A Detailed Analysis On Offer Of Performance/Tender And Liability For Failure To Consider Tender Under The Indian Contract Law

By
Raghav Sehgal
-

Introduction

An agreement enforceable by law constitutes a valid contract. In the case of a contract, each party is legally bound between both parties. Under section 2(h) of the Indian Contract Act, 1872 (ICA), the term contract has been defined as an agreement enforceable by law. The term agreement has been defined under section 2(e) of the ICA, 1872 as “every promise and every set of promises forming consideration for each other becomes an agreement.” An agreement involves a promise from both sides, and when an agreement becomes enforceable under the law, a valid contract arises. An important essential element of a valid contract is the offer and subsequent acceptance to form an agreement. An offer is the manifestation of the promisor’s mind, and an offer can be both positive and negative, that is, to do or not to do something. Towards this offer, consent should be signified and communicated by an act or omission by which the promisee or the party accepting the offer intends to express their consent, and this consent is known as acceptance Once a proposal is accepted by the other party and it is timely communicated to the party who proposed in a proper manner, it becomes a binding contract, provided that consideration and object are legal and the parties do have the intention to create legal relationships. 

Offer of Performance/Tender

In case of an offer of performance of tender, the promisor is willing to perform the contract and offers the same, the promisee as an obligation to accept the same and in case, the promisee rejects the offer, then the promisor cannot be made liable for non-performance of the contract, nor does he lose his rights under the contract. The act of non-providing reasonable opportunities/facilities for the performance of the contract by the promisee to the promisor also excuses the promisor from the performance of the contract and the same has been upheld by section 67of the Indian Contract Act, 1872. An offer of performance is also known as Tender. The essentials of a valid offer of performance/Tender are stated under section 38 of The Indian Contract Act, 1872.  

Essentials of a Valid Offer of Performance/Tender

As stated above, the essentials of a valid tender are mentioned in section 38. These essentials are as follows:

1. The Tender must be unconditional: The tender must be unconditional. In the case of Sitaram v Ramrao, it was held that the offer of the promisor to pay only a fraction of the total sum and consideration of the part payment as full payment will amount to the imposition of a condition and thus, the tender was considered invalid. In the case of Navin Chandra v Yogendra Nath, it was held that payment by cheque is deemed to be subject to encashment and tender was considered a conditional tender, and the promisee was given the right to lawfully refuse to accept the tender. Thus, the unconditional nature of tender is essential for a valid tender. 

2. The Creation of the Tender at A Proper Place AND Time: Another important essential of a valid tender is the creation of the tender at a proper place and time, with the opportunity to the promisee to determine or establish the proper performance of the tender by the promisor in the future. If a place and time are determined and the contract is performed according to that place and time, then the contract is discharged and both the parties are discharged from their obligation. The case of Demby Hamilton & Co. v Burden is important case law in this regard. In this case, a contract for the supply of 30 tons of apple juice was made. The juice was tendered, but the buyer refused to take delivery of some of the installments. This delay of acceptance of delivery made the apple juice putrid. It was subsequently held that it was the fault of the buyer for not taking the delivery of the goods when tendered, and he was made liable for compensating the seller for loss caused because of this delay. 

3. The Opportunity to the Promisee to Ascertain/Establish that the Goods are in accordance with the Contract: Another essential of a valid tender is the reasonable opportunity provided to the offeree/promisee to ascertain that the thing offered is the same thing which the promisor is bound by his promise to deliver. A similar provision is provided under Section 41(2) of the Sales of Goods Act, 1930 laying emphasis on the same point made above.

4. The Offer of Performance to One of The Joint Promisees is a Valid Tender: It has been stated in section 38 of the Indian Contract Act, 1872 that an offer to one of the several joint promisees has the same legal consequences as an offer to all of them, in case there is the involvement of several joint promisees. From the above discussion, it is clear that when there are more than one joint promisees, an offer of performance, that is, a tender to one of them will be treated as a valid tender.

Liability for Failure to Consider Tender

As discussed above, in case of an offer of performance of tender, the promisor is willing to perform the contract and offers the same, the promisee as an obligation to accept the same and in case, the promisee rejects the offer, then the promisor cannot be made liable for non-performance of the contract, nor does he lose his rights under the contract. Similarly, not providing reasonable opportunities to the promisor for the performance of the tender or contract discharges the promisor from the performance of the contract. It has been stated under section 38 of the Indian Contract Act, 1872 that if an offer of performance has been made by the promisor to the promisee and the promisee either fails to consider the tender or is not accepted by the promisee, then the promisor is not liable for non-performance of the offer of performance and he does not lose his rights under the contract.

Conclusion:

From the above discussion, it is clear that an agreement enforceable by law constitutes a valid contract. In the case of a contract, each party is legally bound between both parties. Under section 2(h) of the Indian Contract Act, 1872 (ICA), the term contract has been defined as an agreement enforceable by law. An offer of performance is also known as Tender. The essentials of a valid offer of performance/Tender are stated under section 38 of The Indian Contract Act, 1872. There are four essentials of a valid tender, that is, the tender must be unconditional, the creation of the tender at a proper place and time, the opportunity to the promisee to ascertain/establish that the goods are in accordance with the contract, and the offer of performance to one of the joint promisees is a valid tender. In case of an offer of performance of tender, the promisor is willing to perform the contract and offers the same, the promisee as an obligation to accept the same and in case, the promisee rejects the offer, then the promisor cannot be made liable for non-performance of the contract, nor does he lose his rights under the contract. Similarly, not providing reasonable opportunities to the promisor for the performance of the tender or contract discharges the promisor from the performance of the contract. It has been stated under section 38 of the Indian Contract Act, 1872 that if an offer of performance has been made by the promisor to the promisee and the promisee either fails to consider the tender or is not accepted by the promisee, then the promisor is not liable for non-performance of the offer of performance and he does not lose his rights under the contract.

References:

  1. The Indian Contract Act, 1872, No. 2(h) (Indian).
  2. The Indian Contract Act, 1872, No. 2(e) (Indian).
  3. Diganth Raj, What are the essentials of Contract? IPleaders, available at https://blog.ipleaders.in/what-are-the-essentials-of-contract/ (last accessed Apr. 5, 2021).
  4.  Meera Annie Koshy, What do you mean by revocation of proposals and acceptance under a contract? (2020) IPleaders, available at https://blog.ipleaders.in/mean-revocation-proposals-acceptance-contract/ (last accessed Apr. 5, 2021).
  5.  Dr. R.K. Bangia, The Indian Contract Act (12th Edition, 2005), Allahabad Law Agency, Haryana.
  6. The Indian Contract Act, 1872, No. 67 (Indian).
  7. The Indian Contract Act, 1872, No. 38 (Indian).
  8. The Indian Contract Act, 1872, No. 38(1) (Indian).
  9. Sitaram v Ramrao, A.I.R. 1931 Nag., 91.
  10.  Navin Chandra v Yogendra Nath, A.I.R. 1967 All. 293.
  11.  BANGIA, supra note 5, at 223.
  12. The Indian Contract Act, 1872, No. 38(2) (Indian).
  13. Performance of Contract, Theintactone (2018), https://theintactone.com/2019/05/06/bl-u3-topic-8-performance-of-contract/. 
  14.  Demby Hamilton & Co. v Burden, 1 All. E.R. 435.
  15. BANGIA, supra note 5, 224-225.
  16.  The Indian Contract Act, 1872, No. 38(3) (Indian).
  17. The Indian Contract Act, 1872, No. 38 (Indian).

Raghav Sehgal
Raghav Sehgal
I am Raghav Sehgal, a 1st Year FYIC BALLB student at Rajiv Gandhi National University of Law, Patiala. I am new to the arc of law. I am actively seeking opportunities in Academic Writing, Networking and Critical Skills Development. My fields of interest include International Humanitarian Law, Human Rights Law, Current Affairs and Legal Developments around the law. I have two publications under my belt, and this is indicative of my orientation towards academic writing. My career objective is to be an expert in my profession and improve my standard of thought and mental capabilities and to add wealth to my nation and make my nation and family proud.