OFFER AND OFFER AND ACCEPTANCEACCEPTANCE

(COMMERCIAL AND LABOUR (COMMERCIAL AND LABOUR LAWS)LAWS)

PROPOSAL OR PROPOSAL OR OFFEROFFER

SECTION 2 (a) DEFINES PROPOSAL SECTION 2 (a) DEFINES PROPOSAL “ “ When a person signifies to another his When a person signifies to another his

willingness to do or to abstain from doing willingness to do or to abstain from doing anything with a view to obtaining the anything with a view to obtaining the assent of that other to such act or assent of that other to such act or abstinence.”abstinence.”

EXAMPLE :-EXAMPLE :- A offer to sell his motor cycle to B for Rs A offer to sell his motor cycle to B for Rs

3000. B agrees to pay A Rs 3000 for the 3000. B agrees to pay A Rs 3000 for the motor cycle . Here A is called a OFFERER or motor cycle . Here A is called a OFFERER or PROMISER & B the OFFEREE or PROMISEE.PROMISER & B the OFFEREE or PROMISEE.

Section 2 (a) reveals 3 Section 2 (a) reveals 3 essential elements in an essential elements in an

“offer”“offer” Expression of willingness to do or not Expression of willingness to do or not

to do something.to do something. Made to another person i.e. a person Made to another person i.e. a person

cannot make an offer to himself .cannot make an offer to himself . With the object of gaining the With the object of gaining the

consent of the other person to such consent of the other person to such act .act .

KINDS OF OFFERKINDS OF OFFER

HOW MADE TO WHOM

MADE

EXPRESS OFFER

IMPLIED OFFER

GENERAL OFFER

SPECIFIC OFFER

EXPRESS OFFER: EXPRESS OFFER:

An express offer is one which may be An express offer is one which may be made by words spoken or written such made by words spoken or written such as letter , email ,etc..as letter , email ,etc..IMPLIED OFFER :IMPLIED OFFER :

An implied offer is one which may be An implied offer is one which may be gathered from the conduct of the gathered from the conduct of the party or the circumstances of the party or the circumstances of the case..case..GENERAL OFFER :GENERAL OFFER :

An offer made to a definite persons is An offer made to a definite persons is called general offer ..called general offer ..SPECIFIC OFFER : SPECIFIC OFFER :

when an offer is addressed to the when an offer is addressed to the whole world it is called general offer.. whole world it is called general offer..

AN OFFER MUST BE DISTINGUISHED AN OFFER MUST BE DISTINGUISHED FROM:FROM:

a)a)A mere statement of intention .A mere statement of intention .

b)b)An invitation to offer .An invitation to offer .

c)c)A mere communication of information A mere communication of information in the course of negotiations.in the course of negotiations.

d)d)A casual enquiry .A casual enquiry .

e)e)A prospectus inviting the public to A prospectus inviting the public to subscribe to the shares or debentures subscribe to the shares or debentures of a company .of a company .

f)f) Advertisement for the tenders.Advertisement for the tenders.

ESSENTIAL OF VALID ESSENTIAL OF VALID OFFER OFFER OFFER MUST BE CAPABLE OF CREATING LEGAL OFFER MUST BE CAPABLE OF CREATING LEGAL

RELATIONS:- RELATIONS:- The offeror must intended the The offeror must intended the creation of legal relations .he must creation of legal relations .he must intended that if his offer is accepted a intended that if his offer is accepted a legally binding agreement shall result.legally binding agreement shall result.

The leading case is The leading case is

BALFOUR VS. BALFOURBALFOUR VS. BALFOUR OFFER MUST BE CERTAIN DEFNITE AND NOT VAGUE OFFER MUST BE CERTAIN DEFNITE AND NOT VAGUE :- :-

No contract can come into existence if the No contract can come into existence if the terms of the offer are vague or loose and terms of the offer are vague or loose and indefinite.indefinite.

Leading case Leading case TAYLOR V. PORTINGTON TAYLOR V. PORTINGTON (1855)(1855)

OFFER MUST BE COMMUNICATED TO THE OFFEREE:- OFFER MUST BE COMMUNICATED TO THE OFFEREE:- There can be no offer by a person to himself . There can be no offer by a person to himself .

It must always be communicated to the It must always be communicated to the offeree.offeree.

LALMAN SHUKLA V GAURI DUTT(1913)LALMAN SHUKLA V GAURI DUTT(1913)

EXAMPLE :EXAMPLE :

D send his servant P to trace his nephew . D D send his servant P to trace his nephew . D announced a reward for providing information announced a reward for providing information about the missing boy. P in ignorance of about the missing boy. P in ignorance of announcement traced the boy & informed D. P announcement traced the boy & informed D. P later on come to know of the reward & he later on come to know of the reward & he claimed it. His claim is dismissed on the claimed it. His claim is dismissed on the ground that he was ignorant of the offer. It ground that he was ignorant of the offer. It was further held that it was the duty of the was further held that it was the duty of the servant to search for the boy.servant to search for the boy.

OFFER MUST BE MADE WITH A VIEW TO OBTAINING THE OFFER MUST BE MADE WITH A VIEW TO OBTAINING THE ASSENT OF THE OTHER PARTY ASSENT OF THE OTHER PARTY :-:-

an offer must be distinguished from an offer must be distinguished from mere expression of intension mere expression of intension

EXAMPLE:-EXAMPLE:-

N advertised in a newspaper to effect sale of N advertised in a newspaper to effect sale of his goods on a particular day at a particular his goods on a particular day at a particular place . H travelled a long distance to bid for place . H travelled a long distance to bid for the things . On arrival he found the sale was the things . On arrival he found the sale was cancelled. He sued N for breach of contract . cancelled. He sued N for breach of contract . It was held that advertisement was merely It was held that advertisement was merely expression of an intention and an offer expression of an intention and an offer which could be accepted by travelling to the which could be accepted by travelling to the place of intended sale . place of intended sale .

AN OFFER MAY BE CONDITIONAL:-AN OFFER MAY BE CONDITIONAL:-

An offer can be made subject to a condition . In An offer can be made subject to a condition . In that case it can be accepted only subject to that case it can be accepted only subject to that condition. A conditional offer lapses when that condition. A conditional offer lapses when the condition is not accepted. A contract the condition is not accepted. A contract formed on a conditional offer is valid .formed on a conditional offer is valid .

EXAMPLE : EXAMPLE :

T who could not read , took an excursion ticket T who could not read , took an excursion ticket on the railway . On the front of the ticket was on the railway . On the front of the ticket was printed `for conditions see back’. One of the printed `for conditions see back’. One of the condition was that the railway company would condition was that the railway company would not be liable for personal injuries to not be liable for personal injuries to passengers . T was injured by a railway passengers . T was injured by a railway accident . Held T was bounded by the accident . Held T was bounded by the conditions and could not recover any damageconditions and could not recover any damages. s.

OFFER SHOULD NOT CONTAIN A TERM THE NON-COMPLIANCE OFFER SHOULD NOT CONTAIN A TERM THE NON-COMPLIANCE

OF WHICH WOULD AMOUNT TO ACCEPTANCE :- OF WHICH WOULD AMOUNT TO ACCEPTANCE :- one cannot one cannot say while making the offer that if the offer is not say while making the offer that if the offer is not accepted before a certain date, it will be presumed accepted before a certain date, it will be presumed to have been accepted.to have been accepted.

LAPSE OF AN OFFER :- LAPSE OF AN OFFER :-

a)a) If either offeror or offeree dies before acceptance.If either offeror or offeree dies before acceptance.

b)b) If it is not accepted within the specified time or a If it is not accepted within the specified time or a reasonable time if no time is specified .reasonable time if no time is specified .

c)c) If the offeree does not make a valid acceptanceIf the offeree does not make a valid acceptance

d)d) An offer can also lapses by revocation . A person An offer can also lapses by revocation . A person who makes an offer can withdraw it at anytime who makes an offer can withdraw it at anytime before acceptance . A proposal may be made for a before acceptance . A proposal may be made for a fixed period . The offer will automatically expire if it fixed period . The offer will automatically expire if it has not been accepted till then. Where no time limit has not been accepted till then. Where no time limit has been specified the offer will lapse after a has been specified the offer will lapse after a reasonable time.reasonable time.

AN INVITATION TO OFFER IS NOT AN OFFER:-AN INVITATION TO OFFER IS NOT AN OFFER:- An offer must be distinguished from an invitation to An offer must be distinguished from an invitation to

offer . In the case of an “invitation to offer” the aim offer . In the case of an “invitation to offer” the aim is merely to circulate information of readiness to is merely to circulate information of readiness to negotiate business with anybody who on such negotiate business with anybody who on such information comes to the person sending it . Such information comes to the person sending it . Such invitations are not offers in the eye of law and do invitations are not offers in the eye of law and do not become promises on acceptance.not become promises on acceptance.

STANDING OR OPEN OFFERSTANDING OR OPEN OFFER

An offer for the continuous supply of a certain An offer for the continuous supply of a certain article at a certain rate over a definite period article at a certain rate over a definite period is called standing offer . Such offers though is called standing offer . Such offers though accepted do not give rise to contract unless a accepted do not give rise to contract unless a actual order is placed . The offeror can actual order is placed . The offeror can withdraw his offer at any time before an order withdraw his offer at any time before an order is placed with him.is placed with him.

COUNTER OFFER :COUNTER OFFER : A counter offer is an rejection of the original offer and A counter offer is an rejection of the original offer and

making a new offer. This new offer is a counter offer . A making a new offer. This new offer is a counter offer . A person who make a counter offer and subsequently person who make a counter offer and subsequently changes his mind and wishes to accept the original changes his mind and wishes to accept the original offer cannot do so as the first offer lapses and he offer cannot do so as the first offer lapses and he cannot treat is as still open.cannot treat is as still open.

When special term and conditions are to be included in When special term and conditions are to be included in a contract , they must not be specifically stated but a contract , they must not be specifically stated but also communicated to the concerned party. It is the also communicated to the concerned party. It is the duty of the person who deliver a document to give duty of the person who deliver a document to give adequate notice to the offeree of the terms & adequate notice to the offeree of the terms & conditions contained in the document . When this is not conditions contained in the document . When this is not done the acceptor will not be bound by such terms .done the acceptor will not be bound by such terms .

PRINTED CONTRACTS PRINTED CONTRACTS Many big organisations like LIC , INDIAN Many big organisations like LIC , INDIAN

RAILWAYS, etc enter into thousand of RAILWAYS, etc enter into thousand of contracts everyday . It would be difficult for contracts everyday . It would be difficult for such organisations to draw out a separate such organisations to draw out a separate contract with every individual .they have contract with every individual .they have therefore printed contract(standard forms of therefore printed contract(standard forms of contracts)..contracts)..

CROSS OFFERSCROSS OFFERS When two parties make identical offers to When two parties make identical offers to

each other , in ignorance of each other’s each other , in ignorance of each other’s offer, such offers are known as cross offer. offer, such offers are known as cross offer. They shall not constitute acceptance of one’s They shall not constitute acceptance of one’s offer by the other.offer by the other.

ACCEPTANCEACCEPTANCE When the person to whom the proposal is When the person to whom the proposal is

made signifies his assent , it is an acceptance made signifies his assent , it is an acceptance of proposal. An accepted proposal is called a of proposal. An accepted proposal is called a promise or an aggreement. An application for promise or an aggreement. An application for the shares in a company is in the nature of the shares in a company is in the nature of offer while the allotment of the shares by the offer while the allotment of the shares by the company is an acceptance resulting into company is an acceptance resulting into contract. The acceptor should do something contract. The acceptor should do something to signifies his intention to accept.to signifies his intention to accept.

EXAMPLE EXAMPLE ::

A offer to sell his horse to B for $50. B A offer to sell his horse to B for $50. B accepts the offer to purchase the horse accepts the offer to purchase the horse for $50. this is acceptancefor $50. this is acceptance

TYPE OF TYPE OF ACCEPTANCEACCEPTANCE

EXPRESSEDEXPRESSED IMPLIEDIMPLIED

(acceptance by words, (acceptance by words, (acceptance by conducts) (acceptance by conducts)

Spoken or written) Spoken or written) (treatment of docter) (treatment of docter)

ESSENTIALS OF VALID ESSENTIALS OF VALID ACCEPTANCEACCEPTANCE

1. 1. ACCEPTANCE MUST BE ABSOLUTE AND ACCEPTANCE MUST BE ABSOLUTE AND UNCONDITIONAL :UNCONDITIONAL :An acceptance must be An acceptance must be unconditional and unqualified. Accepting an offer unconditional and unqualified. Accepting an offer with conditional, variation and reservations with conditional, variation and reservations ammounts to counter offer and rejection of the ammounts to counter offer and rejection of the original offer .original offer .

EXAMPLE :EXAMPLE : M offered to sell land to N at $ M offered to sell land to N at $ 280 N replied accepting the offer and 280 N replied accepting the offer and enclosing $30 and promising to pay balance enclosing $30 and promising to pay balance amount by monthly installments of $ 50 amount by monthly installments of $ 50 each . Since N accepted the offer subject to each . Since N accepted the offer subject to making payments in installments, it was making payments in installments, it was held that the acceptance was conditional held that the acceptance was conditional and qualified .and qualified .

ACCEPTANCE MUST BE ACCEPTANCE MUST BE COMMUNICATED TO THE COMMUNICATED TO THE

OFFEROROFFEROR If the offeree remains silents and does If the offeree remains silents and does

nothing to show that he accepted the nothing to show that he accepted the

offer, no contract is formed. The offer, no contract is formed. The

acceptor should do something to signify his acceptor should do something to signify his attention to accept. acceptance must be attention to accept. acceptance must be communicated to the offer himself.communicated to the offer himself.

EXAMPLE :EXAMPLE : The manager of a railway The manager of a railway company recieved an offer by a letter company recieved an offer by a letter relating to the supply of coal;he wrote on relating to the supply of coal;he wrote on the letter ‘accepted’ and kept it in his the letter ‘accepted’ and kept it in his drawer and forget all about it . It was held drawer and forget all about it . It was held that there was no contract as the that there was no contract as the acceptance had not been communicatedacceptance had not been communicated

ACCEPTANCE MUST BE MADE ACCEPTANCE MUST BE MADE IN REASONABLE TIMEIN REASONABLE TIME

Acceptance to be valid must be made Acceptance to be valid must be made

with in the time allowed by the offeror with in the time allowed by the offeror

and if no time is specified, it must and if no time is specified, it must

be made with in reasonable time.be made with in reasonable time.

acceptance may be made at any time till the acceptance may be made at any time till the offer is alive . Acceptance made after the offer offer is alive . Acceptance made after the offer has been withdrawns is invalid.has been withdrawns is invalid.

EXAMPLE EXAMPLE : : A person applied for shares A person applied for shares in a company in june. He cannot be in a company in june. He cannot be bound by an allotment made late in bound by an allotment made late in november.november.

ACCORDING TO THE MODE ACCORDING TO THE MODE PRESCRIBED OR USUAL OR PRESCRIBED OR USUAL OR

RESONABLE MODERESONABLE MODE Acceptance has to made in the manner Acceptance has to made in the manner

prescribed or indicated by the offeror.prescribed or indicated by the offeror.

it may be noted that law does not allowit may be noted that law does not allow

an offeror to prescribed ‘silence’ as thean offeror to prescribed ‘silence’ as the

mode of acceptance.where no mode ofmode of acceptance.where no mode of

acceptance is prescribed,acceptance acceptance is prescribed,acceptance must be expressed in someusual and must be expressed in someusual and reasonable manner.acceptance by mail is reasonable manner.acceptance by mail is a very resonable manner in such casesa very resonable manner in such cases

ACCEPTOR MUST BE AWARE ACCEPTOR MUST BE AWARE OF PROPOSAL AT THE TIME OF OF PROPOSAL AT THE TIME OF

OFFEROFFER Acceptance follows offer. If the acceptor is not aware Acceptance follows offer. If the acceptor is not aware

of the existence of the offer and conveys his of the existence of the offer and conveys his acceptance, no contract comes into being.there must acceptance, no contract comes into being.there must be knowledge of the offer before anyone could be knowledge of the offer before anyone could concern it.concern it.

CASE : LALMAN SHUKLA V. GAURI DUTT.CASE : LALMAN SHUKLA V. GAURI DUTT. A sold his business to hiis manager B without A sold his business to hiis manager B without

disclosing the fact to his customers. C, a customer disclosing the fact to his customers. C, a customer who had a running account with A, sent an order for who had a running account with A, sent an order for the supply of goods to A by name.B received the order the supply of goods to A by name.B received the order and executed the same. C refused to pay the price. It and executed the same. C refused to pay the price. It was held that there was no contract between B and C was held that there was no contract between B and C because C never made any offer to B and as such C because C never made any offer to B and as such C was not liable to pay the price to B.was not liable to pay the price to B.

ACCEPTANCE MUST BE GIVEN ACCEPTANCE MUST BE GIVEN BEFORE THE OFFER IS REVOKEBEFORE THE OFFER IS REVOKE

It means that acceptance must be made while the It means that acceptance must be made while the offer is in force i.e. Before the offer has been offer is in force i.e. Before the offer has been revoked or offer has lapsed.revoked or offer has lapsed.

ACCEPTANCE CANNOT BE IMPLIED FROM ACCEPTANCE CANNOT BE IMPLIED FROM SILENCESILENCE

No contract is formed if the offeree remains No contract is formed if the offeree remains silent and does nothing to shoe that he has silent and does nothing to shoe that he has accepted the ofaccepted the offerfer. .

EXAMPLE : EXAMPLE : pankaj told radhika, ‘I offer you pankaj told radhika, ‘I offer you my car for Rs 50000. if you don’t reply in 10 my car for Rs 50000. if you don’t reply in 10 ten days time, i shall assume that you ten days time, i shall assume that you accept the offer’. Radhika kept silenct. accept the offer’. Radhika kept silenct. Held,there is no contract .Held,there is no contract .

Communication of Communication of offer(section 4)offer(section 4)

An offer to be communicated An offer to be communicated

An offer my be communicated to the An offer my be communicated to the offered or offer's by word of mouth, by offered or offer's by word of mouth, by writing or conduct. A written offer my writing or conduct. A written offer my be contained in a letter or a telegram.be contained in a letter or a telegram.

When communication of offer is When communication of offer is Complete Complete

The communication of proposal is The communication of proposal is complete when it comes to the complete when it comes to the knowledge of the person to whom it is knowledge of the person to whom it is mademade..

Communication of Communication of acceptance (section 4)acceptance (section 4)

The communication of The communication of acceptance is complete, as acceptance is complete, as against the proposer, when it is against the proposer, when it is put a course of transmission to put a course of transmission to him, so as to be out of the power him, so as to be out of the power of the acceptor; and as against of the acceptor; and as against the acceptor, when it comes to the acceptor, when it comes to the knowledge of the proposerthe knowledge of the proposer..

Example of Example of Communication of offer Communication of offer

and acceptanceand acceptance Example of offer:-Example of offer:-

Amir propose, by letter. To sell a house to Amir propose, by letter. To sell a house to Babul at Taka 10 lac. The communication of Babul at Taka 10 lac. The communication of proposal is complete when Babul receives proposal is complete when Babul receives the letter.the letter.

Example of acceptance:-Example of acceptance:-

A propose by a letter to sell a house to B at a A propose by a letter to sell a house to B at a certain price. B accepts A’s proposal by certain price. B accepts A’s proposal by letter by post. The communication of letter by post. The communication of acceptance is completed as against A, when acceptance is completed as against A, when the letter is posted, as against B when the the letter is posted, as against B when the letter is received by A.letter is received by A.

Communication of Communication of RevocationRevocation (section 5) (section 5)

As against the persons who As against the persons who makes it, when it is put into a makes it, when it is put into a course of transmission to the course of transmission to the persons to whom it is made so as persons to whom it is made so as to be out of the power of the to be out of the power of the person who makes it, as against person who makes it, as against the person to whom it is made, the person to whom it is made, when it comes to his knowledge. when it comes to his knowledge.

Modes of revocation of offer Modes of revocation of offer (section 6)(section 6)

Communication of revocation Communication of revocation of acceptance (section 5)of acceptance (section 5)

An acceptance can be revoked at any time An acceptance can be revoked at any time before the communication of acceptance before the communication of acceptance complete as against the acceptor but not complete as against the acceptor but not afterwards. Where an acceptor is sent by post, afterwards. Where an acceptor is sent by post, it stands complete against the acceptor when it stands complete against the acceptor when the letter reaches the offeror. It means that the letter reaches the offeror. It means that acceptance can be revoked before the letter acceptance can be revoked before the letter actually reaches the offeror.actually reaches the offeror.

Therefore, the communication of Therefore, the communication of revocation of acceptance must reach the revocation of acceptance must reach the offeror before acceptance. But in English law offeror before acceptance. But in English law once an acceptance given cannot be revoked once an acceptance given cannot be revoked at all.at all.

Difference b/w English law & Difference b/w English law & Indian lawIndian law

1.1. Under Indian law a proposal is revoked by death Under Indian law a proposal is revoked by death of the proposer before its acceptance only. of the proposer before its acceptance only. Where as in English law, death of the proposer Where as in English law, death of the proposer revokes an offer even if acceptance is made revokes an offer even if acceptance is made after the death of the proposer in ignorance of after the death of the proposer in ignorance of his death.his death.

2.2. Under Indian law acceptance can be revoked Under Indian law acceptance can be revoked before the communication of acceptance is before the communication of acceptance is complete against the acceptor. Where as in complete against the acceptor. Where as in English law an acceptance once given, can not English law an acceptance once given, can not be evoked at all.be evoked at all.

Example:- Example:- X by a letter dated July 5, 1995 accepted X by a letter dated July 5, 1995 accepted the offer of Y. the letter did not reach Y. X on July the offer of Y. the letter did not reach Y. X on July 10, 1995 revokes the acceptance by a letter 10, 1995 revokes the acceptance by a letter which reaches Y on 12which reaches Y on 12th.th. The acceptance revoked. The acceptance revoked.