An offer is the initial spark of a contract; it is the seed of a contract.

An offer is said to be one of three essential elements of a contract: the other

two being acceptance (of the offer) and a reciprocal flow of obligations
(consideration).

Lawyers and law professors, in the legal science of contract law, will refer to
the offeror and offeree as in: the offeror offers the offeree the offer.

Halsbury's Laws of England (4th Edition, 2007) defines an offer as follows:

"An offer is an expression by one person or group of persons, or by agents on

his behalf, made to another, of his willingness to be bound to a contract with
that other on terms certain or capable of being rendered certain."

offer and acceptance analysis is a traditional approach in contract law used

to determine whether an agreement exists between two parties. Agreement
consists of an offer by an indication of one person (the "offeror") to another
(the "offeree") of the offeror's willingness to enter into a contract on certain
terms without further negotiations. A contract is said to come into existence
when acceptance of an offer (agreement to the terms in it) has been
communicated to the offeror by the offeree and there has been consideration
bargained-for induced by promises or a promise and performance.

The offer and acceptance formula, developed in the 19th century, identifies a
moment of formation when the parties are of one mind. This classical
approach to contract formation has been weakened by developments in the
law of estoppel, misleading conduct, misrepresentation and unjust
enrichment.

Offer

Treitel defines an offer as "an expression of willingness to contract on certain

terms, made with the intention that it shall become binding as soon as it is
accepted by the person to whom it is addressed", the "offeree".[1] An offer is
a statement of the terms on which the offeror is willing to be bound.

The "expression" referred to in the definition may take different forms, such
as a letter, newspaper, fax, email and even conduct, as long as it
communicates the basis on which the offeror is prepared to contract.

Whether two parties have an agreement or a valid offer is an issue which is

determined by the court using the Objective test (Smith v. Hughes).
Therefore the "intention" referred to in the definition is objectively judged by
the courts. In the English case of Smith v. Hughes [2] the court emphasised
that the important thing is not a party's real intentions but how a reasonable
person would view the situation. This is due mainly to common sense as each
party would not wish to breach his side of the contract if it would make him
or her culpable to damages, it would especially be contrary to the principle of
certainty and clarity in commercial contract and the topic of mistake and how
it affects the contract. As a minimum requirement the conditions for an offer
should include at least the following 4 conditions: Delivery date, price, terms
of payment that includes the date of payment and detail description of the
item on offer including a fair description of the condition or type of service.
Without one of the minimum requirements of condition an offer of sale is not
seen as a legal offer but rather seen as an advertisement.

[edit]Unilateral contract

The contract in Carlill v Carbolic Smoke Ball Co[3] was of a kind known as a
unilateral contract, one in which the offeree accepts the offer by performing
an act which indicates their agreement with the bargain. This can be
something as simple as raising an eyebrow or wearing a certain color t-shirt.
It can be contrasted with a bilateral contract, where there is an exchange of
promises between two parties. In Australian Woollen Mills Pty Ltd v. The
Commonwealth (1954), the High Court of Australia held that, for a unilateral
contract to arise, the promise must be made "in return for" the doing of the
act. The court distinguished between a unilateral contract and a conditional
gift. The case is generally seen to demonstrate the connection between the
requirements of offer and acceptance, consideration and intention to create
legal relations.

[edit]Invitations to treat

An invitation to treat is not an offer, but an indication of a person's

willingness to negotiate a contract. In Harvey v. Facey[4], an indication by
the owner of property that he or she might be interested in selling at a
certain price, for example, has been regarded as an invitation to treat.
Similarly in Gibson v Manchester City Council[5] the words "may be prepared
to sell" were held to be a notification of price and therefore not a distinct
offer, though in another case concerning the same change of policy
(Manchester City Council underwent a change of political control and stopped
the sale of council houses to their tenants) Storer v. Manchester City
Council[6], the court held that an agreement was completed by the tenant's
signing and returning the agreement to purchase, as the language of the
agreement had been sufficiently explicit and the signature on behalf of the
council a mere formality to be completed.

The courts have tended to take a consistent approach to the identification of

invitations to treat, as compared with offer and acceptance, in common
transactions. The display of goods for sale, whether in a shop window or on
the shelves of a self-service store, is ordinarily treated as an invitation to
treat and not an offer.[7]

The holding of a public auction will also usually be regarded as an invitation

to treat. Auctions are, however, a special case generally. The rule is that the
bidder is making an offer to buy and the auctioneer accepts this in whatever
manner is customary, usually the fall of the hammer.[8] A bidder may
withdraw his or her bid at any time before the fall of the hammer, but any bid
in any event lapses as an offer on the making of a higher bid, so that if a
higher bid is made, then withdrawn before the fall of the hammer, the
auctioneer cannot then purport to accept the previous highest bid. If an
auction is without reserve then whilst there is no contract of sale between the
owner of the goods and the highest bidder (because the placing of goods in
the auction is an invitation to treat) there is a collateral contract between the
auctioneer and the highest bidder that the auction will be held without
reserve (i.e., that the highest bid, however low, will be accepted).[9] The U.S.
Uniform Commercial Code provides that in an auction without reserve the
goods may not be withdrawn once they have been put up.[10]

[edit]Revocation of offer

An offeror may revoke an offer before it has been accepted, but the
revocation must be communicated to the offeree, although not necessarily by
the offeror. If the offer was made to the entire world, such as in Carlill's case,
the revocation must take a form that is similar to the offer. However, an offer
may not be revoked if it has been encapsulated in an option (see also option
contract).

If the offer is one that leads to a unilateral contract, then unless there was an
ancillary contract entered into that guaranteed that the main contract would
not be withdrawn, the contract may be revoked at any time.

Knowledge of the offer

In Australian law, there is a requirement that an acceptance is made in

reliance or pursuance of an offer: see R v. Clarke (1927) 40 C.L.R. 227.
[edit]Rejection, death or lapse of time

An offer can be terminated on the grounds of rejection on the part of the

offeree, that is if the offeree does not accept the terms of the offer. Also upon
making an offer,an offeror may include as a condition to the contract the
duration in which the offer will be available.If the offeree fails to accept the
offer within this specific period then the offer will be deemed as terminated.

[edit]Death of offeror

Generally death (or incapacity) of the offeror terminates the offer. This does
not apply to option contracts.

The offer cannot be accepted if the offeree knows of the death of the offeror.
In cases where the offeree accepts in ignorance of the death, the contract
may still be valid, although this proposition depends on the nature of the
offer. If the contract involves some characteristic personal to the offeror, the
offer is destroyed by the death.

[edit]Death of offeree

An offer is rendered invalid upon the death of the offeree: see Re Irvine.

[edit]Counter Offers

If the offeree rejects the offer, the offer has been destroyed and cannot be
accepted at a future time. A case illustrative of this is Hyde v. Wrench (1840)
49 E.R. 132, where in response to an offer to sell an estate at a certain price,
the plaintiff made an offer to buy at a lower price. This offer was refused and
subsequently, the plaintiffs sought to accept the initial offer. It was held that
no contract was made as the initial offer did not exist at the time that the
plaintiff tried to accept it, the offer having been terminated by the counter
offer.

It should be noted that a mere inquiry (about terms of an offer) is not a

counter offer and leaves the offer intact. The case Stevenson v. McLean
(1880) 28 W.R. 916 is analogous to this situation.

Duration Of Offer

Sec. 23. Duration Of Offer

An offer remains open for acceptance: (1) The time stated; or (2) if no time is
stated, a reasonable time; provided in either case it is not sooner withdrawn.

An offer being made, how long will it last? Within what time must the offeree
act upon it ? The offeror may in making the offer expressly stipulate how long
it shall remain open, but more than likely he will say nothing about it. If he
sets the time, that will of course govern ; if he does not set the time, then we
are forced to the general statement that an offer will remain open a
reasonable length of time.

In either case the offeror may withdraw his offer unless he has contracted to
keep the offer open. See Section 27 below for further discussion. If no definite
time is stated, what is a reasonable time? Is it one day, one week, or one
month? Clearly this depends entirely on the circumstances, as the nature of
the subject matter, the locality, the previous dealings of the parties,
prevailing customs.

Example 20. Kempner offers to sell land to Cohn by letter reaching Cohn
February 2. On February 7th Cohn accepted the offer by letter reaching
Kempner February 9th. Seller lived in Hot Springs and buyer in Little Rock,
Arkansas. Land was a lot in Little Rock. Jury found time not unreasonable.28

Example 21. An offer reaching offerer by telegram Monday morning between

8 o'clock and 9 o'clock offering to sell oil which at the time was rapidly
fluctuating in market price was attempted to be accepted by telegram sent
out Tuesday morning at 8:53 A. M. The court held the time to be
unreasonable.29

28. Kempner v. Cohn, 47 Ark. 519.

It is apparent from these considerations that it is an impossible task to lay

down a rule of yardstick character which one may go by. The jury is the final
arbiter, subject of course to the instructions of the court. The time cannot be
measured off by the clock and one who accepts after some delay may not be
able to absolutely know whether he has a good case or not, and his lawyer
may not be able to tell him.
No matter when the offer would expire by mere lapse of time, it may be
accepted thereafter if the offeror still treats it as being in force.

Sec. 24. Termination Of Offer By Rejection

A rejection of an offer by the offeree terminates it. A counter offer is

equivalent to a rejection.

If the offeree positively rejects the offer, it is of course within the offeror's
power to tell him that the offer is no longer open, but he may not think to do
that and may have no opportunity to do so. An offeree may reject an offer,
and then within the time that it would have remained open may attempt to
accept it. Must the offeror honor the acceptance? The law is that the rejection
terminates the offer. For clearly, if A offers B goods at certain prices, and B
replies with a definite rejection, A ought then to be able to forget all about B
and seek another buyer.

A counter offer is regarded as a rejection and therefore also terminates the

offer.30

20. Minn. Linseed Oil Co. v. Collier White Lead Co., 4 Dill. 431 (Fed. Cas. No.
9635) ; 17 Federal Cases 447.

30. Shaw v. Ingram Day Lumber Co., 152 Ky. 329, L. R. A. 1915 D. 145.

Sec. 25. Termination Of Offer By Destruction Of Subject Matter

If the offer relates to definite subject matter, and such subject matter is
destroyed prior to acceptance, there is no contract.
If A offers to sell a certain horse to B and the horse dies before B accepts,
there is no contract. If, however, the subject matter is destroyed out of which
A intends to perform, but he may perform out of any other subject matter,
the destruction of such subject matter does not terminate the offer.

Sec. 26. Termination By Death Or Insanity Of Offeror Or Offeree

The death or insanity of offeror or offeree before acceptance will terminate

an offer.

Except in cases of a consideration to keep an offer open, death of the offeror

before acceptance, or his insanity, will cause the offer to lapse,31 and so will
the death or insanity of the offeree.32

Sec. 27. Revocation Of Offer

An offer may be withdrawn at any time, unless a consideration has been

given to keep it open; but the attempted revocation must actually reach the
offeree before acceptance.

An offer may be withdrawn at any time, even if the offeror in withdrawing it

breaks his promise to keep it open; except where the promisor for a valid
consideration has agreed to keep it open (and except where under seal in
those jurisdictions which still adhere to the law of the seal). The withdrawal
must actually reach the offeree to be effectual.

31. Beach v. M. E. Church, 06 111. 177.

32. Sutherland v. Parkins, 75 111. 338.

Example 22. A mails an offer to B on Monday which reaches B on Tuesday. B,

after receipt of the letter on Tuesday, mails his acceptance. (This completes
the contract, see Section 31, post.) Prior to B's acceptance on Tuesday, A
wires B a revocation which reaches B after B has deposited his letter. The
revocation is ineffective.33

Sec. 28. Contracts To Keep Offers Open

A contract to keep an offer open, operates to prevent its withdrawal within

the time stated.

As we have seen, an offer may be withdrawn at any time before acceptance,

no matter how long it would have otherwise remained open and although the
promise to keep it open is thereby violated. But parties may contract that an
offer shall remain open, as they may contract almost anything else, and in
that case, retraction amounts to a breach of such contract.

Example 23. A offers to sell B his house for $10,000.00. B is undetermined. A,

therefore, at B's request, promises to keep the offer open for ten days, in
consideration that B will pay him $50.00 for the option. B agrees. A has no
right to revoke." If he attempts to do so, some courts look upon the
revocation as a breach of his contract not to revoke, and some look upon it as
ineffectual, leaving the offer still in effect. The result is substantially the same
under either theory.

Sec. 194. Assignment Of Offer

If A makes an offer to B, B can not assign if such offer is not for value; and B's
assignee can not accept and thus establish contractual relations with A, at
least if A does not know that such assignee is the party who accepts.1 While
A may assent to such substitution and thus become bound, this is in effect a
new offer by C which A accepts, if the original offer is not to B and his
assigns. If, by its terms, the offer was made to the offeree or to his assignees,
no reason appears for denying full effect to such provision or for doubting the
power of the assignee to accept, since such offer might, by its terms, have
been made to the general public; and this is an offer to a far more restricted
class. If A makes such offer to B and his assigns, A may be regarded as
assenting to such substitution in advance. Accordingly, an offer to one "and
his assigns" may be assigned, though not given for value.2

If an offer for value is made assignable by its terms,3 as where it is made by

its terms to the offeree and his assigns,4 it may be assigned so that the
assignee can accept the offer and complete the contract, even though it
contained a provision that the vendee should be the exclusive judge as to
whether the title to the property was free from defects.5 An offer for value
which, by its terms, is not expressly made assignable or non-assignable, can
be assigned so that the assignee can accept and thus establish contractual
relations with the offeror.6 On this question there is, however, a conflict of
authority and it has been held that an offer for value can not be accepted by
an assignee unless, by its terms, it is made to the offeree or to his assigns.7
On the other hand, since a provision in a contract which restricts an
assignment thereof, is valid,8 such a provision in an offer for value prevents
it from being assignable, as where credit was, by the terms of the contract, to
be given to the original offeree. The same result follows where the offer is, by
its terms, made to the offeree and to no other person;10 and, it has been
held, where the offeree is given the right to select which tract out of two or
more he will take.11 It has been said, in obiter, that an offer under seal could
not be assigned if it was not made, by its terms, to the offeree and his
assigns;12 but this statement was made in a case in which the real holding
was that such offer did not survive the death of the offeree.

Revocation Of Offer

22. Until the moment of acceptance, an offer may be revoked, and a

subsequent acceptance will be inoperative, except that - EXCEPTION - Where
the party making the offer has contracted under seal or for a consideration to
hold it open for a certain time, he may not revoke it within such time.

23. Notice of revocation must be communicated, to prevent an acceptance

from being effective.

Since an offer, unaccepted, creates no rights, it follows that it may be

revoked at any time before acceptance.86 An order, for instance, given to the
agent of the party to whom it is made, who ha? no authority to accept it, is
revocable at any time before his principal accepts it; and it is immaterial that
the order recites that it is taken with the understanding that it is positive, and
not subject to change or countermand.

The term "Contract" is derived from the latin "contractum" which means
"drawn together". It is an agreement to do or not to do an act. It comes into
existence from the action of the parties. It creates legal rights and obligations
and it is enforceable by law. According to Section 2 (h) of the Indian Contract
Act, contract is "an agreement enforceable by law". Salmond defines a
contract as "an agreement creating and defining obligations between the
parties".

Offer:

A proposal is an expression of will or intention to do or not to do something. It

is also called an "offer". It is one of the essential elements of an agreement. It
is the very basis of the contract. It becomes a promise when it it accepted.
Section 2 (a) of the Contract Act defines the proposal 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". The person making the proposal is called the
proposer or offeror or the promisor. The person to whom the proposal is
made is called the offeree or promisee.

for example; Sunil offers to sell his car to Padmaja for Rs. 50000. This is a
proposal. Sunil is the offeror and Padmaja is the offeree.

An offer may be express or implied. An offer which is expressed by words,

written or spoken, is called an express offer. An offer which is expressed by
conduct is called an implied offer. An offer may be positive or negative. It
may be in the form of a statement or a question.

for example; Sridhar says to Radhika that he will sell his scooter to her for
Rs.20000. This is an express offer.

The Karnataka State Road Transport Corporation runs omnibuses on various

routes to carry passengers at the scheduled faresss. This is an implied offer
by KSRTC.
Essentials of a valid offer:

1. A valid offer must intend to create legal relations. It must not be a casual
statement. If the offer is not intended to create legal relationship, it is not an
offer in the eyes of law.

for example; Sunil invites Sridhar to a dinner party and Sridhar accepts the
invitation. Sridhar does not turn up at the dinner party. Sunil cannot sue
Sridhar for breach of contract as there was no intention to create legal
obligation.

Hence, an offer to perform social, religious or moral acts without any

intention of creating legal relations will not be a valid offer.

2. The terms of an offer must be definite, unambiguous and certain. They

must not be loose and vague. A promise to pay an extra Rs. 500 if a
particular house proves lucky is too vague to be enforceable.

for example; Sridhar says to Sunil "I will give you some money if you marry
my daughter". This is not an offer which can be accepted because the
amount of money to be paid is not certain.

3. An offer may be made to a definite person or to the general public. When

offer is made to a definite person or to a special class of persons, it is called
"specific offer". When an offer is made to the world at large or public in
general, it is called "general offer". A specific offer can be accepted only by
that person to whom it has been made and a general offer can be accepted
by any person.

for example; Sunil promises to give Rs.100 to Sridhar, if he brings back his
missing dog. This is a specific offer and can only be accepted by Sridhar.

Sunil issues a public advertisement to the effect that he would give Rs.100 to
any one who brings back his missing dog. This is a general offer. Any member
of the public can accept this offer by searching for and bringing back Sunil's
missing dog.

4. An offer to do or not to do must be made with a view to obtaining the

assent of the other party. Mere enquiry is not an offer.
5. An offer should may contain any term or condition. The offeror may
prescribe any mode of acceptance. But he cannot prescribe the form or time
of refusal so as to fix a contract on the acceptor. He cannot say that if the
acceptor does not communicate his acceptance within a specified time, he is
deemed to have accepted the offer.

6. The offeror is free to lay down any terms any terms and conditions in his
offer. If the other party accepts it, then he has to abide by all the terms and
conditions of the offer. It is immaterial whether the terms and conditions
were harsh or rediculous. The special terms or conditions in an offer must be
brought to the notice of the offeree at the time of making a proposal.

7. An offer is effective only when it is communicated to the offeree.

Communication is necessary whether the offer is general or specific. The
offeror may communicate the offer by choosing any available means such as
a word of mouth, mail, telegram, messenger, a written document, or even
signs and gestures. Communication may also be implied by his conduct. A
person can accept the offer only when he knows about it. If he does not
know, he cannot accept it. An acceptance of an offer, in ignorance of the
offer, is no acceptance at all.

Let me give a case law regarding this point;

G sent his servant L, to search his missing nephew. Subsequently, G

announced a reward for information relating to the boy. L traced the boy in
ignorance of the announcement. L, later on came to know of the reward and
he claimed it. G refused to give the reward. The Court held that L was not
entitled to the reward as he was not aware of the offer. (In Re: Lalman Shukla
Vs Gauri Dutt)

It should be noted that an invitation to offer is not an offer.

The following are only invitations to offer but not actual offers;

1. Invitations made by a trade for the sale of goods.

2. A price list of goods for sale.

3. Quotations of lowest prices.

4. An advertisement to sell goods by auction.

5. An advertisement inviting tenders.

6. Display of goods with price-tags attached.

7. Railway time-table.

8. Prospectus issued by a company.

9. Loud speaker announcements.

Offer and Tender:

A tender is not an offer to the public. It is in the nature of a continuing offer. It

is different from general offer. A person who invites tenders for the purchase
or sale of goods does not make an offer. The person who submits the tender
is said to make an offer.

Essentials of an Offer

Communication – offeree must have knowledge of the offer and the offer
must be made by the offeror to the offeree.

Intent – determined by an objective standard of what a reasonable offeree

would have believed.

Definiteness – offer's terms must be clear enough to provide a court with a

basis for giving an appropriate remedy.

Duration of Offers

Lapse of Time – offer remains open for the time period specified or, if no
time is stated, for a reasonable period of time.

Revocation – generally, an offer may be terminated at any time before it is

accepted, subject to the following exceptions.

Rejection – refusal to accept an offer terminates the power of acceptance.

Counteroffer – counterproposal to an offer that generally terminates the

original offer.

Duration of Offers

Death or Incompetency – of either the offeror or the offeree terminates the

offer.

Destruction of Subject Matter – of an offer terminates the offer.

Subsequent Illegality – of the purpose or subject matter of the offer

terminates the offer.

Duration of Revocable Offers

Offer Effective

Communicated Intent

Definite and certain

No Offer

OFFER OPEN

Offer Terminated

Lapse of time Death

Revocation Incompetency

Rejection Destruction of subject matter

Counteroffer Subsequent illegality

No Offer

Revocation

Option Contract – contract that binds offeror to keep an offer open for a
specified time.

Firm Offer – a merchant's irrevocable offer to sell or buy goods in a signed

writing ensures that the offer will not be terminated for up to three months.

Statutory Irrevocability – offer made irrevocable by statute.

Revocation

Irrevocable Offer of Unilateral Contract – a unilateral offer may not be

revoked for a reasonable time after performance is begun.

Promissory Estoppel – noncontractual promise that binds the promisor

because she should reasonably expect that the promise will induce the
promisee (offeree) to take action in reliance on it.

Acceptance of Offer

Definition – positive and unequivocal expression of a willingness to enter into

a contract on the terms of the offer.

Mirror Image Rule – except as modified by the Code, an acceptance cannot

deviate from the terms of the offer.

In General

11. To constitute a contract, the expression of common intention must

generally, if not always, arise from an offer made by one party to another,
and an acceptance by the latter, with the result that one or both are bound
by a promise.

12. The offer may be -

(a) Of a promise, or
(b) Of an act.

Lapse Of Offer

24. An offer will lapse, and so be determined without express revocation, so

that a subsequent acceptance will have nc effect -

(a) On the efflux of a time specified for acceptance, or of a reasonable time

where no time is specified;

(b) On its rejection;

(c) On failure of the acceptance to comply with the terms of the offer, which
is equivalent to rejection;

(d) On the death or insanity of either party before acceptance.

Efflux Of Time

An offer may lapse and be determined by the efflux of a specified time for
acceptance. If a person should offer to sell goods "if the offer is accepted by"
a certain day, an acceptance after that time would have no effect. After the
specified time has passed without acceptance, the offer lapses, or is
determined without any further action on the part of the proposer, and it is
no longer open for acceptance.4 If no time is specified, the offer is
determined by the lapse of a reasonable time