Tender and Offer

Meaning of Tender and Offer

In contract law, offer and tender are closely related concepts, but they are not identical.

An offer, or proposal under Section 2(a) of the Indian Contract Act, 1872, is a willingness expressed by one person to do or abstain from doing something with a view to obtaining the assent of another person.

A tender generally refers to an offer to perform a contractual obligation, often involving the supply of goods or services or payment of money. A tender may also refer to an invitation by which an organisation asks interested persons to submit offers.

Thus, the word tender is used in two important senses:

1. Tender as an offer to perform a contract, and
2. Tender as an invitation to submit bids or offers.

Offer under the Indian Contract Act, 1872

Section 2(a) defines a proposal as:

When one person signifies to another his willingness to do or abstain from doing something, with a view to obtaining the assent of that other person.

For example:

A offers to sell his car to B for ₹6 lakh.

This is an offer because A has expressed willingness to enter into a contractual relationship on specified terms.

Meaning of Tender

A tender is commonly used in commercial and government transactions.

For example, a government department may publish:

“Tender invited for construction of a government building.”

Contractors submit their bids in response.

In this situation, the tender notice generally does not itself constitute an offer. It is usually an invitation to offer. Each contractor’s submitted bid is an offer, which the government authority may accept or reject according to the tender conditions.

Therefore:

Tender Notice → Invitation to Offer

Bid Submitted by Contractor → Offer

Acceptance by Authority → Contract

Tender as an Offer to Perform

Tender can also mean an actual offer to perform an existing contractual obligation.

For example, A has agreed to supply 1,000 units of goods to B. A delivers the goods at the agreed time and place.

A has tendered performance of his contractual obligation.

Similarly, a debtor may tender the amount due to a creditor.

Thus, tender in this sense is closely connected with performance of contractual obligations.

Tender under Section 38

The Indian Contract Act, 1872 specifically deals with tender of performance under Section 38.

Section 38 provides that where a promisor has made an offer of performance to the promisee and the offer has not been accepted, the promisor is not responsible for non-performance if certain conditions are satisfied.

This is commonly called a valid tender of performance.

Essentials of a Valid Tender of Performance

For a tender to have the legal effect contemplated by Section 38, several requirements must be satisfied.

1. The tender must be unconditional

The promisor must offer to perform the obligation according to the contract.

For example:

A owes B ₹50,000 and offers to pay ₹50,000 without attaching an unrelated condition.

This may constitute a valid tender.

If A says:

“I will pay ₹50,000 only if you first cancel another independent claim against me,”

the tender may not satisfy the contractual obligation because it is conditional.

2. The tender must be made at a proper time and place

The tender should be made according to the terms of the contract.

For example, if goods are required to be delivered at the buyer’s warehouse on 1 December, an attempt to deliver them at an unrelated location may not constitute proper tender.

3. The promisee must have a reasonable opportunity to ascertain the performance

The promisee must be given an opportunity to determine whether the performance corresponds with the contract.

For example, if A tenders goods to B, B should ordinarily be able to inspect whether the goods correspond with the contractual description.

4. The tender must cover the whole obligation

The promisor should generally offer performance of the obligation in its entirety.

A person cannot ordinarily claim the benefit of a valid tender by offering only a part of what is contractually due, unless the contract or law permits partial performance.

5. The tender must be made to the proper person

The tender should be made to the promisee or a person authorized to receive performance.

6. The tender must be made in the proper manner

The promisor should comply with the contractual requirements concerning the manner of performance.

Tender of Money

Section 38 is particularly relevant to tender of money.

Suppose A owes B ₹1 lakh.

A properly offers the entire ₹1 lakh to B at the agreed time and place, but B refuses to accept the payment.

If the requirements of a valid tender are satisfied, A may obtain the legal protection provided by Section 38 against liability for non-performance caused by B’s refusal.

Tender of Goods

Tender also arises frequently in contracts for the sale or supply of goods.

Suppose:

A contracts to supply B with 500 units of a specified product on 10 November.

A brings the correct goods to the agreed place on 10 November and offers them to B, but B refuses to accept them.

A has made a tender of performance.

Whether A is discharged from liability depends upon whether the tender satisfies the contractual and statutory requirements.

Tender and Acceptance

Tender and acceptance are different concepts.

A tender is an offer of performance, whereas acceptance is the assent to an offer.

For example:

• A offers to sell goods to B → Offer
• B accepts A’s offer → Acceptance
• A later offers to deliver the goods as required by the contract → Tender of performance

Therefore, tender may arise after a contract has already been formed.

Tender vs Offer

Basis	Offer	Tender
Meaning	Proposal to enter into a contract	Offer to perform an obligation or, in procurement, submission of a bid
Main provision	Section 2(a)	Section 38 for tender of performance
Stage	Usually before contract formation	May occur before or after contract formation, depending on meaning
Example	A offers to sell goods to B	A offers to deliver contracted goods
Acceptance	Acceptance may create a contract	Refusal of valid tender may have legal consequences

Tender Notice vs Offer

A tender notice should also be distinguished from an offer.

Suppose a government department publishes:

“Tenders invited for construction of a bridge.”

The notice generally invites contractors to submit their offers.

Contractor A submits a bid of ₹10 crore.

Here:

Tender notice → Invitation to offer

Contractor’s bid → Offer

If the government accepts A’s bid in accordance with the tender terms, a contractual relationship may arise.

This is why a tender notice should not automatically be treated as an offer capable of immediate acceptance.

Tender vs Invitation to Offer

Basis	Tender	Invitation to Offer
Meaning	Can refer to a bid or an offer of contractual performance	Invitation for others to submit offers
Legal effect	Depends on the context	Generally does not itself create a power of acceptance
Example	Contractor’s submitted bid	Government tender notice
Result	May become binding upon acceptance	Leads to offers from interested persons

Standing Tender

A tender may also take the form of a standing or continuing tender.

For example, a company invites suppliers to submit prices for supplying a particular type of material whenever required during a specified period.

A supplier submits a tender agreeing to supply at specified rates.

Such an arrangement may operate as a standing offer. Individual orders placed in accordance with its terms may result in separate contractual obligations.

Great Northern Railway Co. v. Witham (1873)

This case is commonly cited for the principle of a standing offer.

The tender was treated as a continuing offer capable of being accepted through individual orders made according to its terms.

The important point is:

A standing tender is generally not the same as one single contract for the entire quantity unless the terms and circumstances show otherwise.

Tender and Government Contracts

Tendering is particularly important in government contracts and public procurement.

Government authorities generally invite competitive bids and evaluate them according to predetermined conditions.

A tender process may involve:

1. publication of tender notice;
2. submission of bids;
3. evaluation of bids;
4. selection of the successful bidder;
5. acceptance of the bid; and
6. execution of the contract where required.

The exact legal effect of each stage depends on the tender documents and applicable procurement rules.

Important Cases

Spencer v. Harding (1870)

An invitation to submit tenders was treated as an invitation to make offers, rather than an offer that could itself be accepted by submitting the highest or lowest tender.

The case is useful for understanding the distinction between a tender invitation and an actual offer.

Great Northern Railway Co. v. Witham (1873)

The case illustrates the concept of a standing offer arising from a tender.

Acceptance could occur through individual orders made in accordance with the terms of the continuing offer.

Tender and Section 38: Important Distinction

Students often confuse tender as a bid with tender of performance.

Tender as Bid

A company invites tenders for construction work.

The contractor submits a tender.

Here, the tender is essentially a bid/offer.

Tender of Performance

A contractor has already entered into a contract and offers to perform the agreed work.

Here, tender means an offer of performance, which is governed principally by Section 38.

Therefore:

Tender can mean a bid before a contract or an offer of performance after a contract, depending on context.

Key Points for Exams

1. An offer is defined under Section 2(a) of the Indian Contract Act, 1872.
2. A tender can have different meanings depending on context.
3. A tender notice is generally an invitation to offer.
4. A bid submitted in response to a tender notice is generally an offer.
5. Section 38 deals with tender of performance.
6. A valid tender of performance must generally comply with the contractual requirements concerning time, place, manner and completeness.
7. Tender of performance may protect a promisor where the promisee wrongfully refuses to accept proper performance.
8. A standing tender may operate as a standing offer.
9. Spencer v. Harding is important for tender invitations.
10. Great Northern Railway Co. v. Witham is important for standing tenders.

Quick Revision

Offer: Willingness to enter into a contract.

Tender notice: Generally an invitation to offer.

Bid submitted: Generally an offer.

Tender of performance: Offer by a promisor to perform a contractual obligation.

Main provision for tender of performance: Section 38.

Standing tender: May operate as a standing offer.

Important cases:

• Spencer v. Harding (1870) — tender invitation
• Great Northern Railway Co. v. Witham (1873) — standing offer

Conclusion

The term tender has more than one meaning in contract law. In commercial and government procurement, a tender notice is generally an invitation to offer, while the bid submitted by a contractor constitutes the offer. In another sense, tender means an offer of performance, which is specifically addressed by Section 38 of the Indian Contract Act, 1872. Understanding the context is therefore essential to distinguish a tender from an ordinary offer and from an invitation to offer.