The difference between an offer and an invitation to offer is quite simple and primarily depends on the parties’ “intention.” An offer allows the other party to enter a legally binding agreement once accepted. On the other hand, an invitation to treat mainly invites the other party to negotiate and make an offer themselves. This is a basic difference that we encounter frequently in our everyday lives.
For example, when we visit a bookshop, the books displayed are an invitation for the general public to consider buying them. It’s up to each individual to decide whether or not to make a purchase, and there is no legal obligation to do so. Similarly, most advertisements are not actual offers but rather invitations for others to make an offer.
What is Offer or Proposal?
The definition of an offer or proposal can be found in Section 2(a) of the Indian Contract Act. According to this Act, when one person communicates their willingness to do or not do something to obtain the other person’s agreement, it is considered a proposal. In simpler terms, when someone tells another person they are willing or unwilling to do something for them, they are proposing.
For example, if someone offers to sell their bicycle to you for a specific amount, say Rs. 5,000, that is considered an offer. A contract is formed once you and the seller agree about the sale and all the details are clearly stated. When you accept the offer, pay the agreed amount of Rs. 5,000, and receive the bicycle, the contract is considered to be fulfilled or “performed.”
What is an ‘Invitation to Offer’ or ‘Invitation to Treat’?
No specific party intends to enter into a contract in an invitation to offer. The seller is open to entering into a contract with any member of the public who presents the best offer. This means that the seller is the one making the offer in an invitation to treat.
For example, a shopkeeper selling antique statues in their store would prefer to sell to the buyer who offers the highest price. Similarly, when clothes are displayed in a shop, goods are presented in an auction, or advertisements announce discounts like “Offer! 50% Off on All Shirts!” these are invitations to treat rather than actual offers.
As a result, forming a contract differs between an invitation to treat and an offer. Initially, it starts with an invitation to offer, such as displaying goods and their prices. When a person makes a satisfactory offer, and the seller accepts it, it becomes a contract. Unlike an offer the seller makes to the buyer, an invitation to offer allows the buyer to initiate the contractual process.
The Role of Intention
In an offer, both parties intend to enter into a legally binding agreement after proper negotiation. However, such an intention is not present in an invitation to offer. For example, someone may stop by a shop on their way home from work and browse through displayed books or dresses without intending to make an immediate purchase. Similarly, sellers may choose not to sell their goods to a particular customer if they are unwilling to pay the desired price.
In an offer, there is a clear intention to create a contract, whereas an invitation to offer does not carry the same intention. It allows for more flexibility and negotiation between the parties involved before reaching a final agreement.
Difference Between Offer and Invitation to Offer
The difference between an offer and an invitation to treat is as follows:
Invitation to offer: An invitation to offer is not an offer but a statement showing a willingness to negotiate a contract.
Offer: An offer is when someone expresses their willingness to perform or refrain from acting to obtain the other party’s agreement.
Invitation to offer: An invitation to offer elicits an offer from the other party.
Offer: An offer is made to obtain acceptance from the other party.
Invitation to offer: The concept of invitation to offer is not explicitly defined in the Indian Contract Act 1872.
Offer: The definition of an offer is provided in section 2(a) of the Indian Contract Act 1872.
Invitation to offer: An invitation to offer can turn into an offer if accepted by the other party.
Offer: An offer becomes a binding agreement upon acceptance by the other party.
Invitation to offer: An invitation does not result in legal consequences.
Offer: An offer leads to legal consequences and can form the basis of a contract.
Invitation to offer: An offer can be extended to a group.
Offer: An offer is typically made to a specific party.
Invitation to offer: A bookseller sending a catalogue of books with prices listed.
Offer: If a person interested in any book from the catalogue offers to purchase it from the seller.
Case Laws to Distinguish Between Offer and Invitation to Offer
The most fundamental distinction lies between an “offer” and an “invitation” to receive offers. This contrast was elucidated in the case of Harvey v Facey. The court ruled that a simple price quote in response to an inquiry does not constitute a proposal to sell.
In the case of Harvey v Facey, H sent a telegram asking, “Will you be willing to sell White acre to us?” F replied with the telegram, “Lowest price, £900.” H then responded, “We agree to buy for £900 as requested by you.”
The court held that H had only made a purchase offer, and it was up to F to decide whether or not to accept. In this instance, F declined, resulting in no agreement.
An invitation to treat does not indicate the offeror’s willingness to be bound by their offer. It simply presents terms for negotiation. It cannot be accepted as it stands.
A shopkeeper’s price list is not an offer but an invitation for potential customers to make an offer to purchase at the listed prices. The shopkeeper aims to attract customers and engage in contracts based on that invitation, subject to specific terms and circumstances. Transmitting a price list does not create a binding contract to supply an unlimited quantity of the specified goods at the listed price. If that were the case, the shopkeeper might face difficulties fulfilling commitments with limited stock.
Similarly, the auctioneer does not enter into contracts with all attendees at auctions. The auction is primarily an advertisement for sale, and the items are not for sale unless specific conditions are met. A similar ruling was made in the case of Harris v Nickerson (1873).
An invitation to offer becomes a contract only when the seller extends an offer to the buyer. The key distinction lies in the term “invitation.” It signifies an invitation to any potential buyer to make an offer for the goods or services sold.
Examples of invitations to offer include auctioneering, displaying goods in a shop, invitations to tender, presenting a menu in a restaurant, advertisements in newspapers, inviting individuals to view an apartment for sale or rent, recruitment offers, and requests for proposals, among others.
In each case, the invitation prompts potential buyers or interested parties to initiate the process by submitting their offers.
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