Fundamentals of Business Laws and Business Communication · Essential Elements of a Contract, Offer and Acceptance

Tender, Standing Offers and Offer of Performance in Contract Law

Updated 10 October 2026 · Fact-checked

A tender is an offer to supply goods or services at a quoted price or rate. A standing offer is a continuing offer that stays open for a period. If a promisor makes a valid offer of performance (delivery of goods or doing an act) and the promisee refuses it, the promisor is not responsible for non-performance and keeps his rights. A refused money tender does not wipe out the debt.

Understand Tender, Standing Offers and Offer of Performance

A tender has two common meanings. First, it is a response to an invitation to quote, for example a firm sends a quotation to supply 500 chairs at ₹1,200 each. The invitation for tenders is only an invitation to make offers. The tender submitted is the offer. The contract forms only when the inviter accepts it.

Second, tender can mean an offer of performance. Here the promisor actually offers to do what he promised, such as delivering goods, doing an act or paying money, and the promisee refuses to take it.

A standing offer (also called a continuing or open offer) is a tender to supply goods as and when needed over a period. For example, a hospital invites tenders to supply medicines for a year, and a supplier agrees to deliver at fixed rates whenever orders are placed. The standing offer is not a single contract for the whole quantity. Each order placed by the buyer is an acceptance and creates a separate contract for that quantity. The buyer is not bound to place any order. The supplier is bound to supply against orders placed while the offer remains open.

A standing offer can be revoked (withdrawn) before an order is placed, but only if it is not supported by separate consideration or a promise to keep it open for the stated period. If the supplier was given something in return for keeping the offer open, he cannot withdraw it freely during that period. Where revocation is allowed, it applies only to future orders. Orders already placed remain binding, so the supplier must honour them. Revocation takes effect only when it is communicated to the other side.

On offer of performance, the law protects a promisor who is ready and willing but is turned away. Under Section 38 of the Indian Contract Act, 1872, if a valid offer of performance (delivery of goods or doing something) is refused by the promisee, the promisor is not responsible for non-performance, and he does not lose his rights under the contract.

For the offer to be valid, it must be unconditional and made to the promisee or his authorised agent. It must be made at a proper time and place, so that the promisee has a reasonable opportunity to see that the promisor is able and willing to do the whole of what he promised. For goods, the promisee must also have a reasonable chance to check that the thing offered is what was promised. An offer of part performance is not valid unless the promisee accepts it.

Money needs care. Section 38 deals with offers to perform. If a debtor makes a valid tender of the exact amount and the creditor refuses it, the debt is not discharged. The debtor remains liable to pay the money, although a valid tender may protect him from a claim for damages for non-payment. Do not assume that interest stops running, because the Act does not say so.

Key formulas to remember

Invitation for tenders: Invitation for tenders = invitation to offer; Tender submitted = offer; Acceptance by the inviter = contract; The inviter is not bound to accept the lowest or any tender unless it has said so.
Standing offer: Standing offer = continuing offer; each order placed = acceptance = separate contract; The buyer need not place any order. The supplier must supply against orders placed before valid revocation.
Revocation of standing offer: Revocation is valid only if communicated before an order is placed, and only if the offer is not backed by separate consideration or a promise to keep it open; it applies to future orders only; Withdrawal does not cancel contracts already formed by earlier orders.
Valid offer of performance (tender): Unconditional + made to the promisee or his authorised agent + at proper time and place + reasonable opportunity to ascertain that the promisor is able and willing to do the whole + for goods, a reasonable chance to check that the thing offered is what was promised; If the offer of performance (goods or an act) is valid and is refused, the promisor is not responsible for non-performance and keeps his contractual rights (Section 38). An offer of part performance is not valid unless the promisee accepts it.
Tender of money: Exact amount in legal tender currency, offered unconditionally; If less than the full amount is offered or a condition is set, the tender is not valid. Even a valid money tender, if refused, does not discharge the debt. The debtor still owes the money, although the tender may protect him from a claim for damages for non-payment. The Act does not say that interest stops running.

How to solve Tender, Standing Offers and Offer of Performance questions

Use this method for any question on tenders, standing offers or refusal of performance.

1Identify what is being asked: is it an invitation for tenders, a submitted tender, a standing offer, or an offer of performance that was refused?
2If it is an invitation for tenders, treat it as an invitation to offer. The bidder's tender is the offer, and the inviter's acceptance makes the contract.
3If it is a standing offer, treat each order as a separate acceptance. Check whether the offer was revoked before the order, whether the revocation was communicated, and whether the offer was backed by a promise or consideration to keep it open.
4If it is a refused performance, test the offer against the conditions: unconditional, made to the promisee or his authorised agent, at a proper time and place, with a reasonable opportunity to check that the promisor can do the whole, and for goods a chance to check they are what was promised.
5If any condition fails, or only part performance was offered and the promisee did not accept it, the tender is not valid, so there is no protection for the promisor.
6If all conditions are met and the performance is delivery of goods or doing an act, apply Section 38: the promisor is not responsible for non-performance and keeps his rights under the contract.
7If the tender is of money, remember that a refused tender does not discharge the debt. The debtor stays liable to pay, although a valid tender may protect him from damages for non-payment. Do not claim that interest stops running.
8Match the conclusion to the option that states both the effect on liability and the effect on rights.

Quickest way: Four-word check: Offer, Order, Unconditional, Whole

When to use it: Use when you have about 60 seconds per MCQ and the options look similar.

See the word 'tender' in an invitation context: choose 'offer', not 'invitation' or 'contract'.
See 'standing' or 'continuing' offer: choose 'each order is a separate contract' and 'no obligation to order'.
See 'refused performance': check whether the tender was unconditional and covered the whole obligation. Part performance is valid only if the promisee accepts it.
If yes and it is goods or an act, pick the option saying the promisor is not liable for non-performance but keeps his rights.
If it is money, pick the option saying the debt remains payable even after the refusal, not the one saying the debt is cleared.
Eliminate options saying the contract is cancelled, or the promisor must pay damages after a valid tender was refused.

Common mistakes in Tender, Standing Offers and Offer of Performance

Treating the notice inviting tenders as an offer.
The notice looks like a formal proposal to supply, so students assume it binds the inviter.
Fix: Remember: the notice is an invitation to offer. The tender is the offer. The inviter can accept or reject any tender.
Thinking a standing offer is one contract for the whole quantity.
The word 'offer' makes students think of a single contract formed at the start.
Fix: Each order is an acceptance and creates its own contract. The buyer is not bound to order anything.
Believing revocation of a standing offer cancels orders already placed, or that it can always be revoked.
Students confuse the continuing offer with the contracts formed under it, and overlook a promise to keep the offer open.
Fix: Revocation affects only future orders. Contracts formed by earlier orders must still be performed. If the offer is backed by separate consideration or a promise to keep it open, it cannot be freely withdrawn.
Saying a conditional or partial tender is valid.
Students focus on the effort of the promisor and ignore the required conditions.
Fix: A valid offer of performance must be unconditional and cover the whole obligation. An offer of part performance is not valid unless the promisee accepts it, so a conditional or partial offer gives no protection.
Saying that after a valid tender is refused the contract ends and the promisor loses his rights, or that a refused money tender clears the debt.
Students mix up refusal with discharge, and treat money like goods.
Fix: Under Section 38 a promisor whose valid offer to deliver goods or do an act is refused is not responsible for non-performance and keeps his rights. A refused tender of money does not discharge the debt, so the debtor still has to pay, although the tender may protect him from a claim for damages for non-payment.

Worked examples

Example 1

A government hospital invites tenders for supply of medicines for one year. Meera Pharma submits a tender to supply medicines at stated rates as and when ordered. The hospital accepts the tender and places an order for 200 strips in April. There was no separate payment or promise by Meera Pharma to keep the offer open for the year. Before the next order, Meera Pharma withdraws the offer and communicates this to the hospital. What is the position?

Show the solution

Meera Pharma's tender is a standing offer, which is a continuing offer.
Each order placed by the hospital is an acceptance and forms a separate contract.
The April order was placed before the withdrawal, so a contract for 200 strips exists and Meera Pharma must supply it.
There was no separate consideration or promise to keep the offer open, so the offer could be revoked.
The withdrawal was communicated before any later order, so it ends the standing offer for future orders only.
The hospital cannot hold Meera Pharma to supply further quantities after the revocation.

Answer: Meera Pharma must supply the 200 strips ordered in April, but is not bound to supply later orders because the standing offer, not being backed by separate consideration or a promise to stay open, was validly revoked for future orders.

Example 2

Rohan agreed to deliver 100 chairs to Kavita on 10 May at her shop. On that day he brings all 100 chairs to her shop at the agreed time, unconditionally, and allows her to inspect them. Kavita refuses to accept them. Which statement is correct? (a) Rohan is liable to pay damages for non-delivery (b) Rohan is not responsible for non-performance and keeps his rights under the contract (c) The contract becomes void (d) Rohan must refund any advance with interest from the date of refusal

Show the solution

Check the offer: it covers all 100 chairs, is unconditional, at the agreed time and place, to the promisee, with a chance to inspect.
It is therefore a valid offer of performance of a promise to deliver goods.
Section 38 applies: refusal by the promisee does not make the promisor responsible for non-performance.
The promisor also keeps his rights under the contract.
Option (a) is wrong because Rohan is not in default. Option (c) is wrong because the contract is not void. Option (d) is wrong because no liability arises from the refusal.

Answer: (b) Rohan is not responsible for non-performance and keeps his rights under the contract.

Exam tips

Questions often ask whether an invitation for tenders is an offer. The answer is no: it is an invitation to offer.
For standing offers, remember that each order is a separate contract and that revocation does not affect orders already placed.
For refusal of performance, look for words like 'unconditional', 'full amount', 'part' and 'proper time and place'. Missing any of these usually makes the tender invalid, and part performance counts only if the promisee accepts it.
For goods or an act, pick the option that says the promisor is not responsible for non-performance and keeps his rights. For money, remember the debt is not discharged by a refused tender.
There is no negative marking, so always attempt every question after eliminating the options that contradict these rules.

Practice questions from Essential Elements of a Contract, Offer and Acceptance

Tender, Standing Offers and Offer of Performance: frequently asked questions

Is a tender an offer or an invitation to offer?

The notice calling for tenders is an invitation to offer. The tender you submit in reply is the offer. The contract is formed only when the inviter accepts your tender.

What is a standing offer?

A standing offer is a continuing offer to supply goods or services as and when ordered over a period. Each order placed is an acceptance and creates a separate contract. The buyer is not bound to place any order.

What happens if the promisee refuses a valid offer of performance?

Under Section 38, if a valid offer to deliver goods or do an act is refused, the promisor is not responsible for non-performance and does not lose his rights under the contract. The offer must be unconditional and cover the whole obligation, and an offer of part performance is valid only if the promisee accepts it. If it was a tender of money, the refusal does not discharge the debt, so it remains payable, although the tender may protect the debtor from a claim for damages for non-payment.

Can a standing offer be withdrawn?

Yes, it can be revoked before an order is placed, and the revocation must be communicated. This works only if the offer is not backed by separate consideration or a promise to keep it open. Revocation affects future orders only, and orders already placed remain binding.