Offer vs Invitation to Offer: Meaning, Differences, and Case Laws

Introduction

A contract is an agreement that is entered by 2 or more persons in lieu of some lawful consideration. The process of making an agreement commences with offer, i.e., proposal.

Proposal – Section 2(a), Indian Contract Act, 1872

A proposal can be defined as “When one person signifies to another his willingness to do (or) to abstain from doing anything with a view to obtain the consent of that offer to such act (or) abstinence”.

Essentials of Proposal

1. It must be made by one person to another, i.e., a person cannot make an offer to himself.
2. It must be an expression of readiness (or) willingness to do (or) to abstain from doing something.
3. It must be made with a view to obtain the consent of the other party to proposed act (or) abstinence.
4. The proposal must be intended to create a legal relationship.
5. It must be certain, definite and not vague.

Example: A offers to sell B his Tata Sierra at a price of Rs. 10,00,000/- (Rupees Ten Lakh only).

Invitation to Proposal

In case of invitation to offer/proposal, the person giving the invitation has the intention that the person to whom the invitation has been given should make the offer. It is a preliminary communication that expresses the desire to receive offers from others. In this regard, the party inviting to offer does not acknowledge any of the bindings of the contract until they have accepted an offer made in response to the invitation.

Example: Price list, Railway time table, marked price of article placed on the counter, etc.

Difference between Proposal and Invitation to Proposal

Grounds	Proposal	Invitation to Proposal
Intention	Shows intention to create a legally binding relationship.	Merely invites negotiations.
Effect	Acceptance becomes contract.	Acceptance does not create contract.
Example	When a person proposes to sell something to a specific individual at a definite price, it is an offer. Once the other person accepts, a contract is formed.	Displaying goods with price tags in a shop is only an invitation to offer. The customer makes the offer by taking an item to the cashier, and the shop may accept or reject it (for instance, if the item is unavailable)

Case Law

• Pharmaceutical Society v. Boots Cash Chemists (1953)
  • The issue was whether goods displayed on a self-service shelf amounted to an offer or merely an invitation to offer. The court held that:
  • The display of goods with price labels is not an offer.
  • It is only an invitation to customers to make an offer.
  • The customer makes the offer when they take the item to the cashier.
  • The contract is formed at the cashier’s desk, where the cashier may accept or refuse the offer.
  • Principle: Display of goods is an invitation to offer, not an offer.
• Harvey v. Facey (1893)
  • Harvey telegraphed Facey asking two things:
    • Will you sell us Bumper Hall Pen?
    • What is the lowest price?
  • Facey replied only with, “Lowest price £900.”
  • Harvey then claimed acceptance and argued that a contract was formed.
  • The Privy Council held:
    • Facey’s reply was only information about price, not an intention to sell.
    • Since Facey never made an offer, Harvey’s “acceptance” could not create a contract.
  • Principle: A mere statement of the lowest price is not an offer; it is simply a response providing information.

Conclusion

The difference lies in when contractual intention begins. An offer is a definite proposal meant to become legally binding once accepted, while an invitation to offer is only a preliminary communication inviting others to make offers, which the inviter may accept or reject.