Offer of Performance: Tender, and Its Effect

In one line

If you turn up ready to perform and the other side will not take it, the law treats you as having performed for the purpose of blame, though not for the purpose of payment.

In the words a student can write in an exam: section 38 of the Indian Contract Act 1872 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, nor does he thereby lose his rights under the contract." Every such offer must be unconditional; made at a proper time and place and in circumstances giving the promisee a reasonable opportunity of ascertaining that the promisor is able and willing there and then to do the whole of what he is bound to do; and, where it is an offer to deliver a thing, in circumstances giving the promisee a reasonable opportunity of seeing that the thing offered is the thing he is bound to deliver. An offer to one of several joint promisees has the same consequences as an offer to all.

Why the law has this at all

Performance usually needs two people. A seller cannot deliver to a buyer who shuts the gate; a debtor cannot pay a creditor who will not take the money.

Without a rule about tender, the party who was ready would be at the mercy of the party who was not. He would be in breach for a non performance the other side caused, and the other side could sit back, watch the date pass, and then sue.

Section 38 stops that. The technical name for the offer is a tender, and the effect of a valid tender that is refused is that the promisor is excused from the consequences of non performance while keeping his own rights intact.

The conditions in the section exist because a tender is a serious thing: it shifts the blame. So the law insists it be a real, complete and inspectable offer, and not a gesture.

The provision itself

"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, nor does he thereby lose his rights under the contract.

Every such offer must fulfil the following conditions:

(1) it must be unconditional;

(2) it must be made at a proper time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is able and willing there and then to do the whole of what he is bound by his promise to do;

(3) if the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver.

An offer to one of several joint promisees has the same legal consequences as an offer to all of them."