What is Invitation to Treat?
Meaning of Invitation to Treat under Indian Contract Act: – It refers to an invitation for a party to make an offer enter into contractual negotiations. In the invitation to treat or offer, no specific party has the intention to enter into a contract. The seller can enter into a contract with anyone from the public who offers him the best. So, the essence of an invitation to offer is that the offer is made by the buyer.
A proposal or an offer has to be differentiated from invitation to treat or offer. Sometimes a person may not offer to sell his goods but gives some details or information to invite others to make an offer on that basis.
Example 1: – Advertisements are usually an invitation to treat because they lack important information that would make it an offer. Although they make some claims about their products, and these claims must be proven, they are not offered in the legal sense of a contract.
Example 2: – The exhibition of any type of goods for sale. A bookseller sends a catalogue of books with prices of books to many persons. This is an invitation to treat and not an offer. If anyone is interested in purchasing book or books mentioned in catalogue, he may make an offer and the person who is circulating the catalogue has the discretion to accept or not accept the offer.
Bids: – Inviting persons to an auction or bidding where goods to be auctioned are displayed is not an offer for the sale of goods. The offer is made by the intending buyers in the form of bid. Such an offer bid, when accepted by the fall of the hammer or any other customary way, will become a contract.
Tenders: – In the same way an advertisement calling for tenders is not an offer or proposal, but merely an invitation to contractors to make an offer. The submission of tender is an offer. This will result in a contract only on the acceptance of the tender. Making the highest bid will not automatically form a contract. The contract will be generated only if the highest bid is accepted by the competent authority and the said acceptance is also communicated to the tenderer.
Is it an Offer or an Invitation to Treat?
It’s really important you can distinguish between an offer and an invitation to treat. If you accept an offer, you create a binding contract and are legally bound. Wheres, if you accept an invitation to treat you have only made an offer. An invitation to treat is not an offer until you make a clear and direct approach to another party to contract. For example, an offer occurs when you take the item to the register, communicating that you are making an offer. Acceptance is when the shop employee sells the item to you.
This is common in scenarios where you think you are accepting an offer, but actually you are only responding to an invitation to treat. Here, you are only making an offer and not accepting the original offer.
Difference between Offer and Invitation to Treat under Indian Contract Act
The difference between Offer and Invitation to Treat under Indian Contract Act is as follows: –
- The difference between an offer and an invitation to treat is very basic and is primarily rooted in the ‘intent’ of the parties. While an offer allows the other party to enter into a contract directly (which is a legally binding agreement) as soon as it is accepted, an invitation to treat is primarily an invitation to the other party to negotiate and makes an offer to the seller himself.
- When we go to a bookstore, the display of books in the shop is an invitation to treat the general public by the bookseller. Anyone passing through the shop can come to buy one of their books or can buy later. Here, no one is legally obliged to perform any action.
- Similarly, most forms of advertisements are not offers, but invitations to make offers.
- An offer is the final willingness of the party to create legal relations. An invitation to offer is not the final willingness but the interest of the party to invite public to offer him.
- An offer is defined in section 2 (a) of the Indian Contract Act, 1872. Conversely, an invitation to offer is not defined in the Indian Contract Act, 1872.
- An offer is an essential element to make an agreement between the parties, but an invitation to offer is not an important element until it becomes an offer.
- An offer becomes an agreement when accepted. On the other hand, an invitation to offer becomes an offer when the public responds to it.
- The main objective of making an offer is to enter into the contract, whereas the main objective of an invitation to offer is to negotiate the terms on which the contract can be made.
Case Laws
- Harris vs. Nickerson
Facts of the Case: – The defendant advertised a sale by auction. The plaintiff traveled to the advertised place of auction and found that the defendant had cancelled the auctioned sale. He bought an action against the defendant to recover the expenses of the travel.
Judgment of the Case: – In this case, the court held that he was not entitled to recover his travelling expenses from the defendant as there was no contract between the two parties, which could make the defendant liable.
Facts of the Case: – Voluntary Retirement Scheme (VRS) framed by the appellant court, and the respondent employee made an offer for making an application seeking voluntary retirement. In the scheme, 15 days was given to the employees to opt for the scheme. It was also provided that application once made could not be withdrawn. Hence, withdrawal after the date of closure of the scheme was not permissible.
Judgment of the Case: – The Supreme Court observed that scheme was an ‘invitation to offer’ and not an ‘offer’, and such schemes, employees are permitted to withdraw their applications at any time even after the closure of the scheme, so in this case, all the calculations of the management of bank would fail.