Definition of ‘Offer’ under the Indian Contract Act, 1872
The Indian Contract Act, 1872, defines an ‘offer’ (also called a ‘proposal’) in Section 2(a) as follows:
“When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.”
Key Points:
- An offer is a clear expression of willingness by one person (the offeror) to enter into a contract on certain terms.
- The offer can be to do something (an act) or to refrain from doing something (abstinence).
- The intention must be to obtain the assent of the other party (the offeree).
- Once the offer is accepted, it results in a binding agreement.
Example:
If A says to B, “I will sell my car to you for ₹1,00,000,” A is making an offer to B. If B accepts, a contract is formed.
Definition of ‘Invitation to Offer’ under the Indian Contract Act, 1872
The Indian Contract Act does not explicitly define an ‘invitation to offer’ (also known as an ‘invitation to treat’). However, its meaning is well established through legal interpretation and case law:
- An invitation to offer is an action or statement that indicates a willingness to negotiate or receive offers, but does not itself amount to a binding offer.
- The person making the invitation does not intend to be bound immediately upon acceptance; rather, they invite others to make offers, which they may then accept or reject.
Common Examples:
- Display of goods with price tags in a shop window.
- Advertisements for sale of goods or services.
- Auction catalogues.
Legal Position:
- An invitation to offer is a preliminary communication that leads to the making of an actual offer by another party.
- Only when the actual offer is made and accepted does a binding contract arise.
Example:
A shopkeeper displaying goods in a window is not making an offer to sell at the listed price. Instead, they are inviting customers to make offers to purchase, which the shopkeeper may accept or reject.
Offer vs. Invitation to Offer
| Aspect | Offer (Section 2(a)) | Invitation to Offer |
| Definition | Clear willingness to do/abstain from doing something to obtain assent of another | Indication of willingness to negotiate or receive offers |
| Legal Effect | Creates a binding contract upon acceptance | Does not create a contract; invites offers from others |
| Intention | To be bound by acceptance | Not to be bound immediately; only to invite negotiations |
| Example | “I will sell my bike to you for ₹5,000.” | Display of goods in a shop, advertisements, auction catalogues |
| Source in Act | Explicitly defined in Section 2(a) | Not defined; recognized through interpretation and case law |