In the formation of a contract, the essential requirement is that there should be a consensus between the contracting parties by means of offer & acceptance. There must be a definite offer by one party to the other and an unqualified acceptance by the other party. Here you will know the offer in contract law in detail.
Table of Contents
Relevant Provisions:
Sections 2(a), 2(b), 3, 4, 5, 6, 7, and 9 of the Contract Act, 1872.
Definitions of Offer in Contract Law:
(i) Black’s Law Dictionary:
“An offer something referred. An offer by one person to another of terms and conditions with reference to some work or understanding or for the transfer of property.”
(ii) Oxford Dictionary:
“Presents for acceptance or refusal or consideration.”
(iii) Statutory definition:
According to Contract Act 1872; under section 2(a) “When one person signifies to another his willingness to do or abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make an offer.”
Example:
A says to B, “Will you buy my Motorcycle for 50,000(Or $300)?
Here A makes an offer to B signifying his willingness to sell his Motorcycle to B for Rs.50,000(Or $300) with a view to obtaining B’s assent to buy the Motorcycle.
Ingredient of Offer in Contract Law:
(i) Declaration of willingness:
To constitute a valid offer the person making it must declare his willingness to do or abstain from doing an act. Without this willingness which extends to almost being a request, an offer is not complete, thus an offer is considered to be so The Contract Act, 1872, under Section 2(a), only if the person making it manifests his willingness to do or abstain from doing something.
(ii) Clear and Certain terms:
An offer must contain clear and certain terms laid down by the offeror. If an offer contains uncertain or ambiguous terms which do not express clearly the offeror’s intentions and desires then it can not be considered a valid offer.
(iii) Intention to obtain the Assent:
An important ingredient/element of a valid offer is that it should be made with the intention of obtaining the assent of the other party i.e. the party to whom the offer is being made.
(iv) Intention to create Legal obligation:
An offer must be made with the intention to create a legal obligation. If an offer is made without any intention of entering into a legal relationship with the other party, it would not be a valid offer in the eye of the law.
Examples:
(a) A offers B to have dinner with him, which B accepts. This is not an offer made to enter into a legal relationship.
(b) A offers to sell his Motorcycle to B for Rs.50000(or $300). He is making an offer with the intention of entering into a legal relationship and having legal obligations.
Willing is to be bound in respect of doing anything or abstinence to be anything:
Willing to offer always contains two types of expressions. It may contain an expression of doing something or sometimes it shows an expression of abstinence. It necessarily looks to the future. By the offer the person making it expresses his intention that something shall be done or shall not be done, or shall happen or shell not happen, if the offer is accepted. In this sense, an offer contains a promise.
Explanation of Section 2(A), Contract Act, 1872:
An offer in contract law is also known as a proposal, an offer is where one person declares another’s assent. To constitute an offer there must be an expression of a request beyond another that he is willing to do or abstain from doing a certain act with the desire to obtain the mere willingness. The words used must be distinguishable from a simple invitation, and obligation. This means that an offer should be made with the view that if and when it is accepted, it would become a promise; the breach of which would lead to legal consequences.
EXAMPLES OF OFFERS:
- When ‘A’ calls ‘B’ over the telephone and tells him that he is willing to sell his Motorcycle for Rs.50000/, he is making an offer.
- When ‘M’ tells his friend ‘N’ that he is willing to sell his table for Rs.2000/ he is making an offer to ‘N’.
Offeror or Promisor and Offeree or Promisee:
According to section 2(a) of the Contract Act 1872, the person who makes the offer is called the offeror or promiser, and the person to whom the offer is being made is called the offeree or promisee.
Kinds/Types of Offer in Contract Law:
There or two types/kinds of offers in contract law.
(i) Specific offer/proposal:
When an offer is made to a specified person or group of persons it is called a “specific offer”. Such an offer can be accepted only by the person or persons to whom it is made.
Examples:
A offers to sell his house to B for Rs.10000. Only B can accept this offer, it is a specific offer.
(ii) General offer/proposal:
A general offer is one which is made to the public in general and it may be accepted by any person who fulfils the conditions.
Examples:
A announces on TV a reward of Rs.5000/ for anyone who will return his lost golden watch. It is a general offer.
Communication of Offer in Contract Law:
To make an agreement valid, it is necessary that the offer be communicated. Secret intention is immaterial and only overt acts are considered in the determination of mutual assent. The fundamental basis of the agreement is reliance on a manifestation of willingness to some act or abstinence.
Modes/Ways for Communication of Offer in Contract Law:
According to section 3 of the Contract Act 1872, an offer may be communicated in any way that has the effect of laying before the offeree the willingness to do or abstain.
Generally, there are two ways of communicating the proposal/offer.
(i) By Words:
“An offer may be expressed by words, written or Spoken, such an offer is called an “express offer”.
(ii) By Conduct:
An offer can be expressed effectively by conduct as well because “words are not the only medium of expression. The conduct may often convey as clearly as words a promise or an assent to a proposed promise.” The offer expressed by conduct is called an “Implied offer”.
Communication of Offer, When Complete:
According to Section 4, of the Contract Act 1872;
“The communication of an offer is complete when it comes to the knowledge of the person to whom it is made.”
Example:
‘A’ proposes by a letter to sell his house to ‘B’ at a certain price. The communication of the offer is not complete when ‘B’ receives the letter, it is not complete even if ‘B’ opens the letter, rather it completes when he reads the letter and it comes to the knowledge of ‘B’ that ‘A’ has offered him for something.
Revocation of Offer in Contract Law:
(i) According to Black’s Law Dictionary:
Revocation is defined as; “The withdrawal by the offeree of an offer that had been valid until withdrawn.”
(ii) According to Merriam-Webster Dictionary:
A revocation may be defined as; an “Actor instance of annulling by recalling or taking back.”
(iii) Statutory Definition Section 5 of Contract Act, 1872:
“An offer may be revoked anytime before the communication of its acceptance is complete as against the proposer, but not afterward.”
Communication of Acceptance:
Now the question arises when the communication of acceptance is complete as against the proposer. This will be answered by Section 4 which states; “communication of acceptance is complete as against proposer when it is put in course of transmission to him, so as to be out of the power of the acceptor.
Explanation:
The section says that an offer can be revoked by the proposer before the communication of its acceptance is complete against him. When the communication of acceptance is complete as against the proposer? According to the contract act when the notification of acceptance of the offer (by the acceptor) is put in the course of transmission to the proposer, the communication of acceptance is complete. Thus an offer can be revoked by the proposer before the acceptor puts the notice of his acceptance of the offer in the course of transmission to him. Once the acceptor has dispatched his acceptance revocation of the offer cannot be made.
Example:
A sends a letter to B proposing to sell his house. B accepts this offer and sends a letter of acceptance to A. A may revoke his offer any time before B posts his letter, but not afterward.
Communication of Revocation:
For revocation of an offer to be effective, its communication should be completed before the acceptance is made by the proposee.
Modes/Ways of Revocation:
Under Section 6 of the Contract Act, 1872:
Section 6 declares how an offer can be revoked. An offer comes to an end in any of the following ways.
(i) Notice of Revocation:
Offeror can revoke his offer at any time by sending a notice of revocation to the offeree, before its acceptance.
(ii) By Lapse of Time:
When the offer states that it is open up to a particular date, the offer terminates on the date if it is not accepted within that time. If the offer does not specify the time limit, it will terminate after the lapse of a reasonable time depending upon the circumstances of each case.
(iii) Failure to fulfill the Conditions:
An offer stands revoked if the offeree fails to fulfill the conditions given therein. In such cases, there is no right of acceptance until the condition precedent is followed or fulfilled.
(iv) Counter Offer:
When an offer is accepted with some modification in terms of the offer, such acceptance is called a counteroffer. An offer may be revoked by the offeree by making the counteroffer.
(v) Death or Insanity of Either Party:
If the offeror dies or becomes out of mind( before the acceptance, the offer is revoked, provided that the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. If the person to whom the offer is made dies before the acceptance of the offer, the offer will come to amend. But if he dies after the acceptance of the offer, his legal representatives will be responsible for the contract.
(vi) Destruction of Subject Matter:
Performance of the contract may become impossible because of the destruction of the subject matter.
(vii) Subsequent illegality:
An offer lapses if it becomes illegal due to a changing of law after it is made and before its acceptance by the offeree.
Example:
An offer is made to sell 15 bags of sugar for Rs. 3500/- and before it is accepted a law prohibiting the sale of sugar by private individuals is enacted; the offer comes to an end and sale would be illegal on promulgation of the new law.
Frequently Asked Questions (FAQs):
An offer in contract law is a clear and definite proposal that forms a legally binding agreement. It must demonstrate an intention to create legal relations and can be revoked unless certain conditions are met. Understanding offers is important for clarity and protection in contractual agreements.
In contract law, the offeror is the party that initiates negotiations by presenting a proposal to the offeree. The offeror must clearly communicate their intentions and include all essential terms in the offer. The offeree can accept, reject, or propose changes to the offer, which may require negotiation. Understanding the role of the offeror is important for business transactions and legal matters.
An offer in contract law is when a seller advertises a product or a company sends out a job advertisement with specific terms and conditions. The seller or company is making an offer, which can be accepted by the buyer or job applicant. The offer must be clear, definite, and effectively communicated, and acceptance must meet certain requirements.