In order for a binding contract to be formed, there must be an ‘offer’ and an ‘acceptance’ of that offer. An invitation to treat is sometimes mistaken for an offer.
There are many similarities between an invitation to treat and offer, so making the distinction can be difficult. If the validity of your contract turns on this distinction you should consult an experienced contract lawyer. A contract lawyer can refer to relevant case law on the matter to determine whether an offer was in fact made, or if it was the lesser form of an invitation to treat.
A good way of looking at the difference between the two terms is that an offer is a definite promise to be bound on specific terms, whereas an invitation to treat is only an indication that someone is prepared to receive offers with the view of forming a binding contract. Thus, the distinction turns on the specificity of the offer and the degree of vagueness or conditionality attached to it.
The main situation where an invitation is mistaken for an offer is in advertising. Advertising is not an offer, but rather an attempt to induce offers. Advertising is therefore classed under contract law as an invitation to treat. Only when the customer offers to pay for the goods at the advertised price has an offer been made.
Similarly, the ‘exhibition of goods for sale’ can be confused as an offer when really it is an invitation to treat. When goods are displayed in a store this constitutes an invitation to customers to make offers to purchase the items.
Another tricky situation is in auction sales. At an auction the bid itself is an offer and then the auctioneer can either accept or reject the offer. A good example of this is the case of Payne v. Cave 1789. In that case, the defendant made the highest bid for the plaintiff's goods at an auction...