Page 17 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes (d) Akbar, a creditor, offers not to file a suit against Begum, a debtor, if the latter pays
him the amount of ` 2000 outstanding. This is an offer by abstinence or omission to
do something.

1.5.2 Difference between Offer and Invitation to Offer

An offer is to be distinguished from an invitation to offer. A prospective shareholder by filling
up a share application form, usually attached to the prospectus, is making the offer. An auctioneer
at the time of auction inviting offers from the bidders is not making an offer. The price lists,
catalogues and inviting tenders and quotations are mere invitations to offer. Likewise a display
of goods with a price tag on them in a shop window is construed an invitation to offer and not
an offer to sell.

Example: In a departmental store, there is self-service. The customers pick up articles
and take to the cashier’s desk to pay. The customer’s action in picking up a particular article is an
offer to buy. As soon as the cashier accepts payment, a contract is entered into. However, there
are certain exceptions to this. Thus, where a store advertises that it will give a free gift or a
special discount to “the first 100 customers” or something like that, it may be anything that
requires special effort on the part of the customer. If so, the store has made an offer which he may
accept by being among the 100 customers. Similarly, sale promotion schemes requiring customers
to do anything special are offers.

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Caution Essentials of a Valid Offer
1. The terms of the offer must be definite, unambiguous and certain or capable of
being made certain. If the terms of the offer are loose, vague, ambiguous or uncertain,
it is not a valid offer.

2. An offeree must have knowledge of the offer before he can accept it. The offer must
be communicated to the other party. The communication of offer is complete only
when it comes to the knowledge of the offeree. If the offer is lost on the way in
transit it is no offer. This is true of specific as well as general offers.
3. An offer cannot contain a term the non-compliance of which may be assumed to
amount to acceptance. An offeror cannot say that if the offeree does not accept the
offer within two days the offer would be deemed to have been accepted. Such a
burden cannot be imposed on the offeree. It is for the offeree to accept the offer or
not; and therefore, he may communicate his acceptance accordingly.

4. If a person makes a statement without any intention of creating a binding obligation
this does not amount to an offer. It is only a mere declaration of intention to offer.
For example, An auctioneer, L, advertised that a sale of office furniture would take
place at a particular place on a stated day. H traveled down about 100 km. to attend
the sale but found the furniture was withdrawn from the sale. He claimed
compensation from the auctioneer. Held, that auctioneer was not liable.
5. Where two parties make identical offers to each other in ignorance of each other’s
offer this does not result in a contract. Such offers are known as cross offers and
neither of the two can be called an acceptance of the other.
6. The offer must be made with a view to obtain acceptance thereto.

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