What is Offer in Contract Law? Outcomes, Elements, Types

What is an Offer?

If you intend to enter into a contract, you should be aware of what an offer in contract law is. In the law of contracts, a promise of money or another valuable thing from a promisor in exchange for a promise’s performance is known as an offer. In other words, it is a request to sign a contract with specific conditions. An offer may be withdrawn, canceled, or renegotiated. It can be expressed in a variety of ways, from a brief, straightforward oral statement to a lengthy, in-depth written statement.

There are two key components of an offer to a contract which are expressed as a specific promise from the person making the promise (the offerer) and a specific demand from the person receiving the offer (the offeree).

Example: If ‘X’ offers ‘Y’ to sell a product for five lakhs then ‘x’ is the offeree, and ‘Y’ is the offeror. ‘X’ will give the ownership of a product in exchange for five lakhs. Here ‘Y’ also makes an offer.

According to Section 2 of the Indian Contract Act 1872, the offer is defined 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 said to make a proposal”. 

In order to create a valid contract, an offer must be made by one party, it must be accepted by another party and the offer must be exchanged along with consideration.  A common challenge in a contract is to determine the authenticity of the offer and whether the recipient party accepts it as such or not. The court might conclude that you have made an offer if your proposal contains conditions regarding quality, quantity, price, and delivery location in addition to other terms. In most cases, a straightforward price quote is not regarded as an offer. Ads may be viewed as invitations to offers, but they do not constitute actual offers.

Acceptance, Rejection, and Termination of an Offer

If the party receiving the offer chooses to accept it and make a partial payment, the offeror might be obligated to the terms and conditions of the offer. A deal is made once the offeror accepts the payment. Then, he or she will be compelled by the law to carry out their respective commitments under the contract. The offeree has the right to file a lawsuit if the offeror is in breach of their contractual commitments.

If the offer is rejected, then it is considered terminated. If the conditions of the offer are modified then the original offer will be rejected and replaced with a new one. In this case, the new offer is assigned as a counteroffer. If it is stated that the offer will end within a specific time period then the receiving party may not accept it after the given time period. After a particular time period, the offer may automatically be terminated.

Proposal Offer

Proposal is the first essential element of valid contract. The Indian Contract Act of 1872 states in section 2(a) that “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 person who offers the proposal is known as the promisor or offeror. The person who is being proposed is referred to as the promisee or offeree. The proposal turns into a promise when the person to whom it is being made accepts it. A proposal or offer is the initial point of an agreement. When one party offers a proposal to another party then both parties enter into a legally binding agreement. So, every agreement is also considered a promise or set of promises. 

Example: If ‘X’ tells ‘Y’ that he desired to marry in 2024, then it is not considered an offer of marriage. Because a valid offer states that willingness must be made to get the assent of the other. So, if ‘X’ adds another statement “Will you marry me?” then it is considered as an offer. There are various types of offers such as general offers, special offers, cross offers and counter offer contract law. 

Features

In order to be accepted, the offer must fulfill the following conditions.

1. The offer needs to be communicated.
2. Must be able to establish a legal relationship
3. Must be expressed in language that is certain
4. Must be made with the intention of obtaining the consent of the other party

An offer can also be explicit or implied. In the presence of conversation, an express offer is made, whereas in the absence of conversation, an implied offer is communicated. 

Elements of a Valid Offer

The elements of a valid offer constitute the following.

1. Parties involved: To make a proposal there must be a minimum of two participants. The individual making the offer is referred to as the offeror and the individual to whom the offer is made is referred to as the offeree.
2. Communication of the offer: The offeree must be aware of the offer proposal. The offer must be communicated to the offeree before he can accept it. 
3. To do or abstain from doing: The offeror must let the offeree know whether he is willing to perform the act that comprises the offer or not.
4. Create legal relations: An offer or proposal must establish a legal relationship between the parties. A party invitation is not a valid offer because it is a social obligation.
5. Obtaining Assent
6. The offer must not be vogueIt is necessary for the proposal or offer to be made with the goal of winning the offeree’s approval.

Example: ‘X’ tells ‘Y’ that after a year, he will marry her. As ‘X’ is not requesting Y’s acceptance, this will not be regarded as an offer. This is not an offer until X asks Y for her response. 

7. An offer or proposal can be conditional: An offer may contain some specific condition. The offeree must decide whether to accept the offer under those restrictions. If the offeree adds some of his conditions then it is called a counteroffer.
8. The inconvenience of acceptance cannot be on the offeree: The offer can not state negatively that it will be assumed accepted if the acceptance is not communicated within a certain time period.
9. Offer proposal can be specific or implied: The offer can be made explicit by using certain words, a written document, or a verbal message.

You can also check out our free courses offered by upGrad in Management, Data Science, Machine Learning, Digital Marketing, and Technology. All of these courses have top-notch learning resources, weekly live lectures, industry assignments, and a certificate of course completion – all free of cost!

Classification of Offer

Offers are classified into various types: 

Express offer

An offer that is stated verbally or in writing is known as an express offer.

Example: ‘Y’ asked ‘z’ if he would purchase his guitar for Rs2000.

Implied offer

It is a proposal that results from the behavior or situation of the parties. 

Example: A transport company may agree to transport passengers along a particular route at a particular rate.

General offer

This offer is offered to all interested parties. Anyone in the public has the right to accept it because it is offered to them and they have the right to a reward or compensation.

Specific offer

It is a proposal made to a single individual or group, and only that individual or group may accept it.

When communication is complete

The communication of the proposal is complete when the person to whom a proposal is made is aware of it. The communication of an acceptance in contract law is complete when it is put in a transmission course to him so that it is out of the power of the acceptor’s control.

Acquire a deeper understanding of the contract law anomalies via the Contract Law Bootcamp from upGrad.

Difference between General Offer and Specific Offer

Conclusion

An offer is a request to sign a contract with specific conditions. An offer may be withdrawn, canceled, or renegotiated. In order to create a valid contract, an offer must be made by one party, it must be accepted by another party and the offer must be exchanged along with consideration. Here different features of an offer in contract law are explained. The significance of a valid offer is described and also different types of offers are explained to give a complete idea about the offer in contract law.

FAQs