Introduction

Contracts play an important role in our everyday life ranging from insurance policies to
employment contracts. In Fact, we enter into contracts even without thinking for example
while buying a movie ticket or downloading an app. Contracts are oral or written agreements
between two or more parties. Parties entering into a contract might include individual people,
companies, non-profits or government agencies. The whole process of entering into a contract
starts with an offer by one party, an acceptance by another party, and an exchange of
consideration (something of value). Let us take a look at the definition of an offer and the
essentials of a valid offer.

Definition of an offer
According to Contract Act, 1872,

When a person expresses his willingness to another person to do or to abstain from doing
something and also obtain the consent of such expression, it is called an offer.
The person who makes an offer is called “Offerer” or “ Promiser” and the person to whom the
offer is made is called the “Offeree” or “Promisee”.
Illustration- Mr. A says to Mr. B, “Will you purchase my car for Rs.1,00,000?” In this case, Mr. A
is making an offer to Mr. B. Here A is the offeror and B is the offeree.

Essentials of a valid offer

There are mainly three essential elements of a valid offer:

(1) The offer must be Communicated

Communication or expression of the willingness by the offerer to enter into a contract or

abstain from doing so is essential for a valid offer. Mere desire or willingness to do or not to do
something is not enough and will not constitute for an offer.
(2)Terms of the offer must be clear and definite

Knowledge of the Intention of the parties is very essential as without this the courts will not be
able to decide what the parties want to do. Therefore the terms of the offer must be clear and
definite and not vague and loose.

Example-Ali offers Ahmad to sell fruits worth Rs 600/-. This is not a valid offer since what kinds
of fruits or their specific quantities are not mentioned.
(3)Must create a legal relationship

It is essential for a valid proposal that it must be made with the intention of creating a legal
relationship otherwise it will only be an invitation. A social invitation may not create a social
relationship. An offer must lead to a contract which creates legal obligations and legal
consequences in the case of non-performance of the contract.
Example- A lunch invitation extended by A to B is not a valid offer.

Ways in which an offer can be communicated

(1) By words (whether written or oral)

The written offer can be made by letters, telegrams, E-mail, advertisements, etc. The oral offer
can be made either in person or over the telephone.
(2) By conduct

The offer may be communicated by making positive acts or signs to the offeree. However, the
silence of a party does not amount to an offer.
Example– When you board a taxi, you are accepting to pay the taxi fare via your conduct.

Difference between offer and an invitation to offer

An offer is defined in Contract Act, 1872. Conversely, an invitation to offer is not defined in the
Contract Act, 1872.
The major difference between the two is that the purpose of an offer is to enter into a contract
whereas the purpose of an invitation to offer is to receive an offer in order to enter into a
contract.

Illustration- A sees an article marked Rs 50 in B’s shop. He tells B he will buy it and offers him Rs
50.B says that he doesn’t wish to sell that article.

In this case, there is no contract at all and the price tag is not an offer but an invitation to offer.
It is on the discretion of the shopkeeper if he wants to sell his article or not.

Therefore an offer is the final willingness of the party to create legal relations. An invitation to
offer is not the final willingness but the interest of the party to invite the public to offer him.