Section 38 of Indian Contract Act

38. Effect of refusal to accept offer of performance.— 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.

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 areasonable opportunity of satisfying himself that the thing offered is cotton of the quality contracted for, and that there are 100 bales.

Final Thoughts

Introduction

Section 38 of the Indian Contract Act, 1872 deals with what happens when a promisor (the person who has to perform the contract) makes an offer to perform the contract, but the promisee (the person to whom the promise is made) refuses to accept it.

This section explains that if the promisor properly offers to perform his part of the contract and the promisee refuses without a valid reason, then the promisor is no longer responsible for non-performance. Also, he does not lose any rights under the contract.

Meaning of Offer of Performance (Tender)

In legal terms, when a promisor offers to fulfil his promise (like delivering goods or making a payment), it is called an “offer of performance” or “tender”.

For example, if A agrees to deliver goods to B, and A brings the goods on the correct date and time, then A has made a valid offer of performance. If B refuses to accept the goods, A will not be blamed for non-performance.

Key Provisions under Section 38

For an offer of performance to be legally valid and protect the promisor, it must follow certain conditions:

(1) The Offer Must Be Unconditional

• The promisor must offer to perform the contract without any extra conditions.
• He cannot say “I will deliver the goods only if you pay me extra charges” unless it is part of the original contract.

Example: If A promises to deliver 100 chairs and brings them on the right date but says he will only deliver if B pays for packing separately (not agreed earlier), this is not an unconditional offer.

(2) Offer Must Be at Proper Time and Place

• The offer must be made at the right time, right place, and in such a way that the promisee can check and verify that the promisor is ready and able to perform the contract.

Example: If delivery is to be made at a warehouse on 1st March, the promisor must come on that date, to that warehouse, and give the promisee a fair chance to inspect.

(3) Reasonable Opportunity to Verify Goods or Services

• If the contract is to deliver goods, the promisee must get a fair chance to check whether the goods offered are exactly as promised in the contract.

Example: If A promises to deliver 100 bales of cotton of a particular quality, he must allow B to verify that the cotton matches the agreed quality and quantity.

Effect of Refusal by Promisee

Once the promisor has fulfilled all these conditions and still the promisee refuses to accept the performance, then:

• The promisor is not held liable for breach of contract.
• The promisor retains all his rights under the contract (like right to claim payment, sue for damages, etc.).

This protects honest and willing parties who try to perform their duties in good faith.

Joint Promisees and Legal Consequences

If the promise was made to more than one person jointly (i.e., joint promisees), and the promisor makes the offer to any one of them, it is considered as a valid offer to all.

Example: If A has to deliver goods to B and C jointly, and he offers the goods to B properly, it is treated as an offer to both B and C.

Illustration Explained

A contracts to deliver to B at his warehouse, on 1st March 1873, 100 bales of cotton of a particular quality. To make a valid offer, A must bring the cotton to B’s warehouse on the given date, and allow B enough opportunity to check that the cotton is of the correct quality and quantity. If A does all this and B still refuses to accept the goods, A is no longer responsible for non-performance.

Legal Importance

Section 38 is important because it:

• Protects the promisor from unfair blame when he is ready and willing to perform.
• Prevents the promisee from rejecting performance without valid reason.
• Encourages transparency in contracts by requiring reasonable opportunity to inspect.
• Helps in deciding who is at fault when performance does not happen.

Conclusion

Section 38 of the Indian Contract Act ensures fairness in contract performance. It clarifies that a promisor who offers performance properly, as per the contract, should not suffer if the promisee refuses to accept. However, the offer must be unconditional, made at the right time and place, and must allow the promisee a reasonable chance to verify.

In short, this section balances the responsibilities between both parties and promotes good faith in contractual dealings.