Introduction
A contract is a combination of mutual consent and legal enforcability. The offer and acceptance are the first or initial steps in any deal. At least two parties are involved in the contract: the offeror and the offeree.
Amongst the various types of offers present, there is a standing, open or continuing offer.
Offer
An offer is the first step in any contract. When an offer is accepted and communicated to the person, who made the offer, the agreement is complete.
It is defined as follows in Section 2(a) of the Indian Contract Act, 1972:
"When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of the other to such act or abstinence, he is said to make a proposal."
In English law, the words 'proposal' and 'offer'; are synonyms.
According to Section 2, the person who makes the proposal is known as the 'promisor," and the one who accepts the proposal, is known as the 'Promisee' (c).
For instance, "A"; made "B" an offer to buy the house. The offeror, promisor, or proposer is "A," and the "B" is the offeree or promisee.
Continuing or Standing Offer
A standing, open, or continuous offer is one that is allowed to remain open for acceptance for an extended length of time. Standing offers are exemplified by tenders.
Tendering is the nature of a standing offer. An advertisement requesting tenders is merely an invitation to offer, not an offer. The person who submits a tender for goods or services is considered to have made the offer. A tender becomes a standing offer once it has been accepted or approved. Acceptance or approval of a tender, on the other hand, does not imply acceptance of the offer.
It signifies that the offer will be open for a set length of time and will be accepted from time to time as a replacement for particular orders for products supplied. As a result, each order resulted in a distinct contract.
When a party accepts the tender or offer made by the offeror, a legally enforceable contract is not formed until an actual order is placed. It simply indicates that the offer or tender will be open for a set period of time and will be capable of leading to a binding contract once the appropriate quantity is ordered. As a result, a contract is only formed when an order is placed in compliance with the offer's terms and conditions.
For instance -
1. A standing offer is a contract for the provision of items for a large canteen. In this scenario, we state the contract terms, the commodities to be supplied, the quantity of each good, and the duration of supply of goods. Then we don't have to repeat our offer every day, and the supplier sends us the goods on a regular basis. This form of offer is known as a standing offer. They are available for the duration of the contract.
2. X Ltd. requires a big number of particular commodities over the next 12 months and places an advertisement in the leading newspaper asking for tenders. Z put in a bid to supply those things at a certain price. Z's proposal has been accepted or authorised. Z's tender has now become a
standing offer. Every order placed by X Ltd constitutes acceptance of the offer.
Tenders are sometimes used to request specific services or items. Individuals who have submitted tenders will make offers. There are two types of tenders:
a) Definite Offer,
b) Standing Offer or Continuing Offer.
If a tender is made to supply specified commodities in whatever amount as and when required, it will be a standing offer or open offer. The contract does not exist in this circumstance just because the tender is accepted; rather, the contract exists only after the order is placed. Each order is an acceptance in this case, and the contract is formed once the offer is accepted.
Before acceptance or placement of an order, a standing or continuing offer may be revoked. Because the contract is formed after an order is placed, the offer account may be withdrawn after the order is placed.
Case Laws
• Bengal Coal Co. Ltd. Vs. Homee Wadia & Co. [(1899)] ILR 24 Bom. 97]
This is the most well-known case on the issue. The defendants in this case agreed to supply coal as and when it was needed for a term of twelve months at a certain price. The plaintiff placed specific orders, and the defendants supplied the coal, but the defendants withdrew their offer before the 12-month period had expired. The plaintiff subsequently filed a breach of contract lawsuit against the defendants.
The court dismissed the lawsuit, stating that there was no contract at all and hence no breach of contract. The Court points out that a contract only exists when a standing offer is accepted by placing an order; before this step, either party can withdraw, but once an order is issued, it cannot be reversed.
• Union of India Vs. Maddala Thathiah [(1964) SCR (3) 774]
The Supreme Court of India ruled in this case that a standing offer may be cancelled at any moment if it has not been accepted in the legal sense, with acceptance in the legal sense defined as a requisition or a specific quality of goods. Each offeree requisition is a distinct act of acceptance that results in a different contract.
• R. Vs. Demers [2004] 2 S.C.R. 489
In this situation, the government hired a printer to print and bind the documents. At a certain rate, the government keeps records for the government. The government, however, cancelled the agreement the next year. When the printer launched a lawsuit against the government, it was dismissed on the same grounds as in the above case.
• PercLval Ltd. V. London County Council Asylums and Mental Deficiency Committee (1918) 87 L.JKB 677
In this case, tenders for the supply of goods were advertised by the Plaintiff. The defendant accepted the tender, which required him to furnish the corporation with numerous unique goods for a 12-month period. Between these events, the defendant failed to supply for a specific shipment. The Court decided that the Tender was a standing offer that would be converted into a series of contracts by the firm's subsequent actions, and that an order barred pro tanto the option of revocation, hence the company was successful in its breach of contract case.
• Great Northern Railway V. Witam Case [1873] LR 9 CP 16
In this case, tenders were sought for the supply of specific iron goods over a 12-month period by the railway company. The tender from Witam was accepted. Witam refused to execute the order placed during the currency of the tender after supplying for a while. Witam could not refuse within the tender terms, according to the court.
Conclusion
A contract is an agreement between two private parties that binds them to each other legally. A contract might be written or oral in nature.
In contract law, an offer is a promise made to another person in exchange for a specific outcome. An offer can be retracted or revoked in certain conditions. When it gets to the knowledge of the person to whom the offer is made, the communication of the offer is complete.
This article is written by Sakina Ali of Indore Institute of Law.