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

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

Updated on 20 December, 2024

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• 11 min read

Table of Contents

What is Offer in Contract Law?
Elements of an Offer in Contract Law
Types of Offers in Contract Law
Outcomes of an Offer
Difference between General Offer and Specific Offer
Conclusion

If you intend to enter into a contract, you must familiarize yourself with the essential elements of an offer in contract law. The Indian legal system lays out certain standard rules and regulations that must be followed while entering legally binding agreements.

According to the law of contracts, a promise of money or any other valuable thing from a promisor in exchange for a promise’s performance is known as an offer. To understand it simply, an offer is a proposed request to sign a contract with set conditions. An offer may be withdrawn, canceled, or renegotiated. Further, it can be expressed in a variety of ways, from a brief, straightforward oral statement to a lengthy, in-depth written statement.

Don’t worry, you don’t have to go and start digging into heavy law books and legal archives to fully understand what a legal offer constitutes. We have prepared a short and simple guide for you to understand all the necessary features of an offer in contract law.

Keep reading to find insights into the definition, elements, types as well outcomes of an offer in contract law!

Also Read: Career Options in Law in India

What is Offer in Contract Law?

According to Section 2 of the Indian Contract Act 1872, an offer in contract law can be defined as given below:

"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." In simple terms, an offer is a proposal made by one party that seeks the acceptance of said offer from another party, and upon acceptance, a contract is formed, that legally binds the parties involved to agree and follow the terms of the contract.

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.

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.

However, legal offers and contracts aren't always a smooth road. There are various complications and challenges. 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.

Also Read: Types of Contract in Business Law

Elements of an Offer in Contract Law

Before making an offer or accepting an offer, it is important to know the elements or features of an offer in a contractual agreement. These elements are listed below:

1. Proposal: A proposal is the first essential element of a valid contract. A proposal (or offer) is a clear expression of willingness by one party to do or refrain from doing something, intending to create a legal relationship upon acceptance. It must be communicated clearly and made with the intent to be bound by the offer once accepted.

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.

2. 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.

3. 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.

4. 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.

5. Intention to 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.

6. Obtaining Mutual Assent: If both parties accept the offer and willingly accept its terms, then a contract is formed.

7. The offer should have clear and definite terms: An offer must not be vague and should have clear and definite terms. The proposal or offer must be made with the goal of winning the offeree’s approval. For example: if ‘X’ is selling ‘Y’ an item, then they should specify what item is being sold, and what set price is decided for its sale.

8. 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.

9. 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. Thus, there should be no negative condition that automatically renders the offer to be accepted in case of

10. An offer proposal can be specific or implied: The offer can be made explicit by using certain words, a written document, or a verbal message.

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Types of Offers in Contract Law

Offers are classified into various types:

Type of Offer	Description	Example
Express offer	An offer that is stated verbally or in writing is known as an express offer.	‘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.	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.	The police department offers reward to anyone who provides information leading to the capture of a criminal
Specific offer	It is a proposal made to a single individual or group, and only that individual or group may accept it.	An organization offers a job role of an executive to an employee at a salary of Rs 50000 per month, with a joining date of 1st January.
Unilateral Offer	An offer in which one party promises to perform an act in exchange for the other party’s performance.	‘A’ will pay Rs 10,000 to anyone who finds and returns their lost wallet.
Bilateral Offer	An offer in which both parties exchange promises, with each party bound to fulfill their promise.	‘A’ offers to sell her car for ₹500,000, and ‘B’ agrees to pay that amount for the car
Cross Offer	When two parties make identical offers to each other at the same time, without knowing the other’s offer.	‘A’ offers to sell goods to ‘B’ and B offers to buy goods from A on the same terms
Counter Offer	An offer made in response to an initial offer altering its terms and effectively rejecting the original offer.	‘A’ offers to sell a car TO ‘B’ for Rs 500,000 and ‘B’ counteroffers Rs 450,000.
Conditional Offer	An offer that depends on certain conditions being met before it becomes binding.	‘A’ offers to sell her TV to ‘B’ for Rs 10000 if B accepts the offer by Thursday
Standing Offer	An offer that remains open for acceptance over a period of time, typically used in recurring transactions.	A supermarket store offering free delivery on select grocery items over Rs 1,000 until 4 pm

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Outcomes of an Offer

1. Acceptance: Acceptance occurs when the offeree agrees unequivocally to the terms of the offer, resulting in a binding contract. It must be communicated to the offeror and match the offer exactly without any modifications.

To be accepted, an offer must fulfill the following conditions:

The offer needs to be communicated
Must be able to establish a legal relationship
Must be expressed in language that is certain
Must be made to obtain the consent of the other party

Read more here: What is Acceptance in Contract Law?

2. Rejection: Rejection occurs when the offeree refuses the offer, thereby making it void and preventing further acceptance of the original terms. If the offeree proposes new terms, this constitutes a counteroffer, not an acceptance.

3. Termination: Termination of an offer happens when the offer expires, is revoked by the offeror, or is rendered void due to certain circumstances Once terminated, the offer can no longer be accepted unless revived by the offeror.

4. Counteroffer: A counteroffer indicates that the original offer has been rejected, and a new offer is being made with different terms. This alters the course of negotiations. It is crucial in contract negotiations.

5. Revocation or Withdrawal: An offer can be revoked anytime before acceptance. Understanding revocation is essential for both offerors and offerees, as it ensures clarity about when an offer is no longer valid.

Difference between General Offer and Specific Offer

Let’s take a look at the difference between a general offer and a specific offer in Indian contract law:

Differentiation Aspect	General offer	Specific offer
Meaning	A general offer is an offer made to the public or a large group of people	A specific offer, also known as a particular offer, is an offer made to a specific individual or a particular group of people
Intention of Scope	It is intended to be open to anyone who meets the specified conditions or requirements	Unlike a general offer, it is not open to the public or a wide range of individuals
Nature of Communication	Generally open-ended and doesn't specify a particular offeree.	Clearly directed to a specific person or party.
Terms of fulfillment	The offeror (the party making the offer) is obligated to fulfill the terms of the offer if someone accepts it according to the prescribed method	This type of offer typically requires direct communication between the offeror and the offeree (the party receiving the offer)
Example	For example, a company advertising a limited-time discount on its website for all customers would be considered a general offer.	For instance, if a person sends a job offer letter to a particular candidate outlining the terms of employment, it would be considered a specific offer.

Conclusion

By now you must have understood what are the various components of an offer in contract law, ranging from key elements to types and outcomes. After acquiring a thorough understanding of these terms and their contents, you may now proceed to make informed decisions regarding your legal offers.

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Frequently Asked Questions

1. When does an offer become a contract?

An offer becomes a contract when the offer is accepted by the offeree without any modifications, creating mutual consent and binding legal obligations.

2. What is offer in business law?

Similar to contract law, an offer in business law, an offer is a clear proposal made by one party to another, outlining specific terms with the intention of forming a legally binding agreement once accepted. The offer must be communicated clearly, contain definite terms, and demonstrate the offeror's intent to be bound by acceptance.

3. What is acceptance in contract law?

Acceptance occurs when the offeree agrees to the terms of the offer in a clear, unequivocal manner. It must be communicated in the prescribed manner, either verbally, in writing, or through conduct, depending on the nature of the offer. Without acceptance, no contract is formed.

4. What is the difference between an offer and an invitation to treat?

An offer is a definitive proposal to form a contract, while an invitation to treat is an expression of willingness to negotiate, not an offer.

5. What is a valid offer?

A valid offer must meet key criteria: it must be clear, definite, and communicated to the offeree. It should express the offeror's intention to form a legal relationship. A vague or uncertain offer, or one without proper communication, will not qualify as valid in contract law.

6. How does contract law work in India?

Indian contract law is primarily governed by the Indian Contract Act, of 1872, which establishes rules for contract formation, performance, and enforcement. It aims to protect the rights of all parties involved, ensuring fairness and resolving disputes through courts or alternative dispute resolution mechanisms like arbitration.

7. What is the difference between civil law and contract law?

Civil law is a broad field that encompasses various areas like property, torts, family law, and contracts. Contract law, however, is a specific branch of civil law focused on the creation, enforcement, and management of legally binding agreements between parties.

8. How can a dispute in a contract be resolved in India?

Contract disputes in India are typically resolved through negotiation, mediation, or arbitration (alternative dispute resolution mechanisms). If these methods fail, the dispute may be taken to court under the Indian Civil Procedure Code, where the court will enforce the contract’s terms.

9. What career opportunities exist in contract law?

Contract law offers numerous career opportunities in law firms, corporate legal departments, government organizations, and multinational companies. Professionals may work as contract managers, legal advisors, litigators, or contract specialists, ensuring compliance and managing legal risks in business transactions.

10. What skills are required for a career in contract law?

A contract law professional needs strong analytical skills, attention to detail, excellent communication (both written and verbal), and negotiation abilities. Legal drafting skills, along with a deep understanding of legal principles and industry-specific regulations, are also essential for success in this field.

11. How long does it take to become a contract lawyer in India?

To become a contract lawyer In India, it generally takes 5 years if pursuing a 5-year integrated law degree. Alternatively, you can pursue a 3-year LLB after a bachelor’s degree. Post this, you need to clear the All India Bar Examination (AIBE) to obtain a license to practice law. You can choose to pursue further specialization with an LLM degree.

References:
https://indiankanoon.org/doc/171398/
https://lawbhoomi.com/types-of-offer/
https://www.upcounsel.com/types-of-offer-in-contract
https://blog.ipleaders.in/definition-essentials-offer-acceptance/
https://www.drishtijudiciary.com/to-the-point/ttp-indian-contract-act/proposal
https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-i/proposal-or-offer/

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