Offer vs Invitation to Offer: A Critical Law Distinction
Not every statement is a legal offer. An 'Invitation to Offer' is merely a call to others to make offers — a trap that frequently appears in CA Foundation Law MCQs.
head-to-Head Comparison
| Basis | Offer (Proposal) | Invitation to Offer (Invitation to Treat) |
|---|---|---|
| Definition | A definite proposal to do or abstain from doing something, made with the intention of creating a binding contract on acceptance | An invitation to others to make offers; not a proposal in itself |
| Legal Effect | Acceptance of an offer creates a binding contract | Acceptance of an invitation merely creates an offer from the acceptor |
| Who makes it? | The Offeror (Promisor) makes a specific proposal to the Offeree | The invitee calls on the general public or specific persons to make proposals |
| Examples | 'I will sell my bike to you for ₹50,000' — a specific, direct offer | A shop displaying goods with price tags; a company issuing a prospectus; auctioneer's call for bids |
| Binding Nature | Offeror is bound if the Offeree accepts absolutely and unconditionally | The invitee is NOT bound; they can accept or reject any offer received |
The 'Catalogue / Price List' Trap
A price list or catalogue sent by a seller is an Invitation to Offer, NOT an offer. When you 'place an order' based on a catalogue, you are making the offer. The seller can accept or reject. If catalogues were offers, sellers would be bound to sell at that price to everyone, which is impractical.
Common Ground (Similarities)
- Both are part of the negotiation process that ultimately leads to contract formation.
- Both require communication to the other party to be effective.
- Both are governed by the Indian Contract Act, 1872.
Test Your Understanding
Q1: A shop displays a product with a price tag of ₹500. A customer demands the product at ₹500. The shopkeeper refuses. Which statement is correct?
The shopkeeper has breached a contract
The display is an offer that the customer accepted
The display is an invitation to offer; no contract is formed ✅
The customer is guilty of breach of contract
Explanation: A display with a price tag is an Invitation to Offer. The customer's demand to buy is the offer. The shopkeeper can refuse — no contract is formed.
Q2: A company's prospectus inviting applications for shares is:
A valid offer to the public
An invitation to offer ✅
A counter-offer
An acceptance
Explanation: A prospectus is a classic example of an Invitation to Offer. The applicant who fills in the application form is making the offer, which the company may accept or reject.