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Essentials of a Valid Offer – CA Foundation Business Law

Introduction

As we know, that an offer is the first step to make a contract. But whether all offers are complete and valid or do we need something else with an offer. Yes, we need to have some essentials to make an offer valid. What are the Essentials of a Valid Offer – CA Foundation Business Law. Let’s understand.

Essentials mean those components which help an offer to become valid. The Indian Contract Act 1872 provides us various essentials that a person needs to ensure while making an offer. Let’s understand how these essentials are necessary for a valid contract.

Essentials of a Valid Offer

1. It must be capable of creating legal relations

As we have seen in the case of agreement, the same in the case of an offer the intention of the parties must be to create a legal relationship. Therefore a social or domestic invitation or offer cannot be considered as a valid offer as the parties do not have the intention to make it legal.

For Example, Laila invited Majnu for dinner at her house. Majnu forgot the invitation and did not attend the dinner. Here the offer is not a valid offer due to lack of intention to rise legal consequences.

2. It must be certain, defi­nite and not vague

The offer must be certain and must not have vague meanings. When the offer is vague, there will be no acceptance from the offeree due to a lack of clarity. For Example, Ram invited Shyam to buy his car. But Ram forgot to tell which car he was talking about as he has more than 1 car. Here the offer is vague and Shyam will not be in a position to accept the offer.

3. It must be communicated to the offeree

It an important point to remember while making an offer. Communication of offer to the offeree is essentials as without knowing the offer the offeree cannot accept the offer. Further, the offer must be communicated to the offeree. For Example, Tony Stark wants to buy the hammer of Thor but he communicated the offer to Lauki. Here offer will not be considered as valid as the offer was not communicated to the offeree.

Further in ignorance of the offer (when the offeree does not know about the offer), acceptance of the offer will not give any right to the acceptor.

For Example, Thor lost his hammer. He announced that anyone who will bring his hammer, he will give him a reward of 50000. Tony Stark found his hammer without knowing about the announcement. Here although Tony Stark has performed as per offer, he has no right to demand reward as he was unaware of the offer.

4. It must be made to obtain the assent of the other party

The offer can only be valid when the offeror has the intention to obtain the assent of the offeree. Mere telling any statement is not an offer.For Example, Ram said I want to go on a bike trip to Leh Ladakh. This is not an offer as Ram is just telling his wish. This would become an offer when Ram says, “would you like to come with me on a bike trip to Leh Ladakh?”

5. It may be conditional

The offeror can put any condition in the offer. This means an offer can be conditional also. But any condition placed by the acceptor along with acceptance will rise to a counter offer and the original offer will be considered canceled. For Example, Ram made an offer to Shyam to buy his watch. He put a condition to pay the amount by electronic mode instead of cash.

6. The Offer should not contain a term the non-compliance of which would amount to acceptance

We have learned that an offer can be condition but an offer must not contain any such condition, non-compliance of which may result in acceptance. This kind of acceptance will not be considered and this type of offer will not be a valid offer.

For Example, Rancho wants to buy a book from Chatur. So he made an offer to Chatur to sell his books to him. The offer contained a condition that the Chatur must accept the offer within a week otherwise the offer will be considered to be accepted. This is not a valid offer.

7. The offer may be either specifi­c or general

The offer can be a general offer i.e. offer to the public at large or a special offer to a certain person or a group of the persons. Both types of the offer will be considered as valid. For Example an advertisement made in news paper is a general offer.

8. The offer may be express or implied

Express offer – The offer that has expressed communication whether written or oral. For Example, Ram asked Shyam to sell his car to him. This is an expressed offer. Implied Offer – Here the offer is given by the action or conduct of the offeror instead of words. For Example, Standing in a queue for a Railway ticket is an implied offer. Both offers are considered to be valid in the eyes of law

9. The offer is Different from an invitation to an offer

The offer and invitation to an offer both are distinct words. An offer is a process to express the willingness on any act to obtain assent from another person on such act whereas in the invitation to the offer the person doesn’t make an offer by himself but invites the other people to make an offer. This is the step precedent to the offer to induce an offer. (Essentials of a Valid Offer – CA Foundation Business Law)

So we have seen that in the offer the first party is giving an offer but in the invitation, the first party is only the invitor, not the offeror. The invitation to an offer shows that the invitor has the intention to make a contract by accepting a suitable offer.

For Example, X Ltd. gives an advertisement in the newspaper inviting tender for the supply of food for the employee. Here X ltd. is not an offeror but an invitor. Later on, if X Ltd. gets a suitable tender or offer then it will accept it and make a contract with the offeror on the finalized terms and conditions.

10. An offer is different from a response or mere telling the intention

An offer is different from a response or answer to any question. As the answer or response has no intention to get the assent of another party. Further telling the intention to another person is also not construed as an offer.

For Example, Ram said to Shyam that he is thinking to go on a trip to Goa. What does he thinks about this? Shyam replied that it will be great to spend the holidays in Goa. This is not an offer from Both Ram as well as Shyam. As here Ram is telling his intention or wish to Shyam and Shyam is replying to the question asked by Ram.

Conclusion

So we have seen all these essentials are necessary for us to make our offer valid and a valid offer can only give rise to a valid contract.

Essentials of a Valid Offer – CA Foundation Business Law

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