Law for Business Managers, Coursework Example

Difference Between an Offer and An Invitation to Treat

Offer and invitation to treat can be confusing at times. However, the two terms are different in business law. Before we go into discussing the differences, it is essential to define these two terms firstly. An offer is an express or implied proposal made by one party to the other where the offeror intends to enter into a binding agreement with the offeree in case the offer is accepted (Cartwright 2016). It is important to note that the operating words here are “Intention to enter into an agreement.” On the other hand, an invitation to treat can be defined as actions or steps that a party makes for enticing the other party to make an offer. In this case, the role of the invitation to treat, as opposed to that of an offer, is to entice parties who have the potential to make offers. Some of the examples of an invitation to treat include the restaurant’s menu cards displaying the type of food and their prices, railway timetable showing the timing and the fares, and a government tender.

Classification and Characteristics of An Offer

An offer can either be general, which means that it is made to the general public, or specific, which means that it is made to a particular party or parties. A cross offer is an offer that is made across the parties, with each party stating their positions in ignorance of the other’s offer (MacQueen & Thomson 2016). A counteroffer is an offer that is made in response to the previous offer but amending a few items in the original offer. A counteroffer invalidates the initial offer and creates a different ground for negotiations.

For an offer to be valid, it must intend to or create a legal relationship between the parties. It also must be clear and not vague. A valid offer must be communicated to the offeree (Smirniotopoulos 2016). An offer can also be conditional.

Key Differences Between an Offer and An Invitation to Treat

While it has been established that the difference between an offer and an invitation to treat can be difficult because of the elusive criterion of the element of intention, a few differences have been established by law, through precedents. The following are but a few of them.

To start with, the main objective or the intention of an offer is to enter into a binding agreement once the offer has been accepted. That is to say, if one makes an offer and the offer is accepted, then there already exists a binding agreement that requires either party to carry out certain obligations, failure to which it can lead to legal consequences (Smirniotopoulos 2016). One the other hand, an invitation to treat objectives is to entice the target party to make offers. That means that in an invitation to treat, no legal obligations are arising from it until the target party makes an offer and the offer is accepted. The objective of the invitation to treat is to create an opportunity for an offer.

An offer is essential to the making of an agreement, as it is essentially the first element of an agreement. However, an invitation to treat is not necessary to make a contract, although it can aid the process of making one where it entices offers (Cartwright 2016). Accepting an offer will lead to a valid contract. However, accepting the invitation to treat will not necessarily lead to a contract unless one makes an offer as a result of the invitation, and then the offer is accepted.

Several key cases have helped through history to make the distinction between an offer and an invitation to treat clearer. In the case of Harvey V Facey [1893] A.C 552, Harvey (P) sent Facey (D) a telegram in which he stated, “will you sell us Bumper Hall Pen?” D replied by stating the minimum price of the store in the following terms; “lowest price for Bumper Hall Pen £900”. P responded to this telegram by agreeing to the minimum price. Eventually, though, refused to sell to P and P sued for specific performance. P’s case was dismissed, and he appealed at the Supreme court. At the Supreme court, the issue was whether a mere statement of the minimum price was an offer such that when accepted, it resulted in an enforceable contract. The court dismissed P’s case and held that a mere statement of the minimum price was not an offer but an invitation to treat.

In the case of Carlill v Carbolic Smoke Ball Co (1893), Carbolic Smoke Ball company manufactured a drug called Smoke Ball. The company claimed that this drug could cure influenza. On November 13, 1891, the company advertised in the newspapers stating that it would pay £100 to anyone who took its drug and then contracted the influenza. Carlill took the drug and contracted the influenza. The company was sued, and it claimed that the advertisements were a mere invitation to treat and did not constitute an offer. The court held that advertisements that contain specific terms and promise a reward constitutes a binding unilateral offer. Anyone could accept this offer, and a binding agreement would then be formed.

In the case of Fisher v. Bell (1961), it was held that where goods are displayed on the store together with their price tags, such is not an offer by the seller but rather, an invitation to treat. An offer is when a customer picks the goods and approaches the counter. A purchase is only complete at the till. A similar holding was made in the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd (1953), where the court held that the act of the pharmacy displaying drugs on the store constituted an invitation to treat by the seller. An offer arises when a customer picks the goods and approaches the counter. The purchase is complete at the till.

As it is observed, the chief distinction between an offer and an invitation to treat is the element of the intention. In an offer, the offeror intends to enter into a binding agreement with the offeree should the offeree accept the offer. In an invitation to treat, the intention is to entice potential offerors to make their offers. Of course, the distinction can be difficult because of the elusive element of the intention.

Claire and Ric’s Case: Business Mediums

Claire and Ric wish to form a business management consultancy business. For them to get some financing from the bank, they must document their preferred business medium. A business medium can be defined as the legal form under which the business wishes to operate. There are various legal forms that a business can operate under. These include sole proprietorship, partnerships, or a company. A company or partnership can either be limited or unlimited. In the present case of Claire and Ric, either partnership or a limited liability company medium, are advised.

Option 1: Partnership

A partnership can be simply defined as a legal form of business in which two or more people agree to share the management responsibilities of the business as well as the profits and the losses (Browne 2018). The partners are liable for the operations of the business. In General partnerships, the partners share in the management of the business and assume the business’s liability in terms of debts and all other obligations of the company. In a limited liability partnership, the partner’s liability is limited to their contribution to the share capital.

Characteristics of a Partnership

In a partnership, there is a mutual contribution. Every partner contributes to business capital. Others make other contributions, for example, in managing the business. This is important for Claire and Ric because it means they both can put their resources together and establish a good firm (Daro? 2017). In a partnership, partners share the profits and the losses of the business. For Claire and Ric, it would mean that if they make a loss, such loss is shared amongst them, thus distributing the weight of the loss.

All the partners are co-owners of the business assets. This means that they can utilize the assets at the time during the persistence of the partnership. However, business demands that such use is for the good of the business.

Partners are mutual agents of each other. This means that whatever one partner does, it is assumed and known in law that they are doing so as an agent of the other partner. This is important in a business management consultancy business because both Claire and Ric will need to bring business in the firm (Chadwick 2016). To do this, they might meet different persons and act in a manner as if they are the partnership itself.

Partnership business has a limited life. This is so because the life of the business depends on the life of the partners. If anyone of the partners dies, then the business dies. It is unclear how this benefits or disadvantages Claire and Ric; however, it can be suggested that such dependency demands more mutual responsibility and a firm resolve.

Advantages of Partnership as a Business medium

A partnership has several advantages. The first one is that it is easier to form than a company. There is no tedious legal process of forming a partnership; all is needed is a partnership agreement and registration. On the other hand, a company has a long process of formation.

Unlike a sole proprietorship where the proprietors enjoy all the profits and shoulders all the loss, a partnership is a shared responsibility. If it makes losses, that loss is shared by all the partners, and the same is with the profit (Chadwick 2016). Therefore, partners are more motivated to work harder.

Other than the simplicity of the formation process, it also costs less to start a partnership than to start a company. Besides, once the partnership has picked up, it requires less formal or legal obligations to operate, unlike companies.

Disadvantages of a Partnership

A partnership has its disadvantages. A partnership business is dependent on the lives of their partners. It lacks continuity. It means that if either Claire or Ric dies, the business dies. The element of unlimited liability is also a disadvantage (Jones 2019). This is because Claire’s and Ric’s personal assets can be seized to pay for the business’s debts or other liabilities. A partnership has limited access to capital, unlike companies that can issue shares (Jones 2019). Finally, unlike companies, partnerships have a slow rate of development.

Option 2: A limited liability Company

Both Claire and Ric should choose this option. A company is a body corporate that is duly incorporated and operates as so. A company can either be limited or unlimited. A limited company means that the liability of the shareholders is limited to their shares in the company.

Characteristics of a Limited Liability Company

A company is a legal person, separate from its owners and its founders. It can sue and be sued in its name (Kelly et al. 2020). It can own property in its own name, as was held in the case of Macaura v Northern Assurance Co Ltd (1925). The members have limited liability. Finally, a company has a perpetual lifespan beyond the lives of its owners or founders.

Advantages of a Company

Claire and Ric can enjoy several advantages of forming a company. Their liabilities will be limited to their shares. This means that their personal assets will be protected. In case of any legal issues, it is the company that is sued in its name and not that of its owners. A company can access more capital by issuing shares (Kelly et al. 2020). Due to this increased capital, a company has a better opportunity to grow that most other business mediums. Finally, a company’s life is separate from its owners and founder, meaning that its continuity is guaranteed.

Disadvantages of A Company

The process of forming a company is long and tedious. Additionally, the cost of forming a company is also high. In terms of operations, the process of decision-making is long as there are some decisions that cannot be made without the involvement of certain stakeholders, such as the shareholders (Jones 2019). A company has to comply with many legal obligations during its life as compared to a partnership. Finally, the financial affairs of a company are public information. This might not be good, especially when the company is struggling.

The issue

Josephine’s Company, “Best Body Limited,” is reported to have exposed its employees’ health and wellbeing by keeping them in a dangerous working environment, contrary to the requirements of the Health and Safety and Work (HSW) Act of 1974. Some of the reasons for this violation include the fact that the employees complain of exposed wires, leaking machines which make the factory floor particularly slippery, a lack of fire extinguishers in the building, a faulty fire exit door which does not open, and a lack of any written Health and Safety Policy.

The Law

The current law on occupational safety and health was established under the HSW Act of 1974. The law requires that various workplaces take responsibility for the safety and health of their employees. It assigns responsibilities to the employers to ensure that the environment within which the employees are working is safe from any danger.

The Management of Health and Safety at Work Regulations of 1999 requires employers to carry out regular health and safety risk assessments. It also requires employers to have a written health and safety policy (Perry 2016). Additionally, it requires employers to conduct health and safety training on their employees regularly.

The Workplace (Health, Safety, and Welfare) Regulations 1992 provides that employers must ensure that the workplace has adequate ventilation, heating, and lighting. The workspace should also be clean. It requires employers to provide staff facilities such as toilets and washing facilities (Winstone 2016). Additionally, there should be safe pathways.

The Personal Protective Equipment at Work Regulations 1992 requires that all employees are provided with Personal Protective Equipment (PPE) at any cost. Additionally, the employees should be adequately trained and provided with information on how to use the PPEs. This is so especially in the cases where employees work in a factory, like Josephine’s.

The Provision and Use of Work Equipment Regulations 1998 require that the workplace machines are suitable for use and do not expose the employees. It requires frequent maintenance of the machines, whether new or old. It also requires that employees are protected from dangerous parts of the equipment being used at the workplace. In the present case, the leaking machines at Josephine’s factory violate these regulations.

Implications Under the Current Health and Safety Legislation

Violations of current health and safety law have its implications. The following are but a few of these implications.

Criminal Liability. Violation of the HSW Act of 1974 and its subsequent legislation is a criminal offence and can attract a criminal proceeding against the company or the individual directors or managers. If a company is found guilty, it can be fined. If the directors or managers are found guilty individually, then they may be imprisoned. These proceedings take place at the magistrate’s court or the Crown Court.

Civil Liability. A failure by a company to comply with health and safety regulations may be expensive. In case an employee is injured or suffers as a result of the failure of the employer to ensure safety precautions, then the individual employee may sue the company for compensation that may be in vast sums of money.

Public Image. Josephine is the business of making vegan foods. Food is something very personal to anyone, and therefore, if it is put out there in public that the food is made by workers who are exposed in a dangerous environment, then the perception may change, and Josephine may lose her market share. Again, everybody wants to eat food that is made in a clean, healthy, and friendly environment. In the absence of these, then that food is questionable.

Revocation of License. The law allows that in the instance where a company does not comply with the health and safety precautions, that company’s license may be either suspended or until they comply or revoked in its entirety. Josephine may not want this as this means that she will be out of business

Recommendation

The only recommendation to Josephine is to simply comply with the current Health and Safety regulations by fixing the problems at the factory. If she is not conversant with these regulations, it is better to hire a professional who can help her. This is cheaper than the consequences of non-compliance

Reference List

Browne, S., 2018. Beyond aid: from patronage to partnership. Routledge. Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256

Cartwright, J., 2016. Contract law: An introduction to the English law of contract for the civil lawyer. Bloomsbury Publishing.

Chadwick, W., 2018. Significant others: creativity & intimate partnership. Thames & Hudson.

Daro?, M., 2017. A Verification of Advantages and Disadvantages in Partnership

Relations. Zeszyty Naukowe Politechniki Cz?stochowskiej. Zarz?dzanie, (27), pp.96-105.Fisher v Bell [1961] 1 QB 394 Harvey V Facey [1893] A.C 552).

Jones, L., 2019. Introduction to business law. Oxford University Press, USA.

Kelly, D., Hammer, R., Denoncourt, J. and Hendy, J., 2020. Business law. Routledge.

Macaura v Northern Assurance Co Ltd [1925] AC 619

MacQueen, H. and Thomson, J., 2016. Contract law in Scotland. Bloomsbury Publishing.

Perry, P., 2016. The Management of Health and Safety at Work Regulations 1999. In Risk Assessments Questions and Answers: A practical approach (pp. 37-47). ICE Publishing. Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] EWCA

Smirniotopoulos, P.E., 2016. Chapter introduction: understanding Contract Law. In Real Estate Law (pp. 260-277). Routledge.

Winstone, P., 2016. 3.4 Workplace. Watts Pocket Handbook, p.138.