What Is a Valid Offer in Contract Law?
What is a valid offer in contract law? A valid offer is an expression of the desire to enter into a contract that is beneficial to both parties involved.3 min read
2. Types of Offers
3. Identifying a Valid offer
4. Classification of a Valid Offer
What is a valid offer in contract law? A valid offer is an expression of the desire to enter into a contract that is beneficial to both parties involved in the agreement.
Before a contract can be executed, it starts with one party making an offer to the other. Offers are also referred to as proposals. Under the Contract Act, Section 2(a), an individual has made an offer when implying the readiness to do or not do a specific action that will mutually benefit the other party involved in the agreement. An offer must be made with the intention to become legally binding upon acceptance. A contract becomes binding when the offer has been unconditionally accepted.
The two main parties involved in making an offer include:
- The offeror, which is the individual making the offer to the other (also called proposer)
- The offeree, which is the individual having the offer made to them (also called proposee)
Under section 2(c) of the Contract Act, an offeree becomes the acceptor when accepting the proposal made by the offeror.
Types of Offers
Several types of offers exist as well. One is called the express offer, which is handled through words written on paper or stated orally. If made orally, the express offer can be made by telephone or face-to-face. Another type of offer is one that is implied. When conveying the desire to make an offer through signs or acting, this may be taken as an implied offer. However, if one of the parties observes silence in the transaction, an implied offer isn't considered valid.
An offeror can also make a specific offer, which is made to a specific group or individual and must be accepted by the specific group to which it was made. For example, James makes an offer to buy a car from Andrew for $5,000. Since James is only making the offer to a specific person, only Andrew can accept.
A general offer is not made to any specific individual or group, but rather made to the public. As long as the person making the offer abides by its terms, they can respond to a general offer. For example, John puts an advertisement in the local newspaper that anyone who finds his missing dog will receive a reward of $100. Brittany reads the offer in the newspaper and finds the lost dog. After she finds the dog, she calls John to let him know that she found his dog. Brittany would be entitled to receive the $100 award as John advertised in the newspaper.
A cross offer involves both parties in which one makes an offer to the other that is similar to what the other would have offered without realizing it. For example, Jason emails Amber to purchase her vehicle for $500, while at the same time, Amber sends an email to Jason with a price of $500 for her vehicle. This cross-offer situation requires one party to accept the other's offer. The final type of offer is a called an open or standing offer. This offer is continuous until it has been accepted.
Identifying a Valid offer
In order for an offer to be valid, it must be clearly communicated, giving the offeree a chance to accept or reject it. Clear communication can include actions, oral communication, or in writing. A valid offer can be made to a group, a single person, or the public at large. Valid offers are definite in their substance. It must be distinguishable from an invitation to treat in order to be valid.
Classification of a Valid Offer
Offers can also be classified into two main categories:
The differences between the two classifications are especially important in the revocation, communication of acceptance, and advertisements related to offers. A bilateral offer has two sides, involving two parties who are contractually obligated to perform according to the terms and are equally committed. Bilateral offers may start as invitations to treat as they can lead to further negotiations and bargaining. Most offers are bilateral, and many of the common contract laws apply to them. Some of these rules include the way acceptance can be communicated to the person making the offer and how advertisements can be used.
A unilateral offer is made by one party in exchange for the performance of a specific act.
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