This article is written by Samarth Suri, from Symbiosis Law School, Noida.
Table of Contents
An offer is the first step in the formation of a contract, it marks the beginning of contractual obligation between the parties. As is a known fact that Acceptance can only be made to a prior offer, an offer is essential for the formation of a contract.
An offer is defined under Section 2(a) of The Indian Contract Act (hereinafter, ICA) as:
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 words Proposal and Offer can be used interchangeably for Brevity. The person who makes the promise is called the “Promisor”, and the person to whom the offer is made is called the “Promisee”. From the definition itself, it can be construed that an offer can be both positive as well as negative, i.e.- the doing of an act as well as the “not doing” of an act.
Types of Offer
An offer can be of many types, ranging across the spectrum. There are basically 7 kinds of offers:
- Express offer
- Implied offer
- General offer
- Specific Offer
- Cross Offer
- Counter Offer
- Standing Offer
Express offer and Implied offer
Section 9 of The ICA defines both of them as: In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such a proposal or acceptance is made otherwise than in words, the promise is said to be implied.
Therefore, any offer that is made with words, it may be regarded as express. Any promise that is made otherwise than in words is implied. A bid at an auction is an example of an Implied offer. A case in this regard is Upton-on-Servern RDC v. Powell, wherein the defendant called a fire brigade assuming that those services would be free to him, however it was found that his Farm did not come under that of Upton. The court held that the truth of the matter is that the Defendant wanted the services of Upton, he asked for the services of Upton and in response to that they offered their services and they were rendered on an implied promise to pay for them.
In Ramji Dayawala & Sons (p) Ltd v. Invest Import, a case between an Indian and Yugoslavian party the notice for revocation of an arbitration clause in the contract between the parties was made by the Indian party, to which the other party gave no reply. It was held that this would amount to an implied acceptance i.e.- the arbitration clause was deleted from the contract, and a suit would lie in the court of law. Similarly entering into an omnibus also amounts to implied acceptance, same as consuming edibles at a self-service restaurant. Therefore in simpler terms a contract that is entered into because of actions on the offerors part, may be referred to as an implied offer, any contract entered into otherwise is an express offer.
A General Offer is an offer that is made to the world at large. The genesis of a General Offer came about from the Landmark case of Carlill v. Carbolic Smoke Ball Co. A company by the name Carbolic Smoke Ball offered through an Advertisement to pay 100 Pounds to anyone who would contract increasing epidemic Influenza, colds or any disease caused by cold after taking its Medicine according to the prescribed instructions. It was also added that 1000 Pounds have been deposited in Alliance bank showing our sincerity in the matter. One customer Mrs Carlill used the medicine and still contracted Influenza and hence sued the company for the reward. The Defendants gave the argument that the offer was not made with an intention to enter into a legally binding agreement, rather was only to Puff the sales of the company. Moreover, they also contended that an offer needs to be made to a specific person, and here the offer was not to any specific person and hence they are not obliged to the Plaintiff.
Setting aside the arguments of the Defendant, the bench stated that in cases of such offers i.e- general offers, there is no need for communication of acceptance, anyone who performs the conditions of the contract is said to have communicated his/her acceptance, and moreover, the money deposited by the Defendant in Alliance Bank clearly shows that they intended to create a legally binding relationship. Hence the Plaintiff was awarded with the amount. An Indian authority in this regard is Lalman Shukla v. Gauri Dutt, wherein a servant was sent by his master to trace his missing nephew. In the meanwhile, he also announced a reward for anyone finding his nephew, this in itself is an example of an offer that is made to the world at large and hence a General Offer.
Valid acceptance based on fulfillment of condition
This concept has been given statutory authority under section 8 of the ICA:
Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.
This section was applied by YEARS CJ of Allahabad high court in the case of Har Bhajan Lal v. Har Charan Lal, wherein the father of a young boy who ran from home issued a pamphlet for a reward for anyone who would find him. The Plaintiff found him at the railway station and sent a Telegram to his father. The Court held that the handbill was an offer that was made to the world at large and anyone who fulfilled the conditions is deemed to have accepted it. In State of Bihar v. Bengal Chemical and Pharmaceutical Works LTD, the Patna HC held that where the acceptance consists of an act, e.g- dispatching some goods, the rule that there shall be no communication of acceptance will come into play.
General offer of continuing nature
When a general offer is of continuing nature, like it was in a carbolic smoke ball case, it can be accepted by a number of people till it is retracted. However, when a similar offer requires information regarding a missing thing, it is closed as soon as the first information comes in.
A Specific offer is an offer that is made to a specific or ascertained person, this type of offer can only be accepted by the person to whom it is made. This concept was seen briefly in the case of Boulton v. Jones, wherein the Plaintiff had taken the business of one Brocklehurst, the defendant used to have business with Brocklehurst and not knowing about the change in ownership of business, sent him an order for certain goods. The Defendant came to know about the change only after receiving an invoice, at which point he had already consumed the goods. The Defendant refused to pay the price, as he had a set off against the original owner, for which the plaintiff sued him.
The Judges gave a unanimous judgement holding the defendant not liable. Pollock CB held that the rule of law is clear, if you intend to contract with A, B cannot substitute himself as A without your consent and to your disadvantage. It was also held that whenever a person makes a contract with a specific personality, a specific party, so to say, for writing a book, for painting a picture or for any personal service or if there is any set off due from any party, no one has the authority to come in and maintain that he is the party contracted with.
When two parties make an identical offer to each other, in ignorance to each other’s offer, they are said to make cross offers. Cross offers are not valid offers. For example- if A makes an offer to sell his car for 7 lakhs to B and B in ignorance of that makes an offer to buy the same car for 7 Lakhs, they are said to make a cross offer, and there is no acceptance in this case, hence it cannot be a mutual acceptance.
Basic essentials of a cross offer
- Same offer to one another- When the offeror makes an offer to the offeree and the offeree without prior knowledge makes the same offer to the offeror, then both the object and the party remain the same.
- Offer must be made in ignorance of each other- The two parties must make their offer in ignorance of each other.
An important case in this aspect is the English case of Tinn v. Hoffman, the defendant wrote to the complainant an offer to sell him 800 tons of iron at 69s per ton, at the same time the complainant also wrote to the defendant an offer to buy the iron at similar terms. The issue in this case was that, was there any contract between the parties, and would simultaneous offers be a valid acceptance. The court held that these were cross offers that were made simultaneously without knowledge of one another and would not bind the parties.
Here it is imperative to deduce that for a valid contract to be formed there needs to be an offer and acceptance of the same, whereas in a cross offer there is no acceptance, but only simultaneous offers being and therefore a cross offer will not lead to the formation of a contract.
When the offeree offers a qualified acceptance of the offer subject to modifications and variations in terms of the original offer, he is said to have made a counter offer. A counter offer is a rejection of the original offer. An example of this would be if A offers B a car for 10 Lakhs, B agrees to buy for 8 Lakhs, this amounts to a counter offer and it would mean a rejection of the original offer. Later on, if B agrees to buy for 10 Lakhs, A may refuse. Sir Jenkins CJ in Haji Mohd Haji Jiva v. Spinner, held that any departure from original offer vitiates acceptance. In other words, an acceptance with a variation is not acceptance, it is simply a counter proposal which must be accepted by the original offeror, for it to formulate into a contract.
The Bombay High court gave this decision based upon the landmark judgement of Hyde v. Wrench, in which an offer to sell a farm for 1000 Pounds was rejected by the Plaintiff, who offered 950 for it. Subsequently the Plaintiff gave an acceptance to the original offer. Holding that the Defendant was not bound by a contract, the court said that the Plaintiff accepted the original offer of buying the farm at the price of 1000 pounds, it would have been a completely valid contract , however he gave a counter proposal to it, thus rejecting the original offer.
Counter offer also includes within its contours Partial acceptance, meaning that a party to the contract cannot agree to those conditions of the agreement that favour him and reject the rest, the acceptance should be of the complete agreement i.e.- all its parts. In Ramanbhai M. Nilkanth v. Ghashiram Ladliprasad, the plaintiff made an application for certain shares in a company with the underlying condition that he would be made the cashier in its new branch. The Company did not comply with this and hence the suit. The court held that the Petitioners application for shares was condition on him being made the cashier and that he would have never applied for the shares had there been no such condition.
Acceptance of a counter proposal
In Hargopal v. People’s Bank of Northern India LTD, an application for shares was made on a conditional undertaking by the bank that the applicant would be made the director of the new branch. The shares were allotted to him without fulfilling the condition. The applicant did not say anything and took his dividends, a subsequent suit by him failed as the court held that he through his conduct had waived the condition. When a counter proposal is accepted the contract arises in terms of the counter proposal and not in terms of the original contract.
An Offer which remains open for acceptance over a period of time is called a standing offer. Tenders that are invited for supply of goods is a kind of Standing Offer. In Perclval Ltd. V. London County Council Asylums and Mental deficiency Committee, the Plaintiff advertised for tenders for supply of goods. The defendant took the tender in which he had to supply to the company various special articles for a period of 12 months. In-between this the Defendant didn’t supply for a particular consignment. The Court held that the Tender was a standing offer that was to be converted into a series of contracts by the subsequent acts of the company and that an order prevented pro tanto the possibility of revocation, hence the company succeeded in an action for breach of contract.
Difference between an offer and Invitation to offer
Although Invitation to Offer is not a type of offer per se, it is imperative to distinguish both to even construe what an actual offer is. An invitation to offer is an offer to negotiate, an offer to receive offers, offers to chauffeur. An offer is a final expression of willingness to get into a contract upon those following terms. The concept of Invitation to offer was explained in the Privy Council case of Harvey v. Facey, the Plaintiffs in this asked two questions from the defendant i.e.- Would you sell me your Bumper Hall pen , telegram me the lowest price? , the Defendant only gave the answer to the latter question , post which he refused to sell. The Court held that the defendant was not to sell as he had only answered the second question and reserved the same for his first question. Thus, this clearly shows the distinction between an offer and invitation to offer.
In Adikanda Biswal v. Bhubaneswar Development Authority, when a development authority made an announcement for allotment of plots on first come first serve basis on payment of full consideration. An application against this with full consideration was only considered to be an offer, as the Development authority only gave an invitation to offer, and the offer can only be formalized into a contract when it is accepted by the development authority.
Rules regarding display of goods in shops
In Pharmaceutical Society of Great Britain v. Boots Cash Chemists Southern Ltd., lord GODDARD CJ, said that it would be wrong to say that a shopkeeper intends to sell everything that is displayed in his shop. Meaning that the customer makes an offer, to which the shopkeeper has the discretion to accept or deny. The shopkeeper may say that he doesn’t have enough stock of that good and therefore may not sell. Similarly, a bankers catalogue of charges is also not an offer, the auction held by a person is also only an invitation to offer and he may not be liable for the transportation costs that people may have to pay to come to the place of auction, in case he cancels at the end moment.
The Indian Contract act doesn’t specifically mention the different types of offers, but as ours is a common law country, we develop law from the decisions held by Indian and British courts. As an offer is the first step in the formulation of a contract, it is essential to distinguish what type of offer has been made by the offeror, as different types of offers have different types of legal rules being applied to them. It is also imperative to distinguish an offer and an invitation to offer, to avoid unwanted transactions.
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