WHETHER THE AUTOMATIC

VENDING MACHINES OR SELF-

SERVICE PETROL STATIONS
MAKE OFFER OR INVITATION TO
OFFER?

HARSHIT JAIN
BBA-LLB (Hons) First Year
BENNETT UNIVERSITY, GREATER NOIDA
 ACKNOWLEDGEMENTS

The success and final outcome of this assignment required a lot of guidance and assistance and I was
extremely fortunate to have my Professors. Mr. Vikas Kathuria and Ms. Garima Tiwari for providing an
insight in the topic and guiding me all through the Research. I express my gratitude to them.
I would also like to express my special thanks to Mr. V.C Vivekanandan, Dean, School of Law, Bennett
University for providing me with ample resources for completion of my research.

1
 INTRODUCTION

The paper aims to provide an insight into the contractual relationships which have risen after the progress
in technology leading to development of machines which operates self, providing the goods to the customer
and fetching the money. The Contractual Relations made by the Automatic Vending Machines are not clear
in nature. There’s a confusion and difference of opinion regarding the nature of Contractual Relationship
made by such machines, that whether these machines make (i) Offer or (ii) Invitation to Offer. This Research
Paper helped to clear this confusion with the help of case laws and books. We finally reached to the
conclusion that nature of the Contractual Relationships made by the Automatic Vending Machines is that
they make an Offer.
What are Automatic Vending Machines?
Automatic Vending Machines are those self-operated machines which provide the consumer with goods
such as tickets, eatables, cigarettes, contraceptives etc without the need of an intermediary like a shopkeeper.
Such machines contain the goods in them that are withdrawn when one inserts the required money or kind.
These machines are easily visible in shopping malls, metro stations, airports and other such places.
According to Collins, an automatic vending machine is “a machine that automatically dispenses goods, such
as cigarettes, when money is inserted.”1

What is an Offer or Proposal?

In the Indian Contract Act, the word ‘Proposal’ is used for ‘Offer’ that may be used interchangeably and can
have contextual meaning. Section 2(a) of the Indian Contract Act, 1872 defines ‘Offer’ or ‘Proposal, as
“When one person signifies to another his willingness to do or to abstain from doing anything, with a view
to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.”2 In simple
words an individual is said to have made an offer when he implies to another his status to do or to abstain
from doing anything with a the purpose of getting the assent of that other to such act or abstinence. An
‘Offer’ may be Specific (to a particular person) or General (to public at large). An ‘offer’ is different from
‘invitation to offer’.

What is an Invitation to Offer?

An invitation to Offer is an intention towards a contract. It is not an Offer. “An invitation to offer is an act
precedent to making an offer.”3 It is generally made to attract the offeror to make the offer. For example, if a
commodity is placed in a store for sale, the customer tends to pick that commodity and go to the billing
counter to make an offer to the cashier there enquiring whether he will sell this commodity to him. This
implies that displaying the commodity in the store is an intention to enter into a contract by the store
making it an invitation to offer. In this case when the customer goes to the cashier for getting it billed and
making offer for sale [OR PURCHASE?] the cashier could say no to the offer. It gives rise to an offer and
invitation to offer cannot be accepted itself. In invitation to offer there is no willingness to be accepted per
se. It is cannot capable of being accepted as it is not an offer, but only an invite to make an offer.
1
Collin’s Dictionary, (17th edition 2014)
2
Indian Contract Act § 2(a) [1872]
3
The Institute of Chartered Accountants of India, ‘The Indian Contract Act, 1872’,
<http://www.icaiknowledgegateway.org/littledms/folder1/chapter-1-the-indian-contract-act-1872-2.pdf>
2
What is the difference between ‘Offer’ and ‘Invitation to Offer’?
First and most basic Difference is that Invitation to Offer is an intention towards the contract and is the
preliminary act to obtain an offer from the other party, whereas when an offer is made, it can be accepted,
unless there is a counter offer. An offer becomes an agreement when accepted, whereas invitation to offer
cannot be accepted, it can give rise to an offer. Once an offer is made, the ball is in the court of the offeree,
if the offeree accepts the offer then it cannot be revoked by the offeror, but there is no such condition in the
case of Invitation to Offer. Offer does gives rise to Legal consequences whereas Invitation to Offer does not
rise to any legal consequence.

3
 STATEMENT OF ISSUE
WHETHER THE AUTOMATIC VENDING MACHINES OR SELF-SERVICE PETROL PUMPS MAKE
OFFER OR INVITATION TO OFFER?

4
 DISCUSSION

There’s a heated discussion about whether the automatic vending machines make offer or invitation to offer.
Some scholars suggest that an automatic vending machine is just like a store where commodities are lying,
and the consumer comes make an offer to the machine by inserting the required money or swiping the card,
and then the machine accepts the offer and gives down the required commodity out to the consumer. Other
theory on this is that the Automatic Vending Machines make an offer of a general kind as they are willing to
give away the commodities stored in them once the consumer pays the desired amount to the machine i.e. he
fulfils the conditions of the general offer.

As the world advances in technology, the Indian Contract Act, which was formed in 1872 didn’t have the
provisions regarding such kinds of machines. It therefore requires the intellect of the jurists and experts to
deliberate and solve this dilemma. Judgments are therefore, the most important source of law in this regard.
The landmark judgment “THORNTON v. SHOE LANE PARKING LTD. (1971)”4 deals with such an issue.
In this case, Thornton drove his car to a car park. Outside the car park “Shoe Lane Parking”, the prices were
displayed, and a notice stated cars were parked at their owner’s risk. An automatic ticket machine provided a
ticket, a barrier was raised, and Thornton parked his car. In small print on the ticket it was stated to be issued
subject to conditions displayed on the premises. On a pillar opposite the machine was a notice stating the
owners would not be liable for any injuries occurring on their premises. Thornton had an accident and
sought damages from Shoe Lane Parking.
The question before the court was -
1. Whether the term was incorporated into the contract that had the defendant brought it to the attention
of the claimant before or at the time the contract was made. This question depended upon where the
offer and acceptance took place in relation to the machine, whether the machine made the offer and
hence its acceptance made the contract?
2. Whether the nature of ticket being automatically dispensed matters?
In this case, Lord Denning stated that the contract came into existence before the party who was subject to
the conditions was informed of the same. Shoe Lane Parking did not make Thornton aware about the terms
and conditions before entering into the contract that is before taking the ticket of the parking through the
Automatic Vending Machine placed outside the Parking.
Coming to second issue, Lord Denning stated that this case is distinguished from the earlier cases of such
kind as in this case ticket was dispensed by an automatic machine and not any person where there is no
chance of getting the conditions, accept or reject them, get back the money already paid. There is no scope
for such an interaction that would have been possible if there was a person vending the tickets.
Here, only when the ticket is purchased, the terms and conditions could be seen, i.e. after the when the
money has been paid, and further that now it cannot be returned. Therefore, when the ticket was dispensed a
contract was already formed.

The Court held that,

4
Thornton v. Shoe Lane Parking Ltd. [1971] 2 QB 163
5
 “We have been referred to the ticket cases of former times from Parker v. The South Eastern Railway
Co. (1877 2 C.P.D. 4l6) to McCutcheon v. MacBrayne Ltd. (1964 1 WLR 125). They were concerned
with railways, steamships and cloakrooms where booking clerks issued tickets to customers who took
them away without reading them. In those cases, the issue of the ticket was regarded as an offer by
the company. If the customer took it and retained it without objection, his act was regarded as
an acceptance of the offer: see Watkins v. Rymill (1883) 10 Q.B.D. at page 188; Thompson v. L.M.S.,
(1930) 1 K.B. at page 47. These cases were based on the theory that the customer, on being handed
the ticket, could refuse it and decline to enter into a contract on those terms. He could ask for his
money back. That theory was, of course, a fiction. No customer in a thousand ever read the
conditions. If he had stopped to do so, he would have missed the train or the boat. 5

After mentioning these previous decisions, the court noted that none of those cases have any application to a
ticket which is issued by an automatic machine since here the customer pays his money and gets a ticket that
he cannot subsequently refuse to take.

The court discussed that,

“He cannot get his money back. He may protest to the machine, even swear at it. But it will remain
unmoved. He is committed beyond recall. He was committed at the very moment when he put his
money into the machine. The contract was concluded at that time. It can be translated into offer and
acceptance in this way: the offer is made when the proprietor of the machine holds it out as being
ready to receive the money. The acceptance takes place when the customer puts his money into the
slot. The terms of the offer are contained in the notice placed on or near the machine stating what is
offered for the money. The customer is bound by those terms as long as they are sufficiently brought
to his notice before-hand, but not otherwise. He is not bound by the terms printed on the ticket if they
differ from the notice, because the ticket comes too late. The contract has already been made:
see Olley v. Maryborough Court (1949 1 K.B. 532). The ticket is no more than a voucher or receipt
for the money that has been paid (as in the deckchair case, Chapelton v. Barry U.D.C. ...1940 1 K.B.
532), on terms which have been offered and accepted before the ticket is issued.”6

The ratio in this case was that in case of Automatic Vending Machines, they make offer and the contract is
formed when the consumer inserts the money and fetches the product. Any condition laid down after that
would be of no importance as the contract is already made.

In the case Re Charge Card Services Ltd.7, the petrol filled from self-service petrol pumps and payment
through card was considered as a contract, offer made by the self-service petrol station and acceptance was
made when the consumer filled the petrol and paid the money through card. As Poole notes, “Here Lord
Denning MR analysed automatic machines, e.g. Vending machines, as constituting standing offers on the
basis that as soon as the machine was activated there was no possibility of negotiation. The ‘standing offer’
approach also enables commercial sense to be realised by accepting the conclusion that, in a self- service
petrol station, the customer accepts the garage’s offer by putting petrol into the vehicle’s petrol tank and is
therefore liable to pay the amount shown on the pump: Re Charge Card Services Ltd. (No. 2) [1989] Ch.
497.”8

This could further be explained by this paragraph of the book Purchasing Contracts by Graham Fuller -

“Normally, the display of goods for the purpose of sale is not an offer to sell. It is regarded as an
invitation to treat – it is the buyer who makes the offer which the seller is free to accept or reject.
But, with an automatic vending machine, the seller has organised himself so that he does not have

5
Thornton v. Shoe Lane Parking Ltd. [1971] 2 QB 163 [7-8]
6
Thornton v. Shoe Lane Parking Ltd. [1971] 2 QB 163 [7-8]
7
Re Charge Card Services Ltd. (No. 2) [1989] Ch. 497
8
Jill Poole, Textbook on Contract Law, § 43 (13th edn, OUP 2016)
6
 the ability to refuse to sell and accordingly the only sensible analysis is that the seller makes the
offer by making the machine available for sales. The machine, on its owner’s behalf, is making a
standing offer to sell to anyone who chooses to accept that offer.”9

9
Graham Fuller, Purchasing Contracts: A Practical Guide, § 180 (2nd edn, 2010)
7
 CONCLUSION

Therefore, the existing jurisprudence and scholarly discussion points largely to the conclusion that
the automatic self-dispensing machines make an “Offer” and not an “Invitation to Offer” since there
is no scope of negotiation, rejection, or getting the terms and conditions. There is no scope of any
counter offer. Once, the amount is paid to the machine it cannot be derived back and the product
would be dispensed, therefore, such machines make Offer and the Consumer by inserting the Money
accepts the Offer.

8
 REFERENCES

1. Indian Contract Act, 1872

2. The Institute of Chartered Accountants of India,
http://www.icaiknowledgegateway.org/littledms/folder1/chapter-1-the-indian-contract-act-1872-
2.pdf
3. Collin’s Dictionary, (17th edition, 2014)
4. Jill Poole, Textbook on Contract Law, (13th edn, OUP 2016)
5. Graham Fuller, Purchasing Contracts: A Practical Guide, (2nd edn, Spiramus Press 2010)
6. Mindy Chen-Wishart, Contract Law, (2nd edn, OUP 2016)
7. England and Wales Court of Appeal (Civil Division) Decisions,
http://www.bailii.org/ew/cases/EWCA/Civ/1970/2.html
8. Swarb, http://swarb.co.uk/in-re-charge-card-services-ltd-chd-1987-2/