Types Of Offer In Business law

In the realm of business law, understanding the types of offer is pivotal for grasping the foundation of contracts and legal agreements. An offer represents a formal proposal by one party to another, indicating their intent to create a binding contract under specific terms. Offers are the cornerstone of contractual relationships and vary based on their nature, mode of communication, and parties involved.

This blog delves into the diverse types of offer in business law, such as express offers, implied offers, general offers, specific offers, cross offers, counteroffers, and standing offers.

What is Offer in Business Law?

In business law, an offer is a formal proposal made by one party (the offeror) to another party (the offeree), signifying their willingness to enter into a legally binding agreement on specified terms. The offer must be communicated clearly and explicitly, leaving no ambiguity about the intention to create legal obligations.

Let’s understand this by an example:

Amit asks Sumit if he is interested in buying his house. Here, Amit is making an offer to Sumit. Now, Sumit agrees to buy the house or not, an offer has not been made. If he accepts the offer, it may convert into an agreement.

Essentials Of An Offer

For a valid offer, the following essentials must be satisfied:

1. Clear terms: An offer must state in clear and definite terms what it is offering. If you have two black bikes and you have made an offer to W to sell your black motorcycle. The offer is void as it is confusing.
2. Intention: An offer must specify the intent to be bound by it legally.
3. Communication: Communication must be made with the person to whom an offer has been given. If you go to a market and say to no one in particular that you want to sell your black bike, then it is not a valid offer.

Parties Involved In An Offer

There are two parties involved in an offer. The person who makes an offer is called the offeree or promisor, and the person to whom the offer is made is called the promisee or offeree.

Types Of Offers

Here is a brief explanation of the different kinds of offers:

1. Express Offer

An express offer is an offer that is made explicitly to another person. It uses clear terms and is properly communicated using words. It can be either written or oral. There is no assumption or implication about the terms of the offer. The terms are laid clearly before the person whose acceptance is sought. If Amit tells Sumit that he will sell his house to him for Rs. 1 Lakh, this is an express offer.

2. Implied Offer

Opposite to the above, an implied offer isn't made out clearly in words. Words do not directly communicate it. This has to be assumed or implied from the actions or conduct of the parties.

For example, if you go to a restaurant and order food. There is an implied offer from the restaurant to feed you. Similarly, if you go to a bus stand, there is an implied offer that they will take you to your desired destination.

Also Read : Does My Offer Have To Be In Writing?

3. General Offer

An offer that is not made to a particular person by people in general is termed a general offer. It is made for the general public and can be accepted by anyone.

Let’s say Sachin loses his dog, and he offers a reward of Rs. 10,000 to its finder. This is a general offer. It's not aimed at a specific person but at everyone.

The case of Carlill vs. Carbolic Smoke Ball Co. (1892) explains the concept of a general offer.

The facts are that the company advertised that if someone takes their medicine and still gets influenza or a cold, they will pay £100. To show that they were serious, they also mentioned that they had £1000 in their bank account. Ms. Carlill used their medicine but was still infected. So, she claimed the amount from the company.

The case reached the courts. The company defended that they made no offer to Mrs. Carlill and they had no intent to enter into a legal agreement.

The Court held the company liable on the ground that in the case of general offers, express communication to a particular person is not required.

In India, the landmark case of Lalman Shukla vs. Gauri Dutt (1913) dealt with this concept. The facts were that Guari's nephew was lost, and they put up an advertisement stating that anyone who helped bring the boy back would be rewarded. Lalman Shulka was already searching for the boy but did not know that the family had made an offer for a reward the family had made.

It was held that it wasn't a valid offer as communication of the offer was never made to Lalman.

4. Specific Offer

On the other hand, if an offer is made to a specific person, it becomes a particular offer. If Anu gives Manu an offer to sell her painting or if Vishal offers to perform a song for Karan, these are both specific offers. They are not meant for the general public or particular persons.

5. Cross Offer

As described well in its name, cross offers are similar offers that cross each other. These are identical offers made to the other person when the offeror is unaware of the existence of the other offer. But in this case, both the offers cross each other out. So, there is no offer at the end and no ultimate acceptance.

To illustrate, Anita offers to sell her car to Bunny for Rs. 5 Lakh. Bunny also offers to buy her car for the same amount. These are cross-offers and do not form acceptance.

In the case of Tinn vs. Hoffman (1873), H offered to sell 800 tonnes of iron to T at a specific price. At the same time, T also made the same offer to H. These are called cross offers, as both offers were made independently of each other. The other party accepted no offer, so no contract was formed.

6. Counter Offer

An offer that is made to the offeree offering a change in terms and conditions of the initial offer is a counteroffer. Its effect is to reject the initial offer and propose another one in its place.

From the above example, Anita offers to sell her car to Bunny for Rs. 5 Lakh. But Bunny proposes that he would pay Rs. 3 Lakh for it. This is a counteroffer. It does away with the initial offer.

The case of Hyde vs. Wrench (1840) is a case in point. W made an offer to H to buy his farm for £1000. He rejected it and quoted £950. Then, H accepts the offer at the original price. But this was not a valid contract, as, after the original offer, a counteroffer was made, which negates the previous offer.

7. Standing Offer

A standing offer is an offer that can be accepted for a time duration. It stands for a longer period than usual. Mohit offers to sell his crops to Rohit whenever he requires them. This will be a standing offer.

Conclusion

In conclusion, an offer is a crucial element in forming a contract, as it sets the foundation for mutual consent. The various types of offers In business law—such as express, implied, general, specific, cross, counter, and standing offers—illustrate the diverse ways in which offers can be made and accepted. Understanding the essential elements of an offer, such as clear terms, intent, and communication, is vital to ensure that any agreement formed is valid and enforceable. The cases discussed highlight the nuances of how offers work and how they may be interpreted by courts. Ultimately, a well-defined offer ensures clarity between the parties and is essential for establishing a legally binding agreement.

Frequently Asked Questions (FAQs)

Here are some frequently asked questions (FAQs) to clarify key concepts and provide further understanding of the different types of offers in contract law.

Q1. What is an offer in contract law?

An offer is a proposal made by one party to another to enter into an agreement. It must be clear, definite, and communicated to the other party to be valid.

Q2. What is the difference between an express and an implied offer?

An express offer is explicitly stated in words, either written or oral, while an implied offer is suggested through the actions or conduct of the parties, even without words.

Q3. Can a general offer be accepted by anyone?

Yes, a general offer is made to the public at large, and any person who fulfills the conditions of the offer can accept it, as demonstrated in the Carlill vs. Carbolic Smoke Ball Co. case.

Q4. What is a counteroffer and how does it affect the original offer?

A counteroffer is a response to an initial offer with changed terms. It negates the original offer and replaces it with a new offer. It must be accepted by the original offeror to create a contract.

Q5. What is a standing offer?

A standing offer is an offer made for a specific duration or repeated occasions. It remains open for acceptance over time, like a supplier offering goods to a buyer whenever needed.