Edited by- Vaani Garg
A contract means an agreement which is enforceable by law. An agreement consists of reciprocal promises between the two parties. The two parties may agree to something through mutual negotiations. When one party makes an offer and the other accepts the same, there arises an agreement which may be enforceable by law.
An agreement between the parties is one of the essentials for creating a contract. An agreement arises by an ‘offer’ or proposal by one of the parties and the acceptance of such offer but the other party.
What is an ‘Offer’?
The term ‘proposal’ has been defined in Section 2(a) of The Indian Contract Act, 1872 as follows –
“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” The term ‘proposal’ used in the Indian Contract Act, 1872 is synonymous with the term ‘offer’ used in English law.
The person who is making the proposal is called the offeror. The person to whom the proposal is made is known as the offeree.
The various forms of offer are listed below :
Ingredients for Valid Offer:
- There must be two parties – In order to make a valid offer, there have to be two parties; one who is making the proposal and the other party to whom the proposal is made.
- Every proposal must be communicated : Section 4 of the Indian Contract Act, 1872 says that, “the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made”. Thus, it follows that an offer can not be accepted until and unless it has been brought to the knowledge of the person to whom it is made.
- Intention to create a legal Relationship : It is necessary that an offer should be made with an intention to create a legal relationship. Promise in case of social engagements is generally without an intention to create legal relationship. An agreement to go for a walk, to go to a movie , to play some game cannot be enforced in court of law.
- Certainty of offer : The terms of the offer should be definite and certain. It should not be vague.
For example, A cannot be said to make an offer to B unless A brings the offer to the knowledge of B. B cannot be said to have accepted the offer, even if he acts according to the terms of the offer . Thus, acting in ignorance of the offer does not amount to acceptance of the offer.
Types of Offer :
- Express Offer – Section 9 of the Indian Contract Act, 1872 says –
In so far as the proposal or acceptance of any promise is made in words, the promise is said to be expressed.
Example :- When A tells to B, “ will you purchase my house for Rs. 5,00,000?”
- Implied Offer – An offer made otherwise than in words, is said to be an Implied offer . It is an offer inferred from the conduct of the party.
Example:- A bid at an auction is implied offer.
- Cross Offer – When the parties to the contract accept each other’s offer in ignorance of the original offer, it is known as the cross offer.
Example :- X and Y both send mail to each other offering to sell and buy Y’s bike at the same time. This is cross offer made where one party needs to accept the offer of another.
- Counter Offer – This is another type of offer in which the offeree does not accept the original offer, but after modifying the terms and conditions accept it, it is termed as a counter offer.
- Specific Offer – An offer made to a specific or an ascertain person is known as specific offer and can be accepted by same person.
Example :- A offers to sell his car to B . Thus, a specific offer is made to a specific person and only B can accept the offer.
- General Offer – An offer made to a public at large is known as general offer. The person who accepts this offer by performing the condition of the offer, can bind the person making the proposal.
Example :- An offer to give reward to anybody who finds a lost dog.
- Standing offer: An offer which is made to public as a whole and it remains open for a specific period for acceptance it is known as Standing offer.
Example :- An offer to supply 1,000 bags of wheat from 1st January to 31st December, in accordance with the orders which may be placed from time to time, is a standing offer.
Termination of an offer
- Revocation of the offer by an offeror – The offeror needs to communicate their intention to reject the offer to the offeree. Revocation of offer is effective only when the offeree comes to know about the rejection.
- Counter offer by an offeree – When offeree modifies the offer by putting his own terms and condition, then it is not viewed as an acceptance.
- Lapse of time – The offeree generally has a specific amount of period to accept the offer. The amount of time may vary according to their contract.
- Death or disability of either party – When the offeree is dead before accepting the offer, the offer is generally terminated.
- Illegality – The offeree can no longer accept the offer when the performance of contract becomes illegal.