According to Section 2(a) of the Indian Contract Act, 1872- 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.
A proposal or an offer involves two parties-
According to Section 2(c) of the Indian Contract Act, 1872- The person making the proposal is called the “promisor”, and the person accepting the proposal is called the “promisee”.
COMMUNICATION OF OFFER
According to Section 4 of the Indian Contract Act, 1872- The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
Case Law- Lalman Shukla vs Gauri Dutt (1913)
In this case Gauri Dutt’s (respondent) nephew ran away from his home. As a result of this all the servants including Lalman Shukla (appellant) were directed to look for the respondent’s nephew. As a result Lalman Shukla with all the necessary travel expenses left in search of the kid.
Afterwards, the respondent declared a reward of rupess 501 to any individual who would be able to bring back his nephew. Later, Lalman Shukla returned to the respondent’s house along with the kid and as a result was also rewarded.
After half a year when the appellant was dismissed from his job, he sued the respondent in order to seek the amount of 501 rupees as promised by him to anybody who would find his nephew.
Therefore, the question which was raised before the honorable court was whether the respondent was entitled to the said reward or not.
The Allahabad High Court dismissed Lalman’s appeal for the reason that since he had no information about the offer and for the acceptance of the offer to be complete knowledge about the offer is an essential element, therefore the appellant cannot sue the respondent merely on this ground.
REVOCATION OF AN OFFER
According to Section 5 of the Indian Contract Act, 1872- A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.
But one of the most important question here is how can an offer be revoked?
Section 6 of the Indian Contract Act, 1872 states the methods by which a proposer may revoke his offer.
A proposal is revoked-
- by the communication of notice of revocation by the proposer to the other party;
- by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;
- by the failure of the acceptor to fulfil a condition precedent to acceptance; or
- by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.
DIFFERENCE BETWEEN OFFER AND INVITATION TO OFFER/TREAT
It is very important to understand that both offer and invitation to offer are entirely different terms and should not be confused with each other.
- Offer refers to a proposal to do or not to do anything, with a view to obtaining the assent of some other person to such an act or abstinence. However, on the other hand invitation to proposal refers to a process in which a party invites some other party to make an offer. When a person advertises a job in a newspaper or any other source for the purpose of hiring, the person is said to make an invitation to offer and not an offer. Similarly, a menu consisting of different food items is also an invitation to make an offer.
- The main purpose of the person making an offer is to enter into a contract with some other person but this is not the case in an invitation to offer where the main purpose is to negotiate the terms on the basis of which a contract can be made between the parties.
- A distinction between an offer and an invitation to offer is provided in an important case law namely Harvey vs Facey (1893)
In Harvey vs Facey (1893) the appellant Mr. Harvey wanted to purchase a property owned by the respondent Mr. Facey and thus, sent a telegraph to Mr. Facey for the same.
The telegraph stated “Will you sell us Bumper Hall Pen? Telegraph lowest cash price-answer paid.” Mr. Facey in response of the question said “Lowest price for Bumper Hall Pen is £900.” After the stated conversation Mr. Harvey replied back “We agree to buy Bumper Hall Pen for the sum of nine hundred pounds asked by you. Please send us your title deed in order that we may get early possession.”
But, Mr. Facey refused to sell his property and Mr. Harvey sued him arguing that the telegram which was sent by Mr. Facey stating the price of the property was and offer which was accepted by Mr. Harvey thus resulting into a valid contract between the two parties.
The Privy Council in this case held that the telegram sent by Mr. Facey stating the price was a mere piece of information and was in no manner an offer but an invitation to offer. The last telegram which was sent by Mr. Harvey was an offer to purchase the property but the appellant never accepted the offer so made.
Since the offer made was not accepted by the party therefore, no binding contract could be said to have existed between the parties.
Lalman Shukla vs Gauri Dutt Case Summary (1913)
Difference Between Offer and Invitation to Offer (Treat)
Harvey vs Facey Case Summary 1893 (AC)
Harvey vs. Facey : Facts, Issues, Contentions, Judgement & Analysis
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