This article is written by Navya Jain. This article discusses the case of the Pharmaceutical Society of Great Britain vs. M/s Boots Cash Chemists (Southern) Ltd. The article concerns itself with the detailed facts of the case, issues raised, the legal concepts which are involved in the case, the judgement along with the rationale behind the judgement and analysis of the case. The article indulges into the meaning and essentials of offer as a prerequisite of constituting an agreement. Thereafter it explains the distinction between offer and invitation to offer. It also illustrates the distinction with the help of various cases. It educates the reader about various types of offers and how each one of them varies with the aid of illustrations.
Table of Contents
Introduction
Contracts and contractual relations are deeply embedded in society. Indian Contract Act, 1872, (hereinafter mentioned as “the Contract Act”) is the governing law for all the contractual relations in India. This Act is based on the principles of English common law. This Act lays the framework governing different types of contracts such as those related to sale, breach of contracts etc.
An offer is the first step towards creation of a legal relation, it is important to understand the nature of the offer. Sometimes, a statement may appear to be an offer, but on the contrary it is actually just an informative statement made with the intent of dispensing information towards the targeted audience. Thus, it becomes crucial to be able to distinguish between an offer and an invitation to offer.
The case at hand is squarely concerned with the concept of offer and invitation to offer. With the detailed analysis of the case, we shall learn to distinguish between an offer and an invitation to offer. The case discusses how Lord Justice Somervell, Lord Justice Birkett, Lord Justice Romer iterated the essentials of an invitation to offer. Apart from that we shall also examine the concept with the help of the Indian counterpart wherein we discuss the concerning provisions as well as detailed case laws. We shall observe that the Indian counterpart concedes with the English counterpart in this context.
Details of the case
Plaintiff: Pharmaceutical Society of Great Britain
Defendant: M/s Boots Cash Chemists (Southern) Ltd.
Court: Court of Appeal (UK)
Bench: Lord Justice Somervell, Lord Justice Birkett, Lord Justice Romer
Date: 5th february 1953
Citation: [1953] 1 QB 401
Facts of the case
The case arose as a matter of appeal from the former bench. The matter concerns one of the basic tenets of the contractual law, i.e., offer and acceptance. The plaintiff, Pharmaceutical Society of Great Britain was established under the aegis of the Royal Charter whose main duty was to ensure the sale of the poisons as per the Pharmacy and Poisons Act, 1933 (hereinafter referred to as the ‘Act’). The defendant, Boots Cash Chemists (Southern) Ltd. carried on a retail business of selling drugs at their shop premises.
Self service system was introduced in the store. The drugs, along with their prices, were displayed on the shelves and customers were permitted to pick the drugs of their choice off the shelves directly. Having chosen the desired products, the customer could take it to the billing counter and have it billed. The counter was supervised by a registered pharmacist, who had the authority to refrain any customer from removing any drug from the premises, if deemed fit.
However, the customers were unaware of the existent authorization. With this factual background in mind, a sale was effected on 13th April, 1951. The sale consisted of two drugs which were duly purchased following the ‘self service system’ illustrated above established by the defendants. The said drugs consisted of certain poisons the sale of which was considered to be unlawful under Section 18(1)(a)(iii) of the Act, unless it is effectuated by, or under the supervision of the registered pharmacist.
As per Section 25 the Act, it is the duty of the Pharmaceutical Society of Great Britain to enforce Part I of the Act dealing with the status of the registered pharmacist and secure compliance of the provisions related to the registered pharmacist. Part II of the Act refrains the sale of the poisons mentioned under Part I unless it is sold by an authorised seller or the sale is effectuated under the supervision of the registered pharmacist. The Pharmaceutical Society of Great Britain objected to this new system of self service. The Trial Court’s decision was in favour of the defendant so the Society preferred an appeal.
Issues raised
The questions for consideration before the Bench is as follows:
- Whether the aforementioned transaction is considered to be effectuated under the supervision of the registered pharmacist?
- When is the sale of the product considered to be completed? Whether it is before or after the prospective customer has paid the money after having the product scrutinised by the pharmacist?
Arguments
Arguments advanced by the plaintiff
The plaintiff argued that the purchase is said to be complete when the customer places the product into his/her basket after taking the tour of the available options. It was argued that the displaying of goods was an offer and a customer, upon choosing a drug, accepts the offer. It was also pointed out that the defendant had violated Section 18 (1) of the Act as there was lack of supervision by the Chemist (defendant). They further argued that the lower court refused to indulge with the question whether or in what circumstances, the registered pharmacist would have the power to refuse the sale of the drug.
Arguments advanced by the defendant
The defendants argued that the sale is said to be executed only when the payment is made at the counter. As for the role of the pharmacist, the pharmacist is required to supervise the sale of the drug at the counter at the time of billing and the same was present at the time of alleged incident.
Judgement of the case
The Hon’ble Court did not find any merit in the said appeal and dismissed it. Lord Justice Somervell conceded with Lord Chief Justice’s reasoning in the former petition. In the opinion of Lord Justice Somervell, the drugs in question are not dangerous drugs which cannot be obtained without a doctor’s prescription. These drugs contain very small proportions of poison. Moreover, many of them also contain instructions as to appropriate dosage as well. While evaluating the question regarding the completion of the purchase, Lord Sommerville opined that a purchase is not considered to be complete until the customer expresses intents to purchase the product and the same is met by the shopkeeper or someone on his/her behalf. He concludes that the self service system is mainly devised for the convenience of the customers to facilitate them in choosing and substituting their products conveniently.
Similarly, Lord Justice Birkett opined that there is not much difference in the nature of transaction just because it is a self service store. Every product that the customer picks up off the rack is an offer by the customer to buy. As per the opinion of Justice Birkett, the sale was duly made under the supervision of the registered pharmacist.
Lord Justice Romer, refused to accept the argument that any and every article picked up by the customer would turn into an effective sale. In such a scenario, the customer would never be able to exchange any article before billing it. Hence, the court failed to find any merit in the arguments of the defendant, thereby dismissing the appeal.
Rationale behind this judgement
All three judges gave their independent yet concurring opinion with respect to the concerned questions. All the judges examined the question of invitation to customers and opined that the sale is not completed until the shopkeeper, seller, someone on behalf of the seller accepts the offer. Until or unless the customer has not paid for the product, it is not possible to conclude that the sale has been completed. Neither can such a product be substituted or replaced with the other product. A sale is not deemed to be effectuated until the buyer’s offer to buy is executed with the payment of sum due against the product.
The Court of Appeal held that it would be wrong to conclude that merely picking up an article from the shelf is capable of compelling the customer to pay for the same. Picking up a product from the shelf and placing it in the basket merely means that the customer is interested in purchasing the product. It is absolutely up to the will of the customer to retain it in the basket or substitute it with another product. Up until the payment is made, it is merely considered an offer on behalf of the customer to purchase the product. It is only when the payment is made and accepted, only then the sale shall be deemed to be completed.
Applying the principle enunciated above, in the case at hand, the sale was deemed to be effectuated only after the payment. With respect to the involvement of the pharmacist, it was concluded that the above transaction was rightfully concluded under the supervision of the registered pharmacist.
Thus, the appeal was dismissed with cost.
Analysis of Pharmaceutical Society of Great Britain vs. Boots Cash Chemists (Southern) Ltd. (1953)
The stepping stone for any contractual agreement is making a proposal/offer. Every agreement is based on certain basic elements, such as a valid offer, its acceptance, capacity to contract and legal consideration for the same. A contract must be made for a legally enforceable intent. It must be entered into by the competent parties for a lawful object. The competent parties must give their consent in order to enter into a valid agreement. Such consent should be free, voluntary, devoid of any form of coercion, undue influence, misrepresentation, mistake of fact, or law. In any case where either of these given elements are missing, such an agreement shall not be considered to be a valid agreement.
The case at hand succinctly illustrates the difference between offer and invitation to offer. This can be observed in several cases. For instance in Harvey Anor vs. Facey & Ors (1893) where the plaintiff telegraphed the defendant seeking “will you sell us the Bumper Hall Pen? Telegram the lowest price.” In response, when the defendant communicated the price to the plaintiff, stating “Lowest price for Bumper Hall pen, £900,” it was deemed that this was not an offer made by the defendant. The telegram only solicited the defendant’s response with respect to their intent to sell it. The resultant response by the defendant was merely an answer to the query and not an offer per se. Thus, the court concluded that there was no valid contract between both parties.
Another notable case in this context is the famous Carlil vs. Carbolic Smoke Ball Company [1893] 1 QB 256, wherein the defendant company issued an advertisement stating that it would reward the person who would catch influenza even after using their medicine as per the prescribed instructions. Mrs. Carlil, the plaintiff, used the medicines as per instructions, caught influenza, and thereby sued the company. The defendant argued that the plaintiff had not communicated the acceptance of the offer; thus, there was no valid contract between the parties. In this context, the court clarified that the advertisement by the defendant company was a general offer and not an invitation to offer.
Hence, when the plaintiff purchased the medicine and consumed it as per the prescribed directions, the offer was considered to be accepted. Thereby creating a valid contract between both parties. The fact that the plaintiff suffered from influenza even after using the medicines as per the directions makes the defendants liable for compensation.
A clear distinction between offer and invitation to offer was demarcated by the House of Lords in the case of Gibson vs. Manchester City Council [1979] UKHL 6. As per the factual matrix, the City Council was selling the council houses under a policy. Plaintiff also applied for a house under the policy seeking details of price and the mortgage term. He received a response from the Corporation stating, “The corporation may be prepared to sell the house to you..”. Resultantly, Gibson completed the application and sought possession.
However, due to a change in the ruling party, the contract could not be executed. So, Gibson sued the council stating that there was a valid contract between the two. The House of Lords rejected the argument, stating that the corporation had merely made an invitation to offer. It was the plaintiff who made the offer by filing the application which was yet to be accepted. Hence, the council was not in breach of any contract.
Understanding offer and invitation to offer in Contract Law
Section 2(a) of Indian Contract Act, 1872
The case revolves around the concept of an offer/ proposal as an essential prerequisite for any contract. The term “proposal” has been defined in the Section 2(a) of the Contract Act, it refers to the expression of willingness of one person to do or abstain from doing something and seeking consent of the opposite party to concede with the same. When such a proposal becomes accepted by the party to whom the proposal is made, it then becomes a promise. The person who makes the proposal is called the promisor, and the person who accepts the promise is called the promisee. Some of the key considerations for a valid offer are as follows:
Offer must be made for a lawful object
For every promise made, it must be backed by a lawful object and consideration, for it to become a valid agreement. It means that the contract must not be forbidden by law or defeat any provision of law. Neither should it involve or imply to injure any person or property of another. The agreement immoral in nature or against public policy shall also be deemed void.
Offer must be made for a lawful consideration
By lawful consideration, it means that the consideration must be clear, certain and definite. Uncertainty or indefiniteness in terms of consideration shall invalidate the agreement.
Intent to create legal relations
An offer or a proposal cannot be regarded as a valid offer unless it is specifically intended to create legal relations.
Offer must be clearly worded
The offer must be definite and clearly worded. Vague or loosely worded offers will lead to invalidation of the agreement. The offer must be clearly and completely communicated to the party to whom it is made.
Offer must not contain such a term that requires non compliance
As an essential ingredient to form a valid offer, it is desirable that the offer must not comprise a term or a condition requiring negative action or non compliance to communicate acceptance of the offer. For instance, A makes an offer to B stating that “I shall sell my house to you for Rs.4000 if you fail to reply to the offer.” in this scenario, A is demanding B to make a negative action so as to communicate acceptance of the offer. This shall invalidate the offer.
Types of offers
There are various types of offers. Each type of offer varies on the basis of the terms and conditions specified in the offer. Let us examine these forms of offers:
Express offer
Section 9 of the Contract Act defines the meaning of express offer. An express offer means an offer made in words or through word of mouth. For example: Ram writes a letter to Jagmohan proposing to sell his car for Rs.1,00,000. This is an express offer.
Implied offer
Implied offer means an offer which is communicated not by words but with the help of some action or fulfilment of some condition. For instance: Ram writes a letter to Jagmohan proposing to sell his car for Rs.1,00,000 stating “ send us your further queries, should you be interested in the deal.”
Specific offer
It refers to an offer which is particularly made to a specific person. Thus, in order to convert it into a valid agreement, the offer must be accepted by the same person. For instance: The offer made by Ram to Jagmohan is an ideal example of a specific offer since it is specifically addressed to Jagmohan.
Cross Offer
It refers to the circumstance where the two parties make identical offers to each other without having knowledge of the opposite party’s offer. For instance: Meanwhile Jagmohan makes an identical offer to Ram regarding sale of Ram’s car for Rs. 1,00,000.
Counter offer
It refers to an offer made in return to the original offer with modified terms and conditions. The intent behind such an offer is to seek bargain in the original terms and conditions. For instance: Jagmohan makes a counter offer to Ram to reduce the selling price to Rs. 80,000.
General offer
It refers to the offer made to the public at large. Thus anybody aware of the offer may accept the offer by fulfilling the given terms and conditions. For instance: Ram issues an advertisement in the newspaper, inviting the interested buyers to purchase his car for Rs.1,00,000.
Invitation to offer
An invitation to offer is simply an offer to invite an offer. For instance, in the case of Badri Prasad vs. State of Madhya Pradesh (1970) the appellant had entered into a contract to cut trees with some specification. Subsequently, after the enforcement of Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950 the appellant refrained from chopping certain types of trees. After due negotiation, the divisional forest officer wrote to appellant asking “kindly inform whether you are ready to pay further Rs. 17,000 for the contract of big tree..” the court considered this to be an invitation to offer.
Auctions
The proposition of invitation to offer can also be observed in auctions. An auction is nothing but sale of goods or property, whereby the interested buyers openly bid for the same, raising their offer. The auctioneer communicates his/her acceptance by knocking the hammer. A similar situation was observed in Payne vs. Cave (1789) 3 TR 148, wherein the defendant made the highest bid in an auction but withdrew it before the knock of the hammer. The court concluded that the auctioneer’s request for bids is an invitation to treat, whereas each bid submitted constitutes an offer. Until the knock of the hammer, the offer is not considered to be accepted.
With that being said, in the case of Harris vs. Nickerson (1873) LR 8 QB 286 the court has clarified that an advertisement to auction is just an invitation to offer and does not bind the auctioneer in any form of legal contract. Therefore, when the plaintiff filed a suit against the defendant claiming recovery of travelling expenses, the court refused to impose any liability upon the defendants.
Difference between offer and invitation to offer
Let us quickly examine some distinction between an offer and invitation to offer
| Offer | Invitation to offer | |
| Meaning | An offer is a wilful intent of the party to establish legal relations between the two. | An invitation to offer involves inviting the interested parties to make an offer. |
| Definition | The term is explained and defined under Section 2(a), Indian Contract Act, 1872. | The term is not defined anywhere in the Act. |
| Validity | An offer is required to formulate a valid agreement. | An invitation to offer does not constitute a valid agreement. |
| Acceptance | Once accepted, it gives birth to a valid agreement. | Acceptance of invitation to offer merely becomes an offer. |
| Effect | It becomes legally binding as soon as it is accepted by the parties. | Mere acceptance does not attract bindingness. |
| To whom can be made | It is extended to a specific person/ party. | It can be extended to a group or people at mass. |
| Negotiation | It is not open to negotiation unless specifically stated otherwise. | An invitation to offer is an indication of willingness to negotiate. |
| Example | Example: A buyer expressing his/her interest in purchasing the product after shortlisting it from the manufacturer’s catalogue. | Example: A manufacturer displaying his goods in the form of a catalogue along with prices. |
Conclusion
The concept of offer and invitation to offer squarely applies in our daily lives. Thus, it becomes crucial to understand the key differences between the two. Shopping at a store where the products are on a display with their price tags can be considered as an invitation to offer. It means that the shopkeeper is inviting the prospective buyers to purchase the products by paying for the same at the billing counter. Similarly, online shopping also works with the same mechanism. Advertisements in the newspaper, tenders issued in newspapers, sale/rent/purchase advertisements in papers etc are all based on the concept of invitation to offer.
After the case analysis, we can successfully distinguish between an offer and an invitation to offer. Offer and invitation appear to be similar, but there is a slight difference between the two of them. One has to clearly examine the words of the statement constituting the offer to understand whether it is an offer or an invitation to offer. A valid proposal and acceptance of the same creates a binding obligation upon both the parties. Thus, failure to honour the commitment may attract legal actions in form of suit or compensation.
On the contrary, an invitation to offer does not create any legal consequence or legal relationship between the parties. In the case of invitation to offer, the parties possess an intent to create a legal relation, however such an intent is subject to certain qualifications. Unless such qualifications are fulfilled, it does not constitute a contract. On that note, it is imperative for the parties to be cautious while examining the offer and invitation to offer, in order to avoid unnecessary litigation.
References
- https://egyankosh.ac.in/bitstream/123456789/13367/1/Unit-2.pdf.
- http://student.manupatra.com/Academic/Studentmodules/Judgments/2022/June/MANU_UKWA_0122_1953.pdf.
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