Basis

Offer

Invitation to Offer

Definition

Defined under Section 2(a) of the Indian Contract Act, 1872 – “When one person signifies to another his willingness to do or abstain from doing anything, with a view to obtaining the assent of that other, he is said to make a proposal.”

Not defined in the Act, but understood through case law. It means a person is merely inviting others to make offers. It is a preliminary step before an offer is made.

Intention

Clear intention to be bound by acceptance.

No intention to be bound, only an invitation to negotiate.

Legal Consequence

Once accepted, becomes a binding contract.

Does not become a contract, only leads to offers.

Who makes the offer?

Offeror himself makes the proposal.

The other party (customer, bidder, etc.) makes the offer.

Examples

“I will sell you my bike for ?50,000. Do you accept?”

Goods displayed in a shop window. Tender notices. Advertisements. Prospectus issued by a company.

Important Case Laws

Carlill v. Carbolic Smoke Ball Co. (1893) -The company advertised they would pay £100 to anyone who used their smoke ball and still got influenza. Court held: This was a valid offer to the whole world; acceptance was by performance.

Lalman Shukla v. Gauri Dutt (1913, Allahabad HC) -Servant found a missing boy without knowing about the reward. Held: Since he had no knowledge of the offer, there was no acceptance – no contract.

Harvey v. Facey (1893, Privy Council) -Harvey asked Facey: “Will you sell us Bumper Hall Pen? Telegraph lowest cash price.” Facey replied: “Lowest price £900