INTRODUCTION
A contract is the foundation of a society that is courteous. The regulation on contracts in India is provided under the Indian Contract Act, 1872. Simply defined, a contract signifies that if two parties have signed an agreement consisting responsibilities (promises) to be fulfilled by both parties, and if that particular agreement becomes binding by law, it transforms into a contract. There is a common term attached with contract and that is enforceable by law which means when people who are a party to the agreement have acquired the ability to enforce and a violation of such rights will cause legal action, along with the cancellation of the whole contract.
A Contract is an agreement enforceable by law, this is what the Indian Contract Act, 1872 defines contract. Section 2(e) of the Act defines the agreement, which is the consideration for each other, like any promise. When a promise is made to an individual and he approves it, the proposal is considered to be acceded, then the proposal is considered to be agreed and hence it becomes a promise.
An agreement is an accepted promise, and a contract is an agreement which is enforceable by law. In law of Contract, there are two parties:- a promisor (the person who agrees to do something in return for a consideration) and a promisee (the person who is liable to pay such consideration). Section 10 of the Act provides that if the parties, with lawful aspect and permissible object, have provided their free consent, then all agreements are said to be contractual and like contracts will not be pronounced void. It is well known that all contracts are agreements, but all agreements are not contracts.
So to constitute a valid contract there are various elements out of which the offer and acceptance is the main as without an offer no agreement can be made and hence there will be no contract.
The quintessence of a contract is Offer and Acceptance. Except for an offer and such an offer must be accepted, there will be no contract. An offer/proposal is, in adherence with section 2(a) of the Contract Act:
If one person expresses to another his willingness to do or to step back from doing something so to acquire the other's consent for such an act or sobriety, he is considered to make a proposal.
The offer has to be made by one side, and the other party has to accept to such an offer acceptance according to Section 2(b) of the Indian Contract Act, 1872 means that the person to whom the offer was made has provided his consent to that offer. Providing acceptance of the proposal ultimately results in agreement that forms promises. In a particular or complete way, acceptance must be bequeathed.
The offer may be in express or in implied form, but the intention should have to be there to form a contract and such an offer has to be bequeathed. Though the agreement is necessary, there must exist "Consensus ad-idem". Consensus ad-idem means a meeting of minds. [1]
OFFER AND INVITATION TO OFFER (TREAT)
The term offer/proposal is explained under Section 2 (a) of the Indian Contract Act, 1872. According to the Act, “when one person signifies to another his willingness to do or abstain from doing something with a view to obtaining the assent of the other to such an act or abstinence, he is said to make a proposal”. It implies that when a person tells to any another person about his desire of doing or not doing anything for them, they are considered to be making a proposal to them. For instance, a person named Z may offer to sell his bike to N at a certain amount, for example Rs. 50,000. This is an offer. As soon as the buyer and the seller come into an agreement regarding the sale, and the details are expressly provided, a contract comes into life. When N accepts the offer and pays the decided amount of money (the sum of Rs 50,000), and the bike is delivered to N, the contract is considered to have been ‘performed’.
An offer can mainly be either specific or general. An offer which is made to the public at large is a general offer that is an offer common to all. For example, an advertisement which provides a reward for that person who finds a lost cow for its owner can be considered as a general offer. The offer will be considered as accepted by any person only when he finds the cow and delivers it to its owner. A specific offer, on the other hand means an offer made specially to a particular person. For example, Arina makes an offer to sell her house to Gursirat at the cost of Rs. 40.5 lakhs. So this offer can be considered to be a specific offer since it is made personally to an individual and not to general public at large.
In the case of invitation to offer, no particular party has the intention to come into a contract. The seller may come into a contract with anybody from the public at large who provides the best offer to him. So, the quintessence of an invitation to offer or the distinct feature of invitation to offer is that the offer is actually made by the seller and not by the buyer. For example, a shopkeeper selling antique materials or things that were used in the past by various popular personalities in his store would obviously prefer that buyer who would agree to provide the higher cost or who would agree in paying the higher price for his goods. In a similar manner, example can be given of auction of various establishments where the higher prices are preferred.
So this are actually an invitation to offer (invitation to treat by English Law), and not an offer.
Therefore, an invitation to offer develops into a contract in a contrasting way than an offer. Originally, it is an invitation to offer, i.e., by a display of goods along with their prices. When a person makes an offer that is proper and the seller ‘accepts’ it, it becomes a contract. But in case of offer, the offer is made by the seller to the buyer.
In an offer, what happens is that both the parties consisting similar mindset have an intention to enter into an agreement that is legally binding after due negotiation. But in invitation to offer such an intention is absent. A person may, while coming back home from market stop by a shop and look at a displayed book or dress, but he does not have the intention to buy it then and there. In the same manner, a seller may wish to sell his goods at a higher price than offered by a specific customer and hence rejecting the selling of goods is good for him.[2]
The topic of invitation to offer would be incomplete without the case of Carlill vs Carbolic Smoke Balls Company, 1893 in this case the defendant was the company that advertised that the company would reward that person who suffers from influenza after using the medicine produced by the company according to the directions provided by the company. Mrs Carllil who was the plaintiff in this case purchased the medicine and used it according to the given directions by the company but still suffered from influenza. She then filed a suit to get the reward. The defendant’s contention was that the offer was not accepted by the plaintiff through communicated consent. Here the Court held that there existed a contract since she accepted the general offer by using the medicines as according to the prescribed directions by the company even after then she suffered from influenza hence the defendant is liable to compensate the plaintiff. Thus it can be said that it was not an invitation to offer rather it was a general offer.
In Harvey vs. Facey[3] the plaintiff sent a telegraph to the defendant asking “Will you sell us Bumper hall pen? Telegraph Lowest Cash Price” the defendant in reply sent another telegram that the lowest price for pen is £900.
The Plaintiff sent an affirmation telegram that “we agree to buy Pen for £900 as asked by you”.
The defendant however denied to sell the plot of land at that price. So the plaintiff went to the Court o file a suit against the defendant. The Court here held that the defendant only stated the lowest amount of price but they did not expressed any willingness to sell the plot of land. So it can be considered as an invitation to offer.
Invitation to Tenders
An invitation or a tender is a formal invitation to the suppliers to submit a bid to supply the required products or services. So any individual may invite tenders for the supply of specific goods or services. Thus it can be said that a tender is an offer. But it can be noted that the person who invites tenders for the purchase of goods is not making an offer, here the person who is submitting the tender is making the offer. It actually depends on the person who invites the tender to accept it or reject it. In Percival Ltd. V.L.C.C (1918) K had tendered to supply goods up to a particular amount to W over a certain period. But W’s order did not come up to the amount expected and therefore W sued K for breach of contract. The Court held, each order made was a separate contract and K was bound to execute all the orders made. And W had no obligation to make any order at all.
Auctions
Auction is a public sale in which goods and properties are sold to the person who has highest bidding. Therefore an advertisement for auction is an invitation to offer. In auction sale the offer comes from the side of the bidder and it is upon the auctioneer to accept the offer or not. In an auction, the acceptance of the offer is marked by the fall of the hammer. But the offer can be abrogated before such acceptance. In Payne v. Cave[4] , Mr. Cave made the highest bid for good in an auction. But all of a sudden Mr. Cave changed his mind and withdrew his mind before the auctioneer has brought down his hammer. So here the Court held that Mr. Cave was not bound to buy the goods since his bid amounted to an offer which he was permitted to withdraw at any time before the auctioneer marked acceptance by knocking down the hammer.
Proposals for Insurance
When any individual submits a proposal form for insurance in an insurance company, it is an invitation to offer. Then the insurance company gives an offer that which is accepted by that individual after the payment of the premium. So when the premium is paid the contract gets concluded. Once the premium gets paid, the question becomes immaterial that whether the insurance company has issued the policy or not. In South British Insurance Co. V. Stenson[5][6] case, S being an individual proposes to have an insurance Policy and F being a representative of an insurance company issues one but which is subject to premium. But S does not pay the premium and so F files a suit against S. The Court held that here F has given a counter offer to S and that S did not accept. Hence the contract is not concluded. So the claim of F was rejected[7].
Distinction between Offer andInvitation to offer
AN OFFER | AN INVITATION TO OFFER |
An offer is the ultimate wish of the party to give birth to legal relations. | An invitation to offer is not the ultimate desire but the interest of the party to generate public invitation to offer to him. |
An offer is explained under section 2(a) of the Indian Contract Act, 1872. | On the other hand, nowhere in the Indian Contract Act, 1872 invitation to offer is defined. |
An offer is one of the quintessential elements to prepare an agreement between the parties. | But, an invitation to offer does not become an essential element until it transforms into an offer. |
An offer transforms into an agreement only when it gets accepted. | Whereas, an invitation to offer becomes an offer only when public responds to it positively. |
The main aim of making an offer is only for entering into the contract. | The actual aim of invitation to offer is to negotiate on the terms which form the contract. |
Conclusion
From the above discussion the difference between an offer and an invitation to offer is clear and the consequences of both are well known. While the concept of offer grants upon the offeree the capacity to accept or reject the offer and thus, the contract comes to an end, but the invitation to offer is only meant to express the purpose to obtain the prelude of offer in which then the inviter has the freedom to accept or reject the offer so made, in reaction to such an invitation. An invitation to offer has no legal consequences, unlike a contract. But, as simple as it might sound, sometimes deciding either if one is besotted with an offer or an invitation to offer is quite a difficult task and it totally depends upon the regulations and laws provided by various legal systems.
[1]https://www.legalserviceindia.com [2] https://blog.ipleaders.in [3] (1893) A. C. 552 [4] (1789) 3 TR 148 [6] Bom. 532 [7] https://thefactfactor.com
This article is written by Srinjana Mitra of Assam University, Silchar.