Types of Offer

There are several types of offers in Indian Contract Act. An offer is the initial step in creating a contract. It marks the start of the legal commitment between the parties. It’s important to note that acceptance can only be given in response to a prior offer, so an offer is a crucial element in forming a contract.

Under Section 2(a) of The Indian Contract Act (referred to as ICA), an offer is defined as follows:

“When one person indicates to another that they are willing to do something or refrain from doing something, with the intention of getting the other person’s agreement to such an action or inaction, it is considered a proposal.”

In simpler terms, the terms “proposal” and “offer” can be used interchangeably for brevity. The person making the promise is called the “Promisor,” and the person to whom the offer is made is known as the “Promisee.” From this definition, it’s clear that an offer can involve both a positive action and a negative one, meaning it can be about doing something or refraining from doing something.

The types of offers in contract law have been discussed below:

Types of Offer in Contracts

Offers come in various forms and there are essentially seven types of offers:

• Express offer 
• Implied offer
• General offer
• Specific Offer
• Cross Offer
• Counter Offer
• Standing Offer

Here is a table highlighting the differences between the various types of offers in contract law:

Express Offer and Implied Offer

Express Offers and Implied Offers are 2 types of offer. Section 9 of The Indian Contract Act (ICA) defines both Express Offers and Implied Offers as follows:

Express Offer: When a proposal or acceptance of a promise is made using words, it is considered an express offer. In other words, it’s a clear and direct offer communicated in spoken or written language.

Implied Offer: On the other hand, when a proposal or acceptance is conveyed in a manner other than using words, it is categorised as an implied offer. This means that the offer is not explicitly stated but is inferred from the actions or circumstances of the parties involved.

For example, consider an auction where bids are made without verbal offers. This is an example of an implied offer. Another case, Upton-on-Severn RDC v. Powell, involved a situation where the defendant called a fire brigade, assuming the service was free. The court found that although no verbal offer was made, the defendant’s actions implied a request for Upton’s services and Upton, by responding and providing those services, created an implied promise to pay.

In the case of Ramji Dayawala & Sons (p) Ltd v. Invest Import, a notice to revoke an arbitration clause was sent by an Indian party and the other party did not respond. This lack of response was considered an implied acceptance, resulting in the removal of the arbitration clause from the contract.

To put it simply, if a contract is formed based on actions or conduct without explicit verbal communication, it can be referred to as an implied offer. In contrast, any contract created through clear verbal communication is an express offer.

General Offer

A General Offer is an offer that is open to anyone, effectively made to the public in general. The concept of a General Offer was established in the landmark case of Carlill v. Carbolic Smoke Ball Co. In this case, the Carbolic Smoke Ball company advertised that they would pay £100 to anyone who contracted influenza, colds, or any disease caused by colds after using their medicine according to the prescribed instructions. They also stated that £1000 had been deposited in the Alliance bank to demonstrate their sincerity in the matter. A customer, Mrs. Carlill, used the medicine but still contracted influenza and sued the company for the reward.

The company argued that their offer was not intended to create a legally binding agreement but was merely a marketing ploy to boost sales. They also contended that an offer must be made to a specific person and since this offer was not directed at any specific individual, they were not obligated to pay Mrs. Carlill.

However, the court ruled in favour of Mrs. Carlill, stating that in cases of general offers, there is no need for explicit acceptance communication. Anyone who fulfils the conditions of the contract is considered to have accepted the offer. Furthermore, the money deposited by the company in the bank demonstrated their intent to create a legally binding relationship and therefore, the Plaintiff was entitled to the reward.

An Indian case, Lalman Shukla v. Gauri Dutt, also illustrates the concept of a General Offer. In this case, a servant was sent by his master to find his missing nephew and announced a reward for anyone who could locate the nephew, which is another example of an offer made to the public at large.

A General Offer of a continuing nature, like the one in the Carbolic Smoke Ball case, can be accepted by multiple people until it is revoked. However, in cases where the offer relates to obtaining information about a missing item, it is typically closed as soon as the first person provides the required information.

Specific Offer

A Specific Offer is a type of offer that is directed toward a particular, identified individual. This type of offer can only be accepted by the person for whom it was intended. This concept is illustrated in the case of Boulton v. Jones, where the Plaintiff had taken over the business of a person named Brocklehurst. The defendant, unaware of this change in ownership, placed an order for certain goods with Brocklehurst. The defendant only learned about the change in ownership when he received an invoice, by which time he had already consumed the goods. The defendant refused to pay for the goods, claiming that he had a set-off against the original owner and the plaintiff sued him.

The judges delivered a unanimous judgment, absolving the defendant from liability. Pollock CB clarified that the legal principle was clear: if you intend to contract with person A, person B cannot insert themselves as A without your consent and to your disadvantage. It was also established that in cases where a contract is made with a specific individual for personal services, such as writing a book, creating a painting, or any service unique to that person, or if there is a set-off owed by any party, no one else has the authority to assert that they are the contracted party. In other words, the offer was meant for a specific person and couldn’t be transferred to someone else without consent.

Cross Offer

Cross offers are those types of offers which occur when two parties independently and unknowingly make identical offers to each other. However, it’s important to note that cross offers are not considered valid offers and they do not lead to the formation of a contract. Here are the basic essentials of a cross-offer:

Same Offer to One Another: In a cross offer, both the offeror and the offeree make the same offer to each other. This means that the object of the offer and the parties involved remain the same.

Offer Must Be Made in Ignorance of Each Other: The two parties must make their offers independently and without prior knowledge of each other’s offers.

An important case that illustrates this concept is Tinn v. Hoffman. In this case, the defendant offered to sell 800 tons of iron to the complainant at a specific price per ton. Simultaneously, the complainant also made an offer to buy the same quantity of iron from the defendant at similar terms. The key issue was whether a contract existed between the parties and whether simultaneous offers constituted a valid acceptance.

The court ruled that these were indeed cross offers because they were made simultaneously and independently without knowledge of each other. Consequently, these offers did not bind the parties and no contract was formed.

It’s essential to understand that for a valid contract to be established, there must be a clear offer and an acceptance of that offer. In the case of cross offers, there is no acceptance; instead, there are only simultaneous offers made independently by both parties and thus, they do not result in the formation of a contract.

Counter Offer

A Counter Offer occurs when the offeree responds to the original offer with a qualified acceptance that includes modifications or variations to the terms of the original offer. It’s important to understand that a counter offer is, in fact, a rejection of the original offer. Here’s an example to illustrate this concept:

Suppose A offers to sell a car for 10 Lakhs to B. Instead of accepting the offer as is, B responds by agreeing to buy the car for 8 Lakhs. This response by B amounts to a counter offer and effectively rejects A’s original offer. If later on, B agrees to buy the car for the original price of 10 Lakhs, A may refuse.

This principle is well illustrated by Sir Jenkins CJ in the case of Haji Mohd Haji Jiva v. Spinner, where it was established that any departure from the original offer constitutes a rejection. In other words, when an acceptance contains variations or modifications, it is not a valid acceptance but rather a counter proposal. The original offeror must agree to this counter proposal for it to form a contract.

This legal concept is rooted in the landmark case of Hyde v. Wrench. In this case, an offer to sell a farm for 1000 Pounds was initially rejected by the Plaintiff, who instead offered 950 Pounds for the farm. Later, the Plaintiff provided an acceptance at the original price. The court ruled that the Defendant was not bound by a contract because the Plaintiff’s response amounted to a counter proposal. If the Plaintiff had simply accepted the original offer to purchase the farm at the price of 1000 Pounds, a valid contract would have been formed. However, the counter proposal effectively rejected the original offer.

Standing Offer

A Standing Offer is a type of offer that remains open for acceptance over a specified period of time. It allows potential offerees to accept the offer within that time frame. An example of a standing offer is when tenders are invited for the supply of goods or services.

In the case of Perclval Ltd. v. London County Council Asylums and Mental Deficiency Committee, the Plaintiff had advertised for tenders for the supply of goods. The defendant submitted a tender in which they agreed to supply various special articles to the company for a duration of 12 months. However, during this period, the defendant failed to supply a particular consignment.

The court held that the tender made by the defendant was a standing offer, which was meant to be converted into a series of contracts through subsequent acts of the company. When a company issues an order based on a standing offer, it prevents the offeror (in this case, the defendant) from revoking the offer for that specific portion. Consequently, the company succeeded in taking legal action for breach of contract when the defendant failed to supply a consignment as per their standing offer. This case exemplifies how standing offers work and how they can lead to contractual obligations when accepted by subsequent orders or actions.

Conclusion

The various types of offers in contract law provide flexibility and clarity in the formation of agreements. There are 7 types of offer in contract law and are express offer, implied offer, general offer, specific offer, cross offer, counter offer and standing offer.

An express offer, made in clear and explicit terms, contrasts with implied offers, which stem from actions and circumstances. General offers, open to the public at large, differ from specific offers directed at particular individuals. Cross offers, while interesting, do not lead to contracts, as they involve identical, simultaneous offers by two parties.

Counter offers, on the other hand, represent a rejection of the original offer, as the offeree suggests modified terms. Standing offers, like tenders, create opportunities for extended acceptance over a set period. Understanding these types of offers is essential in contract law, as they shape the dynamics of contract formation and acceptance.