NOW the primary difference between an offer and an invitation to treat, is intention. The intention :n the part of the person Initiating the communication_ An Invitation to treat is distinct from an ffer in that an it does is merely invute offers rather than indicate a willingness to be bound like an offer does.
What it allows the party inviting the offers to be able to do is accept ohr re fject ainnoitffate.r v ,hoic h re is made to him or her. So, if a particular communication only reaches the hg t o will not have any binding effect in similar fashion to an offer. Now, the types of situationsiwhich arnount to an Invitation to treat include, for example, auctions. DisPialmo t g of goods or sac• Advennernents. Tenders, and where, for example. you’re merely stating the price Now let’s take them In that order, starting of course, with auctions. Generally. In an auction, a : ct the -oneer asks for bids. He m ‘s not making n so t g a offer to sell the goods to the highest bidder. auctioneer Payne and Cave in 1789, the court said that the auctioneer was merely inviting offers from which bidders he can then either accept or reject frorn that bidder. This rule, of course, is now set out in statute in Section 57, subsection two of the sale of Goods Act 1979, and it says this -a sale by auction is complete when, the auctioneer announces its completion by the fall of the hammer or in other custornary manner”. And until the announcement is made, any bidder may retract his bid. But think for a moment. That would be where an auction is what is called with a reserve. Is there a binding promise when the auction is without reserve? That is the question. To clarify that an auction is where a person bids on an item. And the person making the highest bid wins. However, the item may have a reserve price. Meaning there is a minimum price that it will not be sold less than. So even if persons are bidding, if the reserve price is not met, there is no sale, but assuming that the reserve price is met or exceeded for that matter, there will be a fully formed contract when the auctioneers hammer falls. And the case of McManus and Fortescue in 1907 is the authority for that proposition.
However. The auction item maybe without reserve, meaning there is no minimum price on the item. So, whatever the bid for the item, no matter how low it is, that will be an offer_ So going back to our question Is there a binding promise when the auction is without reserve? Well. Although the position had not been quite clear historically. The reason Court of Appeal decision in 2001 in the case of Barry and Davis. Trading us heathcoat Bowl and company has now made it somewhat clear that there is a binding promise when the auction is without reserve. Now in that case, two machines were advertised for Sale by auction without reserve Barry, who was the claimant, was the only bidder and his bid of 8200 for each of the machines felt well short of the commercial value of the machines. Davis, who was the auctioneer, refused to sell the machines to Barry and he withdrew them from the sale. Now Both the Court of First Instance and the Court of Appeal found that Davis was in breach of contract, and they emphasise that in an auction sate without reserve, it was not open to the auctioneer to reject the highest bid, which was the only did n this case. Simply because it was not high enough. tom an objective standpoint, this may seem harsh, especially as the bid was so far below the true value. However, to avoid a situation like that, a seller putting items into auction would certainly be well advised to place a reserve price on the item. That then is the position with auctions. They are invitations to treat, and the bidder makes the offer, which then the auctioneer accepts or rejects with slightly different approaches depending on whether the item is with, or without reserve.
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