Offer & Invitation to Offer: When Does a Statement Become a Legal Offer?
Not every statement showing willingness to make a deal is an offer. In contract law, knowing the difference between an offer and an invitation to offer is essential.
What Is an Offer?
Under the Indian Contract Act, an offer is made when one person expresses willingness to do or not do something with the intention of obtaining the other person’s assent. The person making the offer is the offeror, while the person receiving it is the offeree.
Example
A tells B, “I will sell you my phone for ₹20,000.”
If A intends to be legally bound once B accepts, this may amount to an offer.
For an offer to be valid, it should generally be:
- Clear and definite
- Communicated to the offeree
- Made with an intention to create a legal obligation
- Capable of being accepted
What Is an Invitation to Offer?
An invitation to offer is simply an invitation for people to make offers. It is not itself an offer.
Common examples include:
- Advertisements
- Display of goods in shops
- Price lists
- Auction advertisements
- Catalogues
Example
A clothing store displays a jacket with a price tag of ₹2,000. The display is generally an invitation to offer, not an offer. When a customer takes the jacket to the cashier, the customer is making an offer to buy it, which the store may accept or reject according to the applicable rules.
Offer vs Invitation to Offer
| Offer | Invitation to Offer |
| Shows willingness to be legally bound upon acceptance | Invites others to make offers |
| Acceptance can create a contract | Mere response does not usually create a contract |
| Made with intention to obtain assent | Preliminary step before an offer |
Remember:
Offer → Accept it → Contract may arise
Invitation → Make an offer → Other party may accept
Why Is This Important?
The question may give you a situation involving an advertisement, shop display, auction or price quotation and ask whether it amounts to an offer.
Approach
Ask:
- Is the statement clear and definite?
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2. Was it communicated to the other party?
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3. Does it show an intention to be legally bound upon acceptance?
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4. Or is it merely inviting people to make offers?
Practice Question
Principle: A valid offer must show a clear intention to be legally bound upon acceptance. A statement that merely invites others to make offers is an invitation to offer.
Facts:
A newspaper publishes an advertisement stating: “Beautiful two-bedroom apartment available for ₹40 lakh. Interested buyers may contact the owner for further discussion.” Rahul immediately sends a message stating that he accepts the offer and agrees to pay ₹40 lakh.
Has a contract been formed?
A. Yes, because Rahul accepted the advertised price.
B. Yes, because every advertisement is an offer.
C. No, because the advertisement is an invitation to offer.
D. No, because property can never be sold through an advertisement.
Answer: C
Explanation:
The advertisement invites interested buyers to contact the owner for further discussion. It does not show a clear intention to be legally bound upon acceptance. Therefore, it is an invitation to offer, not an offer.
Quick Revision
Offer: A clear willingness to be legally bound upon acceptance.
Invitation to Offer: An invitation for others to make an offer.
Ask: “Is this person making an offer, or asking others to make one?”
