Offer And Acceptance

• A contract is made by process of lawful offer by oneparty and lawful acceptance of the offer by the otherparty to whom it is made.

• Thus an offer is the starting point of making acontract.

Types of Offer

1. Express and Implied Offer:An offer made by words, spoken or written

2. Specific and General Offer:When an offer is made to definite class of people

3. Positive and Negative Offer:Whether the offer is positive or negative

Legal Rules and Essentials Regarding Offer1. The offer may be Express and Implied

2. The offer may be Specific and General

3. The offer may be Positive and Negative

4. Offer must intend to create legal relationship

5. Term of offer must be certain

6. The offer must express the final willingness of theofferor

Legal Rules and Essentials Regarding Offer7. Every offer must be communicated to the offeree

8. An offer must be distinguished

9. Offer must be made with a view to obtaining theassent

10. Offer should not contain a term, the complianceof which would amount to acceptance

11. An offer may be conditional

Termination of offer1. By notice of revocation2. By lapse of time3. By failure of acceptor to fulfil a condition precedent to

acceptance4. By failure to accept according to the mode prescribed5. By the death or insanity of the offeror6. By rejection7. By subsequent illegality or destruction

Acceptance

An acceptance is defined as ‘when the person towhom the proposal is made signifies his assentthereto, the proposal is said to be accepted. Aproposal when accepted become a promise.(Sec 2(b))

Legal Rules and Essentials Regarding Valid Acceptance

1. Acceptance must be absolute and unconditional

2. Acceptance by usual mode as desired by offeror

3. Acceptance can not precede an offer

4. Acceptance must be express or implied

5. Acceptance must be given within a reasonabletime

6. Acceptance must show to fulfil a promise

Legal Rules and Essentials Regarding Valid Acceptance

7. Acceptance must by an ascertained person8. Offer once rejected can not be accepted until it is

renewed9. Acceptance of offer means acceptance of all terms

attached to the offer10. Acceptance must be made before the lapse or

revocation of an offer11. The acceptor must be aware of the proposal at the

time of the offer

CommunicationCommunication When Completed:

In Case of Proposal/Offer:“The communication of proposal is complete when it comes to theknowledge of the person to whom it is made.”

In Case of Acceptance:“The communication of an acceptance is complete,as against the proposer, when it is put in a course of transmission to him, soas to be out of the power of the acceptor;

as against the acceptor, when it comes to the knowledge of the proposor.

Rules for Communication of Offer or Acceptance

• As against the person who makes it- when it is putinto course of transmission

• As against the person to whom it is made- when iscomes to the knowledge of the person

Rules for Communication by Post 1. An offer sent by post is communicated only when it

reaches the offeree2. An acceptance sent through post is completed, the

moment the letter of acceptance properly addressedand stamped is posted

3. An acceptance binds the acceptor only when itreaches the offeror

4. The place where letter of acceptance is posted will bethe place where the contract is made

Communication Of RevocationCommunication of Revocation When Completed:

as against the person who makes it, when it is put into acourse of transmission to the person to whom it is made,so as to be out of the power to the person who makes it;

As against the person to whom it is made, when it comesto his knowledge.

ConsentSection . 13

“Two or more persons are said to consent they agreeupon the same thing in the same sense.”

Free ConsentSection . 14Consent is said to be free when it is not caused by.1. Coercion, as defined in section 15, or2. Undue influence, as defined in section 16, or3. Fraud, as defined in section 17, or4. Misrepresentation, as defined in section 18, or5. Mistake, subject to the provisions of section 20,

21 and 22

CoercionCoercion is;i. The committing or threatening to commit any act

forbidden by the Pakistan Penal Code orii. The unlawful detaining or threatening to detain

any property to prejudice of any personwhatsoever

iii. With the intension of causing any person to enterinto an agreement.

Essential Elements of Coercioni. The committing of any act forbidden by the Pakistan Panel

Codeii. The Threat to commit any act forbidden by Pakistan Panel

Codeiii. The unlawful detention of any propertyiv. Threatening to detain any property wronglyv. The intention to get consent to the agreementvi. Coercion may proceed from any partyvii. It is immaterial whether the Pakistan Panel Code is or not

in force in the place where the Coercion is employed.

Coercion (Special Cases)

•Does a threat to prosecute a man or file a civil or criminal suit against a man amount to coercion?

•Does a threat to charge high prices amount to coercion?

•Does a threat to charge high rate of interest amount t coercion?

Undue influence

•A contract is said to be induced by undue influence where

i. One of the parties involved is in position to dominate the will of the other

ii. He has been in a position to obtain an unfair advantage over the other

Burden of Proof

•Where a person who is in a position to dominatethe will of another, enters into a contract withhim, and the transaction appears, on the face ofit or on the evidence adduced, to beunconscionable, the burden of proving that suchcontract was not induced by undue influenceshall lie upon the person in a position todominate the will of the other

Distinction between Coercion and Undue influence

1. Property: The consent is obtained by threat of an offence

2. Crime: Includes criminal act and criminal liability

3. Character or Force: Coercion is mainly of physical character

4. Consent: Destroying the consent

5. Place: May be committed outside Pakistan but undue influence is exercised in Pakistan

6. Presumption: Has to be proved by a person who alleges it

7. Third party: may be directed against a third party

Fraud“Fraud” means and includes any of the following acts limited by a party to a contract, or with his connivance, or by his agent with intent to deceive another party thereto or his agent, or to induce him to enter, into the contract;

1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true;

2. The active concealment of a fact by one having knowledge or belief of the fact;

3. A promise made without any intention of performing it;

4. Any other act fitted to deceive; and

5. Any such act or omission as the law specially declares to be fraudulent.

Essential of Fraudi. Suggestion as to a fact

ii. The active concealment of a fact

iii.The representation must relate to a fact

iv.Fraud by a party or his agent to the contract

v. The representation must in fact deceive

vi.Actually deceived or suffered damage

Silence amounting to Fraud1. The general rule is that mere silence is not fraud

2. Silence is fraudulent

3. Silence is Fraudulent where the circumstances are such that “silence is in itself equivalent to speech”

Exceptions to General Rule (Good Faith):

1. Statutory obligation to disclose

2. Duty to disclose in contracts of “utmost good faith”

3. Silence is , in itself, equivalent to speech

Misrepresentation

•Misrepresentation is any undue statement made by a party to the contract to another, which is a material statement of fact and not of law and which induced the other party to act upon the statement and enter into the contract.

•Misrepresentation arises when the presentation or statement made is inaccurate but the inaccuracy is not due to any desire to defraud the other party.

Effect of Misrepresentation

• In case of misrepresentation, the contract becomes voidable and the aggrieved party can

i. Avoid the agreement

ii. Insist that the contract be performed and he shall be put in the position in which he would have been if the representation made had been true.

iii. If the party to whom the innocent misrepresentation is made had the means of discovering the truth with ordinary diligence, the contract is not voidable.

Similarities between Fraud & Misrepresentation

i. In both the cases, a false “representationis made by a party

ii. In both the cases, the contract is“voidable” at the option of the partywhose consent is obtained by fraud ormisrepresentation

Distinction between Fraud & Misrepresentation

i. Intention: The type of statement

ii. Damages: Suit for Damages

iii. Rescission: When contract is vitiated by innocent misrepresentation

iv. Where true can be recovered with ordinary diligence: Discovering the truth

v. Criminal Act: Criminal act punishable under the Pakistan Panel Code

vi. Silence: Silence can be Construed as fraud

Mistake

•Mistake may be defined as erroneous beliefconcerning something, consent cannot be saidto be “free” when an agreement is entered intounder a mistake.

•An agreement is valid as contract only when theparties agree upon the same thing in the samesense

Types of Mistakes

•Mistake by Law•Mistake as to Law in Pakistan•Mistake as to a Foreign Law

•Mistake of Fact•Bilateral •Unilateral