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Meaning & Types of an offer – CA Foundation Business Law

Unit-1 Nature of contract

Chapter-1 The Indian Contract Act 1872

Meaning of Offer

In general terms, offer means giving a proposal to another person for getting his acceptance or asking the other person’s wish on a particular subject. But the Indian Contract Act 1872 provides its own meaning for the word “offer”. Let’s see what the Indian contract Act says – (Meaning & Types of an offer – CA Foundation Business Law)

As per section 2(a) of the Indian Contract Act, 1872, “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”.

As we can see this is not an easy definition. So let’s understand this by analyzing the definition.

  • Parties of proposal/offer
    • Offeror/promisor– The person who gives an offer called the offeror or promisor.
    • Offeree- The person to whom the offer is given is called the offeree. When the offeree accepts the offer becomes an acceptor or promisee.
  • Expressing willingness

For making an offer the offeror must express his willingness to do or not to do anything. Just merely telling someone our wish is not an offer. In other words, we can say that the offer must show the exact wish of the offeree that he wants to do something or not.

For example, Ram said to Shyam he wants to buy a car. In response to that Shyam asked, “Would you like to buy my car.” In this example, Shyam is the offeror as he is telling his exact wish to sell the car to Ram. Ram will not be considered as an offeror because he just mere telling his wish which does not require further consent of Shyam.

  • An offer can be positive or negative

An offer can be for a positive act i.e. for doing something or can be for not doing something i.e. negative act. In the eye of the law, there is no difference between both in the context of a contract.

For Example, Ram was an employee of X Ltd. He left X Ltd and started his own business in the same product line in which X Ltd. is working. X Ltd makes an offer to Ram not to do the competitive business in return of which X Ltd. will give him Rs. 10 lakhs. Here this offer is for a negative act i.e. not doing the business.

  • The offer must be given to obtaining the assent of another party

Mere telling the wish or saying something to do is not an offer. An offer must be given to get the assent of the offeree.

For example, Ram told Shyam he wants to buy a car. This is not an offer because Ram is just telling his willingness. He has no intention to get Shyam’s assent. This would become an offer when Ram asks, “Shyam I want to buy your car.”

So we have seen that when a person expresses his willingness about any positive or negative act to obtain the consent of another person on such an act is called an offer. So now we will learn about the types of offer a person can give in situations.

Types of offer

  • General Offer

A general offer is an offer that is made to the public at large. Here are some points related to the public offer-

  • Here offeree is public at large. Hence anyone from the public can accept the offer and can become an acceptor by acting on such an offer.
  • It can only be accepted until it is a continuing offer. Once the offer is withdrawn, acting on the offer will not be considered, as the offer is closed.

For Example, Ram lost his Dog. He gives a post in the newspaper announcing a reward of Rs. 1000. Here anyone from the public who finds the lost dog will be considered the acceptor. (Meaning & Types of an offer – CA Foundation Business Law)

  • Special Offer

When the offer is made to a specific or ascertained person, the offer will be called a special offer. Here only the offeree has the right to accept the offer.

For Example, Ram gives an offer to Shyam to buy his car. Here offeree is a specific person i.e. Shyam.

  • Express Offer

When an offer is made by an express communication, known as an express offer. This type of offer can be oral or written. For example, Ram sent an email to Shyam asking him to buy his car. This is an express offer.

  • Implied Offer

When an offer is made not by words but by conduct or action of the offeror, known as an implied offer. It has the same legality as of express offer. For example, standing in the queue for a railway ticket is an implied offer.

  • Counter Offer

When the offeree accepts the offer with modification of the terms or conditions of an offer than it is known as a counter offer. Here the original offer is considered to be canceled and the offeror has the option to refuse the modified conditions. Here two offers exist i.e. original offer and counteroffer.

For Example, Jai made an offer to sell his gun to veeru for Rs.500. Veeru offered to pay only Rs. 400. Here Veeru has given a counter offer to Jai. Jai can refuse his offer.

  • Cross offer

When two persons give an offer to each other on the same subject without knowing the offer of the other person, then it is known as a cross offer. Here offer by one person cannot be construed as acceptance on the offer of another party.

For example, Raj sent an email to Simran asking her to buy his car for Rs. 1 lakh. Without knowing this fact, Simran also sent a message to Shyam making an offer to buy Raj’s car. Here message (offer) of Simran cannot be construed as acceptance by Simran on Raj’s offer.

  • Standing offer

When an offer contains a time limit to accept the offer, then it is known as a standing offer. A standing offer is also called an open offer or continuing offer. This can be accepted only until it is open.

For example, Harry made an offer to Rawn to sell his wind and directed him to give his assent within a week. This will be called a standing offer.

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