Offer and Invitation to offer
Section 2(a) of the Indian Contract Act, 1872 defines proposal. 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 an offer is called the Offeror and the person to whom the offer is made is called the Offeree.
There is a difference between an offer and an invitation for others to make an offer. An invitation for others to make an offer is not an offer within the meaning of “Offer” under the Contract Act.
Sometimes a person may not make an offer to sell his goods, but makes a statement or conducts in such a way, to make other persons make an offer to him. This is an invitation to offer.
Such situations generally include advertisements, tenders, goods on display, Expression of Interest (EoIs) and auction. In case of an auction, when the auctioneer starts the bid by quoting a price, it is basically for others to make him an offer with the amount in addition to the minimum price, which the auctioneer had announced.
Similarly, when a company floats tender for construction of a building, it basically is asking others (builders) to make them an offer by quoting the price of construction.
This is because an offer is an offer to buy and there is no offer to sell.
In Adikanda Biswal v. Bhubaneswar Development Authority, when a development authority made an announcement for allotment of plots on first come first serve basis on payment of full consideration. An application against this with full consideration was only considered to be an offer, as the Development authority only gave an invitation to offer, and the offer can only be formalized into a contract when it is accepted by the development authority.
The concept of Invitation to offer was explained in the Privy Council case of Harvey v. Facey, the Plaintiffs in this asked two questions from the defendant i.e.- Would you sell me your Bumper Hall pen , telegram me the lowest price? , the Defendant only gave the answer to the latter question , post which he refused to sell. The Court held that the defendant was not to sell as he had only answered the second question and reserved the same for his first question. Thus, this clearly shows the distinction between an offer and invitation to offer.
Rules regarding display of goods in shops
In Pharmaceutical Society of Great Britain v. Boots Cash Chemists Southern Ltd., lord GODDARD CJ, said that it would be wrong to say that a shopkeeper intends to sell everything that is displayed in his shop. Meaning that the customer makes an offer, to which the shopkeeper has the discretion to accept or deny. The shopkeeper may say that he doesn’t have enough stock of that good and therefore may not sell. Similarly, a bankers catalogue of charges is also not an offer, the auction held by a person is also only an invitation to offer and he may not be liable for the transportation costs that people may have to pay to come to the place of auction, in case he cancels at the end moment.
Offer and Invitation to offer