A contract is the essence of a business, and to initiate a contract; there must be an offer. An offer is an invitation by a person to form a contract. Generally, an offer or proposal is a willingness of a person to do or to abstain from doing something. A person promises in exchange for a performance by another party.
An offer can be expressed in different ways and several forms. It may be expressed precisely into an oral statement, or it may be elucidated into writing. In the course of a valid contract, there must be an offer made by one party, it should be accepted by the other, and the consideration is exchanged. The person making the offer is called an 'offeror,' and the person to whom the offer is made is called the 'offeree.'
However, the person making an offer should be vigilant whether the offer has been communicated to the offeree. That must be reasonable enough to convince that an offer has been made. The Indian Contract Act, 1872 governs the law related to the contract.
Essentials of a Valid Offer
An offer can either be in writing or can be communicated orally to the offeree. However, mentioned are the requisites of a valid offer:
- Two parties
- Every proposal must be communicated
- It must create legal relations
- It must be certain and definite
- It may be general or specific
The above-mentioned can be explained as:
There must be at least two parties to initiate a contract. The offeror makes an offer to the offeree, and the offeree should accept the offer to initiate the contract. However, the offeror and the offeree may include a legal person and an artificial person as well.
Communication to an offer is essential for a valid offer. The intention of the offeror must be conveyed clearly to the offeree. The communication can be made either expressly or impliedly. However, the offeror proposes with the intent to get the accent of the offeree. The transmission is considered to be complete when the offeree is made aware of the offer. The offeree gives his assent once he is satisfied with the terms of the offer communicated by the offeror.
The offer, when accepted, must create a legal relationship between the parties. If it does not create a legal relationship, the offer made is not considered to be valid. However, a social invitation cannot be regarded as an offer because it does not create a legal relationship when accepted.
Certain and definite:
The offer to be a valid offer must be specific and definite. The terms and statement of the offer should be certain that there is no ambiguity in the meaning of the offer. It must be reasonable and definite at the same time. An uncertain statement in an offer may destroy the validity of the offer. Thus, the statement of the contract must be certain and definite.
Specific or general:
The offer may be specific to some person or a group of a person, i.ie., it shall only be accepted to those from whom it has been made. In case of a general offer, anyone from the public can accept it.
Types of offer
Following are the types of offers:
- Express Offer
- Implied Offer
- General Offer
- Specific Offer
- Cross Offer
- Counter Offer
- Standing Offer
The above-mentioned can be explained as:
Section 9 of the Act enumerates what promises are expressed and what is implied. In simple terms, if an offer is made in words, it is regarded as an expressed offer. Moreover, if that offer is made in expressed words, i.e., it is either spoken explicitly or written in a statement, the offer is an expressed offer.
The implied offers are those offers that are made otherwise than in words, i.e., such offers which are by action and intention of the parties considered as an offer. Therefore, in simpler terms, a contract entered into because of actions on the offeror's part may be an implied offer.
Suppose a person makes an offer to the public at large that any member of the public can accept and avail the right or the consideration from the person intending so. Such an offer is called a general offer.
An offer made to a specific person or a group of persons who can only accept the offer is called a specific offer. However, no person out of that specific group can accept the specified offer.
If two persons make the same offer at the same time, it is called a cross offer. This is possible in certain special circumstances. However, a cross offer does not mean that either party has accepted the offer.
If a person gives an offer as an answer to the initial offer made by the offeror, it is considered a counteroffer. In simple terms, the original offer has been revoked and replaced by a new offer. The offeree has three choices, i.e., to accept, refuse, or make a new offer.
The offers which are kept open for acceptance over a specific period is referred to as standing offer.
The Indian Contract Act, 1872 does not explicitly recognize the classification of the offer. Since the judgments make such bifurcation, the Indian and British Courts were adjudicating the matters according to the Common law system. It is necessary to classify the types of offers to prohibit irregular transactions. The Act does not even incorporate that the offer made compulsorily should be in writing. It can, however, be either in writing or stated orally. But in order to make one's side stronger and in a registered contract, the parties feel safe to offer in writing to maintain the records. This helps in avoiding legal lacunae post contract.
Author: Shweta Singh