy. Example of this kind of contract is gambling, unlicensed professionals and clients. The court also refuse to honour the contract if it violates public goal and policy. Voidable Contract: It is a contract that can be rejected by one party based on victimization. He/she was induced by another party to enter into the said contract and the contract was not fair. It is based on the fraudulent misrepresentation and the victim after legalizing the fact of the contract can refuse to perform what he/she promised. Then their will be no damages for the breach of the contract. In this case the victim can sue the fraudulent party to recover his money. He/ or she can get out of the contract without any liability. Example of this kind of contract is threat, force, minor and misrepresentation. In this contract the victim has a choice to reject or accept the terms of contract. So it is enforceable contract.

Bilateral Contract: It is a type of contract that a promise is returned with a promise. Example of this kind of contract is sale and purchase. Ahmad says to Karim that he will deliver the goods to him on Friday at 5 o'clock and Karim agrees to pay him upon delivery of the goods. So both parties are legally bound by their promises.

Unilateral Contract: This is a contract that involves only one party making a promise in the contract. For example Karim posts a reward of RM 500 for his lost cat Mimi. Anybody returns with Mimi, the contract is complete and Karim must honour his promise. If not he can be sued in the court of law for not fulfilling his promise. This kind of contract is very poor type of contract because the first party may withdraw his promise anytime without notice.

Executory and Executed Contract: This type of contract is performed in the future. Once the contract is performed by both parties, it is called executed contract. Executory and executed contracts are related to performance. In this type of contracts both parties promise to perform certain action in the future. Once the action is performed, the contract is complete. Both parties are liable to each other in case of breach of the contract.

Express Contract: Express contract contains an explicit agreement between the parties. For example a man is employed by a university for a specific job with a specific salary.

Implied Contract: This type of contract is based on the conduct of the parties. It involves consent. For example Karim enters to a clinic to see a doctor. Once Karim enters into the clinic it is implied that Karim will pay the doctor's fees. The implied contract must be reasonable. If Karim visits the doctor and then makes payment and suddenly the doctor says his fees is RM 5,000 just for one normal visit, Karim is not liable to pay the amount because it is not justified. So this kind of contract is based on routine situation and every body knows how much it cost to visit a doctor in a clinic.

Quasi Contract: The following is said to be quasi-contract: (1). Plaintiff renders some benefit to the defendant, (2). Expecting to have some compensation. (3). Defendant understands the benefit and willingly accepts it. (4). But defendant refused to pay once the job is complete. If Karim enters your gate with a grass cutting machine and then you welcome him and he starts cutting your grass. After he finishes the job you can not refuse to give him a reasonable wage. If you are not around, Karim again comes to your gate and cuts your grass and when you come home, Karim claims money for the job performed. You can refuse to pay him.

TERMINOLOGIES IN CONTRACT Warranties, guaranties, disclaimer and terms of use are frequent transaction language in web sites. Terms of use also covers such as web site rules, defines permission, paying methods, statement of privacy. The sole purpose for the terms of use is to be free from any legal issues that arises latter from purchase of any product advertised in that particular web site. Warranty: Is an assurance given by the company that the product in question is satisfactory and it is made based of certain known standard. Express Warranty: Statement of fact about the product regarding its quality. Implied Warranty: Seller says it is reasonably ok for your purpose of use. The good is reasonably fit for the job. PayPal Account: Send and receive money. PayPal make money out of interest in the bank and transaction fees. Customer clicks the button of application rules. Presume that you have read..... PayPal has sole discretion to close an account...... So they put allot of terms to protect the company from being sued by the customers. It is all in the expense of the customers.

CONDUCTS THAT INVALIDATES AGREEMENTS Contracts are invalidated when one party is taken by surprise without giving him a chance to think about terms, conditions and consequences of an agreement. As such situations arise where the alleged contract is subject to undue influence, duress, misrepresentation, fraud and sometimes both parties are under mistake of fact regarding the essence of the agreement.

UNDUE INFLUENCE: Undue influence is defined as a close proximity between parents and child, member of a society, client and lawyer and so on. If the courts realize that there is no free will in the agreement to form a legally binding contract, then the court prevents its enforcements. It happens when someone is not in the right state of mind and lacks creative thinking. It also can happen when some member of the family uses emotional and psychological factors to convince him to enter into a contract which later regrets it. As thus, when one party genuinely does not understand the consequences and the nature of entering into a valid contract, then the court will order the dissolution of the agreement.

FRAUD AND MISREPRESENTATION: Fraud happens when a person deliberately lies about his age or product. It also happens when he makes a statement to cause economic damage to other party. Misrepresentation happens when a person makes a false claim luring or persuading other party to enter into a legally binding contract.