5/12/22, 9:35 PM Law of contract: Implied offer

Law of contract: Implied

offer

Reading time: 8-10 minutes.

The term ‘offer’ is one of the fundamental concepts of

the law of contracts. It is a term used in the English
Common Law, synonymous with the term ‘proposal’
under the Act. The Indian Contract Act, 1872 is based
on the English Common Law. The Preamble of the ’Act’
mentions that it has been passed to define and amend
certain parts of the law relating to contracts.

The definition of the term ‘proposal’ in the ambit of

Section 2(a) of the Indian Contract Act, 1872 reads as
follows,

“When one person signifies to another his willingness

to do or to abstain from doing anything, to obtain the
assent of that other to such act or abstinence, he is
said to propose.”

The person making the offer or proposal is called an

‘offeror’ or ‘promisor’ and the person who may accept
such an offer is known as the ‘acceptor’ or ‘promisee’.
It is pertinent to note that an offer to do or to abstain
from doing something must be made to be agreed by
the other party. A voluntary act done by a person and
informing the other of his willingness or desire to do
such an act, with no intent to obtain the assent of the
other party does not constitute an offer or proposal.

“I will serve the nation whenever required“, is a

statement expressing the willingness of the person but
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5/12/22, 9:35 PM Law of contract: Implied offer

does not constitute an offer as there is no intent to

obtain the assent of another party. But a statement, “I
am willing to sell you this book for Hundred Rupees”
is an offer made with the intent to obtain the assent of
another party.

A valid offer is the one that gives rise to a valid

contract. The offer should create or be with a capacity
to create legal relations. Mere social or moral
relations, for instance: an invitation to dinner does
not give rise to legal relations.

Thus, an Offer is an important constituent of the

Indian Contract Act, 1872 and possesses a legal duty
to do or to abstain from doing something to amount to
a contract. An Offer, by the virtue of this Act, can be
Expressed, Implied, General, or Specific. It can also
be a Cross Offer or a Standing/Open Offer.

What are implied offers?

Implied Offer is an offer conveyed through an act or

signs. Such an offer is only implied rather than
overtly stated. However, if the opposite party remains
silent over the offer, the offer itself is not valid.

The offer is stemmed from the belief that the product

or service offered is proper and legally valid. For
instance, a person buying a product from a seller
assumes that the product functions properly without a
seller explicitly claiming that the product works.

This offer is inferred by the act of a person or

circumstances of a particular case. For instance,
when a taxi driver offers his service for you to reach
your desired destination, it implies that the taxi
driver is offering his service for some payment. Such
an offer would be an implied offer. In the above-
mentioned scenarios, an agreement stems from the

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5/12/22, 9:35 PM Law of contract: Implied offer

offer which is construed to be the proposal as per the

act.

As per the Indian Contract Act, a person who makes

an offer, when he or she implies to another party
regarding the validity of a product or service, he/she
has officially entered into an implied offer agreement.
An implied offer agreement is of two kinds: in- fact
and at law.

An implied offer agreement in-fact is construed to be a

legal substitute for an agreement assumed to have
taken in place. Such agreements are neither written
nor oral but if the conduct of the party creates an
obligation of some kind, the law rules that both the
parties had an in-fact agreement. The legal elements
of implied-in-fact agreements encompass: (i)
Acceptance and offer; and (ii) Consideration and
mutuality of intent, with which, some terms should be
deducted from the actions of the party.

In an English Book of Law, namely, Benjamin’s Sale

of Goods, 8th Ed. at page 68 the law as to mutual
assent is stated as:

“The assent need not be as a general rule be

expressed. It may be implied from their language or
their conduct; may be signified by a nod or a gesture,
or may even be inferred from silence in certain cases;
as if a customer takes up wares off a tradesman’s
counter and carried them away and nothing is said
on another side, the law presumes an agreement of
sale for the reasonable worth of the goods. But the
assent must constitute a valid contract, be mutual,
and intended to bind both sides. It must also co-exist
in the same moment”.

Implied at-law agreements apply when the law levies

a duty to perform an agreement and enforces an
agreement against a person’s wishes, if necessary.
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5/12/22, 9:35 PM Law of contract: Implied offer

This can take place in cases where one party would

stand to benefit at the expense of the other party.
Since a party would unjustly enrich him or herself, the
beneficiary must pay fair value or make restitution on
all services.

Relevant legal provisions

While the Section 2(a) of the Indian Contract Act

defines the term Offer – synonymous with Promise,
which also includes of offers- express or implied, the
term ‘Implied Offer’ can be construed in preliminary
stages of the contract as well as in the case of
contracts on the sale of goods or services. The relevant
legal provisions of implied offer are:

As per Section 9 of the Indian Contract Act,

1872 describes Promises, express, and implied
as:

‘In so far as the proposal or acceptance of any

promise is made in words, the promise is said to be
express. In so far as such proposal or acceptance is
made otherwise than in words, the promise is said to
be implied.’

As per Section 5(2) of the Sale of Goods Act,

1930:

‘Subject to the provisions of any law for the time being

in force, a contract of sale may be made in writing or
by word of mouth, or partly in writing and partly by
word of mouth or maybe implied from the conduct of
the parties.’

Section 62 of the Sale of Goods Act denotes

Exclusion of implied terms and conditions, in
scenarios which are :

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5/12/22, 9:35 PM Law of contract: Implied offer

‘Where any right, duty or liability would arise under a

contract of sale by implication of law, it may be
negative or varied by express agreement or by the
course of dealing between the parties, or by usage, if
the usage is such as to bind both parties to the
contract.’

Case laws

Vishnu Agencies (Pvt.) Ltd v. Commercial Tax

Officer &Ors (AIR 1978 SC 449)

In the aforementioned case, where the view that on

obtaining the necessary permit, the sugar mills on the
one hand, and the Government of Madras on the other
agreed to “sell” and “purchase” sugar could admit of
no doubt, Hon’ble Hidayatullah. J observed that when
the Province of Madras after receiving the permit,
telegraphed instructions to despatch sugar and the
mills despatched it, “a contract emerged and consent
must be implied on both sides though not expressed
antecedent to the permit.” The learned Judge summed
up the matter as :

“So-long as the parties trade under controls at a fixed

price and accept these as any other law of the realm
because they must, the contract is at the fixed price
both sides having or deemed to have agreed to’ such a
price. Consent under the law of contract need not be
expressed, it can be implied, The present is just
another example of an implied contract with an
implied offer and implied acceptance by the parties.”

M/s New India Sugar Mills Ltd v.

Commissioner of Sales Tax, Bihar (1963 AIR
1207)

In the said case, the case of State of Madras v. Gannon

Dunkerky & Co (1959) was relied upon, which relied
on the case of The Tata Iron & Steel Co. Ltd. v. The
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5/12/22, 9:35 PM Law of contract: Implied offer

State of Bihar (1958) The Hon’ble Hidayatullah, J.

quoted as “In these transactions, there was a sale of
sugar for a price and sales tax was payable in respect
thereof. Though consent is necessary for a sale, it
may be express or implied, and it cannot be said that
unless the offer and acceptance are in an elementary
direct form there can be no taxable sale. The
controller permitted the assesses to supply sugar of a
Stated quality and quantity to the State of Madras;
thereafter the two parties agreed to “sell” and
“purchase” the sugar. So long as the parties trade
under controls at a fixed price they must be deemed to
have agreed to such a price; there was an implied
contract with an implied offer and an implied
acceptance.”

Critical analysis

The implication of an implied offer could be made

obsolete merely by an act of expressed offer. There are
also instances where an act of Implied offer is not
given validity on account of inadequate
representation of the conduct of the parties or where
the words were spoken do not fall adequate for it to be
construed as an Implied Offer.

As implied offer is primarily through words spoken or

through conduct, there is no written representation of
such an offer which makes it difficult to prove its
validity when the same is questioned. As express
offers are in oral as well as in writing and implied
offers are solely through act or conduct, an express
offer gains precedence over the implied offer for its
strength to be ratified in writing which can be a valid
proof in the court of law.

Conclusion

Implied Offer is an important subject in the law of

contracts of sale of goods and services. Therefore the
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5/12/22, 9:35 PM Law of contract: Implied offer

term, ‘Implied Offer’ finds its mention both in the

Indian Contract Act, 1872 and the Sale of Goods Act,
1930. The conduct or an act of a person is the basis of
such an offer, if the intent to create such an offer is
absent or there is no mutual agreement between the
parties to the offer, the action of the implied offer
would stand invalid.

As mentioned below, an agreement stems from an offer

and thus an implied agreement stems from an implied
offer.

If there is an implied agreement-in law where the law

levies a duty to perform an agreement and enforces an
agreement against a person’s wishes if necessary,
there is no need to ratify the same. Such agreements
abhor discrimination, where the beneficiary is bound
to pay the fair value or make restitution of all the
services provided.

Thereby, if there is profound applicability of such

agreements backed by law, this would protect the
interests of the offeror and bound the beneficiary with
the duty to pay and acknowledge for the services
provided.

Author: Vidhi S Shrivastav from University of

Mumbai.

Editor: Yashika Gupta from Rajiv Gandhi National

University of Law, Patiala.

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