What is an Offer?
In order to create a valid contract, there must be an offer. Where one party makes an offer and the another party must accept it, and the consideration must be exchanged. Therefore, the proposal or offer must be accepted to enter into an agreement.
One who makes an offer is called as "offerer/promisor" and who accepts or receives it is called as "offeree/promisee."
According to Section 2(a) of the Indian Contract Act, 1872
(a) 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.
According to Section 2(c) of the Indian Contract Act, 1872
(c) The person making the proposal is called the “promisor”, and the person accepting the proposal is called the “promisee.”
ESSENTIAL OF VALID OFFER:
- There must be two parties
- Must be communicated
- Intention to create Legal Relations
- Definite and certain terms
- Must be made with the purpose of obtaining the assent of other party
- Expressed or Implied
- It is not an invitation of offer
1. There must be two parties:
There have to be atleast two parties where one person makes an offer and other person accepts.
2. Must be communicated:
Communication of the proposal is mandatory. The offer must be communicated to the offeree or brought to their knowledge. Until the offeree becomes aware of the offer, it cannot be accepted. The communication can be made through various means, such as in writing, orally, or even through conduct. In the case of Lalman Shukla v. Gauri Dutt, it was decided that in order for a proposal to be considered a legal contract, it must be communicated to the parties involved. If they agree to the proposal's provisions, the parties can then reward each other.
3. Intention to create Legal Relations:
The offeror must intend to create a legally binding relationship by making the offer. It means that the offer must be serious and not just a mere expression of intention or an invitation to negotiate.
4. Definite and certain terms:
The offer must have clear, definite, and specific terms that leave no room for ambiguity. The terms should be precise enough to enable the offeree to understand what is being offered and what is expected in return.
5. Must be made with the purpose of obtaining the assent of other party:
When the offeree accepts the terms and conditions outlined in the offer can it turn into a legally binding contract. The offer is made by the offeror, and the contract is formed when the offeree agrees to it or accepts it.
6. Expressed or Implied:
An offer can be expressed or implied. An expressed offer is one that is explicitly and clearly stated, either orally or in writing. It may be in the form of a written contract, a letter, an email, or even a verbal statement. An implied offer arises when the offeror's actions, conduct, or circumstances reasonably indicate an intention to enter into a contract. In these cases, the offer is not expressly stated but can be inferred from the conduct or behavior of the offeror.
7. It is not an invitation of offer:
An invitation to treat is a preliminary stage in the formation of a contract where one party invites others to make an offer. It is not a binding offer but an invitation for others to enter into negotiations or make offers. On the other hand, an offer is a specific proposal made with the intention to create a legally binding contract upon acceptance.
CLASSIFICATION OF OFFER:
There are various kinds of offer or proposal under the Indian Contract Act, 1872. They are,
- Express offer
- Implied offer
- Specific offer
- General offer
- Cross offer
- Counter offer
- Standing offer
EXPRESS OFFER:
An express offer is made explicitly, either orally or in writing. It contains clear and definite terms that are capable of creating a binding contract once accepted. It can be made face-to-face or via telephone. The written offer can be made in the form of text messages, advertisements, letters, or emails.
IMPLIED OFFER:
An implied offer is not stated explicitly but is inferred from the conduct, actions, or circumstances of the parties involved. It implies an intention to enter into a contract. It may be implied from:
- Conduct of the parties
- Circumstances of the case
SPECIFIC OFFER:
A specific offer is made to a specific person or a group of persons. It is not intended to be open to the general public. Specific offer can be accepted only by that person to whom it is made. The offeror intends to create legal relations with the specific person(s) to whom the offer is made.
For Example, if A wants to buy a house from B, considering this is a specific offer only B can agree to this offer and not anyone else.
GENERAL OFFER:
A general offer is made to the public at large or a specific section of the public. It is intended to be open for acceptance by anyone who fulfills the conditions specified in the offer.
A classic example of a general offer is the "Carlil vs. Carbolic Smoke Ball Company.".
Case Facts:
The Carbolic Smoke Ball Company manufactured and sold a product called the "Carbolic Smoke Ball," which they claimed could prevent influenza and similar diseases. They published advertisements in newspapers, offering a reward of £100 to anyone who contracted influenza after using their smoke ball as instructed for a specified period. The advertisement also mentioned that they had deposited £1,000 in a bank to show their sincerity in fulfilling the offer.
Mrs. Carlill, a customer, purchased and used the smoke ball as instructed but still contracted influenza. She sued the company to claim the £100 reward mentioned in the advertisement.
Judgement:
The court ruled in favor of Mrs. Carlill based on the principle of general offer. The rule of a general offer states that an offer made to the public or a specific group of people can be accepted by anyone who fulfills the conditions specified in the offer.
CROSS OFFER:
A cross offer occurs when two parties independently make identical offers to each other without knowledge of the other's offer. Since the parties are making offers and not accepting them, no contract is formed until one party communicates acceptance to the other.
The well-known case of "Tinn V. Hoffman" helps explain the idea of a cross offer in detail.
Case Facts:
In the case of Tinn v. Hoffman, the defendant proposed to the petitioner to sell 800 tonnes of iron for 69 cents a tonne. The petitioner simultaneously made an offer to the defendant to buy the same amount of iron from him for the same price.
Judgement:
The court determined that because these cross offers were made side by side and neither party was aware of them, the parties were not obligated to uphold the contract. Cross offers cannot be seen as any sort of acceptance between parties. Therefore, neither side would experience a binding consequence.
COUNTER OFFER:
A counter offer is made in response to an original offer and introduces new terms or conditions. It amounts to a rejection of the original offer and acts as a new offer. The original offeror can accept, reject, or make a counter offer in response to the counter offer.
For Example, A offers B a house for 15 Lakhs, B agrees to buy the house for 10 Lakhs, this amounts to a counter offer and would mean the rejection of the original offer.
STANDING OFFER/ OPEN OFFER:
A standing offer is an offer that remains open for a specified period, allowing the offeree to accept it at any time during that period. The offeror is obligated to fulfill the terms of the offer if the offeree accepts within the specified time.
Once the other party accepts the offer, a standing or open contract is deemed to have been concluded. A tender, which is nothing more than an offer, serves as the best illustration of a standing or open offer.
