Fundamentals of Business Laws and Business Communication · Performance of Contracts

Offer of Performance (Tender) and Its Essentials

Updated 10 October 2026 · Fact-checked

A tender is a promisor's actual offer to perform. Section 38(1) requires it to be unconditional, at the proper time and place, with a reasonable chance to check the thing offered. Case law adds whole performance and tender to the promisee or an authorised person. A refused valid tender frees the promisor from responsibility for non-performance; his rights stay.

Understand Offer of Performance (Tender) and Its Essentials

A contract is discharged when both sides perform their promises. But what if you are ready to perform and the other party refuses to accept? The law lets you protect yourself through a tender, also called an offer of performance. This is covered in Section 38 of the Indian Contract Act, 1872.

A tender is not just saying you are ready. You must actually offer to perform, and the offer must meet certain conditions. If it does, it is a valid tender. If it does not, the promisee can reject it, and the promisor gets no protection under Section 38.

Section 38(1) deals with a tender of performance by the promisor. It requires the tender to be unconditional, made at the proper time and place, and the promisee must have a reasonable opportunity to ascertain that the thing offered is what the promise requires. This is why, for goods, you must allow the promisee to inspect them.

Alongside the section, it is a settled rule developed by case law that the tender must be for the whole of the promise, not part of it. It must also be made to the promisee or a person authorised to accept it. These two rules do not come from the wording of Section 38(1). Still, learn all the conditions as one checklist for the exam.

The legal effect is important. If the promisee refuses a valid tender, the promisor is not responsible for non-performance and does not lose his rights under the contract. The contract is not cancelled.

There are two common situations. A tender of goods or services is an offer to deliver or perform. A tender of money is an offer to pay a debt. For money, the need for the exact amount in legal tender currency comes from the general law on payment (such as the Coinage Act and the RBI Act), not from Section 38. If a valid tender of money is refused, the debt still subsists, but the debtor is not liable for non-performance. So he cannot be treated as having broken the contract or made to pay damages for it.

Key formulas to remember

Meaning of valid tender: Valid tender = actual offer to perform + all required conditions met; A mere statement of readiness is not a tender.
Conditions of valid tender: Unconditional + proper time + proper place + proper person + whole performance + reasonable chance to inspect goods; Section 38(1) itself states the unconditional, time and place, and reasonable opportunity to ascertain conditions. Whole performance and the proper person are settled rules from case law. Learn all as a checklist. Most MCQs test one condition at a time.
Effect of valid tender refused (Section 38): Promisee refuses valid tender → promisor not responsible for non-performance and does not lose his rights under the contract; The contract is not cancelled.
Tender of money: Exact amount + legal tender currency + unconditional; The exact-amount and legal tender rule comes from the general law on payment (Coinage Act, RBI Act), not from Section 38. A refused valid tender of money leaves the debt subsisting, but the debtor is not liable for non-performance.
Tender of goods: Goods must match contract + promisee gets reasonable chance to inspect; Tender of wrong quantity or quality can be rejected.

How to solve Offer of Performance (Tender) and Its Essentials questions

Use this method for any fact-based MCQ on tender. Check the conditions one by one and find the one that fails, or confirm all pass.

1Identify who is the promisor (offering to perform) and who is the promisee (refusing or accepting).
2Check whether an actual offer to perform was made. Only saying 'I am ready' is not enough.
3Check that the offer is unconditional. Any condition the contract does not allow makes it invalid.
4Check time and place. Compare them with the contract, or with business hours and usual place if the contract is silent.
5Check the person. The tender must go to the promisee or an authorised agent.
6Check that the whole promise is offered. Part performance can be refused.
7For goods, check whether the promisee had a reasonable chance to inspect them.
8State the result. If valid and refused, the promisor is not responsible for non-performance and keeps contract rights. If invalid, the refusal is lawful.

Quickest way: One failed condition decides it

When to use it: Use for scenario MCQs where you have about a minute per question.

Underline any word showing a condition, a part, a wrong time or a wrong place in the question.
If any such flaw is present, mark the tender invalid and eliminate options that call it valid.
If nothing is wrong, mark it valid and pick the option saying the promisor is not liable and keeps rights.
Eliminate options saying the contract ends or the promisor must tender again.

Common mistakes in Offer of Performance (Tender) and Its Essentials

Thinking that saying 'I am ready to deliver' is a valid tender.
Students confuse willingness with an actual offer.
Fix: Remember a tender needs an actual offer to perform. Readiness alone does not count.
Treating a conditional offer as valid.
Students focus on the offer and miss the added condition.
Fix: Look for words like 'only if' or 'provided that'. If the contract does not allow the condition, the tender fails.
Believing a refused valid tender cancels the contract.
Students read 'discharge' as ending everything.
Fix: The promisor is only excused from responsibility for non-performance and keeps contract rights. The contract continues.
Accepting a tender of part of the goods as valid.
Students think any real effort to deliver is enough.
Fix: A tender must be for the whole promise. A part tender can be refused.
Ignoring the chance to inspect goods.
Students remember time and place but forget this condition.
Fix: Add the inspection condition to your checklist for every goods question.

Worked examples

Example 1

Ravi agrees to deliver 100 bags of rice to Meena's shop in Pune on 10 March during business hours. On 10 March at 11 am he arrives with all 100 bags, unconditionally, and lets Meena check them. Meena refuses to accept. Which statement is correct? (a) Ravi's tender is invalid because Meena refused (b) Ravi has made a valid tender and is not responsible for non-performance (c) The contract is cancelled (d) Ravi must tender again the next day

Show the solution

Promisor is Ravi and promisee is Meena.
Ravi made an actual offer, with the full 100 bags.
The offer was unconditional, at the agreed place and date, during business hours.
Meena was given a chance to inspect the goods.
All conditions are met, so the tender is valid. Refusal by the promisee does not make it invalid.
Under Section 38, Ravi is not responsible for non-performance and does not lose his rights. The contract is not cancelled and he need not tender again.

Answer: (b) Ravi has made a valid tender and is not responsible for non-performance.

Example 2

Anil owes Sunita ₹50,000 due on 5 April. On that day he offers ₹30,000 and says it is full settlement. Sunita refuses. Is this a valid tender? (a) Yes, because Anil came on the due date (b) Yes, because part payment is always allowed (c) No, because it is only part of the amount and is conditional (d) No, because it was made on the due date

Show the solution

Anil owes ₹50,000 but offers only ₹30,000.
A tender must be for the whole amount, so a part payment fails.
He also says it is full settlement, which is a condition. A valid tender must be unconditional.
The due date is correct, so time is not the problem.
Two conditions fail, so the tender is invalid and Sunita may lawfully refuse.

Answer: (c) No, because it is only part of the amount and is conditional.

Exam tips

Treat tender questions as a checklist. Find the one condition that fails.
Remember that a refused valid tender excuses the promisor from responsibility for non-performance but does not cancel the contract.
Watch for words like 'only if' and 'part' in the options. They often signal an invalid tender.
Remember the Section 38 effect: the promisor is not responsible for non-performance and does not lose his rights under the contract.
Never treat 'ready and willing' as a tender in an MCQ. An actual offer is needed.

Practice questions from Performance of Contracts

Offer of Performance (Tender) and Its Essentials: frequently asked questions

What is a valid tender under the Indian Contract Act?

It is an actual offer to perform a promise that meets the legal conditions. Section 38(1) requires it to be unconditional, at the proper time and place, with a reasonable chance for the promisee to check what is offered. It must also be for the whole promise and made to the promisee or an authorised person, which are settled rules from case law.

What happens if a valid tender is refused?

Under Section 38, the promisor is not responsible for non-performance. The promisor also does not lose his rights under the contract. The contract itself is not cancelled.

Does tender of money discharge the debt?

No. A valid tender of money that is refused leaves the debt subsisting. But the debtor is not liable for non-performance, so he cannot be treated as having broken the contract or be made to pay damages for it. The rule that the tender must be the exact amount in legal tender currency comes from the general law on payment, not from Section 38.

Can a tender be made to anyone?

No. It must be made to the promisee or a person authorised to accept it on the promisee's behalf. A tender to a stranger is not valid.