Invitation to Offer
What is an Invitation to Offer?
An invitation to offer occurs when one party invites another to make an offer, rather than directly making an offer themselves. It’s like extending an invitation for someone else to propose terms. In this scenario, the person making the invitation is not obligated to accept any offer that may be made.
Exceptions to the general offer-acceptance-contract sequence, such as an invitation to offer, remind us that contractual relationships are more nuanced than a simple formula. These exceptions allow parties to negotiate and assess offers before entering into a binding agreement.
Example:
Let’s understand this exception with a simple example. A has a limited edition book priced at Rs. 1,000 in his shop. B comes to the shop and places Rs. 1,000 on A’s counter, indicating his willingness to buy the book. However, A refuses to sell the book. B argues that since he accepted the offer (by placing the money), a contract is formed, and A must hand over the book. But should A be bound by this?
In this case, A’s act of placing the money on the counter is not considered an acceptance of an offer. Rather, it is viewed as an invitation to A to make an offer to sell the book. Therefore, A is not obligated to sell the book to B based solely on the act of placing the money. A has the freedom to accept or reject the offer made by B.
Tenders as “Invitation to Offer”
Consider the process of tendering. When a company or government entity invites bids or proposals from suppliers or contractors, it is an invitation to offer. The tenderer is seeking offers from interested parties, who then submit their proposals. The tenderer is not obligated to accept any specific offer.
Invitation to Offer and Offer
Here’s a table summarizing the differences between an Invitation to Offer and an Offer:
| Invitation to Offer | Offer | |
| Definition | Act that invites others to make an offer or propose terms | Definite proposal indicating willingness to enter a contract |
| Nature | Preliminary step in the negotiation process | Actual proposal for entering into a contract |
| Legally Binding | Does not create a legally binding obligation | Creates a power of acceptance in the offeree |
| Obligation | Party extending the invitation is not obligated to accept any offer | Definite proposal indicating a willingness to enter a contract |
| Examples | Parties are obligated to fulfil the terms of the offer | Verbal/written proposals to sell a specific product |
Summary
An invitation to offer deviates from the typical offer-acceptance-contract framework. It occurs when one party invites another to make an offer. Tenders serve as a prime example of invitations to offer.
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