Difference Between Offer and Invitation to Offer | Law Optional Notes for UPSC PDF Download

Understanding Offers or Proposals

• The concept of an offer or proposal is defined in Section 2(a) of the Indian Contract Act. When one party communicates their willingness to perform or abstain from an action to secure the other party's agreement, it constitutes a proposal. Simply put, when someone expresses their readiness to do or not do something for another, they are making a proposal.
• For example, if someone offers to sell their bicycle for a specific price, like Rs. 5,000, it constitutes an offer. A contract is established upon mutual agreement, payment of the specified amount, and receipt of the bicycle. Fulfilling these conditions signifies the completion or "performance" of the contract.

Understanding 'Invitation to Offer' or 'Invitation to Treat'

• Definition: In an 'Invitation to Offer' or 'Invitation to Treat', no specific party intends to immediately enter into a contract. It is an indication that the seller is open to considering offers and is not bound to accept any particular offer.
• Examples:
  • A shopkeeper displaying antique statues in their store is inviting potential buyers to make offers, with the intention of accepting the best offer presented.
  • When goods are put up for auction or when advertisements announce discounts like "50% Off on All Shirts," these are examples of invitations to treat.

Contract Formation Process

• Initiation: An invitation to treat marks the beginning of the contract formation process, where goods and their prices are displayed.
• Offer Submission: When a person makes a satisfactory offer in response to the invitation, it signals a willingness to enter into a contract.
• Acceptance: If the seller accepts the offer, a contract is formed based on the terms agreed upon.

Distinguishing Features

• Initiator: Unlike a direct offer made by the seller, an invitation to offer empowers the buyer to kickstart the contractual process.
• Flexibility: An invitation to treat provides flexibility for both parties to negotiate and reach a mutually acceptable agreement.
• Legal Implications: Understanding the distinction between an invitation to offer and an offer is crucial in contract law to ensure clarity and avoid misunderstandings.

The Role of Intention

• Intention in Offer vs. Invitation to Offer:
  • Offer: In an offer, both parties aim to establish a legally binding contract following negotiations. This intention is explicit and signifies a readiness to create a legal relationship.
  • Invitation to Offer: Conversely, an invitation to offer lacks the same level of commitment. It provides room for flexibility and discussion before a final agreement is reached.
• Examples Highlighting Intention:
  • When a customer visits a store and browses items without the immediate intention to buy, it represents an invitation to offer. The customer explores options without a firm commitment to purchase.
  • Sellers retain the right to refuse a sale if a buyer is unwilling to meet the specified price. This demonstrates the flexibility inherent in negotiations preceding a formal offer.
• Difference Between Offer and Invitation to Offer
  • Definition:
    • An invitation to offer is a statement indicating a willingness to negotiate a contract, not a direct offer.
    • An offer is when someone expresses their willingness to perform or not perform an action to obtain agreement from the other party.
  • Purpose:
    • An invitation to offer aims to elicit an offer from the other party.
    • An offer is made to secure acceptance from the other party.
  • Defined In:
    • The concept of invitation to offer is not explicitly defined in the Indian Contract Act 1872.
    • The definition of an offer is outlined in section 2(a) of the Indian Contract Act 1872.
  • Acceptance:
    • An invitation to offer can transform into an offer if accepted by the other party.
    • An offer becomes a legally binding agreement upon acceptance by the other party.
  • Legal Consequences:
    • An invitation to offer does not result in legal consequences.
    • An offer leads to legal implications and can serve as the foundation of a contract.
  • Made To:
    • An invitation to offer can be extended to a group of people.
    • An offer is typically directed towards a specific individual or party.
  • Example:
    • For an invitation to offer, consider a bookseller sending a catalog of books with listed prices.
    • In the case of an offer, if a person interested in any book from the catalog offers to purchase it from the seller.

Case Laws to Differentiate Between Offer and Invitation to Offer

• Offer vs. Invitation to Offer:
  • Offer and invitation to offer represent distinct legal concepts in contract law.
• Harvey v Facey Case:
  • In the Harvey v Facey case, a price quote in response to an inquiry was not considered a binding offer.
  • Harvey inquired about buying White Acre, and Facey responded with the lowest price of £900.
  • The court ruled that Harvey's response was an offer, leaving it to Facey to accept or reject.
  • Facey's refusal led to no agreement between the parties.
• Invitation to Treat:
  • An invitation to treat presents terms for negotiation without indicating a willingness to be bound by an offer.
• Shopkeeper's Price List:
  • A shopkeeper's price list is an invitation for customers to make offers, not a binding offer itself.
  • Customers are invited to negotiate based on the listed prices.
  • Transmitting a price list does not create a binding contract for unlimited quantities of goods at listed prices.
• Auctioneer's Role:
  • An auctioneer's role is primarily to advertise sales, and items are not for sale unless specific conditions are met.
  • Attendees at auctions do not automatically enter into contracts with the auctioneer.
  • The case of Harris v Nickerson (1873) also exemplifies these principles.

Invitation to Offer

• An invitation to offer transitions into a contract when the seller extends an offer to the buyer. The pivotal term here is 'invitation,' indicating a call to any potential buyer to propose an offer for the goods or services being sold.
• Various instances of invitations to offer include auctioneering, displaying goods in a shop, invitations to tender, presenting a menu in a restaurant, newspaper advertisements, inviting individuals to view a property for sale or rent, recruitment offers, and requests for proposals.
• In each scenario, the invitation stimulates potential buyers or interested parties to commence the process by submitting their respective offers.

Illustrative Examples:

• Auctioneering: When an auctioneer initiates bidding for an item, it is an invitation for potential buyers to make offers, with the highest bid ultimately securing the purchase.
• Menu Presentation: In a restaurant setting, the menu serves as an invitation for customers to select dishes they wish to order, thus initiating the offer to purchase those items.
• Recruitment Offers: Job postings and employment advertisements are invitations for candidates to apply, signaling their interest and offering their skills and services to the employer.
• Property Viewing: Inviting individuals to view a property for sale or rent prompts interested parties to make offers based on their assessment of the property's value and suitability.