Tender

What is Tender?

In contract law, a **tender** (also called an **offer of performance**) is the act of one party to a contract presenting themselves as ready and willing to perform their contractual obligation. When the promisor makes a valid tender, they are essentially saying: "I am here, ready to do what I promised — please accept my performance." If the other party (the promisee) refuses to accept the tender without any lawful excuse, the promisor is discharged from further liability and may also have the right to claim damages.

In everyday language, a tender is offering to do exactly what you promised in a contract. If you agreed to deliver goods on a certain date and you show up with the goods at the right time and place, and the buyer refuses to take delivery, you have made a valid tender — and the buyer, not you, becomes the party at fault.

Legal Definition and Framework

Section 38 of the Indian Contract Act, 1872

The primary provision governing tender of performance is **Section 38 of the Indian Contract Act, 1872**, which states:

> "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."

Section 38 further specifies the conditions for a valid tender:

> "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 who makes it 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."

Section 37 — Obligation of Parties to Perform

**Section 37** establishes the foundational rule: "The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law."

This means that **tender of performance** is legally treated as equivalent to **actual performance** — a promisor who makes a valid tender has fulfilled their obligation under the contract.

Section 39 — Effect of Refusal to Accept Tender

**Section 39** deals with the effect of a party refusing to perform: "When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance."

Read together with Section 38, these provisions establish that if A makes a valid tender and B refuses, A is discharged from liability and can either treat the contract as subsisting (and sue for specific performance or damages) or treat it as rescinded.

Requirements of a Valid Tender

Drawing from Section 38 and judicial interpretations, a valid tender must satisfy the following requirements:

1. **Unconditional:** The tender must not attach any new conditions not present in the original contract. A conditional tender is no tender at all. For example, offering to deliver goods only if the buyer pays in advance when the contract allows credit is a conditional tender and is invalid.

2. **At the proper time:** The tender must be made at or before the time fixed for performance. A tender after the due date is not a valid tender (unless time is not of the essence of the contract and a reasonable extension is permissible).

3. **At the proper place:** If the contract specifies a place for performance, the tender must be made there. If no place is specified, the promisor must apply to the promisee to fix a reasonable place (Section 49 of the Contract Act).

4. **Of the whole obligation:** The promisor must offer to perform the **entire** obligation — a partial tender is generally not valid unless the contract permits performance in instalments. The promisee is not obliged to accept part performance.

5. **By a person able and willing:** The promisor must be actually capable of performing at the time of the tender. A mere verbal offer without the ability to perform is not a valid tender.

6. **Reasonable opportunity to inspect:** If goods are being tendered, the promisee must be given a reasonable opportunity to inspect them to verify they conform to the contractual specifications.

Tender of Money

A tender of money has special rules:

- **Section 38** applies to monetary obligations as well — if a debtor offers to pay the exact amount due, at the proper time and place, and the creditor refuses, the debtor is not liable for non-payment from that point.

- However, unlike tender of goods or services, a valid **tender of money does not discharge the debt** — the debtor remains liable to pay, but is relieved from paying interest from the date of the valid tender, and any costs incurred by the creditor in recovering the money thereafter may be borne by the creditor.

- **Order XXIV Rule 1 CPC** allows a defendant in a suit for money to deposit the amount claimed into court, which operates as a tender and affects the allocation of costs.

When Does This Term Matter?

Sale of Goods Transactions

Tender is most commonly relevant in sale of goods transactions. When a seller is ready to deliver goods at the agreed time and place but the buyer refuses to accept delivery, the seller has made a valid tender. Under the **Sale of Goods Act, 1930** (Section 36), when the buyer wrongfully refuses to accept goods that have been tendered, the seller can sue for **damages for non-acceptance**.

**Example:** A manufacturer contracts to deliver 1,000 units of a product to a retailer by 15th March. On 15th March, the manufacturer arrives at the retailer's warehouse with the goods, but the retailer refuses to accept them (perhaps because market prices have fallen). The manufacturer has made a valid tender and can claim damages.

Real Estate Transactions

In property transactions, tender is frequently relevant when one party is ready to perform (e.g., the buyer tenders the balance purchase price) but the other party refuses (e.g., the seller refuses to execute the sale deed). A valid tender by the buyer is essential to maintain a suit for **specific performance**. Courts will not grant specific performance to a buyer who was not ready and willing to pay the price.

Debt Repayment

When a borrower tenders repayment of a loan and the lender refuses to accept it (perhaps because the lender wants to continue earning interest), the borrower's tender stops the running of interest from the date of tender. This is particularly relevant in cases involving mortgages and secured loans.

Government Tenders and Procurement

In a different but related sense, **tender** also refers to the process by which governments and public bodies invite bids for contracts — a **tender notice** or **invitation to tender**. This is governed by the **General Financial Rules (GFR)** and various state procurement rules. While this is a procurement concept rather than a Contract Act concept, the two are connected because the successful bidder enters into a contract that is then subject to the Contract Act provisions on performance and tender.

Construction Contracts

In construction contracts, disputes often arise about whether the contractor made a valid tender of the completed work. If the contractor offers to hand over the completed building and the employer refuses to take possession or refuses to issue a completion certificate, the contractor may have made a valid tender, entitling them to payment and release of retention money.

Practical Significance

- **Preserves the promisor's rights:** A valid tender protects the promisor from being treated as the party in breach. Without making a tender, the promisor may be unable to sue for damages or specific performance because courts may hold that they never offered to perform.

- **Documentation is essential:** In practice, a tender should be **documented** — through written correspondence, notice to the other party, or a formal offer letter. Oral tenders are difficult to prove in court. Sending a legal notice through a lawyer offering performance and calling upon the other party to accept is a common practice.

- **Readiness and willingness in specific performance suits:** In suits for specific performance of property sale agreements, the plaintiff must demonstrate **continuous readiness and willingness** to perform. Making a valid tender (e.g., tendering the balance sale consideration by demand draft) is the strongest evidence of readiness. The Supreme Court in **Katta Sujatha v. Kodanda Rami Reddy (2005)** emphasized this requirement.

- **Impact on costs:** If a defendant tenders the claimed amount and the plaintiff refuses and continues with the suit, and the court eventually decrees only the tendered amount or less, the plaintiff may be ordered to **bear the costs** of the proceedings from the date of tender. This incentivizes plaintiffs to accept reasonable tenders.

- **Tender must be kept good:** In many situations, particularly in specific performance suits, the party making the tender must **keep the tender good** (keep the money or goods available) throughout the proceedings. A one-time tender followed by withdrawal of the money may weaken the claim.

Frequently Asked Questions

What happens if the promisee refuses a valid tender?

If the promisee refuses a valid tender without lawful justification, the promisor is **discharged from liability for non-performance** under Section 38 of the Indian Contract Act. The promisor does not lose their rights under the contract — they can sue for damages, claim specific performance, or treat the contract as rescinded. The refusing party becomes the party in breach.

Is a conditional tender valid?

No. Under Section 38, a tender must be **unconditional**. If the promisor attaches conditions that are not part of the original contract, the tender is invalid. For example, if a seller tenders goods but demands payment in a mode not agreed upon in the contract, or insists on additional terms, the tender is conditional and does not discharge the seller's obligation.

Does a valid tender of money discharge the debt?

No. Unlike tender of goods or services, a tender of money **does not extinguish the debt**. The debtor remains liable to pay the money. However, a valid tender of money (a) stops the running of **interest** from the date of tender, (b) relieves the debtor from **penalty for late payment**, and (c) may shift the burden of **costs** if the creditor sues and recovers only the tendered amount or less.

How is tender relevant in government procurement?

In the context of government procurement, a **tender** (or bid) is a formal offer submitted by a vendor or contractor in response to a **tender notice** (invitation to bid) issued by a government body. This process is governed by the General Financial Rules, government e-procurement portals (like GeM — Government e-Marketplace), and state-specific procurement rules. The tender process ensures transparency, competition, and value for money in public spending. While conceptually different from tender under the Contract Act, the successful tender results in a contract that is governed by contract law principles.