Solved Problem (INDIAN CONTRACT ACT)

About the Author

Sandra Hanjo is a 4th semester Three Year LLB student of Govt Law College Trivandrum. Member of Munsiff Magistrate Exam training program

‘A’ sends a price list of goods to ‘B’ on the latter’s request. ‘B’ places an order on dealer ‘A’ for the goods specified in the price list on prices quoted in the said list. ‘A’ did not execute the order for supply. What is ‘B’s remedy, if any ?

FACTS OF THE CASE

‘A’ sends a price list of goods to ‘B’ on the latter’s request.‘B’ places an order on dealer ‘A’ for the goods specified in the price list on prices quoted in the said list. A’ did not execute the order for supply.
ISSUES
(1) Whether it is an offer or invitation to offer?
(2) Is there any remedy available to B?
REASON
The principles of Indian Contract Act, relevant here are :
a)Offer is distinguished from Invitation to offer.
b)It is only when an offer is accepted it becomes a promise. Offer, therefore has to be distinguished from invitation to offer.

Invitation to offer is not defined in the Indian Contract Act, 1872. An Invitation to treat or an invitation to bargain is a concept in the law of contracts which has been derived from a Latin phrase “invitation ad offerendum”, meaning “inviting an offer”. In the words of professor Andrew Burrows, an invitation to treat means: “…an expression of willingness to negotiate. A person making an invitation to treat does not intend to be bound as soon as it is accepted by the person to whom the statement is addressed.”
Eg:
(i) A book seller sending a catalogue of his books with price mentioned therein, it is not an offer
it is in fact an invitation to other to make offer upon the price mentioned in catalogue.
(ii) Goods displayed in a departmental store with price chit is only an invitation to offer. Customer who carry any goods from store to purchase makes an offer. Section 2(a) of Indian Contract Act defines ‘Proposal’ or ‘Offer’ as: “When one person signifies to another his willingness to do or abstain from doing with a view to obtaining assent of that another to such act or abstinence, is said to make proposal.”

Similarly when an “offer” as defined under Section 2(a) of the Act is made by one person to
other, it by itself does not create a contract unless such offer is accepted and communication of
such acceptance is not complete. Section 2(b) of the Act reads as under: “When the person to whom proposal is made, signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted becomes promise.” So it is only when an offer is lawfully accepted, it ripes into a binding agreement between parties.

Case Laws
Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern)Ltd: (1953, 1 Q.B
401)
The court held that when a shopkeeper displays goods in a shop window or even puts them out
on shelves in a self service store, that it is to be construed as an invitation to treat and not as an
offer to sell. When a customer picks up an article in a “self service” and takes it to the cashier’s
desk to pay for it, his action cannot be said to be an acceptance of an offer to sell but it is an offer to buy which the shopkeeper my or may not accept.
Gibson v. Manchester City Council: (1979, 1 All E.R 972)
The House of Lords brought out the distinction between offer and invitation to treat in the
following facts: In September 1970 the council adopted a policy of selling the council houses to the councils tenants. In February 1971 the City Treasurer wrote a letter to Gibson stating that the council “may be prepared to sell the house to you at £ 2180”, inviting him to make a formal application which he did. Normally this would have been followed by exchange of formal contracts. But in May 1971 the control of the council changed hands as a result of fresh elections. Gibson claimed that a binding contract had come into existence. But the House of Lords held that the letter of February was most an invitation to treat and Gibson’s application was an offer for an acceptance.
Badri Prasad v. State of Madhya Pradesh: (1966 AIR 58)
The D.F.O wrote to the plaintiff “ Kindly inform whether you are ready to pay Rs 17000 for the
contract to fell trees in Sunderpani village”. The reply was, “I am ready to pay Rs 17000 provided my claim to have the refund of Rs 17000 already remains unaffected”. The Supreme Court held that the first letter was an invitation for offer.
DECISION
Therefore, in this case where `A’ sent a price list of goods to B, in strict sense of law it is not an
offer but is infact an invitation to B to make an offer and it is only when B places order to A for
goods specified in the price list, is an offer or proposal. Upon such offer it is the will of A to
accept or reject the offer. Therefore, here A not supplying the goods to B implies that A had not