Difference between offer and invitation to offer for CLAT - Practice Questions & MCQ

Understanding the distinction between an "Offer" and an "Invitation to Offer" (or "Invitation to Treat") is fundamental in contract law. These concepts help determine when a legally binding contract is formed. Let's delve deeper into these concepts with more details, examples, Indian case law references, and simplified language.

Offer:

• Definition: An offer is a specific, definite, and unconditional proposal made by one party (the offeror) to another party (the offeree). It demonstrates the offeror's intention to enter into a contract under precise terms. When the offeree accepts these terms without any further negotiation, a legally binding contract is created.
• Example 1: A offers to sell his car to B for ₹500,000, and the offer specifies that B has one week to accept. If B agrees to these terms within the stipulated time frame, a valid contract is formed.
• Example 2: In e-commerce, when you add an item to your online shopping cart and proceed to checkout, you are making an offer to purchase the items in your cart at the listed prices.

Case Law Example - Lalman Shukla v. Gauri Dutt (1913):

Background:

• Lalman Shukla, the plaintiff, was employed as a servant by Gauri Dutt, the defendant. Gauri Dutt's nephew went missing, and in an attempt to find him, Gauri Dutt announced a reward of ₹501 for the person who could locate the missing boy. Importantly, Gauri Dutt did not inform Lalman Shukla about this reward offer.

Facts of the Case:

• Lalman Shukla, without knowledge of the reward, found and brought Gauri Dutt's missing nephew back.
• After the nephew's return, Lalman Shukla learned about the reward and claimed it.

Legal Issue:

• The main issue in this case was whether Lalman Shukla was entitled to claim the reward even though he was unaware of Gauri Dutt's reward offer.

Court's Decision:

• The court ruled in favor of Gauri Dutt, the defendant. They held that Lalman Shukla was not entitled to the reward because he was unaware of the reward offer. In essence, the court emphasized that for a contract (in this case, the offer of a reward) to be binding, the offeree (Lalman Shukla) must have knowledge of the offer.

Significance:

• The Lalman Shukla v. Gauri Dutt case underscores a fundamental principle in contract law: an offer must be communicated to the offeree for it to be valid. 
• In this case, Lalman Shukla had no knowledge of the reward offer, and therefore, he could not accept it. 
• The case serves as a clear example of how the communication of an offer is essential for the formation of a binding contract.

Invitation to Offer (Invitation to Treat):

• Definition of Invitation to Offer: An invitation to offer is an indication of willingness to negotiate or an invitation for others to make offers. It is not a binding proposal but rather an invitation to initiate the bargaining process. When someone responds to an invitation to offer with an offer, it becomes the offer, and a contract can be formed upon acceptance.
• Example 1: Price tags in a supermarket or items displayed on shelves are considered invitations to offer. They invite customers to make offers to purchase those items, but they do not constitute offers themselves.
• Example 2: Online marketplace listings that provide a "Make an Offer" option allow potential buyers to initiate the offer process. The seller, in this case, is extending an invitation to treat, and the buyer's offer will follow.

Case Law Example - Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd. (1952)

Background

• This case involves a dispute over the sale of medicines in a Boots pharmacy. Boots Cash Chemists (Southern) Ltd., the defendant, operated a self-service pharmacy where customers could select medicines from store shelves and take them to the cash counter for payment.

Facts of the Case

• Boots displayed various medicines on store shelves along with price tags.
• The Pharmaceutical Society of Great Britain, the plaintiff, argued that these displayed medicines with price tags constituted offers to sell at those prices, and they contended that the prices should adhere to the pharmacy's license.
• The plaintiff claimed that Boots had violated pharmaceutical regulations by offering medicines for sale at prices not consistent with their license.

Legal Issue

• The primary issue in this case was whether the displayed medicines with price tags were offers or merely an invitation to treat.

Court's Decision

• The court held that the displayed medicines with price tags were not offers but invitations to treat. 
• They emphasized that when customers selected items and brought them to the cash counter, they were making offers to purchase, and Boots, as the seller, could choose to accept or reject those offers. 
• This arrangement allowed for negotiation between the customer and the seller at the point of sale.

Significance

• The Pharmaceutical Society of Great Britain v. Boots Cash Chemists case is significant because it clarified the legal status of displayed goods with price tags in self-service stores. 
• It established that such displays are invitations to treat and not offers. This means that customers make offers when they select items, and the contract is formed upon the seller's acceptance at the cash counter. 
• This distinction is crucial in retail and contract law, as it determines when a binding contract is actually formed in such commercial transactions.

Indian Constitution Reference - Article 299(1)

• Article 299(1) of the Indian Constitution pertains to contracts made on behalf of the Government of India. It emphasizes that contracts should be made by persons authorized by the President and executed in the name of the President. This underscores the importance of proper authorization and clear terms in government contracts.