Invitation To Offer Or Treat Under Contract Law

INTRODUCTION

Through this article author has attempted to elucidate the concept of “an invitation to offer”. Having said that, certain transactions have an added preliminary stage whereby one party to the agreement invites another party to make an offer and such a process is known as “invitation to treat”. At times, parties might confuse an invitation to treat for an offer and therefore, it becomes essential to first differentiate ‘offer’ from ‘an invitation to offer/treat’.

OFFER AND ITS TYPES

An offer/proposal is defined in section 2(a) of the Indian Contract Act, 1872. As per the Indian Contract Act, 1872, offer/ proposal is defined as, “When one person signifies his willingness to do or abstain from doing something with a view to obtain the assent of another person is called a proposal.” The person who makes the offer is known as ‘offeror’ and to whom an offer is made is known as ‘offeree’. When the offeree accepts the offer, it becomes a ‘promise’.

For example: let’s say A asks to B, if B wants to buy A’s bike for INR 50,000, here, A is offeror and has made an offer whereas, B is offeree.

Now, let’s go through the different types of offer for ease in understanding the concept behind “invitation to treat/offer”-

Cross offer:

When an offer is made by two parties to each other having same terms of bargain or agreement and if such offers cross each other, it is known as ‘cross offer’.

For example- let’s say X offers to sell his house for 2 lakhs to Y by post and on the same day, Y offers to purchase X’s house for 2 lakhs by post itself. Such an offer will be known as cross offer and in such situation, their won’t exist any offer per se.

Specific offer:

When an offer is made to a specific party or person, then such an offer is known as a ‘specific offer’.

General offer:

When an offer is made to the public at large or many parties at once but not to any specific party, then such an offer is known as a ‘General offer’.

INVITATION TO OFFER/TREAT:

An invitation to treat or an invitation to bargain (used in USA) is a concept in the law of contracts which has been derived from a Latin phrase “invitation ad offerendum”, meaning “inviting an offer”. There is no mention of ‘invitation to offer in the Indian Contract Act, 1872.

In the words of professor Andrew Burrows, an invitation to treat means:

“…an expression of willingness to negotiate. A person making an invitation to treat does not intend to be bound as soon as it is accepted by the person to whom the statement is addressed.”

A contract is an enforceable agreement with an offer, acceptance, consideration and an intention to create a legal relationship as its components, whereas an invitation to offer is merely a preliminary discussion before an offer is formally made. A true offer implies a willingness to develop legal relations while an invitation to offer has no intention of creating legal obligations. Before finalizing an offer, parties express their “statement of intention” during the process of negotiation on the terms of a contract, which has no intention of acquiring acceptance.

A statement having terms of an offer is an offer or an invitation to offer entirely depends on the willingness of the offeror. If an individual is expressing his willingness to do or not to do something, with no further intention of negotiation on acceptance then it will be called an offer. A catalogue of any shop or a menu of a restaurant with pricing of food items is just an example of an invitation to treat but an offer, since they are inviting customers to make an offer to buy at a certain price and hence after an offer has been made by the customer, it’s up to the shopkeeper to accept or reject the offer. Advertisements in newspapers or in any other media are an invitation to treat, which allows vendors to refuse the offers made by the customer. At times, in case of unilateral contracts, advertisements of a product may be considered as an offer, for instance, the case of ‘Carlil v Carbolic Smoke Ball Company’ which is an example of ‘General offer’.

Invitation to tenders, invitation of bids, an invitation for proposals are some examples of ‘invitation to treat’. The party making invitation for bids or tenders only seeks bids or tenders for certain commodities or services made by prospective suppliers. After such an invitation, if an offer is made in that respect, it is up to the party who made the invitation to either reject such bid or tender or accept it. Upon rejection, no legal consequences will be faced by the inviter.

CASE LAWS

1. Pharmaceutical Society of Great Britain V Boots Cash Chemists (Southern) Ltd [1953]:

Issues-

  1. When does an acceptance of offer takes place in the self-serve stores?
  2. Is the customer bound to purchase any commodity once such a thing is placed it its basket?
  3. Is the shopkeeper bound to sell its products at a price enlisted at the display?

Conclusion-

  1. Acceptance of offer takes place in a purchase when the cashier accepts the money offered by the offeror.
  2. Customer is not bound to purchase anything that he has placed in his basket.
  3. Goods on the display with or without price is an invitation to offer not an offer, customers are said to make an offer when they take the product to the cashier.
  4. Cashier is under the shopkeeper’s authority to accept or reject the offers made by the customers, therefore, a contract doesn’t take place until cashier accepts the purchase.

2. Harvey v Facey [1893]:

Facts-

In this case, the defendant owned a plot of land known as Bumper Hall Pen. Harvey, sent a message to Facey via telegram which has, “will you sell us Bumper Hall Pen? Telegraph the lowest cash price-answer paid”, written on it. Facey answered via telegram: “lowest price for Bumper Hall Pen is euro 900.” Harvey then in return replied that, “we agree to buy Bumper Hall Pen for the sum of euro 900 as asked by you. Please send us your title deed in order that we may get an early possession.”

Facey then mentioned that he never intended to sell Bumper Hall Pen.

Conclusion-

In this situation, the quotation of price was not held to be an offer.

The House of Lords upheld that the telegram didn’t constitute a valid offer but an invitation to offer. Therefore, no valid contract existed to begin with. The telegram only contained information regarding the price for the plot of land but didn’t have other terms and conditions. Hence, it didn’t give rise to legal enforceability. Harvey’s telegram stating that they want to buy the plot of land at the quoted price was an offer made to Facey, which Facey rejected. Hence, no contract was finalized.

3. Gibson v Manchester City Council [1979]:

Facts-

In this case, a tenant named Mr. Gibson wanted to buy a council house. He filled an application form regarding the same and later received a letter from the city council stating that “it may be prepared to sell the house to you for euro 2,180”. Mr. Gibson at first was reluctant regarding the price and pointed out to the bad condition of the roads, in response to which the council maintained that the price has been fixated after due consideration of the condition of the property. Then, on march 18th 1971, Mr. Gibson wrote to them to carry on with the purchase according to the application filled by the tenant. However, after the change in the council, it was decided not to sell council houses to the tenants, following which Mr. Gibson was informed that the house won’t be sold to him. Afterward, the tenant filed a suit against the City Council, stating that the price quoted by the council was an offer, which he accepted.

Conclusion-

The House of Lords upheld that the quoted price being sent to the tenant by the City Council was merely an invitation to offer for inviting the application and not an offer since no further terms of the contract were negotiated upon. Therefore, no contract took place and the City council was free to reject the offer made by the tenant.

CONCLUSION

Now, the difference between an offer and an invitation to offer is clear and its follow-up actions well known. While the concept of offer bestows upon the offeree the power to accept or reject the offer and thereby, conclude the contract, the latter concept is only meant to express the intention to elicit the overture of offer which then the inviter is at the liberty to accept or reject the offer so made, in response to such an invitation. Unlike a contract, an invitation to offer has no legal consequences. Although, as simple as it might sound, at times determining either if one is faced with an offer or invitation to offer/treat is quite a task and depends upon the rules and laws laid down by different legal systems.

This article has been written by Devyani Mishra, 1st Year BALLB(Hons.) Student at NLIU, Bhopal.

Also Read – What Is Contract? Is Indian Contract Act An Exhaustive Law Relating To Contract?

Note - The information contained in this post is for general information purposes only. We try our level best to avoid any misinformation or abusive content. If you found any of such content on this website, please report us at [email protected]

Interested to publish an article at Law Corner? Click Here to submit your article.

About Law Corner

Whats app group joining
Lex Research Hub