Invitation to offer

An offer must be distinguished from an invitation to offer (Invitation to treat by English

Law). An invitation to offer is an action inviting other parties to make an offer to form a
contract. These actions may sometimes appear to be offers themselves, and sometimes it
is very difficult to distinguish between the two. The distinction between the two is
important because accepting an offer creates a binding contract while “accepting” an
invitation to offer is actually making an offer. There is no mention of ‘invitation to offer in
the Indian Contract Act, 1872.

An invitation to offer is an action inviting other parties to make an offer to form a contract.
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.
● Example – 1: Advertisements on media are usually invitations to offer, which allows sellers
to refuse to sell products at prices mistakenly marked in the advertisement. Any word
showing intention to make a contract may make the advertisement to be an offer.
● Example – 2: Auctions are invitations to offer which allows the seller to accept bids and
choose which to accept. However, if the seller states that there is no reserve price or the
reserve price has been met, the auction will be considered an offer accepted by the
highest bidder.
● Example – 3: The ‘exhibition of goods for sale’ can be confused as an offer when really it is
an invitation to offer. When goods are displayed in a store this constitutes an invitation to
customers to make offers to purchase the items. Only when the customer indicates that
they will pay for the goods at the quoted price has an offer been made.

Case Laws:
In Harvey v. Facey, ((1893) A. C. 552) case the plaintiffs telegraphed to the defendants,
writing, “Will you sell us Bumper Hall Pen? Telegraph lowest cash price”. The defendants
replied, also by a telegram, “Lowest price for Pen, £ 900”. The plaintiffs immediately sent
their last telegram stating, “We agree to buy Pen for £ 900 asked by you”. The defendants,
however, refused to sell the plot of land at that price. The court held that the defendants
only quoted the lowest price and did not express their willingness to sell the plot of the
land. It can just be considered as an invitation to offer.
In Philip & Co. v. Knoblanch ((1907) S. C. 994) case A merchant (the plaintiff) wrote to a
firm of oil millers (the defendant), “I am offering today plate linseed for January-February
shipment to Litth and have pleasure in quoting you 100 tons at usual plate terms. I shall
glad to hear if you will buy and await reply”. The oil miller telegraphed the next day:
“Accept”, and confirmed it by letter. It was held that the letter by the plaintiff has all the
characteristics of a valid offer and contract was concluded by the defendant by the
telegram. Thus it is an actual offer.

In Carlill v Carbolic Smoke Ball Co. 1893 case the defendant company advertised that a
reward would be given to any person who would suffer from influenza after using the
medicine (Smoke balls) made by the company according to the printed directions. One
lady, Mrs, Carlill (the plaintiff), purchased and used the medicine according to the printed
directions of the company but suffered from influenza, She filed a suit to recover the
reward. The defendant’s contention was that the plaintiff has not accepted the offer by
communicated consent to the offer. The court held that there was a contract as she had
accepted a general offer by using the medicine in the prescribed manner. Still, she
suffered from influenza, hence she is liable for getting the reward from the company. Thus
the general offer is not an invitation to offer.

In Gibson v Manchester City Council, [1979] 1 All ER 972 case, Gibson leased and
occupied a council house which the City Council owned. In 1970 the Council created a
scheme which would allow council house tenants to purchase the properties at favourable
rates. They created an application form which tenants could fill out, and provided them to
the tenants. Gibson complete his form and sent it back to the Council, enclosing the
administration fee and asking how much he would have to pay for the house. The Council’s
treasurer wrote back to him. The treasurer’s letter stated that the Council ‘may be
prepared to sell the house to you at the purchase price of £2,180. It also included details
of a corporation mortgage, including an application form, but noted that Gibson should not
regard this as a firm offer of a mortgage. Gibson completed the mortgage application form
and sent it back to the Council. He left the purchase price section blank, asking the
Council to reduce the price to account for defects with the property’s path. The Council
wrote back stating that the price was fixed. Gibson responded asking them to ‘carry on
with the purchase as per my application.’ The Council did not reply to this letter, but took
the house off the list of houses which they were responsible for. In 1971, before any formal
sale was concluded, the Council’s policy on selling council houses changed. The Council
 sent out a notice stating that they would only proceed with those council house sales in
which there had been an exchange of contracts. This had not happened in Gibson’s case.
Nevertheless, Gibson argued that there was a completed contract for the sale of the
house, and sued for specific performance of the agreement. The House of Lords held in
favour of the Council. The Council never made an offer to Gibson which he could
have accepted. Words like ‘may be prepared to sell’ were too equivocal to constitute an
offer. The mortgage letter explicitly stated that it was not a firm offer. There was therefore
no completed contract between the parties.

In Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd,

[1953] 1 All ER 482 case, Boots Cash Chemists introduced a new method of purchasing
drugs from their store- the drugs would be on display, shoppers would pick them from the
shelves, and pay for them at the till. The Pharmaceutical Society of Great Britain objected
to this method, claiming that S.18(1) of the Pharmacy and Poisons Act 1933 mandated the
presence of a pharmacist during the sale of a product listed under the Act’s schedule of
poisons. The Society alleged that the display of goods constituted an offer and a
customer, upon choosing a product/drug, had accepted the offer. Due to lack of
supervision of a pharmacist, the Boots Cash Chemists had, according to the
Pharmaceutical Society, violated the terms of the Pharmacy and Poisons Act of 1933.
Matter was taken to court. The Court held that in this case that display of articles in a
shop, even on a self-service basis, is an invitation to offer. When the customer selects the
article and brings it to the cash desk, then it is a proposal/offer by the customer, the
acceptance of which can be given by the shopkeeper by accepting payment from the
customer.

Tenders:
Government, Railways and other bodies who require a supply of large quantities of
material often invite tenders for the supply of goods.
Invitation for Tenders:
An invitation or a request for tenders is a formal, structured invitation to suppliers to
submit a bid to supply products or services. Thus a person may invite tenders for the
supply of specific goods or services. Thus, a tender is the response to the request of
tenders, and it is an offer.

Note that the person who invites tenders for the purchase of goods does not make an
 offer, it is the person who submits a tender that makes an offer. It depends on the person
who invites the tender to accept or not.
Tender as Definitive Offer:
If a tender has been submitted for goods or services in specified quantities it is termed as
a definite offer. A binding contract comes into existence as soon as the tender is
accepted.
Example: A invites tenders for the supply of 100 tons of wheat. Three persons say X, Y,
and Z submit the tenders. A accepts Z’s tender. Then there is a binding contract between
A and Z.
Tender as a Standing or an Open Offer:
Standing offer or tender may be of the nature of a continuing offer. A tender to supply
goods as and when required over a certain period amounts to a be a standing offer. In this
case, the tenderer must supply whenever an order is placed. But he cannot insist on any
order being made at all.

In Percival Ltd. V.L.C.C. (1918) case, A tendered to supply goods up to a certain amount
to B over a certain period. B’s order did not come up to the amount expected and A sued
for breach of contract. The Court held, each order made was a separate contract and A
was bound to execute the orders made. B was under no obligation to make any order at all.

In Great Northern Railway V. Witham case, the railway company invited tenders for the
supply of certain iron articles over a period of 12 months. Witham’s tender was accepted.
After supplying for some time, Witham refused to execute the order placed during the
currency of the tender. Court held that Witham could not refuse within the terms of the
tender.

In Bengal Coal Co. v. Homi Wadia & Co. (24 Bom 97) case, A agreed in writing to supply
coal to B at certain prices and up to a stated quantity, or in any quantity which may be
required for a period of twelve months. Court held that B has not agreed to buy any
specific quantity of coal, hence it is not a contract. It is a standing or continuous offer,
which may be accepted by placing orders from time to time.

Auctions:
It is a public sale in which goods or property are sold to the highest bidder. an
advertisement for auction is an example of an invitation to offer. In auction sales, the offer
proceeds from the bidder, and it is for the auctioneer to accept it or not. In an auction, the
 proceeds from the bidder, and it is for the auctioneer to accept it or not. In an auction, the
acceptance of the offer is signified by the fall of the hammer. But the offer can be revoked
before such acceptance.

In Payne v Cave (1789) 3 TR 148 case Mr. Cave was made the highest bid for good in an
auction. But then, Mr. Cave changed his mind and he withdrew his bid before the
auctioneer brought down his hammer. It was held that Mr. Cave, the defendant, was not
bound to purchase the goods. His bid amounted to an offer which he was entitled to
withdraw at any time before the auctioneer signified acceptance by knocking down the
hammer.

In Harris v Nickerson (1872) LR 8 QB case, the defendant was an auctioneer who had
advertised in the Newspapers that certain goods would be sold by him by auction at a
certain place over a period of three specified days. The plaintiff, who attended the sale on
the final day came to know that many goods were withdrawn by the defendant. The
plaintiff sought to recover his expenses and the time which he had wasted in attending the
auction from the defendant. The contention of the plaintiff was that the withdrawal of the
lots was a breach of contract which had been formed by the offer made by the defendant
in the advertisement, and accepted by the plaintiff in attending the auction. The court held
that the advertisement was merely a declaration to inform potential purchasers that the
sale was taking place. It was not an offer to contract with anyone who might act upon it by
attending the auction, nor was it a warranty that all the articles advertised would be put or
sale. As such, it did not legally bind the defendant to auction the items in question on any
particular day. Hence the claim of the plaintiff was rejected.

In Warlow v. Harisson, I. E. & E 295 case the defendant Harrison, who was an auctioneer
advertised the sale ‘without reserve’ of a mare by public auction. The plaintiff, Warlow
attended the auction and bid 60 guineas. Horse owner attended too, and bid 61 guineas.
The plaintiff knew that it was the horse owner who bid 61 guineas, so he didn’t bother
bidding any higher. The auctioneer, Harrison, knocked down the hammer 3 times to the
horse owner. The plaintiff claimed the horse should be his as he was the highest bona fide
bidder. The plaintiff had performed the required act (made the highest bid). However,
because the hammer had not been put down on the plaintiff’s bid there was no acceptance
of his offer. Therefore, there was no contract for the sale. The plaintiff was only entitled to
sue the defendant for the loss of the opportunity to buy the horse.

Proposals for Insurance:

Proposals for Insurance:
When a person submits a proposal form to the insurance company, it is an invitation to
offer. Now the insurance company gives an offer which is accepted by the person after
paying the premium. After paying the premium the contract is concluded. Once the
premium is paid, it is immaterial that the insurance company has issued the policy or not.
In Canning v. Farquhar, (1998) 16 Q.B.D. 727 case, Canning filled “Proposal form” and
applied for life assurance with the company. The company wrote that the proposal is
accepted and told Canning that no insurance contract take place until the first premium
was paid. Before the premium was paid, Canning fell over a cliff and died. The company
refused to accept the premium from Canning’s agent. The Court held that the so-called
proposal was initial negotiation, while acceptance by the insurance company was the
actual offer. Which was not accepted by Canning by paying the premium. Hence the
company was under no obligation to pay the sum insured because the risk had
substantially changed between the time of the original proposal and the tendering of the
premium.

In South British Insurance Co. V. Stenson, 52 Bom. 532 case, A proposes to have an
insurance policy; B issues one to A, subject to payment of premium. A does not pay the
premium. B files the suit to recover premium. The court held that B gave a counter-offer to
A which was not accepted by A. Hence the contract is not concluded. Hence the claim of
B was rejected.

In Mohamed Sultan v. Clive Insurance Co., 56 All. 726 case the plaintiff entered into a
contract of insurance against theft of his goods and furniture. He signed the proposal and
paid the premium for the year. The insurance company acknowledged the receipt of
premium and informed to the plaintiff than within 30 days policy shall be issued. Actually,
no policy was issued. There was a theft in plaintiff’s house within one year from taking the
policy. The insurance company rejected the claim of compensation from the plaintiff. Court
held that the contract is complete and the insurance company is liable for paying the
compensation.

Distinguishing Between Offer and Invitation to Offer:

An Offer An Invitation to Offer

An offer is the final willingness of An invitation to offer is not the
the party to create legal relations. final willingness but the interest of
the party to invite the public to
offer him.
An offer is defined in section 2 (a) An invitation to offer is not defined
of the Indian Contract Act, 1872. in the Indian Contract Act, 1872.
An offer is an essential element to An invitation to offer is not an
make an agreement between the important element until it
parties. becomes an offer.
An offer becomes an agreement An invitation to offer becomes an
when accepted. offer when the public responds to
it.
The main objective of making an The main objective of an invitation
offer is to enter into the contract. to offer is to negotiate the terms
on which the contract can be
made.

CONCLUSION

An invitation to offer is an action inviting other parties to make an offer to form a contract.
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. 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.