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.
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.
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.
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.
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.
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.
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.
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.