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- 1 Definition
- 2 Meaning of Offer in Contracts
- 3 Legal Rules of a Valid Offer
- 3.1 Express or Implied
- 3.2 Capable of creating Legal Relations
- 3.3 Terms must be certain and not vague
- 3.4 Offer may be Specific or General
- 3.5 Must be communicated to the Offeree
- 3.6 Should not contain the term non-compliance would amount to acceptance
- 3.7 Can be subject to any terms or conditions
- 3.8 Offer different from Quotation or Invitation
- 3.9 Example
- 3.10 Two incidental cross offers does not make a contract
- 4 Revocation of an Offer
- 5 Communication of Offer
- 6 Related Topics
Black's Law Dictionary definition:
- A proposal
- A proposal to do a thing
- To bring to or before
- To present for acceptance or rejection
- To hold out or proffer
- To make a proposal to
- An act on the part of one person whereby he gives to another the legal power of creating the obligation called contract
Meaning of Offer in Contracts
An offer, as an element of a contract, is a proposal to make a contract. It must be made by the person who is to make the promise, and it must be made to the person to whom the promise is made.
It may be made either by words or by signs, either orally or in writing, and either personally or by a messenger; but in whatever way it is made, it is not in law an offer until it comes to the knowledge of the person to whom it is made.
An "offer" must be so definite in its terms, or require such definite terms in acceptance, that the promises and performances to be rendered by each party are reasonably certain.
Legal Rules of a Valid Offer
The following are the legal rules that make up a valid offer.
Express or Implied
An Offer may be made either by words or by conduct. If the Offer is expressed by use of words, either spoke or written, it is called a 'Express Offer'. If the offer is inferred by the conduct of a person, it is an 'Implied Offer'.
Capable of creating Legal Relations
An Offer should be capable of creating legal consequences. Hence, social or moral agreements are not a valid offer in a contract.
Example Case Laws
- Balfour vs. Balfour (1919)
- Simpkins Vs Pays
- Rose and Frank Co. vs. Crompton and Brothers Ltd. (1925)
- Affin Credit (Malaysia) Sdn Bhd v Yap Yuen Fui  1 MLJ 169
Terms must be certain and not vague
An offer is not a valid offer if the terms mentioned in the offer are not definite and certain. The offer must not be vague or ambiguous.
Example: An agreement to agree in future is not a contract.
Example Case Laws
- Taylor vs Portington, (1855)
Offer may be Specific or General
An offer may be specific or general. If the offer is made to an individual or a body of individuals it is called a specific offer. If the offer is made to an unascertained individual, it is a general offer. Jurist Salmond called specific offers as "offers to individuals" and general offers as "offers at large".
Example Case Laws
- Carlill vs. Carbolic Smoke Ball Co. (1893)
Must be communicated to the Offeree
An Offer is effective only if it is communicated to the Oferee.
Example Case Laws
- Lalman Shukla vs. Gouri Dutt (1913)
Should not contain the term non-compliance would amount to acceptance
The offer should not say that if acceptance is not communicated by a specified date the offer would be presumed to have been accepted. If the offeree does not reply, there is no contract.
Can be subject to any terms or conditions
An Offeror can prescribe the mode of acceptance to the offer. He can also make any number of terms or conditions in the offer. The offeree will have to accept all the terms of the offer in the mode prescribed in a contract.
Offer different from Quotation or Invitation
An "offer" is the final expression of willingness by the offerer to be bound by his offer. Sometimes a person may not offer to sell his goods, but make some statement or give some information with a view to inviting others to make offers on that basis.
Where a party, without expressing his final willingness proposes certain terms on which he is willing to negotiate, he does not make an offer but merely 'invites' the other party to make an offer on those terms.
- Harvey v Facey (1893)
- If a proposal is sent by a proposer asking for a higher price and also some advance with acceptance in response to a proposal to purchase his land, it was held that the proposer accepting the same along with an advance payment amounted to a contract, although the letter of acceptance came back being refused [Byomkesh v Nani Gopal].
- A book-seller sends catalogue of books indicating price of various books to many persons. This is an 'invitation to treat'. The interested part may make an offer and the book-seller may accept or reject the offer.
- An advertisement for bids / tenders are only 'invitation to offer the bid/tender constitutes the offer which can be accepted or rejected. A auctioneer is not bound to accept even the highest bid (offer). Where an auctioned sale was cancelled, the plaintiff cannot recover travel expenses as there was no contract. An offer can be withdrawn before it is accepted [Harris v Nickerson].
- A special discount by a shopkeeper is a "commercial puff' or an invitation to treat and not an offer. A banker’s catalogue of charges or a prospectus of a company inviting applications for job is also not an offer. A quotation of prices is not an offer. In Grainger & Sons v Gough, it was held that, "The transmission of a price list does not amount to an offer to supply an unlimited quantity of the wine described at the price named."
- In McPherson v Appana, it was held that mere statement of the lowest price at which the offerer would sell contains no implied contract to sell at that price to the person making the inquiry. The plaintiff offered to purchase the lodge owned by the defendant for Rupees 6,000. He wrote the defendant's agent asking whether his offer had been accepted and saying that he was prepared to accept any higher price if found reasonable. The agent replied, "Won't accept less than Rupees 10,000." The plaintiff accepted this and brought a suit for specific performance. Held that the defendant did not make any offer or counteir offer but was merely inviting offers. There was no assent to the plaintiff's offer to buy at Rupees and, therefore, no concluded contract.
- In Bank of India v OP Swarankar, it has been held that a contract of employment is governed by the Contract Act. Announcement of Voluntary Retirement Scheme by a nationalized bank is not an offer. The employee offering to retire makes an offer and the same becomes effective when the written request of retirement is accepted. An employee who has offered to retire under the scheme can withdraw before his request is accepted.
- In Ghaziabad Development Authority v UOI, the court observed that when a development authority announces a scheme for allotment of plots, the brochure issued by it for public information is an invitation to offer. Several members of public may make applications for availing benefit of the scheme. Such applications are offers. Some of the offers having been accepted subject to the rules of priority/preference laid down by the authority result into a contract between the applicant and the authority.
Two incidental cross offers does not make a contract
When two parties make offers to each other, the offers are known as cross offers. They do not constitute acceptance of one's offer by the other.
Revocation of an Offer
An Offer can be revoked any time before acceptance. If the offer is accepted, the offer can not me be made irrevocable. Section 5 of the Indian Contract Act, 1872 says a proposal may be revoked at any time before communication of its acceptance and is complete as against the proposer, but not afterwards.
According to section 4, if the communication of acceptance is sent by post, it is said to be complete as against the proposer when the letter of acceptance is posted.
An Offer lapses under the following circumstances.
- An Offer lapses after reasonable or stipulated time.
- An Offer lapses by not being accepted in the mode prescribed.
- An Offer lapses by revocation
- An Offer lapses by rejection
- An Offer lapses by death or insanity of the Offeror or Offeree.
- An Offer lapses by subsequent illegality or destruction of subject matter
- An Offer lapses by failure to fulfill conditions precedent to acceptance
Example Case Laws
- Rams Gate Victoria Hotel Co. vs Montefiore (1866)
- Dickinson vs. Dodds (1876)
- Reynolds vs. Athertion (1921)
Communication of Offer
The communication of offer is complete when it comes to the knowledge of the person to whom it is made.
Acceptance through Post
The offeror is bound by acceptance from the moment when the letter of acceptance is posted, although the letter is delayed or wholly lost through an accident in the post. However the letter of acceptance must be correctly addressed, properly stamped and actually posted. The Acceptor can revoke the acceptance by sending a telegram.
Acceptance over phone