Define offer. Explain the rules regarding a valid offer.
Meaning of offer : Section 2(a) of the Indian Contract Act, 1872 defines proposal or offer as follows : When one person signifies to another his willingness to do or abstain from doing anything, with a view to obtain the assent of that other to such an act or abstinence, he is said to make a proposal.The person making the offer is known as the offeror and the person to whom the offer is made is known as the offeree.
Essential Requirements of a Valid Offer :
- It should be an expression of willingness to do or to abstain from doing something.
- It must be made to another person. There can be no ‘proposal’ by a person to himself.
- It must be made with a view to obtain the assent of that other to such an act or abstinence.
Legal Rules Regarding a Valid Offer :
The offer must be capable of creating legal relationship : If the offer does not intend to give rise to legal consequences, it is not a valid offer in the eyes of law. Sometimes, offers are made which are social in nature. Such social agreements do not make a valid contract because in these cases the intention is not to form a legal relationship. It is very important for a valid offer to intend to give rise to a legal relationship, otherwise the offer is not considered valid. In business agreements, it is taken for granted that parties intend to create legal relationship.
The terms of the offer must be clear, definite and certain and not loose or vague : An offer must be definite and certain. An indefinite or vague offer can not be accepted because the courts, in such cases, can not tell what the parties are to do. The intention of the parties must be very clear, as to what they intend to do.
An offer must be distinguished from a mere declaration of intention : Sometimes, there may be a preliminary discussion or an invitation by one party to the other to negotiate terms or simply declaration of intention. Such declaration merely indicates that an offer will be made in future.
An invitation to offer is not an offer : An offer must be distinguished from an invitation to offer. In the case of an ‘invitation to offer, the person making an invitation invites others to make an offer to him. For example, quotations, catalogs of prices or display of goods with prices marked thereon do not constitute an offer.
An offer must be communicated to the offeree : An offer must be communicated to the person to whom the same is addressed. Communication of offer is important to conclude an agreement because acceptance can be given only after one knows about the offer. This applies to both ‘specific’ as well as ‘general’ offer. Section 4 states that communication of a proposal is complete when it comes to the knowledge of the person to whom is is made.
An offer should not contain a term the non-compliance of which would amount to acceptance : The offeror can not say that if the offeree does not communicate acceptance by a certain time offer would have been deemed to be accepted. The burden of communication of rejection of offer can not be imposed on the offeree. If the offeree sends no reply, there is no contract.
Two identical cross-offers do not make a contract : Where two parties make identical offers to each other, in ignorance of each other’s offer, the offers are known as cross-offers. ‘Cross-offers’ do not constitute acceptance of one’s offer by the other and as such there is no completed agreement.