What are the essentials of a valid offer?

Question: What are the essentials of a valid offer? [HJS 1988]

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Answer

The most basic and essential element of a valid contract is that there should be an offer and acceptance of the same. The intention to create a legal obligation is necessary for the existence of a valid contract. Communication of offer and acceptance is absolutely required.

Section 2(h) of the Indian Contract Act, 1872 defines the term “contract” as an agreement enforceable by law. A proposal/offer and its acceptance is the universally acknowledged process for making a contract of which the former is the beginning point.

Section 2(a) defines a proposal as “when one person signifies to another his willingness to do or abstain from doing anything, with a view of obtaining the assent of that other to such act or abstinence, he is said to make a proposal.”

The person who makes the proposal is called the promisor and the person accepting is called the promisee (Section 2(c)). As per the definition, a valid proposal has two main parts. Firstly, an expression of the offeror’s willingness to do or abstain from doing something and secondly it is made with a view to obtaining the assent of the offeree to the proposed act or abstinence.

While making a contract, it is essential that the offer should be communicated to the other party. A proposal is complete when it is communicated. (Section 3)

A valid offer may be made either expressly or impliedly. An offer that is made by conduct is called an “implied offer” whereas the one which is made by words written or spoken, is called an “express offer” (Section 9). The conduct of the part includes not only their acts but also their omissions.

1. Communication of proposal

Section 4 provides that the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. When such an offer is accepted with knowledge of the reward, the fact that an informer was influenced by some other motives other than the reward will be immaterial. However, an act in ignorance of an offer does not amount to acceptance of that offer.

2. Intention to contract

In order to create a valid contract, every offer must be made with the intention to create a legal obligation. Under English law, the position was well settled in the case of Balfour v. Balfour [(1919) 2 KB 571 (CA)] where it was held that “to create a contract there must be a common intention of the parties to enter into legal obligations”.

It is for the court in each court to decide whether the parties must have intended to enter into legal obligations. The test of contractual intention is objective, not subjective. What matters is not what the parties had in mind, but what a reasonable person would think, in the circumstances, their intention to be.

It is not specified anywhere under the Indian Contract Act, 1872 that parties should have the intention of creating a legal obligation. But it is as essential as it is under English law. It can be interpreted from the term “willingness” which shows the intention to be bound by the proposal when accepted.

The term of the offer must be certain and not vague. Agreements, the meaning of which are not certain, or capable of being made certain, are void (section 29). A agrees to sell B “100 tons of oil”. There is nothing whatsoever to show what kind of oil was intended. The agreement is void for uncertainty. But if A agrees to sell B all the grain in his granary at Ramnagar, then the agreement is valid.

3. It must be distinguished from an invitation to offer

An offer has to be distinguished from an invitation to receive offers. The latter is an offer to negotiate or may be considered an offer to receive offers whereas an offer is the final expression of willingness by the offeror to be bound by his offer.

If a party, without expressing his final willingness, proposes certain terms on which he is willing to negotiate, he is only making an invitation to the other party to make an offer on those terms. The distinction was clearly laid down in the infamous case, Harvey v. Facey [1893 AC 552]

For example, A suit was displayed with a price tag in a shop. This is not an offer but it is an invitation to offer.

4. It may be general or specific in nature

The offer can be given to the public at large in general by advertisement in newspaper etc. or it can be given specific person too.

5. Offer must be made with a view to obtain the assent

The offeror must obtain consent which should be “free” in nature as defined under Section 14 as it defines it should not be taken under coercion [section 15], undue influence [Section 16], fraud [Section 17], misrepresentation [Section 18] & Mistake [Section 20, 21 and 22].

6. Definite, unambiguous and certain in nature

Offer must be certain as specified in [Section 29], it must be unambiguous means that the thing offered must clearly specified.

For example, X offered to sell his car to Y. X is owned two cars one is of Ford & the other is of BMW and X offered his Ford car to Y but Y thought X is offering him his BMW one. As in the offer it was not definite which car X wants to sell, thus this is not a valid offer.

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Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
2. Law of Contract Mains Questions Series Part-II
3. Law of Contract Mains Questions Series Part-III
4. Law of Contract Mains Questions Series Part-IV
5. Law of Contract Mains Questions Series Part-V
6. Law of Contract Mains Questions Series Part-VI
7. Law of Contract Mains Questions Series Part-VII
8. Law of Contract Mains Questions Series Part-VIII
9. Law of Contract Mains Questions Series Part-IX
10. Law of Contract Mains Questions Series Part-X