Difference between Offer and Invitation to Offer

282 votes

Offer and invitation to offer are important steps leading to contract formation and form fundamental concepts of contract law. Where an offer implies the proposal by a party to enter into a contract, invitation to offer signifies the act of inducing other parties to make a proposal to eventually form a definite offer. Both these concepts carry separate legal ramifications; therefore, it is essential to understand the differences between the concepts of offer and invitation to offer.
 

Offer

An offer is defined under the Indian contract act as the expression of the willingness by one person to another to do or to abstain from doing something, aimed at obtaining the acceptance of such other person to such act or abstinence. In layman terms, offer can be understood as an individual expressing his/her willingness to enter into a legal relationship with another individual by way of an agreement. An offer is an integral element of an agreement. Law requires an offer to be definite, unambiguous and complete to constitute a valid and binding agreement. Further, there are numerous kinds of offers which are detailed below:

1.    General offer – such type of an offer is not made to a particular individual but to the public as whole.

2.    Cross offer – this is an offer made to another person while the other person has made the same offer, in ignorance of the original offer.

3.    Specific offer – this offer is one which is made to a specific person as opposed to the public at large.

4.    Counter offer – this refers to the offer made by the offeree in response to the original offer made by the offeror, after modifying the terms as a counter to the original offer.

5.    Standing offer – this signifies an offer made to the public which remains open for acceptance for a specified period of time.
 

Invitation to offer

An invitation to offer precedes a formal offer and essentially is a call to the public at large to make an offer. A person making an invitation to offer seeks to encourage others to make offers which can then be negotiated to culminate in an offer which is accepted thereby creating a formal contract. The acceptance of an invitation to offer therefore leads to merely an offer but not a binding contract.
 

Difference between offer and invitation to offer

The following are the distinguishing characteristics of offer vis-à-vis invitation to offer:

1.    An offer signifies the inclination and preparedness of an individual to enter into a contractual relationship with another. Conversely, an invitation to offer indicates the mere interest a person exhibits to inviting individuals from the public at large to make an offer to such person.

2.    The significance these two concepts carry in the formation of an agreement is also different. Where an offer forms an integral element to constitute an agreement, invitation to offer does not carry any significance in this process and is not recognised till it fructifies in an offer.

3.    The acceptance of an offer leads to the formation of a defined contractual relationship, while on the other hand, an invitation to offer culminates in a defined offer, once acted upon by a person.

4.    The primary purpose behind making an offer is the will to enter into a contract and be governed by a contractual relationship. Conversely, the purpose behind making an invitation to offer is to invite willing parties to undertake negotiations on the basis of which a define offer can be received.

5.    The intention of a party making an offer is to enter into a binding legal relationship, whereas a party making an invitation to offer lacks such definite intention.

LawRato LawRato

65 votes

Differences between an Offer and an Invitation to Offer: The offer is a specific and clear proposal from one party to the other to enter into an legally binding contract. An invitation to offer (also known as an invitation treat) is an expression that you are willing to negotiate or to enter into contract.

Advocate Chikirsha Mohanty LawRato