Definition and essentials of a valid Offer
Sections 2(a), 2(c), 4 and 29 of the Indian Contract Act, 1872
In one minute
An offer (the Act calls it a proposal) is a clear statement of willingness to do or not do something, made so that the other person can say "yes". If the other person accepts, a promise is born.
Not every price tag or advertisement is an offer. Many are only invitations to others to make offers. A valid offer must show a serious intention, must be certain, and must reach the person it is made to.
This is the first step in every contract problem. In real life, it decides who is bound when you reply to an advertisement, bid at an auction or answer a price enquiry.
Exam focus
- Frequency: No data
- Usually asked as: No data
Legal provision
- Section 2(a): "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."
- Section 2(c): the person making the proposal is the promisor. The person accepting it is the promisee.
- Section 4: the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
- Section 9: a proposal made in words is express. A proposal made in any other way is implied.
- Section 29: an agreement whose meaning is not certain, or cannot be made certain, is void.
Meaning and definition
An offer has three parts in the words of section 2(a). One person signifies (shows) willingness to do or not do something. The willingness is shown to another person. The purpose is to obtain that person's assent (agreement).
The person who makes the offer is the offeror, called the promisor in section 2(c). The person who receives it is the offeree. When the offeree accepts, the offeree becomes the promisee.
The law asks for a real offer for a reason. A contract binds a person to a promise, so the law must be sure that the person meant to make one. An offer sets out what the offeror will do, and the offeree can then bind the offeror by saying "yes". Casual talk and price enquiries do not give that power.
- Offer (proposal) section 2(a)
- By form section 9
- ExpressMade in words, spoken or written.
- ImpliedMade by conduct, for example a taxi waiting at a stand.
- By person addressed
- SpecificMade to one named person, who alone can accept.
- GeneralMade to the public. Anyone who meets its conditions can accept.
- By duration
- Standing (continuing)Stays open and is accepted again and again.
- By form section 9
Detailed explanation
A valid offer must meet the following requirements. Each one is explained below, with an example.
1. It must be communicated
An offer has no legal effect until it reaches the person it is made to (section 4). An offer left in a drafts folder binds nobody.
Example. Kiran writes a letter offering his motorbike to Deepak for Rs 45,000 but never posts it. Deepak cannot "accept" an offer he has never received.
2. It must show an intention to create legal relations
The offeror must mean to be bound if the offeree accepts. A casual remark is not an offer. The same reason lies behind Balfour v. Balfour, where a domestic promise stayed outside the courts.
Example. Meera says to a friend, "I will take you out for dinner sometime." Nobody expects a court to enforce this, so it is not an offer.
3. Its terms must be certain
The terms must be definite enough for a court to enforce them if the offer is accepted (section 29). A vague promise cannot become a contract.
Example. "I will sell you some of my land" does not say how much land, where or at what price. "I will sell you my plot at Survey No. 45, Warangal, for Rs 12 lakh" is certain.
4. It must be an offer, not an invitation to offer
An invitation to offer only asks others to come forward with offers. The person who invites stays free to accept or refuse. Shop-window displays, price lists, advertisements and replies to price enquiries are usually invitations. Courts look at the intention shown by the words and the setting.
Example. A bookshop in Hyderabad displays a law textbook marked Rs 600. The display invites customers to make an offer at the counter. The shopkeeper may refuse to sell.
5. It may be express or implied
A promise made in words is express. A promise made by conduct is implied (section 9). Both can be offers.
Example. An autorickshaw driver stands at a stand with the meter on and the "For hire" board up. This conduct is an implied offer to carry a passenger.
6. It may be specific or general
A specific offer is made to one person, and only that person can accept it. A general offer is made to the public, and anyone who meets its conditions can accept it by doing so. Carlill v. Carbolic Smoke Ball Co. is the standard case on general offers.
Example. A college in Vijayawada announces a prize of Rs 5,000 for any student who finds a printing error in its prospectus. Any student who finds one and reports it has accepted.
7. The offeror cannot make silence an acceptance
An offeror cannot say, "If I do not hear from you, I will take it that you accept." Silence does not bind the offeree. The offeree's side of this rule is explained in the note on acceptance.
Example. Anita writes to Bala: "I offer you my old laptop for Rs 15,000. If I hear nothing, it is yours." Bala does not reply. There is no contract.
Kinds of offer
The tree above shows the main kinds. These situations are commonly tested.
- Cross offers. Two persons send each other identical offers, and neither knows of the other's offer. The offers cross in the post. In Tinn v. Hoffmann (1873), the court said these offers do not make a contract, because neither is an acceptance of the other.
- Standing (continuing) offer. A standing offer stays open for a period and can be accepted again and again. In Great Northern Railway Co. v. Witham (1873), a tender to supply goods "as required" was a standing offer. Each order was an acceptance that made a separate contract. The supplier could withdraw the offer for future orders.
- Tender. An invitation for tenders is an invitation to offer. Each tender is an offer. The contract is made when the inviter accepts one tender. The inviter is not bound to accept the lowest tender.
- Auction. The auctioneer's call for bids is an invitation to offer. Each bid is an offer. The sale is made when the auctioneer accepts a bid, by the fall of the hammer or in another customary way. A bidder may withdraw a bid before it is accepted.
- Shop displays. In Pharmaceutical Society of Great Britain v. Boots Cash Chemists (1953), goods on self-service shelves were held to be an invitation to offer. The customer makes the offer at the cash desk. In Fisher v. Bell (1961), a flick-knife in a shop window was held to be an invitation to offer, not an offer to sell.
Don't confuse: offer and invitation to offer
Students often treat every price statement as an offer. Only a statement that lets the other side form a contract by saying "yes" is an offer.
| Point | Offer | Invitation to offer |
|---|---|---|
| Purpose | To get a "yes" that makes a contract | To get others to make offers |
| Effect of a reply | Acceptance makes a promise at once | The reply is itself an offer |
| Who is free to refuse? | Nobody, once it is accepted | The person who invites |
| Examples | A firm promise to sell a bike for Rs 20,000 | Window display, price list, call for tenders, call for bids |
Inside the concept. Ravi tells Suresh, "I will sell you my bike for Rs 20,000. Reply by Friday." Suresh replies, "Agreed." Ravi made an offer, and Suresh's reply is an acceptance.
Just outside the concept. Ravi's bike stands outside his house with a card saying "Rs 20,000". A passer-by says, "I accept." The card invites offers. Ravi can refuse.
Common mistakes
- Treating a price quotation as an offer. See the facts of Harvey v. Facey: a reply that only stated a price was not an offer to sell.
- Writing that a shop window display is an offer. It is an invitation to offer.
- Forgetting that a general offer needs no communication of acceptance back to the offeror. Performing the conditions is enough.
- Saying silence can be fixed as acceptance by the offeror. It cannot.
Apply it
Problem
Kiran posts in a Hyderabad classifieds group: "Motorbike for sale, Rs 45,000." Deepak replies, "I accept." Kiran later refuses to sell. Can Deepak enforce the sale?
Issue. Was Kiran's post an offer that Deepak could accept?
Rule. A valid offer shows willingness to be bound and is certain (section 2(a), section 29). An advertisement is usually an invitation to offer, as in Harvey v. Facey for a price statement.
Application. The post is general advertising. It does not say that Kiran will sell to the first person who replies. Deepak's reply is therefore an offer, which Kiran may refuse.
Conclusion. There is no contract unless Kiran accepts Deepak's reply. Deepak cannot enforce the sale.
Leading case laws
- Harvey v. Facey (1893)
Facts. Solicitors in Kingston telegraphed Facey, asking whether he would sell Bumper Hall Pen and for his lowest cash price. He replied only: "Lowest price for Bumper Hall Pen £900". They then telegraphed that they agreed to buy at that price.
Principle. Facey's reply only stated a price. The last telegram was itself an offer that Facey never accepted.
Why it matters. It separates a statement of price from an offer to sell.
- Carlill v. Carbolic Smoke Ball Co. (1893)
Facts. A company advertised a reward of 100 pounds for anyone who used its smoke ball as directed and still caught influenza. It said 1,000 pounds was deposited at a bank. Mrs Carlill used the ball, caught influenza, and sued.
Principle. The advertisement was not an empty boast. The bank deposit showed a serious intention to be bound.
Why it matters. It is the standard authority that an advertisement can be a general offer.
- Lalman Shukla v. Gauri Dutt (1913)
Facts. Gauri Dutt's nephew went missing. After his servant Lalman Shukla had left to search, Gauri Dutt announced by handbill a reward of Rs 501 for finding the boy. Lalman found the boy without knowing of the reward.
Principle. A person who does not know of an offer cannot accept it by performing its conditions.
Why it matters. It shows that a general offer must be known to the person who claims it.
How to write this answer in the exam
5-mark answer
- Quote section 2(a) and name the parties (promisor, promisee).
- List the essentials: communicated, intention, certain, not an invitation.
- Give one example.
- Cite Harvey v. Facey for price statements or Carlill v. Carbolic Smoke Ball Co. for general offers.
10-mark answer
- Section 2(a), then sections 2(c), 4, 9 and 29.
- Each essential with one line of explanation and an example.
- Offer against invitation to offer, with a comparison table.
- Kinds of offer: express, implied, specific, general, cross, standing.
- Tenders and auctions in one paragraph each.
- Cases: Harvey v. Facey, Carlill v. Carbolic Smoke Ball Co., Lalman Shukla v. Gauri Dutt.
Key points to remember
- Offer (proposal) is defined in section 2(a). The offeror is the promisor.
- An offer must be communicated, show intention, and be certain.
- Shop displays, price lists, tenders and calls for bids are invitations to offer.
- A statement of price is not an offer to sell (Harvey v. Facey).
- A general offer can be accepted by anyone who performs its conditions (Carlill v. Carbolic Smoke Ball Co.).
- Cross offers do not make a contract. A standing offer is accepted by each order.
Quick self-test
1. Which section defines a proposal?
Section 2(a).
2. Is a call for tenders an offer?
No. It is an invitation to offer. Each tender is the offer, and the inviter need not accept the lowest.
3. What did the Privy Council decide about the telegram "Lowest price for Bumper Hall Pen £900"?
It only stated a price. It was not an offer to sell (Harvey v. Facey).