8 CONTRACT

Offer and Invitation to treat (offer) distinguished

A proposal, oran ojertras to be distinguished from an invitation
to offer or treat..
Sometimes a person may not offer to sell his goods, but makes
some statement or gives some information with a view to inviting
others to make offers on that basis. For example, a book seller sends
catalogue of books indicating prices of various books to many
persons. This catalogue is not an offer to sell those books at prices
indicated against those books. This is an 'invitation to treat'. If any
person is interested in purchasing the book or books mentioned in
the catalogue, he may make an offer and the person circulating the
catalogue has a discretion to accept or not to accept the offer.
Likewise, inviting persons to an auction, where goods to be
auctioned are displayed, is not an offer for the sale of goods. The
offer is made by the intending buyers in the form of bid. Such an
offer (bid), when accepted by the fall of hammer or in some other
customary way, will result in a contract.
In the same way, the advertisement calling for tenders is not a
proposal or offer but merely an invitation to the contractors for
making an offer. The 'submission of a tender' is in the nature of an
offer. It will result in a contract only when the tender is accepted.
Making of the highest bid will not automatically.result in a contract.
The contract will arise only when the highest bid is accepted by the
competent authority and the said acceptance is communicated to the
tenderer2
Nobody is bound to accept an offer. An auctioneer, therefore,
may not accept even the highest bid (offer)3 An advertisement by
the auctioneer to sell goods by an auction being an invitation to
treat rather than an offer, he does not incur any liability by not
accepting the offer which is in the form of a bid. An auctignheer is
even free to cancel an auction sale announced by him. In Harrisv.
Nickerson. the defendant advertised a sale by auction. The plaintiff
travelled to the advertised place of auction to find that the defendant
had cancelled the auction sale. He brought an action against the
defendant to recover the expernses of his travel. It was held that he
was not entitled to the same as there was as yet no contract between
the two parties, which could make the defendant liable.
Display of goods either in a show-window or inside the shop
and such goods bear price-tags, would not amount to an offer to
1.2. See Section 64(2) of the Sale of Coods Act, 1930.
See Executive Engineer, Sundergarh v. M.P. Sahu, A.I.R. 1990 Orissa 26.
3. See
infra, 32.
(1873) L.R. 8 QB. 286.

Yashraj
 FORMATION OF CONTRACT 9
sell goods at prices mentioned on the price tags. It would be mere
invitation to treat. In Pharmaceutical Society of Great Britain v.
Boots Cash Chemists Ltd. it was held that if an intending buyer
was willing to purchase the goods at a price mentioned on the tag,
he could make an offer to buy the goods. The shopkeeper had the
option to accept the offer or reject the same. The contract would
arise only when the offer was accepted. No customer can force the
shopkeeper to sell the goods at the price mentioned on the tag. In
the instant case, the defendants were having the business of retail
sale of drugs. Medicines were displayed on the shelves and their
retail prices were also indicated. They had "self-service" system. On
entry into the shop a customer was given a wire basket. After
selecting the articles needed by a customer he could put them in the
basket and take them to the cash desk. The defendants had put a
registered pharmacist near the cash counter, who had been
authorised to stop any customer removing any drug from the
premises.
It was held that the display of articles, even on a "self-service"
basis was not an offer but was merely an invitation to treat. When
the-customer selected an article and brought the same to the cash
desk that amounted to an offer to buy the goods. The defendants
were, therefore, free to accept the offer or not. The following
observations of Lord Goddard, C.J? are worth noting
"I think that it is a well-established principle that the mere
exposure of goods for sale by a shopkeeper indicates to the
public that he is willing to treat but does not amount to an
offer to sell. I do not think I ought to hold that principle is
completely reversed merely because there is self-service
scheme, such as this, in operation. In my opinion, it comes
to no moe than that the customer is informed that he may
himself pick up an article and bring it to the shopkeeper
with a view to buying it, and if, but if, the shopkeeper then
the contract for sale is
expresses his willingness to sell,
completed. In fact, the offer is an offer to buy, and there is no
offer to sell; the customer brings the goods to the shopkeeper
to see whether he will sell or not. In 99 cases out of a 100
he will sell and, if so, he accepts the customer's offer, but
he need not do so. The very fact that the supervising
pharmacist is at the place where the money has to be paid
is an indication to the purchaser that the shopkeeper may
not be willing to complete a contract with anybody who may

1. (1952) 2 QB. 795.

2. Id., 801-802 (Emphasis added).

Yashraj
10 CONTRACT
bringthe goods to him."
Harvey v. Faceyl is an example where the quotation of the price

was held nOt to ve un ofjer.

The defendants in this case, were the owners of a plot of land
in
known as Bumper Hall Pen. The plaintiffs being interested
"Will you sell
purchasing the same sent a telegram to the defendants,defendantsin
us BumperHall Pen? Telegraph lowest cash price" The
reply telegraphed-
"Lowest price for Bumper HaH Pen, £ 900"
The plaintiffs sent another telegram to the defendants saying,
asked by you. Please
"We agree to buy Bumper Hall Pen for £ 900
send us your title-deeds."
The defendants refused to sell the land. In a suit, the plaintiffs
contended that the second telegram from the defendants quoting
had been accepted by the
lowest price was an offer and the same
The defendants, on the
plaintiffs, and the contract was complete. was not an offer which
other hand, contended that quoting the price
Committee of the Privy Council held
could be accepted. The Judicial
had not resulted in a
that exchange of the above stated telegrams
contract. It was observed that
the first telegram had asked two
one regarding willingness to sell, and the other regarding
questions, quoted, and this
the lowest price. In reply only lowest price was

not an offer. Thë third telegram from the

quoting of the price was
was only an offer and
not the
plaintiffs saying, "we agree to buy" there
Since this offer had not been accepted,
acceptance of an offer.
was no
contract between the parties.
binding
Pradesh,? the Divisional
In Badri Prasad v. State of Madhya
inform whether you
Forest Officer wrote to the plaintiff: "Kindly the contract of big
further Rs. 17,000 for
are ready to pay at present. The contract
can
trees...which (contract) is under dispute
be given to you on this compromise
only...On receipt of your reply
be informed."
the State Government will back
In reply to the above
letter the plaintiff wrote
have
"I am ready to pay Rs. 17,000
provided my claim to
paid, from the owner of the
the refund of Rs. 17,000 already
to the judgment of
or any other relief consequential
Village unaffected.Subject to those conditions
I
that case remains
in your referred letter."
shall pay Rs. 17,000 as required
no contract had
Court held that by those letters
The Supreme

1. (1893) A.C. 552. Mahabir Industries Pvt.

Also see Matanhella Brothers v.

2. A.ILR. 1970 S.C. 706.

91.
Ltd., A.L.R. 1970 Patna

Yashraj
 FORMATION OF CONTRACT 11

been concluded between the plaintiff and the Government. The letter
from the Divisional Forest Officer seemed to be merely invitation to
offer rather than offer. The letter in reply from the plaintiff was an
offer. It was further observed that even if the letter from the
Divisional Forest Officer to the plaintiff is treated as an offer, there
is no unconditional acceptance from the plaintiff and as such there
is no contract in any case.
The case of Mac Pherson v. Appanna' is another illustration of
an invitation to treat. The plaintiff having already offered to pay Rs.
6,000 to the defendant for his property, again wrote to the
defendant's agent asking whether his offer had been accepted and
also stating that he was willing to pay even higher price if found
reasonable. The defendant's agent replied that the defendant would
not accept less than Rs. 10,000. The plaintiff then wrote that he wvas
willing to pay Rs. 10,000. The plaintiff contended that the offer of
Rs. 10,000 had been accepted by him (the plaintiff) and sued for
specific performance of the contract. It was held that in this case the
letter from the defendant's agent was not a counter offer but was a
mere quotation
amounting to invitation to offer. The plaintiff's
willingness to pay Rs. 10,000 was an offer and since the same had
not yet been accepted, there was no binding contract between the
parties.
Special Voluntary retirement scheme.-Where the scheme is
statutory in character, its terms will prevail over the general
principles of contracts and the provision of the Contract Act, 1872.
Further, there will be no question of any "consideration" for the
condition in the Scheme that the employee will not withdraw from
the option exercised.
Subject to any challenge to the validity
of the
scheme itself, the terms of the scheme will be binding on
statutory
the employees concerned, and once the
option is exercised by an
employee to voluntary retire in terms of the Retirement Package
contained in the Scheme, the
employee will not be entitled to
withdraw from the exercise of the option, if theré is a bar
such withdrawal. The question, therefore, is against
5 of the S.V.R.S. contained in the Amendment
whether clause 4 of Para
Scheme of 2003 is void
and .whether Section 5 of the the Contract Act
which enables the
person making the offer, to withdraw the offer, any time before its
acceptance,would apply. The special
voluntary
the General Insurance (Rationalizationretirement
is a part of package
of Pay Scales and
Other Conditions of Service of
Development
Scheme, 2003, made by the Central Government Staff)
Amendment
in exercise of the
power under Sectio 17A of the General
Insurance Business
1. A.I.R. 1951 S.C. 184.

Yashraj
 12 CONTRACTH

(Nationalisation) Act, 1972. Section 17A authorizes and empowers

the Central Government, to frame, by notification published in the
official Gazette, one or more schemes for regulating the pay scales
and other terms and conditions of service of officers and other
employees of the Corporation or of any acquiring company
(including the appellant).
Sub-section (6) of Section 17A provides that
the provision of Section 17 and of any scheme framed under it shall
have effect notwithstanding anything to the contrary contained in
any other law or any agreement award or other instrument for the
time being in force. Therefore, the scheme is statutory in character.
Consequently, the provisions of the Scheme will prevail over the
provisions of Contract Act or any other law or any principle of
contract and having regard to the binding nature of the scheme, the
employee upon exercising the option, cannot withdraw from the
same.
In State Bank of Patiala v. Ramesh Chander Kanoji,? pursuant
to Voluntary Retirement Scheme (VRS) framed by the appellant bank,
the respondent employee made an offer by making an application
seeking voluntary retirement. In the scheme 15 days' time was given
to the employee to opt for the scheme. It was also provided that
application once made could not be withdrawn. Hence withdrawal,
after date of closure of Scheme, was not permissible. The Supreme
Court observed that as scheme was an invitation to offer and not an
offer and such Scheme being funded Scheme, employee if permitted
to withdraw at any time after closure, then in such event, al
calculations of management would fail3
Essentials of a valid acceptance
In order that acceptance of an offer
result in a contract, the
can
acceptance must satisfy the following requirements
Acceptance should be communicated by the offeree to the
offeror.
Acceptance should be absolute and unqualified.
Acceptance should be made in some usual and reasonable
manner, unless the proposal prescribes the manner of
acceptance.
Acceptance should be made while the offer is still
subsisting
 CONTRACTH

II. STANDARD FORM CONTRACTS

Due to enormous increase in the volunme and complexities of
trade and business, a business concern may have to enter into a large
number of contracts with its customers or clients. When a large
number of contracts have got to be entered into by a person, from
a practical point of view and for the sake of convenience, a standard
form for the numerous contracts may be used. The contfacts with
standard terms may be drafted by one party and on the same terms
contracts may be made with numerous persons. For instance, an
insurance company may prepare a draft of insurance policy, which
may form the basis of contract with a large number of insured
persons. Similarly, the railway authorities may print various terms
and conditions in the Time Table, which may be deemed to be the
basis of the contract with thousands of passengers who may be
travelling by rail everyday. In the same way, the same terms and
conditions may be printed on the back of every receipt issued by a
dry-cleaner, or every lottery ticket sold by any particular person or
institution. The contract in such a case is not made by the process
of negotiation, as regards its terms and conditions, between the two
parties. One of the parties generally prepares draft of the contract,
which the other party is enabled or made to, or sometimes even
deemed to, agree to. Such contracts have become quite common in
our everyday life.
When the terms of the contract are prepared beforehand by one
of the parties and the other party does not have much say in the
matter, and he, therefore, enters into the contract with those
pre-drafted terms, the question which may, in such a case, ariseis
as to how far such a contract is valid and binding. There is no legal
bar on such contract being entered into. If the contract has been
properly entered into with the free consent of both the parties, there
is full understanding of the terms of the contract, and there is no
attempt on the part of the one party to take an undue advantage at
the cost of the other, there would arise a valid contract.

Exclusion or Limitation of liability by one party

In standard form contracts, generally the terms of the contract
are pre-drafted by one of the parties and the other is
supposed ti sign
on the dotted line, without having any ime or opportunity to get the
terms changed. One of the parties being in a greater bargaining
position generally drafts the terms which suit him most, and at times
tries to exclude or limit his liability, without caring for the interest of
the other side, who is in a weaker bargaining position. In view of the
unequal bargaining power of the two parties, the courts and the

Yash
 FORMATION OF CONTRACT 61

legislature
have evolved certain rules o protect the interest of the
weaker r i y The same are being discussed here under.

1. There should be contractual document

The parties are bound if the terms are
contained in a contractual
document. In Chapelton v. Barry Urban District
been held that if the document is a mere Council, it has
a contract, the terms
receipt and
contained in such a document are not
does not create
In this case the
plaintiff hired a chair from the defendants to binding.
sit
a beach. He
paid the requisite charge, took one chair from a on
and also got a ticket from the
attendant. Without reading pile
written on the ticket he put that
into his anything
chair, he went through the canvas, as a pocket. As he sat on the
received personal injuries. In an consequence of which he
action by the
compensation for personal injuries, the defendants plaintiff to claim
exemption from liability because of the pleaded
printed on the ticket: "The council will following clause having been
or
damage arising from hire of chairs."not be liable for
It was held thàt
any accident
was no more than a this ticket
mere
exemption from liability onreceipt and the defendant
the basis of could not claim
2. There should be
anything printed on it.
Even if a
no
misrepresentation
person
there is found to be signs a
document containing certain
a
different oral terms but
contents of the
misrepresentation
one. In Curtis v. document, the document would not
about the
Chemical
delivered her white satin Cleaning and Dyeing Co.,2 Mrs.binding
be a

cleaning. She was asked to wedding dress to the Curtis

by the shop assistant that sign 'Receipt', and she was
a defendants for
printed on the receipt, theher signatures were needed orally told
responsibility for defendants did not because, as
damage
clause in the receipt which to beads and undertake any
for damage to the articles exempted the sequins. In fact, there
was a
thatwas not received for deterndants from liability
back it was disclosec-te-the plaintiff. When cleaning, however caused, but
as there badly stained. It was held the dress was
delivered
was by the Court of
misled the misrepresentation
plaintiff as to the
as to
the contractual Appeal that
liability, the
bound to paydefendants could not rely the
extent of
defendants'
.terms which
damages. on the exemption
clause and of
3. There they were
should be a
In order that
the
reasonable notice of the contractual
1.
(1940) 1 K.B.
532. terms of a contract terms
2.
(1951) 1 K.B. 805. become binding, all that

Yashr-
 *

62 CONTRACT
is necessary to draw the attention of the other party to those terms
should be done by the party who has pre-drafted the terms of the
contract. If the attention of a party to the contract has been drawn
to the terms of the contract by a sufficient notice, for example, by
printing on a ticket, "For conditions see back", or obtaining his
signatures on the document containing the terms, or otherwise
explaining the terms to him, there arises a binding contract as
regards such terms. If, on the other hand, reasonably sufficient notice
about the terms of the contract has not been given, there is no
binding contract as regards such terms.
In M/s Prakash Road Lines (P) Ltd. v. HM.T. Bearing Ltd., it
has been held that the carrier is bound to deliver the goods
consigned at the appointed destination or else he will be liable to
pay compensation for the same.
Merely printing on the lorry receipt that the goods are
transported at the owner's risk will not absolve the transporter from
his duty unless it is proved that such term was brought to the notice
of the plaintiff. Mere printing on the lorry receipt cannot be deemed
to be the term of the contract unless the plaintiff's knowledge and
the consent about the same is there.
4. Notice should be contemporaneous with the contract
If a party to the contract wants to have exemption from liability,
he must give a notice about the exemption while the contract is
beingentered into and not thereafter. If the contract has already been
entered into without the exemption clause, subsequent notice about
the exemption from liability will be ineffective. In Olley v.
Marlborough Court Ltd.,' the plaintiff and her husband hired a room
in the defendants' hotel and paid for one week's boarding and
lodgingin advance. When they went to occupy the room, they found
a notice displayed there which stated: "The proprietors will not hold
themselves responsible for articles lost or stolen, unless handed to
the manageress for safe custody." Due to the negligence of the hotel
staff, their property was stolen from the room. In an action against
the defendants to recover compensation for loss, they sought
exemption from liability on the basis of the notice displayed in the
room. It was held that the notice in the room did not form part of
the contract, and the defendants were, therefore, liable for the loss.

5. The terms of the contract should be reasonable

It is not enough that the terms of contract have been brought
to the knowledge of the other party by a sufficient notice before the
contract is entered into, it is also necessary that the terms of the
contract themselves should be reasonable. If the terms of the contract
are unreasonable and opposed to public policy, they will
not be
enforced merely because they were printed on the reverse of a bill
or a receipt or have been expressly or impliedly agreed upon
between the parties.
In Central Inland Water Transport Corporation Ltd. v. Brojo
of the clauses in contract of employment providedthat
Nath2 one a
of a
the employer (Corporation) could terminate the service
or 3 months'
permanent employee by giving him a 3 months' notice
of the
salary. In accordance with the above clause, the services
respondent Brojo Nath and another were terminated instantly by
1. (1949) 1 K.B. 532.
2. A.LR. 1986 S.C. 1571.

Yashra
 FORMATION OF CONTRACT 65

giving them the notice, accompanied by a cheque for 3 months'

salary. It was held bythe Supreme Court that such a clause in the
service agreement between persons having gross inequality of
bargaining power was wholly unreasonable and against public policy
and was therefore void under Section 23 of the Contract Act.
&Strictnterpretation of the exemption clause
Sometimes the courts have resorted to the device of strict
construction of the contract to give protection to the weaker
in cases where the parties to the contract do not party
have bargaining
equality or one of the parties is likely to have an undue advantage
at the cost of the other. This
may be illustrated by referring to the
case of Wallis v. Pratt.!
In that case there was sale
a
by sample
of the seeds described
as
"English sainfoin" by the respondents to the appellants. The
contract was made
subject to an exemption clause saying : "The
sellers give no warranty,
express or implied, as to growth,
description, or any other matters." The respondent supplied an
inferior quality of seeds known as "giant sainfoin". The two kinds
of the seeds were
indistinguishable and the fact could be known
only after the seeds were sown and the crop was ready. The
appellants, who had sold the seeds further, were forced to pay
compensation to their buyers and they in their turn brought an
action against the respondents to recover the
them. The respondents pleaded compensation paid by
of the clause in the
exemption from liability on the basis
agreement as stated above. It was held that there
was a breach of an
implied condition that the goods shall correspond
not only to sample but
must pay
description as well for which the respondents
compensation. It may be noted here that the exemption
clause had excluded liability for breach of
breach of conditions and in this case there was warranty and not for
breach of condition.

7. Eundamental Breach of Contract

Another device which has been adopted to the interest
1.
protect
(1911) AC. 394; Also see Andrews Bros. v.
Singer & Co., (1934) 1 K.B. 17.

Yashraj
 FORMATION OF CONTRACT
of the weaker of the'parties to the contract when have
they
unequal bargaining position, is to see that enforcing the terms of the
an

contract does not result in the fundamental breach of contract. In a

standard form contract it is likely that the party having a stronger
bargaining power may insert such exemption clause in the contract
that his duty to perform the main contractual
obligation is thereby
negatived. But the main obligation under the contract is not allowed
to be negatived by any term of the contract. No clause
is allowed to permit the
exemption
non-compliance of the basic contractual
obligation. If, for example, a contract said: "We will deliver your
goods: we promise to deliver your goods at such and such a place,
and in the condition in which we receive them but we are not
:
liable if they are lost or damaged from any cause whatsoever". That
is not in law a contract at all. It is illusory to say: "We promise to
do a thing, but are not liable if we do not do it"
Alexander v. Railway Executive? the plaintiff deposited his
luggage in the defendant's cloak-room and in return received a ticket.
A term printed on the ticket
exempted the defendant from liability
for loss or misdeliuery -of the
luggage. Plaintiff's luggage was
delivered to an unauthorized person without the production of the
ticket. It was held that non-delivery of the luggage to the plaintiff
amounted to fundamental breach of contract for which the defendant
was liable.
 8. Non-contractual Liability
In cases where more than one kind of liability arises, exclusion
of contractual liability may not negative any other kind of liability.
In White v. John Warrick and Co. Ltd.2 the plaintiff hired a
cycle
from the defendants under an agreement stipulating that "nothing
in this agreement shall render the owners liable for any personal
injury" While the plaintiff was riding the cycle, its saddle tilted
forward, as a consequence of which he was thrown and injured. In
an action by the plaintif the defendant pleaded non-liability on the
basis of the exemption clause. It was held that the exemption clause
excluded only contractual liability of the defendant, whereas they
still remained liable for negligence
under the law-of torts.
9. Liability towards third parties
If A and B enter into a contract under which B tries to exclude
his liability by an exemption clause, such a clause would not
exempt
any other person, say C,from liability because of the rule, that C is
a stranger to the coniract and he cannot take advantage of the
contract between A and B. Thus, +f a carrier, by an exemption clause,
excluded his liability, that does not mean that his servants will be
able to avoid their liability, if they are negligent."

1. Ganga Retreat & Towers Ltd. and another v. State of Rajasthan and others, 2004(2)
S.C.c.D. 578 (S.C.).
(1953) W.L.R. 1285: (1953) 2 All E.R. 1021
3. Adler v. Dickinson, (1955) 1 Q.B. 158.

Yashraj

70 CONTRACTH

In Morris v. C.W. Martin and Sons Ltd.,! the plaintiff gave her
fur garment to a furrier for cleaning. Since the furrier himself could
not do the job, he gave this gament to the defendant for cleaning,
with the consent of the plaintiff. The defendant's servant stole the
garment, for which the plaintiff brought an action against them. The
defendants sought exemption from liability on the basis of the
agreement between the plaintiff and the furrier. The defendants were
not allowed exemption and they were held liable.

10. Statutory Protection

Sothat one party cannot take undue advantage of the unequal
bargaining power of the other, exclusion of liability in many
situations has been barred by various statutes in England. Some
instances of such statutory provisions are as under
() The Misrepresentation Act, 1967 permits compensation
even for innocent misrepresentation. Prior to this Act, a
party to the contract could claim compensation under law
of torts only in case of fraud. Section 2 of the Act
recognizes liability even for innocent misrepresentation.
(ii) Road Traffic Act, 1960 makes any contract for the
conveyance of passengers in a public service vehicle,
which restricts or excludes liability for injury to a
passenger, void.
(i) Transport Act, 1962 debars Transport Boards from
excluding or restricting their liability towards their
passengers travelling on tickets, for death or injury caused
to them.
(iv) The Sale of Goods Act, 1979 imposes restrictions on the
right of the seller to exclude liability for implied
conditions and warranties. Liability for breach of implied
undertaking as to title cannot be excluded. In case of
consumer sales liability for breach of some other implied