Difference between offer and an invitation to offer

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.

The major difference between the two is that the purpose of an offer is to enter into a contract whereas the purpose of an invitation to offer is to receive an offer in order to enter into a contract.

Illustration- A sees an article marked Rs 50 in B’s shop. He tells B he will buy it and offers him Rs 50.B says that he doesn’t wish to sell that article.

In this case, there is no contract at all and the price tag is not an offer but an invitation to offer. It is on the discretion of the shopkeeper if he wants to sell his article or not.

Therefore 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 the public to offer him.

Case Laws 

(1)In Balfour vs. Balfour (1919)

Mr. Balflour was a civil engineer and worked for the government as the Director of Irrigation in Ceylon(now Sri Lanka).In 1915 both of them came back to England when Mr. Balflour was on leave but due to an illness(arthritis) of Mrs. Balfour, she was unable to come back to Ceylon with her husband. The husband promised to pay 30 euros per month to his wife until she rejoined him in Ceylon. The husband failed to pay her the said amount hence the wife sued him for the amount. The court held that the husband was not liable as there was no intention to create a legal relationship.

(2)In Jones v Padavatton(1969)

Mrs. Violet Laglee Jones agreed with her daughter Mrs. Ruby Padavatton that if she would give up her job in the USA and studied for the bar exam in England, the mother would pay her an allowance of 200$ per month. In 1964 the mother bought a house and varied the agreement by giving the daughter a part of the house to stay and a part to rent so as to cover her expenses and her maintenance. In 1967 the parties had an argument and as a consequence, the mother brought an action for the possession of the house. The mother based her claim on the allegation that the agreement was not made with the intention of creating a legal relationship. It was held that there was no intention to create a legal relationship and gave possession to the mother.

Definition of Acceptance

The Indian Contract Act 1872 defines acceptance in Section 2 (b) as “When the person to whom the proposal has been made signifies his assent thereto, the offer is said to be accepted. Thus the proposal when accepted becomes a promise.”

Therefore once an offer is accepted it cannot be revoked because it has become a promise which creates a legal obligation between the parties.

Example -Anita offers to buy Priya’s car for Rs.10 lakhs and Priya accepts such an offer. Now, this has become a promise.

Essentials of a valid acceptance

Section 7 of The Indian Contract Act,1872 lays down two essentials of a valid acceptance.

(1) Must be unconditional and absolute

Conditional Acceptance will not be a valid acceptance as it would amount to a counter offer which would nullify the original offer. Example. Anita offers to sell her bag to Priya for 3000/-. Priya says she accepts if Anita will sell it for 1500/-. This does not amount to the offer being accepted and it will count as a counteroffer.

(2) Must be expressed in some usual and reasonable manner

If the offeror does not describe any prescribed manner then it must be expressed in the normal and reasonable manner, i.e. as it would be in the normal course of business.

Difference between an acceptance and a counter offer

A counter offer is an offeree’s new offer that varies the terms of the original offer and therefore, constitutes a rejection of the original offer.

In John Hancock Mutual Life Insurance Co. v. Dietlin(1964), an acceptance which is upon the condition or with a limitation is a counteroffer and requires acceptance by the original offeror before a contractual relationship can exist.

In Ardente v. Horan(1976), the defendants offered to sell their house to the Plaintiff who agreed to buy the house but he requested that certain furniture and fixtures should also come with the property. The Defendants refused to sell their furniture and fixtures along with the house and returned the unsigned agreement as well as the Plaintiff’s deposit. The Plaintiff sued for specific performance. It was held that a valid contract was not formed as the defendants never accepted the counteroffer. A contract is considered valid when the acceptance is definite and unequivocal, conditional acceptances shall be construed as counter-offers.

Case Laws 

(1) In L’Estrange v Graucob (1934)

A  buyer signed an agreement for the purchase of a cigarette vending machine without reading its terms. One of the terms excluded liability for all kinds of defects in the machine. The machine supplied was defective but the court held that the supplier was not liable.

(2)In Lalman Shukla vs Gauri Dutt(1913)

The plaintiff was in defendants service as a Munim. The defendant’s nephew absconded and the plaintiff went to find the missing boy. In the plaintiff’s absence, the defendant issued handbills, offering a reward of Rs 501 to anyone who might find the boy. The plaintiff traced him and claimed the reward. The plaintiff did not know of the handbills when he found the boy. The court held that the plaintiff was not entitled to a reward.