Offer of Performance: Tender, and Its Effect

Its illustration:

"A contracts to deliver to B at his warehouse, on the 1st March, 1873, 100 bales of cotton of a particular quality. In order to make an offer of a performance with the effect stated in this section, A must bring the cotton to B's warehouse, on the appointed day, under such circumstances that B may have a reasonable opportunity of satisfying himself that the thing offered is cotton of the quality contracted for, and that there are 100 bales."

Broken down: the three conditions

(1) Unconditional

The tender must not be coupled with a condition the promisor is not entitled to impose. A debtor who offers payment "in full and final settlement of all claims" when more is due, or who demands the return of a document he has no right to, has made a conditional tender, and it is no tender at all.

Two qualifications. Asking for a receipt is not a condition, because the payer is entitled to one. And a tender of the exact sum due is required: a tender of part of a debt is not a tender of the debt, and a tender of more, requiring change, has been treated as bad where it puts the creditor to trouble he need not accept.

(2) Proper time and place, and a real opportunity to check readiness

Three things inside one condition.

• Proper time. Within the time the contract fixes, and at a reasonable hour of the business day. Sections 46 to 50 supply the rules where the contract is silent; see [Time and Place for Performance].
• Proper place. Where the contract requires, and again sections 49 and 50 fill the gap.
• 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. The words "there and then" and "the whole" both matter. A promise to be ready next week is not a tender, and a tender of part performance is not a tender of the contract.

(3) Where a thing is to be delivered, a chance to inspect it

The promisee must have a reasonable opportunity of seeing that the thing offered is the thing the promisor is bound to deliver. The illustration is precise about what that requires: bring the cotton to B's warehouse, on the appointed day, in circumstances letting B satisfy himself both as to quality and as to quantity, that there are a hundred bales.

Joint promisees

An offer to one of several joint promisees has the same legal consequences as an offer to all. This matches section 45's treatment of joint rights; see [Joint Liabilities and Joint Rights].

The effect of a valid tender refused

Three consequences, and the third is the limitation students forget.

1. The promisor is not responsible for non performance. He is not in breach, and no action lies against him for failing to perform.
2. He does not lose his rights under the contract. He may sue the promisee for breach, and he keeps whatever the contract gives him.
3. A tender of goods discharges the promisor from the obligation to deliver, but a tender of MONEY does not discharge the debt. This is the crucial distinction. A seller whose goods are refused is excused; a debtor whose money is refused is excused from the consequences of not paying, such as interest running or a penalty, but he still owes the money, and he must keep it ready and pay it into court if sued.

A worked example

Rakesh contracts to deliver a hundred bales of cotton of a stated quality to Sudha at her Bhiwandi warehouse on 1 March, against payment of twelve lakh rupees.

• He arrives on 1 March during business hours with a hundred bales of the right quality, opens them for inspection, and Sudha refuses to take delivery. A valid tender. Rakesh is not responsible for non performance, keeps his rights, and may sue Sudha for breach.
• He arrives on 1 March with ninety bales. Not a tender of the whole of what he is bound to do, so condition (2) fails. He is in breach.
• He arrives on 1 March with a hundred bales but refuses to let Sudha open any of them. Condition (3) fails: she has had no reasonable opportunity of seeing that the thing offered is the thing contracted for.
• He arrives on 3 March. Not at a proper time. Whether that matters depends on whether time was of the essence; see [Time as the Essence of the Contract].
• He arrives on 1 March and says he will deliver only if Sudha also renews an unrelated contract. The tender is conditional and therefore bad.

Now reverse the roles. Sudha tenders twelve lakh rupees in cash on 1 March and Rakesh refuses to accept it. Sudha is not responsible for non payment and keeps her rights, but the debt is not discharged: she still owes twelve lakh rupees and must be ready to pay it.

What it does NOT mean

"A refused tender discharges the contract." It does not. It excuses the promisor from the consequences of non performance and preserves his rights, but the contract remains on foot.

"A refused tender of money wipes out the debt." It does not. It stops the promisor being in default; the money is still owed.

"Any offer to perform is a tender." All three conditions must be met, and the offer must be of the whole performance, unconditional, at the proper time and place, with a chance to inspect where goods are to be delivered.

"A tender must be made to every joint promisee." An offer to one of several joint promisees has the same effect as an offer to all.

"Offering to be ready tomorrow is enough." The promisee must be able to see that the promisor is able and willing there and then.

Quick revision

• s.38: where an offer of performance is made and not accepted, the promisor is not responsible for non performance and does not lose his rights under the contract. The offer is called a tender.
• Three conditions: (1) unconditional; (2) proper time and place, with a reasonable opportunity to ascertain that the promisor is able and willing THERE AND THEN to do THE WHOLE of what he is bound to do; (3) for goods, a reasonable opportunity to SEE that the thing offered is the thing contracted for.
• Illustration: bring the hundred bales to B's warehouse on the appointed day so that B can check quality and quantity.
• An offer to one of several joint promisees has the same effect as an offer to all.
• Tender of goods refused excuses delivery. Tender of money refused does not discharge the debt; it only stops the promisor being in default.
• A tender of part, or a tender coupled with a condition the promisor cannot impose, is no tender.

Test yourself

1. State the three conditions of a valid tender. It must be unconditional; it must be made at a proper time and place and in such circumstances that the promisee has 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 something, the promisee must have a reasonable opportunity of seeing that the thing offered is the thing the promisor is bound to deliver.

2. What is the effect of a valid tender that is refused? The promisor is not responsible for the non performance that follows, and he does not lose his rights under the contract, so he may himself sue the promisee. The contract is not discharged, and in the case of money the debt is not extinguished.

3. Why is a tender of money treated differently from a tender of goods? Because refusing goods puts an end to the seller's ability to perform, so he is excused from delivering, whereas refusing money leaves the debt exactly where it was. A debtor whose tender is refused escapes the consequences of default, such as further interest, but he continues to owe the sum and must remain ready to pay it.

4. A debtor offers the full sum "in full and final settlement of all claims" when a larger sum is disputed. Is that a good tender? No. The offer is coupled with a condition the debtor is not entitled to impose, so it fails the first requirement that the tender be unconditional. Asking for a receipt would be different, because a payer is entitled to one.

5. Does a tender have to be made to all the joint promisees? No. The last paragraph of section 38 provides that an offer to one of several joint promisees has the same legal consequences as an offer to all of them.