Offer and Acceptance

By: Fazal-e-Malik

Offer and Acceptance

The First essential of a valid contract is an agreement i.e. offer and acceptance. An agreement arises when one party makes an offer and the other party accepts it.

By: Fazal-e-Malik

OfferDefinitionSection 2(a) defines a proposal as, “When one person signifies (show) to another his willingness to do or to abstain(give up) from doing any thing, 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 when a person show his willingness to do or not to do something to obtain (find) the consent to other person, it is considered a proposal.

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Cont…The person making the offer is called the offeror or promisor. The person to whom the offer is make is called the offeree. The person accepting the offer is called the promisee or acceptor. The word “offer” in English Law is similar to the word “proposal”.

Examples: a) A offers to sell his watch to B to for 100

AFN. A makes an offer to B.b) A offers to sell his car to B for 300,000

AFN. A makes an offer to B.By: Fazal-e-Malik

Essentials of a Valid OfferThe following are legal rules or essentials of a valid

offer.1. Express or implied

An offer may be made by words or conduct. An offer which is made by words spoken or written is called an express offer. The implied offer appears from the actions, conduct of parties, course of dealing or circumstances of the case.Examples:

a) M says to N that he sell his motorcycle to him for 40,000 AFN. It is an express offer.

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Conti…b) A cart carrier carries the luggage of B without asking

to do so. B allows him to do so. It is an implied offer.c) B is running a bus services to carry passengers at

scheduled fares. This is an implied offer by the company.

2. Legal RelationsThe offer must be made to create relations otherwise there is no agreement. If an offer does not give rise to legal obligation between the parties, it is not a valid offer. In business transactions it is presumed (suppose) that the parties intend to create legal relation.

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Conti…Examples:a)A invites B to dinner and B accepts the

invitation. It does not create legal relations, so there is no agreement.

b)A offers to sell his house to B for 1 million AFN and B agrees. There is an agreement because the parties intend to create legal relations.

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Conti…3. Definite & Clear

An offer must be definite and clear. If the terms of an offer are not definite and clear, it cannot be called a valid offer.

Examples: a) A has two cars. He offers B to sell one car

for 200,000 AFN. It is not a valid offer because it is not clear which car A wants to sell.

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Conti…4. Specific or General

When an offer is made to a specific person or group of persons, it is called specific offer. Such an offer can be accepted only by the person or persons to whom is made. A general offer is made to public in general and it may be accepted by any person who fulfills the conditions mentioned in it.Examples:

a) M makes an offer to N to sell his bicycle for 10,000 AFN, it is a specific offer. In this case only N can accept it.

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Cont…b) A announces in a newspaper a reward of

10,000 AFN for any one who will return his lost documents of his car. It is a general offer.

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Conti…5. Communication with Offeree

An offer is effective only when it is communicated to the offeree. If an offer is not communicated to the offeree, is cannot be accepted. An acceptance of offer without having knowledge of such offer is not valid acceptance and does not create any legal obligation. Thus, an offer which is not communicated is not a valid offer.

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Conti…Example:G’s nephew was missing from home. He sent his servant Lalman, in search of the boy. When the servant left, G announced a reward of $ 500 for anyone who gives information about the boy. The servant before knowing the announcement found the boy and informed G. Later, he claimed the reward. He failed on the grounds that he could not accept the offer unless he had the knowledge of it. (Lalman vs. Gauri Datt 1893)

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Cont…6. Negative Condition

An offer cannot contain a condition that the offer would be considered as accepted, if acceptance is not communicated up to a certain date. If the offeree does not reply, there is no contract because an obligation to reply cannot be imposed on the grounds of justice.

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Conti… Example:A wrote to B to sell his house adding that if he did not reply within five days, the offer would be considered as accepted.

There is no agreement.7. Condition in offer

An offeror may include any condition in his offer without negative condition. There is no contract unless all the conditions of the offer are accepted. If the offeror prescribes a specific mode of acceptance, the offeree must adopt the same mode of acceptance.

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Conti…If the offeree does not follow the prescribed mode, the offeror must inform the offeree regarding its rejection otherwise he is considered to have accepted the acceptance.Example:A ask B to send the reply of his offer by letter but B send reply by e-mail. A may reject such acceptance.

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Revocation of OfferAn offer may revoke in any of the following ways:

(Sec.6)1.Notice of revocation2.Lapse of Time3.Failure to fulfill condition4.Death or Insanity of Offeror 5.Revocation of Offer by Offeree6.Counter offer by Offeree7.Death or Insanity of Offeree8.Subsequent Illegality9.Destruction of subject Matter10.Prescribed Manner

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1. Notice Of RevocationAn offer can be revoked (canceled) by sending a notice to revocation to the other party it means that the offeror may revoke his offer at an time before acceptance, even though the period of acceptance of offer has not yet expired. This way the offeree cannot create a contract by accepting the revoked offer.

Example: A, at an auction gives the highest bid to buy B’s goods. He withdraws the bid before the fall of hammer. The offer is revoked.

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2. Lapse of TimeWhen the offer is kept open for a specified time period, it terminates if it is not accepted within that period. If the offer does not specify any time period, it terminates after lapse of a reasonable time. The reasonable time depends upon the circumstances of each case. If the commodity is perishable, the reasonable time will be relatively shorter.Example: M offered to buy shares of a company R, on 8th June. R allotted shares to M on 23rd November. M refused to accept them, that the offer had lapsed by delay in accepting.

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3. Failure to Fulfill ConditionIf an offer contains some conditions and the offeree fails to fulfill these conditions, the offer terminates.Example:A offers to sell his scooter to B, for 50,000 AFN if B gets admission in Medical college. B fails to get admission, the offer is revoked.

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4. Death or Insanity of OfferorAn offer terminates on death or insanity of the offeror, if the offeree comes to know about the death or insanity of offeror before his acceptance. If the offeree does not know about the death or insanity of offeror and gives his acceptance, it is valid acceptance. It results in a valid contract and legal representatives of the deceased offeror will be bound by the contract.

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Conti…Example:X requested D, to give credit to Y and guaranteed payment up to 100,000 AFN. X died and D in ignorance of this fact continued to give credit to Y. D sued X’s legal representatives on the guarantee. Held, that the legal representatives were liable.

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5.Revocation of Offer by OffereeIf the offeree rejects the offer and communicates the rejection to the offeror, the offer terminates even though the period for acceptance of offer has not yet expired.Example:A offers to sell his cycle to B and keeps the offer open for ten days. B refuses after three days. It terminates although the period has not yet expired.

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6. Counter Offer by OffereeWhen an offer is accepted with some change in the terms of the offer, such acceptance is called counter offer. An offer terminates when a counter offer is made. The party making a counter offer cannot accept the original offer.Examples:a) A offers to sell his house to B for 100,000 AFN. B counter offers 80,000 AFN. Later, even if B is ready to pay 100,000 AFN, the original offer is terminated.

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7. Death or insanity of OffereeAn offer can be accepted only by the offeree. It cannot be accepted by his legal representatives upon his death. If the offeree dies or becomes insane before acceptance, the offer terminates.Example:X offers to sell his camera to Y. Y dies before acceptance. The offer terminates.

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8. Subsequent IllegalityAn offer lapses if it becomes illegal before its acceptance. An offer may also terminates if it becomes illegal due to change in law before its acceptance by the offeree.Example:A offers to sell 10 bags of rice to B for 2,000 AFN. before its acceptance, a law bans the sale of rice. The offer terminates.

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9. Destruction of matterAn offer lapses if the subject matter of the offer is destroyed before its acceptance by the offeree.Example:A offers to sell his car to B. The car get accident before the acceptance of offer by B. The offer terminates.

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10. Prescribed MannerIf the offeror prescribes the manner of acceptance, the offer terminates if the offeree dose not accept it according to the prescribed manner. If the offeror wants to reject the offer, he must inform the offeree within a reasonable time. If offeror dose not inform, he will be bound by such acceptance.Example:A offers to sell his car to B. A requests B to give acceptance by telephone. B sends acceptance by letter. The offer terminates.

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AcceptanceDefinitionSection 2(b) defines promise as, “ When the person to whom the proposal (offer) is made signifies (show) his assent (agree) upon it, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.”Example: A offers to sell his house to B for 500,000 AFN. B accepts the offer. This is an acceptance.

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Essentials of Valid AcceptanceThe following are legal rules or essentials of a valid acceptance.

1. Acceptance by OffereeAn offer can be accepted only by the person to whom is made. Is cannot be accepted by another person without the consent of offeror. When an offer is made to a particular group, it can be accepted by any member of that group. If the offer is made to general public, it can be accepted by any person who has knowledge of that offer.

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Conti…Examples:a) X offered to sell his house to Y. Z who

was aware of such offer said that he is ready to buy X’s house. Z cannot accept the offer because the offer is offered to Y not to Z .

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Conti…2. Absolute & Unconditional

For a valid agreement, the acceptance must be absolute (complete or fixed) and unconditional. If the offeree imposes any condition in his acceptance, it is not a valid acceptance but a counter offer. There is no until the counter offer is accepted by the original offeror.

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Conti…Examples:a) A offers to sell his watch to B for 500 AFN.

B replies that he can buy it for 300 AFN. There is no acceptance on the part of B.

b) M offered to sell land to N for 200000 AFN . N replies for 150,000 AFN with a promise to pay the balance by monthly installments of 10,000 AFN each. Held, there was no contract as the acceptance was conditional.

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Conti…3. Prescribed Manner

If the offeror prescribes a particular manner of acceptance, it must be given according to that particular manner, the offeror may reject it. If no particular manner is prescribed in the offer then acceptance should be made in a reasonable manner.

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Conti…Examples:a) A offers to B and ask to accept the offer by post. B sends his acceptance by telephone. It is not a valid acceptance.b) A offered to buy goods from B and request to send acceptance by messenger who had brought the order. B sent his acceptance by post thinking that this would reach to A earlier than messenger. Held, A was not bound by the acceptance.

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Conti…4. Communication with offeror

The offeree must communicate the acceptance to the offeror in a clear manner. Showing the intention to accept an offer is not a valid acceptance. If the offeree does not accept the offer, no agreement is formed. When offeree accepts an offer but fails to clearly communicate, it is not considered an acceptance.

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Conti…Examples:a) A offers by letter to purchase B’s house. B expresses his intention to sell it but does not reply. B cells to C. A has no legal remedy against B.b) The manager of a railway company received a draft agreement relating to supply of coal. The manager approved and put the agreement in the drawer and forgot all about it. Held, there was no contract

as the other party was not informed.(Brodgen vs. Metropolitan Railway Co. 1877)

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Conti…5. Express or Implied

When an acceptance is given by words spoken or written is called express acceptance. When is given by conduct or action it is called implied acceptance. If the offer is made to the pubic, the contract arises when any person accepts it by words or conduct.

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Conti…Examples:a) A offered by letter to sell his motorcycle to B for 10,000 AFN. B accepted his offer and sent a letter of acceptance. It is an express acceptance.b) A widow promised to give some property to her niece if she stayed with her. The niece stayed in her residence till her death. Held, the niece was entitled to the property.

(V Rao vs. A. Rao)

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Conti…6. Acceptance after Offer

Acceptance must be given after receiving an offer. It cannot precede the offer. If acceptance is made without having knowledge of the offer; there is no contract because no acceptance can be made

without an offer.

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Conti…Example:a) A offered a reward for anyone who finds his lost documents. B in ignorance of the offer; finds and returns the documents. B cannot claim the reward.

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Conti…7. Reasonable time

If offeror specifies a time period for acceptance in his offer, the offeree must given acceptance within that specified time. If no time is specified, the acceptance must be given within a reasonable time.

The reasonable time depends upon the circumstances of each case.

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Conti…Example:

M applied for shares of a company in June but allotment was made in November. M refused to accept the shares. It was held that M could refuse to take shares because offer has lapsed (failed) after the expiry of a reasonable time.

(Ramsgate Victoria Hotel Co. vs. Montefiore 1866)

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