Invitation to Treat vs Offer
An offer and an invitation to treat are different stages in the formation of a contract. An offer is a proposal made with the intention that acceptance will create a binding agreement, while an invitation to treat merely invites another person to make an offer or enter into negotiations.
This distinction is important in contract law because it determines whether a communication can itself be accepted to create a binding contract.
The Statutory Starting Point
The Indian Contract Act, 1872 does not expressly use the phrase “invitation to treat.” The concept is derived from common law and is also commonly described in Indian contract law as an invitation to offer.
The statutory starting point is Section 2(a) of the Indian Contract Act, 1872, which defines a proposal as a situation where one person signifies to another their willingness to do or abstain from doing something with a view to obtaining the other’s assent.
The important question is whether the person making the communication intends that the other party’s acceptance should immediately result in a contract. If further negotiation, selection, or acceptance is still required, the communication is generally an invitation to treat rather than an offer.
Offer vs Invitation to Treat
An offer is capable of being accepted and, once validly accepted, can result in a binding contract. An invitation to treat, on the other hand, only invites another person to make an offer.
The distinction affects who makes the final offer and who has the power to accept or reject it. For example, where goods are displayed in a shop, the display is generally treated as an invitation to treat. The customer makes the offer when presenting the goods for purchase, and the seller may accept or reject that offer.
Similarly, a general advertisement or a statement of price will ordinarily not constitute an offer where the circumstances indicate that the person making the statement intends to negotiate further.
Display of Goods in a Shop
The leading authority on the display of goods is Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401.
The case concerned a self-service pharmacy where customers selected goods from shelves before taking them to the cash desk. The Court held that the display of goods was an invitation to treat, rather than an offer. The customer’s presentation of the goods at the cash desk constituted the offer, which could then be accepted by the cashier.
The case illustrates that the display of goods does not ordinarily create a binding obligation on the seller to sell the goods to every person who selects them.
Mere Statements of Price
A statement giving the price of property or goods does not necessarily amount to an offer.
In Harvey v Facey [1893] AC 552, the buyer asked whether the seller would sell certain property and also asked for the lowest cash price. The seller responded only by stating the lowest price. The Privy Council held that this did not constitute an offer to sell. The statement merely communicated the price and did not demonstrate an intention to sell the property to the buyer at that price.
The Supreme Court of India applied similar reasoning in Col. D.I. Mac Pherson v M.N. Appanna, AIR 1951 SC 184; 1951 SCR 161. The seller communicated that he would not accept less than a particular price, but the Court held that this communication was not an offer capable of acceptance. It was, at most, an invitation to further negotiation.
Advertisements, Catalogues and Tenders
Advertisements for the sale of goods, catalogues and price lists are generally treated as invitations to treat rather than offers. They ordinarily invite interested persons to make offers, which the advertiser can then accept or reject.
The same principle generally applies to a call for tenders. The invitation to submit tenders is normally an invitation to treat, while the tender submitted in response constitutes the offer. The party inviting tenders may then decide whether to accept a particular tender.
This approach prevents a person issuing a general advertisement or tender notice from becoming automatically bound to contract with every person who attempts to accept it.
Exception: Unilateral Offers to the Public
An advertisement can, however, amount to a genuine offer where its language and circumstances demonstrate a clear intention to be bound upon performance of specified conditions.
The leading case is Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. The company advertised that it would pay £100 to anyone who used its product according to the specified directions and nevertheless contracted influenza. The Court of Appeal held that the advertisement constituted a unilateral offer capable of acceptance by anyone who performed the stated conditions.
The case demonstrates that the form of a communication is not decisive. The important question is whether the communication shows an intention to be legally bound upon the other party’s performance, without requiring further negotiation or acceptance.
Under Section 8 of the Indian Contract Act, 1872, performance of the conditions of a proposal may constitute acceptance. This principle is relevant when analysing unilateral offers.
The Test for an Invitation to Treat
The central question is whether the person making the communication intended it to be accepted as it stands, so that nothing further would be required to create a contract.
If the communication merely invites another person to make an offer or indicates that further acceptance or negotiation is required, it will generally be an invitation to treat.
A shop display, ordinary price quotation and general advertisement will commonly fall into this category. However, where the circumstances demonstrate a clear intention to be bound upon performance of specified conditions, as in Carlill, the communication may constitute an offer.
Conclusion
The distinction between an offer and an invitation to treat is fundamental to understanding contract formation. Section 2(a) of the Indian Contract Act provides the statutory foundation for identifying a proposal, while cases such as Harvey v Facey, Pharmaceutical Society v Boots, Carlill v Carbolic Smoke Ball Co, and Mac Pherson v Appanna demonstrate how courts apply the distinction.
The key consideration is whether the communication is intended to create a binding contract upon acceptance or merely invites the other party to make an offer or enter into further negotiations.
References
Statute
The Indian Contract Act, 1872, Sections 2(a) and 8.
Cases
Harvey v Facey [1893] AC 552 (Privy Council).
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401 (Court of Appeal).
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 (Court of Appeal).
Col. D.I. Mac Pherson v M.N. Appanna and Another, AIR 1951 SC 184; 1951 SCR 161 (Supreme Court of India).
