Dr.

RAM MANOHAR LOHIYA NATIONAL

LAW UNIVERSITY

CONTRACT ACT

Project

On

OFFER V. INVITATION TO TREAT

Submitted to Submitted by

Dr. Manoj Kumar Simran Yadav

Assistant Prof. (Law) 180101136

RMLNLU Ist Year, IInd Semester

B.A. LLB.(Hons.)

2018-2019

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 ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to my guide Professor
Dr. Manoj Kumar for her exemplary guidance, monitoring and constant encouragement to give
shape to this project. The blessing, help and guidance given by them time to time shall carry me
a long way in the journey of life on which I am about to embark. I also take the opportunity to
express a deep sense of gratitude to my respected seniors who share their cordial support,
valuable information and guidance which helped me in completing this task through various
stages.
Lastly, I thank the almighty, my parents, brother and my friends for their constant
encouragement without which this assignment would not have been possible.

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 TABLE OF CONTENTS

INTRODUCTION .......................................................................................................................... 1

OFFER ............................................................................................................................................ 2

1. What is an offer or proposal? ............................................................................................... 2

2. Essentials of a valid offer ..................................................................................................... 2

i. An offer must create a legal relationship ......................................................................... 2

ii. The offer must not be vague or uncertain ..................................................................... 3

iii. An offer must be communicated to the offeree ............................................................ 3

i. GENERAL OFFER .......................................................................................................... 4

ii. COUNTER OFFER ...................................................................................................... 5

iii. CROSS OFFER ............................................................................................................ 6

iv. SPECIFIC OFFER ........................................................................................................ 6

v. STANDING OFFER OR OPEN OFFER ..................................................................... 7

vi. IMPLIED OFFER......................................................................................................... 8

vii. EXPRESSED OFFER .................................................................................................. 8

INVITATION TO TREAT ............................................................................................................. 8

1. What is an invitation to treat? .............................................................................................. 8

2. Types of invitation to treat ................................................................................................... 8

i. Auction Sales.................................................................................................................... 8

ii. Advertisements ........................................................................................................... 10

iii. Exhibition of goods on sale ........................................................................................ 11

iv. Tenders ....................................................................................................................... 12

OFFER V. INVITATION TO TREAT ......................................................................................... 13

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 1. Distinction between offer and invitation to treat ............................................................... 14

2. Case Laws Differentiating Offer and Invitation to offer ................................................... 14

CONCLUSION ............................................................................................................................. 19

BIBLIOGRAPHY ......................................................................................................................... 20

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 INTRODUCTION

An offer and invitation to treat are not one and the same. The difference between the two must be
appreciated. An offer is definite. It is an intention towards a contract. An invitation to treat is an
act precedent to making an offer. It is done with the intent to generally induce or negotiate. The
test to decide whether a statement is an offer or invitation to treat is to see the intention. If a
person who makes the statement has the intention to be bound by it as soon as the other accepts,
he is making an offer. If he however intends to do some other act, he is making only an invitation
to offer. Thus, the intention to be bound is an important thing, which is to be seen.

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 OFFER

1. WHAT IS AN OFFER OR PROPOSAL?

Section 2(a) of the Indian Contract Act, 1872 defines offer as “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, such act or abstinence, he is said to make a proposal.”1 There must be an objective
manifestation of intent by the offeror to be bound by the offer if accepted by the other party.
Therefore, the offeror will be bound if his words or conduct are such as to induce a reasonable
third party observer to believe that he intends to be bound, even if in fact he has no such
intention.
In the case of Storer v. Manchester City Council2, it was held that an offer is an expression of
willingness to contract on specified terms, made with the intention that it is to become binding as
soon as it is accepted by the offeree.Parties to negotiations may, by their words and conduct,
make it clear that they do intend to be bound even though there are other terms yet to be agreed,
but where a binding agreement is alleged to have come into existence after oral and/or written
communications between the parties over a period of time, the communications alleged to
constitute the agreement must be considered in the light of the other exchanges and not in
isolation.The legal rights and obligations of the parties turn upon what their words and conduct
would reasonably be understood to convey, and not upon their actual beliefs or intentions.Lord
Denning MR said: ‘In contracts you do not look into the actual intent in a man’s mind. You look
at what he said and did. A contract is formed when there is, to all outward appearances, a
contract. A man cannot get out of a contract by saying ‘I did not intend to contract’ if by his
words he has done so. His intention is to be found only in the outward expression which his
letters convey. If they show a concluded contract that is enough.’

2. ESSENTIALS OF A VALID OFFER

i. An offer must create a legal relationship: There is no provision in the Indian Contract Act,
1872 requiring that an offer or its acceptance should be made with the intention of creating

1
Indian Contract Act, 1872 § 2(a).
2
Storer v. Manchester City Council, [1974] 1 W.L.R. 1403.

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 legal relations. But in English Law it is a settled principle that to create a contract there must
be a common intention of the parties to enter into legal obligation which was discerned from
the case of Williams v. Carwardine.3In the case of Simpkins v. Pays,4it was observed that
where three ladies, two of them being mother and daughter and the third a paying guest,
together made entries in a crossword puzzle in the name of the mother, the expenses being
met by one or the other without any rules. The entry was successful on week and the mother
refused to divide the prize. But the court held that she was bound to do so, for any reasonable
man looking at their conduct would once conclude that they must have intended to share the
prize. On similar lines in ascertaining legal obligation, the Supreme Court deduced that an
investment in a partnership firm was taken to be of a commercial nature putting the onus on
the party asserting absence of legal obligation to prove that fact in the case of CWT v. Abdul
Hussein.5

ii. The offer must not be vague or uncertain: In the case of Taylor v. Portington,6the offeror
offered to take a house on lease for three years for 285 pounds per annum provided the house
was repaired and the drawing room handsomely decorated according to the fashion
prevailing. The terms of the offer cannot be ascertained as the prevailing fashion trend is very
subjective and cannot be the same for all. No contract can come into existence if the terms of
the offer are vague or loose and indefinite. Both the parties should be clear about the legal
consequences arising out of the contract. Similarly, Gould v. Gould7 is a famous case law
wherea husband while breaking up his marriage promises his wife to pay her fifteen pounds a
week so long as he can manage. Here again the terms of offer are vague and discretionary.
Such cases do not constitute a valid offer.

iii. An offer must be communicated to the offeree:An offer must be communicated to the offeree
because acceptance by the offeree can be given only after he or she has come to know of the
offer.“The communication of a proposal is complete when it comes to the knowledge of the

3
Williams v. Carwardine, (1833) 2 L.J.K.B. 101.
4
Simpkins v. Pays, [1955] 1 W.L.R. 975.
5
C.W.T. v. Abdul Hussein, (1988) 3 S.C.C. 562.
6
Taylor v. Portington, (1985) A.L.L. E.R. 128.
7
Gould v. Gould, (1970) 1 Q.B. 275.

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 person to whom it is made.” Therefore, an offer cannot be accepted unless and until it has
been brought to the knowledge of the person to whom it is made, as observed inSultan Sadik
v. Sanjay Raj Sabba.8
Lalman Shukla v. GauriDutt9is a leading case which emphasises on the importance of
communication of proposal. In this case, a person sent his servant to trace his missing
nephew. After the servant left he announced a reward for tracing his missing nephew. He
announced a reward of rupees five hundred and one. The servant traced the nephew but was
ignorant of the reward offered. Later he claimed the reward.The Court held that there can be
no acceptance unless there is knowledge of the offer and since the servant did not know
about the reward when he found the boy, he was not entitled to the reward.His claim was
dismissed on the ground that he was ignorant of the offer .It was further held that it was the
duty of the servant to search for the boy.

3. TYPES OF OFFER
i. GENERAL OFFER
An offer may be made to the world at large. The contract is not made with all the world.
Contract is made only with that person who comes forward and performs the conditions of the
offer. The principle is thus stated in Anson: “An offer need not be made to an ascertained
person, but no contract can arise until it has been accepted by an ascertained person.” A leading
authority is Carlill v. Carbolic Smoke Ball Co.10, a company offered by advertisement to
pay£100 to anyone ‘who contracts the increasing epidemic influenza, colds or any disease
caused by taking cold, after having used the ball according to printed directions.’ It was added
that ‘£1000 is deposited with the Alliance Bank showing our sincerity in the matter.’ The
plaintiff used the smoke balls according to the directions but she nevertheless subsequently
suffered from influenza. She held entitled to recover the promise reward. It was contended by
the defendants that there was no intention to enter into a legal relations as it was simply a
puffing advertisement; that the offer was not made to any one person in particular and that
plaintiff had not communicated her intention to accept. The first argument was easily disposed
of by Bowen LJ by saying: “Was it intended that £100 should, if the conditions were fulfilled,
8
Sultan Sadik v. Sanjay Raj Sabba, (2004) 2 S.C.C. 377.
9
Lalman Shukla v. GauriDutt, (1913) A.L.L. L.J. 389.
10
Carlil v. Smoke Ball Company, [1893] 1 Q.B. 256.

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 be paid? The advertisement says that £1000 is lodged at the bank for the purpose. Therefore, it
cannot be said that the statement that £100 would be paid was intended to be a mere puff.”

ii. COUNTER OFFER

When an offeree offers to accept the offer of the offeror, subject to some modifications or
conditions, the offer of the offeree is called is called a counter offer. Counter offer becomes
an offer itself and therefore amounts to rejection of the original offer. The counter offer
results in a new offer and the original offer comes to an end and later on such original offer
cannot be revived. The counter offer may be accepted or rejected by the other party. The
case of Col. D.I. Mac Pherson v. M.N. Appanna and Anr11is an apt illustration for the
explanation of counter offer. The plaintiff desired to buy “Morvern Lodge” owned by the
first defendant in Mercara. Mr Youngman was the manager of the Morvern Lodge. Mr
White was the manager of another one of the firs defendant’s estates. The plaintiff conveyed
his offer to buy the Morvern Lodge to the first defendant. MacPherson responded to the
offer saying that he would not accept anything fewer than 10,000 Rupees. The plaintiff took
this to be a counter-offer and accepted it immediately. In the meantime, the first defendant
accepted another offer made by the second defendant. The second defendant paid the 11,000
rupees and occupied the Bungalow. The court held that there was no concluded contract in
the present case. The plaintiff himself in his letter responding to the alleged counter-offer
said that he was confirming his own offer and not the counter-offer of the plaintiff. Even the
manager of the disputed estate, Mr. Youngman treated it to be an offer and not an
acceptance to any counter-offers made by the plaintiff. Any offer to be made by the plaintiff
was subject to the acceptance by the first defendant. On these grounds the court held that the
first defendant had made no counter-offer and was merely inviting offers. The court also
rebutted the contention of the plaintiff that the managers of the estate of the defendant were
biased towards the second defendant to his prejudice. Mr. Youngman had found the offer
made by the second defendant improper and did not even communicate the same to the first
defendant. Mr. Youngman’s learning, if there was any, could only be said to be in favour of
the plaintiff. Hence, it was difficult for the court to find that Mr. Youngman had deliberately
wrongly described the plaintiff’s acceptance as his offer.

11
Col. D.I. Mac Pherson v. M.N. Appanna and anr., A.I.R. 1951 S.C. 184.

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 iii. CROSS OFFER
When two parties make similar offers to each other without knowing the offer made by the other,
and the terms and conditions of both the offers are identical, then the offers are called cross offer.
In this case, no contract will be created as ones offer cannot be construed as acceptance by the
other. One of the leading cases relating to such an offer is Tinn v. Hoffman.12The defendant, Mr.
Hoffman wrote to the complainant, Mr. Tinn with an offer to sell him 800 tons of iron for the
price of 69 per ton. He requested a reply to this offer by post. On the same day, without knowing
of this offer, Mr Tin also wrote to Mr. Hoffman. He offered to buy the iron on similar terms.
This case concerned the validity of these two cross offers. It was held in this case that there was
no contract between Mr. Tinn and Mr. Hoffman for the iron. The cross offers were made
simultaneously and without knowledge of one another; this was not a contract that would bind
the parties for the iron. There is a difference between a cross offer and a counter offer. In order to
form a valid contract, there must be communication that consists of an offer and acceptance.
There was no acceptance by post, as had been stated in the offer. The court also said that while
post had been indicated in the offer, another equally fast method would have been successful,
such as a telegram or verbal message.

iv. SPECIFIC OFFER

A specific offer is the one which is made to a specific person or group of persons. It can be
accepted only by the person or group of persons to whom it is made. One such case being
Boulton v. Jones.13The defendant sent a written order for goods to a shop owned by Brocklehurst
and which was addressed to him by name. Unknown to the defendant, Brocklehurst had earlier
that day sold and transferred his business to Boulton. Boulton fulfilled the order and delivered
the goods to the defendant without notifying him that he had taken over the business. The
defendant accepted the goods and consumed them in the belief that they had been supplied by
Brocklehurst. When he received Boulton’s invoice he refused to pay it, claiming that he had
intended to deal with Brocklehurst personally, since he had dealt with him previously and had a
set-off on which he had intended to rely. The defendant was not liable for the price. There was

12
Tinn v. Hoffman, (1873) 29 L.T. 271.
13
Boulton v. Jones, (1857) 157 E.R. 232.

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no contract.
Pollock CB said: ‘Now the rule of law is clear, that if you propose to make a contract with A,
then B cannot substitute himself for A without your consent and to your disadvantage, securing
to himself all the benefit of the contract.’
Martin B said: ‘Where the facts prove that the defendant never meant to contract with A alone, B
can never force a contract upon him; he has dealt with A, and a contract with no one else can be
set up against him.’ Bramwell B: ‘I do not lay it down that because a contract was made in one
person’s name another person cannot sue upon it, except in cases of agency. But when any one
makes a contract in which the personality, so to speak, of the particular party contracted with is
important, for any reason, whether because it is to write a book or paint a picture, or do any work
of personal skill, or whether because there is a set-off due from that party, no one else is at
liberty to step in and maintain that he is the party contracted with, that he has written the book or
painted the picture, or supplied the goods; and that he is entitled to sue, although, had the party
really contracted with sued, the defendant would have had the benefit of his personal skill, or of
a set-off due from him.’ Channell B: ‘The plaintiff is clearly not in a situation to sustain this
action, for there was no contract between himself and the defendant. The case is not one of
principal and agent; it was a contract made with B, who had transactions with the defendant and
owed him money, and upon which A seeks to sue.’

v. STANDING OFFER OR OPEN OFFER

An offer is a standing offer if it is intended to remain open for a specified period and can be
accepted at any time during the period. When an organisation requires large quantities of goods
time to time, it is usual for the concern to invite tenders, through an advertisement, for the supply
of goods and services. The tender or offer is called a standing, open or continuing offer. The
acceptance of tender or offer by the party, who has invited the tender, does not result in a binding
contract unless an actual order is placed. In the case ofPerclval Ltd. v. London County Council
Asylums and Mental Deficiency Committee14the plaintiffs advertised for tenders for the supply of
stores. The defendant made a tender to the effect that he undertook to supply the company for
twelve months with such quantities of special articles as the company may order from time to
time. The Company, by a letter accepted the tender and subsequently gave various orders which

14
Perclval Ltd. v. London County Council Asylums and Mental Deficiency Committee, (1918) 87 L.J.K.B. 677.

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were executed by the defendant. Ultimately the Company gave an order for goods within the
schedule, which the defendant refused to supply.The Company succeeded in an action for breach
of contract. The tender was a standing offer, to be converted into a series of contracts by the
subsequent acts of the company and that an order prevented pro tantothat possibility of
revocation, and the defendant, though he might regain his liberty of action for the future, was
meanwhile bound to supply the goods actually ordered.

vi. IMPLIED OFFER

The offer which could be understood by the conduct of the parties or circumstances of the case is
called an implied offer.

vii. EXPRESSED OFFER

When the offeror expressly communicates the offer, it is said to be an express offer. The express
communication of the offer be made by word spoken or written.

INVITATION TO TREAT

1. WHAT IS AN INVITATION TO TREAT?

Invitation to treat is a request made by one party to the other party to start negotiations, with a
view to entering into a contract in future. Invitation to treat is not an offer which can be accepted
to form a binding contract in fact it is just an invitation from the party so that everyone invited
can make offer which shall finally be accepted or rejected by the inviting party. To determine
whether a statement is an offer or an invitation to treat, the intention of theperson who is making
that statement should be considered.

2. TYPES OF INVITATION TO TREAT

There are four types of invitation to treat:

i. Auction Sales
An auctioneer’s announcement that specified goods will be sold by auction on a certain day is
not an offer to hold the auction and he will not be liable to the persons travelling up to that place

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if he changes his mind and does not hold the auction. A leading authority relating to the case of
auction sales is Harris v. Nickerson.15The defendant was an auctioneer who had advertised in the
London papers that certain brewing materials, plant, and office furniture would be sold by him
by auction at Bury St. Edmunds over a period of three specified days. The plaintiff was a
commission broker in London, who attended the sale on the final day (on which it had been
advertised that the office furniture, which he had commission to purchase, would be sold).
However, on that day, all the lots of furniture were withdrawn by the defendant. The claimant
sought to recover his expenses and the time which he had wasted in attending the auction from
the defendant, arguing 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 claimant in
attending the auction.The court held, dismissing the claimant’s case, 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. Similarly, in the case of Payne
v. Cave,16the defendant made the highest bid for the plaintiff's goods at an auction sale, but he
withdrew his bid before the fall of the auctioneer's hammer. It was held that 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.

The case of Heathcote Ball v. Barry17is a different case where the acceptance of the terms of the
bid resulted in a binding contract. The claimant had submitted the highest (and only) bids at an
auction stated to be without reserve. The items were two Alan Smart engine analysers which
were worth £14,000. The claimant had submitted bids of £200 each. The auctioneer refused to
sell them at that price. The claimant brought an action for breach of contract claiming damages
of £27,600. The claimant was entitled to damages. Where an auction takes place without reserve
the auctioneer makes a unilateral offer which is accepted by submitting the highest bid. There
was thus a binding contract and the claimant entitled to damages covering the loss of bargain.

15
Harris v. Nickerson, (1873) L.R. 8 Q.B. 286.
16
Payne v. Cave, (1789) 3 T.R. 148.
17
Barry v. Davies (trading as heathcote ball and co.) and others, [2000] 1 W.L.R. 1962.

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 ii. Advertisements
The basic purpose of advertisements are to make people aware that these goods are available for
sales or in other words an advertisement is an attempt to receive offer(s).Partridge v.
Crittenden18is a case law where the accused advertised for sale of prohibited birds (the sale of the
birds was punishable under criminal law under Protection of Birds Act, 1954). The accused was
held guilty. One appeal the conviction was set aside and it was held that the advertisement is
merely an invitation to treat. Another authority which distinguishes an invitation to treat in the
form of advertisement from offer is Denton v. Great Northern Railway Co.,19where Denton
caught a train that was late. He sued Great National Railways for breach of contract. Denton
ultimately failed. The offer relevance is in deciding when a contract was made; Denton’s claim
failed because at the time of catching the train, no contract had been made. The timetable was
held to be an invitation to treat and not an offer. Denton had made the assumption that the
timetable was an offer, and sued for breach of contract. The courts instead decided that the offer
would have been made either when the ticket was bought, or the claimant got on the train. It was
an invitation to treat and not an offer because it was made to the public at large, but this view
would still allow for interpretation of the timetable as a unilateral contract.In Grainger v. Sons &
Gough20, the defendant was a wine merchant who circulated a catalogue which contained a price
list for its products. The claimant ordered a number of bottles of wine from the catalogue and
when the defendant refused to deliver these at the stated price, alleged that a contract had been
formed.Rejecting the claim, the House of Lords held that the price list must be construed not as
an offer, but as an invitation to treat. In reaching this conclusion, it reasoned that to interpret the
list as an offer would mean that in theory the defendant would be obliged to deliver an unlimited
quantity of wine at the stated price, upon receipt of an order. This would be unreasonable, and
would not reflect the intentions of the parties as the merchant’s stock is necessarily limited, and
it would not be possible for him to carry out such an order. Both reasonableness and objective
intention are key to distinguishing between an offer and an invitation to treat. On this basis, the
list was interpreted an invitation to customers to offer to buy wine at the stated price, which the
merchant may then accept or reject. In this case, the defendant was not bound to deliver the wine
ordered by the claimant.

18
Partridge v. Crittenden, [1968] 2 A.L.L. E.R. 421.
19
Denton v. Great Northern Railway Co., [1856] 5 E. & B. 860.
20
Grainger v. Sons & Gough, [1896] A.C. 325 H.L.

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 iii. Exhibition of goods on sale
Displays of priced goods are not offers; they are only invitations to treat. An offer is created
when the customer presents the item to the cashier together with payment. Acceptance occurs at
the point the cashier takes payment. For the same reason in Pharmaceutical Society of Great
Britain v. Boots Cash Chemists Ltd.21, the defendant ran a self-service shop in which non-
prescription drugs and medicines, many of which were listed in the Poisons List provided in the
Pharmacy and Poisons Act 1933, were sold. These items were displayed in open shelves from
which they could be selected by the customer, placed in a shopping basket, and taken to the till
where they would be paid for. The till was operated by a registered pharmacist. However, the
claimant brought proceedings against the defendant for breach of section 18(1) of the Pharmacy
and Poisons Act 1933, which requires the supervision of a registered pharmacist for the sale of
any item in the Poisons List.The Court of Appeal held that the defendant was not in breach of the
Act, as the contract was completed on payment under the supervision of the pharmacist. The
dispplay of the goods on the shelves were not an offer which was accepted when the customer
selected the item; rather, the proper construction was that the customer made an offer to the
cashier upon arriving at the till, which was accepted when payment was taken. This analysis was
supported by the fact that the customer would have been free to return any of the items to the
shelves before a payment had been made. As in the case of Fisher v. Bell22, a shopkeeper who
displayed flick knives in his window and had sold them to customers was charged under the
Restrictions of Offensive Weapons Act 1959, which made it an offence to "offer for sale" these
articles. He was found not guilty since the display of goods in a shop window is only an
invitation to treat, not an offer. The offer is made by the customer, which the shopkeeper is free
to accept or reject.

Where in pursuance of a scheme adopted by Esso, the petrol station proprietor announced that
they would give “The World Cup Coins”, one for every buyer of four gallons of petrol, it was
held that the distribution of the coins was not a contract of sale so as to attract the provisions of
the Purchase Tax Act, but was only a gift. This was pointed out in the case of Esso Petroleum
Company Ltd. v. Commissioners of Customs and Excise23where firstly the court held that at there

21
Pharmaceutical Society of Great Britain v. Boots Cash Chemists Ltd., [1952] 2 Q.B. 795.
22
Fisher v. Bell, [1961] Q.B. 394.
23
Esso Petroleum Company Ltd. v. Commissioners of Customs and Excise, [1976] 1 W.L.R.

11
was an intention to create a legal obligation by Esso to supply the coins. The transaction took
place in a business setting, and was itself a legal offer beyond a mere ‘puff’that rendered Esso
commercial advantages, and was accepted by the customers. Secondly, the Court held that, for a
contract of sale, there must be a transfer of the goods for monetary consideration. The Court held
that, despite the intention to create a legal obligation, there was no consideration for the transfer
of the coins as the coins were transferred under the separate contract for sale of the petrol.
Accordingly, the Court held that there was no contract of sale by Esso, there was a contract to
produce the coins as goods “for general sale.”

iv. Tenders
A tender is an estimate given in response to a request. An invitation for tenders is an invitation to
treat. It is not an offer to use the person quoting the lowest price.An example of tenders being an
invitation to treat is the case of Spencer v. Harding 24the defendants advertised a sale by tender
of the stock in trade belonging Eilbeck& company. The advertisement specified where the goods
could be viewed, the time of opening for tenders and that the goods must be paid for in cash. No
reserve was stated. The claimant submitted the highest tender but the defendant refused to sell to
him. It was eventually held that unless the advertisement specifies that the highest tender would
be accepted, there was no obligation to sell to the person submitting the highest tender. The
advert amounted to an invitation to treat, the tender was an offer, and the defendant could choose
whether to accept the offer or not. Further in the case of Blackpool and Fylde Aero Club Ltd. v.
Blackpool Borough Council25the defendants were a local authority that managed the local airport
as its owners. They had granted the plaintiffs, who were a flight club, a concession to operate
casual flights out of the airport. The concession came up for renewal and the tender invitation
was released to the plaintiff and six other companies. The tender had a clause stating that tenders
would not be considered if they missed the time and date deadline stipulated. The town’s clerk
failed to empty the letterbox on time and as such, the plaintiff’s tender missed the deadline and
the defendant accepted a lower proposal. The plaintiffs brought an action for damages against the
defendant for negligence and for breaching their contract. At an initial hearing, the judge held
that the request for tenders by the defendant required them to consider all the tenders received
and on this basis, they were liable to the plaintiff. The defendants appealed this decision.The

24
Spencer v. Harding, (1870) L.R. 5 C.P. 561.
25
Blackpool and Fylde Aero Club Ltd. v. Blackpool Borough Council, [1990] 3 A.L.L. E.R. 25.

12
court dismissed the defendant’s appeal. They found that the invitation to submit a tender was
usually no more than an offer to receive bids but in this circumstance, examining the behaviour
of the parties created clear intention to create a contract and therefore the failure to consider the
plaintiff’s application made them liable.

The decision in the case of Anil Kumar Srivastava v. State of U.P.26laid down a principle that
fixation of reserve price in an invitation for submission of tenders has been held to be not an
offer. In Harvela Investments v. Royal Trust Co. of Canada27the first defendant held shares in the
company. By means of a telecommunication they invited the claimant and the second defendant
to make an offer to purchase shares by sealed tender. They stated in this invitation that they
bound themselves to accept the highest offer. The claimant made a bid for a fixed sum; the
second defendant made a bid for a fixed sum or alternatively for ‘$101,000 in excess of any other
offer’, whichever was to be higher. The first defendant accepted the bid made by the second
defendant, despite the fact that the fixed sum which they offered was lower than that offered by
the claimant.The House of Lords held that the referential bid was invalid, and as such, the first
defendant was bound to accept the claimant’s offer. It reasoned that to allow a referential bid
would create the possibility of conflicting obligations for the first defendant (had both parties
made a bid offering a certain sum in excess of any other offer), in which case the offeror would
be bound by the terms of its own promise to accept both offers. This would therefore be an
unreasonable construction of the invitation to tender. It would also undermine the purpose of a
sealed tender, which is to prevent a bid being made based on the sum offered by the competitor.

OFFER V. INVITATION TO TREAT

26
Anil Kumar Srivastava v. State of U.P., (2004) 8 S.C.C. 671.
27
Harvela Investments v. Royal Trust Co. of Canada, [1986] A.C. 207.

13
An offer must be distinguished from an invitation to treat, by which a person does not make an
offer but invites another party to do so. Whether a statement is an offer or an invitation to treat
depends primarily on the intention with which it is made. An invitation to treat is not made with
the intention that it is to be binding as soon as the person to whom it is addressed communicates
his assent to its terms.The distinction between an offer and an invitation to treat is often hard to
draw as it depends on the elusive criterion of intention. There are certain stereotyped situations
that the distinction is determined by the Rules of Law. An offer is made when a person is shows
willingness to enter into a legally binding contract. An invitation to treat is merely a supply of
information to tempt a person into making an offer.

1. DISTINCTION BETWEEN OFFER AND INVITATION TO TREAT

a) Offer: An invitation communicated by one party to another to enter into a legally binding
contract on certain specified terms
Invitation to treat: An invitation to enter into negotiations with a view to creating an
offer.
b) Offer: An offer is made with the object of getting consent of the offeree.
Invitation to treat: An invitation to offer on the other hand is made with an intention to
call for offers.
c) Offer: An offer can be accepted by the offeree.
Invitation to treat: An invitation to offer cannot be accepted by the person to whom it is
made.
d) Offer: An offer when accepted becomes an agreement.
Invitation to offer: An invitation to offer cannot be accepted at all.
e) Offer: Offer is defined in Section 2(a) of the Indian Contract Act, 1872.
Invitation to treat: It is not defined anywhere in the Indian Contract Act, 1872.

2. CASE LAWS DIFFERENTIATING OFFER AND INVITATION TO OFFER

Mann and Roberts (2005) defined an offer as “a definite undertaking or proposal made by one
person to another indicting willingness to enter into a contract.” Invitation to treat is an

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indication that the person is willing to enter into negotiations, but not that he is yet willing to be
bound by the terms mentioned by Kuchhal and Kuchhal (2013).

 The case of Harvey v. Facie28 laid down the opinion which was decided by the British
Judicial Committee of the Privy Council, which held final legal jurisdiction over most of
the British Caribbean. It is an important case law because it defined the difference
between offer and invitation to treat. The Privy Council held that indication of lowest
acceptable price does not constitute an offer to sell. Rather, it is considered an offer to
treat (i.e., to enter into negotiations).

 In Bank of India v. O. P. Swarankar29, it has been held that a contract of employment is

governed by the Contract Act. Announcement of Voluntary Retirement Scheme by a
nationalized bank is not an offer. The employee offering to retire makes an offer and the
same becomes effective when the written request of retirement is accepted. An employee
who has offered to retire under the scheme can withdraw before his request is accepted.

 Further in the case of Chapelton v. Barry Urban District Council30Chapelton wished to

hire a deck chair and approached a pile of chairs owned by Barry Urban District Council
(BUDC). A notice adjacent to the chairs detailed the cost of hire and advised customers
to obtain tickets and retain them for inspection. He purchased the tickets and placed them
in his pocket. On one side of the tickets, the council purported to exclude liability for any
accidents caused by hiring the chairs. Chapelton sat down and the canvas gave way. He
sought damages from BUDC and it was held they had effectively excluded liability.
Chapelton appealed. He argued that he had not been given sufficient notice of the clauses
printed on the ticket and, therefore, he should not be bound by them. There was nothing
on the notice adjacent to the chairs, or on the face of the ticket to alert customers’
attention to the clauses on the back. The ticket should be regarded as a receipt provided
after the formation of the contract. BUDC contended Chapelton did have notice of the
terms because the exclusion clause was clearly printed on the ticket. The notice adjacent

28
Harvey v. Facie, [1893] A.C. 552.
29
Bank of India v. O.P. Swarankar, (2003) 2 S.C.C. 721.
30
Chapelton v. Barry Urban District Council, [1940] 1 K.B. 532.

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 to the deck chairs was merely an invitation to treat. The ticket was not merely a receipt
but it amounted to a written contract detailing the terms by which the parties agreed to be
bound.Chapelton’s appeal was successful. The ticket was held to be a receipt and the
conditions by which BUDC were held to have offered the chairs for hire were those
contained in the notice, and the notice did not contain any exclusion clause. BUDC had
not, therefore, brought Chapelton’s attention to the clause and they could not rely on it.

 Pointing out a clear distinction between offer and invitation to treat is the case of Crawley
v. Rex31 in which a shopkeeper advertised on a placard outside his shop a particular brand
of tobacco at a cheap price to attract the public. A customer who refused to leave the
premises when the shopkeeper declined to sell more of the tobacco to him on a second
occasion was charged with trespass. In his defence, the customer claimed he was entitled
to be in the shop as he was accepting the shopkeeper’s offer. The court held that no
contract had arisen because the advertisement did not constitute a binding offer that the
customer could accept but was merely an announcement of the shopkeeper’s intention to
sell at the advertised price.

 In the case of Bird v. Summerville32the appellant, who wished to sell his property, was
informed by an estate agent that the first respondent was interested in buying. The
appellant signed a written offer to sell naming the first respondent as sole purchaser.
However, the first & second respondents both signed as buyers. At the time of making
the offer, the appellant had been unaware of the existence of the second respondent. The
court found that although the appellant would have been prejudiced by both parties
buying the property, the appellant was not bound to a contract of sale to both the
respondents, because he never intended that his offer could be accepted by both of them.

 In Bloom v. American Swiss Watch Co.33the defendants advertised a reward for any
person who gave information to the police regarding to a jewellery robbery that took
place on their premises. The court held that the offer had not been accepted by the first

31
Crawley v. Rex, 1909 T.S. 1105.
32
Bird v. Summerville, (1960) 4 S.A. 395 (N.) 401 (D.).
33
Bloom v. American Swiss Watch Co., 1915 A.D. 100.

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 person who supplied information to the police because he had at the time been unaware
of the offer.

 Another such case which laid down the principles for distinguishing offer from invitation
to treat is Walford v. Miles.34In this case,the buyers and sellers of a company agreed
orally for the sellers to deal with the buyers exclusively and to terminate any negotiations
between them and any other competing buyer. The sellers later decided not to proceed
with their negotiations with the buyers and went on to sell the company to another party.
The buyers sued for breach of the oral agreement. The sellers’ defence was that the
parties were still in negotiations and the oral agreement was an agreement to negotiate in
good faith. The oral agreement was unenforceable. An agreement to negotiate in good
faith was unworkable in practice because while negotiations were in existence, either
party was entitled to withdraw from those negotiations at any time and for any reason.

 Gibson v. Manchester City Council35is a case where the issue on appeal was whether the
defendant’s letter of February 1971 was properly construed as an offer or as an invitation
to treat.The defendant City Council had adopted a policy of selling council houses to its
tenants. The claimant was a tenant of such a council house, who had applied for details of
the house he was renting and applicable mortgage terms, using the printed form
designated and supplied by the defendant for this purpose. In February 1971, the city
treasurer responded to this application stating that 'The [council] may be prepared to sell
you the house at the purchase price…', and providing details of the mortgage. This letter
also stated that it did not amount to a ‘firm offer’ of a mortgage, and invited the claimant
to make a formal application using an enclosed form. In March 1971, the claimant
returned the completed form to the defendant. Following local elections in May of the
same year, control of the Council passed from the Conservatives to Labour. The new
Labour Council policy was that council houses would not be sold under the previous
Conservative policy unless a legally binding contract was already in place. The defendant
refused to sell to the claimant, who brought an action against them in breach of contract.

34
Walford v. Miles, [1992] 2 W.L.R. 174.
35
Gibson v. Manchester City Council, [1979] 1 W.L.R. 294.

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 This action was successful at first instance and the Court of Appeal, upon which the
defendant appealed to the House of Lords.
The House of Lords held that there was no concluded contract and the defendant was not
legally bound to sell the property, as the council’s letter did not state the price and was
not an offer but an invitation to treat.

 The case of Ghaziabad Development Authority v. Union of India36clarified the doubts

regarding offer and invitation to treat.The Ghaziabad Development Authority (GDA),
though informed the plaintiffs about the allotment of plots to them, yet even after more
than considerable time had elapsed, never conveyed the property to them. Latter
approached MRTP Commission which granted them not only amount paid by them to the
defendants for the possession of the plot along with the interest due, but also awarded
them damages for mental agony, which were disputed by GDA. It was held that when a
development authority announces a scheme for allotment of plots, the brochure issued by
it for public information is an invitation to offer. Several members of public may make
applications for availing benefit of the scheme. Such applications are offers. Some of the
offers having been accepted by the Authority result into a contract between the applicant
and the Authority. In present case, since the contract was breached by GDA by not giving
the possession of the house to the claimants even after reasonable period of time had
elapsed; it was liable for paying back the amount taken along with interest; and not the
damages with respect to mental agony for it did not fall into any of the exception.

36
Ghaziabad Development Authority v. Union of India, A.I.R. 2000 S.C. 2003.

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 CONCLUSION

The distinction between offer and invitation with the help of the cited authorities becomes
lucid. An invitation to treat is an action inviting other parties to make an offer to form a
contract. These actions may sometimes appear to be offers themselves, and the difference can
sometimes be difficult to determine. The distinction is important because accepting an offer
creates a binding contract while "accepting" an invitation to treat is actually making an offer.
The project is concluded drawing a parallel between the two.

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 BIBLIOGRAPHY
WEBSITES

 https://keydifferences.com/difference-between-offer-and-invitation-to-offer.html
 https://sol.du.ac.in/mod/book/view.php?id=644&chapterid=361
 https://www.lawteacher.net/free-law-essays/contract-law/offer-vs-invitation-to-treat-
contract-law-essay.php
 https://www.scribd.com/document/162945962/offer-and-invitation-to-treat-itt
 http://swarb.co.uk/gibson-v-manchester-city-council-hl-8-mar-1979/
 https://www.owlgen.com/question/define-the-term-offer-discuss-the-essential-
elements-and-legal-rules-of-a-valid-offer
 http://www.scconline.com/Members/SearchResult2014.aspx

BOOKS
 Law of Contract and specific relief, Avtar Singh.

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