OFFER AND ACCEPTANCE CONTRACT LAW NOTES
QUESTION: Define Offer? What are the essentials of a valid offer?
ANSWER:
The term offer is also known as proposal. It is the starting point in the formation of a contract.
According to Section 28 of the Indian Contract Act, 1872
“When one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.”
It means that an offer or a proposal is an expression of will or intention of the parties to the contract.
According to Section 2(c) of Indian Contract Act, 1872
“The person who makes an offer is known as Proposer or Offeror or Promisor and the person to whom the proposal or offer is made is known as of the Proposee, Promisee or Offeree.
EXAMPLE
A offers to sell his motorcycle to B for ₹ 3,000. B agrees to pay ₹ 3,000 to A for the motorcycle. In this, A is the Offeror or Promisor and B is the Offeree or Promisee.
ESSENTIALS OF VALID OFFER OR PROPOSAL
The various rules regarding valid offer for the essentials of valid offer are as follows:
Offer or proposal must be capable of creating legal relationship
If the offer does not intend to give rise to the legal consequences, it is not a valid offer in the eyes of the law. The social offers or social engagements does not become a valid contract.
CASE: BALFOUR VS. BALFOUR
A husband was serving in the Ceylon. He promised orally to his wife, who was living in England, to pay an allowance of $30 per month to her. The husband did not pay the money and the wife filed suit against the husband. It was held that the agreement between them was just a family arrangement and they never intend to create legal relationship.
Offer or proposal must be definite and certain
An offer must be definite and certain. An indefinite or vague offer cannot be accepted as the courts in such cases cannot tell what the parties are to do. The intention of the party must be very clear as to what they intend to do.
CASE: TAYLOR VS. PORTINGTON
A agreed to take 2 houses on rent for 3 years at the rent of $85 per annum provided the house was put into thorough repair and the drawing rooms were decorated according to the “Present Style”.
“Present Style” is a vague term as this term would have different meanings to different parties.
Thus, the agreement was declared void as the terms of offer were vague and uncertain.
An offer or a proposal must be communicated to the offeree
An offer must be communicated to the person to whom the same is addressed. Communication of offer is important to conclude an agreement because acceptance can be given only if one knows about the offer. This rule applies to both ‘specific’ and ‘general’ offer.
An offer made to a definite person or body of persons is called specific offer. It must be accepted by that specific person or party only.
The offer made to the public as a whole is called general offer. It can be accepted by anyone from the public.
Section 4 of the Indian Contract Act, 1872 states that communication of an object is complete when it comes to the knowledge of the person to whom it is made.
CASE: LALMAN SHUKLA VS. GAURI DUTT
The nephew of the defendant Gauri was missing. He sent his servant Lalman to find him out. After the servant had left, he announced a reward of ₹51 for anybody who would trace his nephew. The plaintiff traced the nephew before having knowledge of the reward announced by the defendant. Subsequently, the plaintiff claimed the reward when he came to know about it.
Held that plantiff could not recover the reward as the offer containing the reward was not communicated to him.
Offer or proposal must be made with a view to obtaining the assent of the other party
The offer must be made with an intention to obtain the assent of the other party. The offer made as a prank or a joke is not a valid offer and therefore if accepted, it cannot amount to a valid contract.
CASE: HARRY VS. NICKERSON
N advertised in the newspaper to affect sale of his goods on a particular day at a particular place. H travelled a long distance to bid for the things. On arrival, he found that the sale was cancelled. He sued N for the breach of the contract. It was held that advertisement was merely expression of an intention and not an offer which could be accepted by travelling to the place of intended sale.
EXAMPLE
If B jokingly offers M to sell his scooter at ₹10 and M knowing that B is not serious, accepts the offer, such acceptance does not hold any value as the offer made jokingly is not valid.
An offer or a proposal may be conditional
An offer can be made subject to the condition. In that, it can be accepted only subject to that condition. If the conditions are clearly expressed or written and these have been made known to the offeree, then he is bound to fulfill these conditions. Conditional offer lapses when the conditions are not fulfilled.
CASE: THOMPSON V. L M. AND S. RAILWAY 1930
T, who could not read, took an excursion ticket on the railway. On the front of the ticket was printed “for conditions see back’. One of the conditions was that the railway company would not be liable for personal injuries to the passengers. T was injured by a railway accident. Held T was bound by the conditions and could not recover any damages.
CASE: MACKILLICAN V. CAMPAGNIE DE MESSAGERIES MARITIMES DE FRANCE
A plaintiff purchased a ticket from a railway company. It was printed on the front of the ticket ” for conditions see back”, but he never cared to read the conditions as these were given in the French language which X could not read. It was held that there was no excuse for the plaintiff that the conditions were in French language because he had sufficient notice as to the conditions and this was his duty to make himself acquainted with them.
An offer or a proposal should not contain such term the non compliance of which would amount to acceptance.
The offeror cannot say that if the offeree does not communicate acceptance by a certain time, the offer would have been deemed to be accepted. The burden of the communication of rejection of offer cannot be imposed on the offeree. if offeree sent no reply, there is no contract.
EXAMPLE
A writes to B “I offer to sell my house for ₹ 40,000. If I do not receive a reply by Monday next, I shall assume that you have accepted the offer”. There will be no contract if B does not reply.
An offer or a proposal must be distinguished from declaration of intention
A mere statement of intention is only an intention to give an offer. It only states that offer will be made in future. The acceptance of statement of intention does not constitute a contract. Whether a particular statement is offer or mere a statement of intention depends upon the circumstances of the case.
CASE: FARINA VS. FICKUS
A father brought to his would-be son-in-law that his daughter would have a share of what he would leave, after the death of his wife. It was held that letter contains a statement of intention only.
CASE: HARVEY VS. FACEY
X telegraphed Y, ” Will you sell us Bumper Hall Penn? Telegraph lowest cash price.” Y replied telegraphically, ” Lowest price for Bumper Hall Penn $900″. X telegraphed, ” We agree to buy Bumper Hall Penn for $900 asked by you. Please send us your title deeds in order that we may get early possession”. It was held that there was no offer made by Y. He never intended to sell the Bumper Hall Penn. It is mere an information about the lowest price.
An invitation to offer is not an offer
An offer must be distinguished from “Invitation to an Offer.” The offer should express his willingness to do or abstain from doing something. But where a party proposes certain terms on which he is willing to negotiate, he is not making an offer but only inviting others to make an offer on those terms.
CASE: HARRY VS. NICKERSON
N advertised in the newspaper to affect sale of his goods on a particular day at a particular place. H travelled a long distance to bid for the things. On arrival, he found that the sale was cancelled. He sued N for the breach of the contract. It was held that advertisement was merely expression of an intention and not an offer which could be accepted by travelling to the place of intended sale.
An advertisement in a newspaper to sell certain goods is not an offer but it is an invitation to offer. “Such advertisements are offer to negotiate-offer to receive offer”. It is not the final expression of willingness by the advertiser, making him not bound by the terms of advertisement. The main purpose of the person who gives advertisement in the newspaper is to sell the certain article by inviting offers from the potential buyers and this does not constitute an offer.
Display of goods with the prices marked on the, quotations, catalogues and railway time table and auction sales etc. are the examples of Invitation to an offer.
Offer or proposal may be expressed or implied
The offeror can make an offer through words or even by his conduct.
An offer made by words spoken or written is called Express offer.
EXAMPLE
X offers to sell his house to buy through a letter it is an Express offer
When a person makes an offer through his conduct, it is known as Implied offer.
EXAMPLE
Where a person goes to doctor for treatment, his conduct implies an offer that if the treatment is given, the offeree will pay the usual charges.
Lapse of an offer or proposal
An offer can be lapsed if
- Offeree dies before acceptance.
- It is not accepted within time specified.
- Offeree does not make the valid acceptance.
- There is lapse by revocation.
Two identical cross offers do not make a contract
Where two parties make identical offers to each other, in ignorance of each other’s offer, the offers are known as cross offers. Cross offers do not constitute acceptance of one’s offer by the others and as such there is no completed agreement.
EXAMPLE
H wrote to T offering to sell him 800 tons of iron at ₹ 69 per ton. On the same day T wrote to H offering to buy 800 tons at ₹ 69. Their letters crossed in the post. T contended that there was a good contract. Held there was no contract. As it was a cross offer.