Presentation on Offer & Acceptance

8/10/2019 Presentation on Offer & Acceptance

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Legal Environment ofBusiness Chapter 2 Offer and Acceptance

by

Dr Nazrul Islam


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The Proposal Or Offer

When one person signifies toanother his willingness to do or toabstain from doing anything, with aview to obtaining the assent of thatother to such act or abstinence, he

is said to make a proposal.


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The Proposal Or Offer, Contd.,

Example M says to N that he is willing tosell his motorcycle to him for tk.20,000. This is an offer.


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The essentials of a proposal (i) It must be an expression of the willingness to

do or to abstain from doing something

(ii) The expression of willingness to do or toabstain from doing something must be toanother person.

(iii) The expression of willingness to do or toabstain from doing something must be madewith a view to obtaining the assent of theother person to such act or abstinence.



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A mere statement of intention is not anoffer.

Example I may sell my motorcycle if I can gettk. 14,000 for it. This is a mereintention to offer.

But if M says to N, Will you buy mymotorcycle for tk. 14,000? It is aproposal or offer.



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Rules Regarding a Valid Offer

1. An offer may be express or implied. 2. An offer must contemplate to give rise

to legal consequences and be capable of

creating legal relations.3. The terms of the offer must be certain

and not loose or vague.

4. An invitation to offer is not an offer.5. An offer may be specific or general. 6. An offer must be communicated to the

offeree.


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7. An offer should not contain a term thenon-compliance of which would amount toacceptance.

8. An offer can be made subject to anyterms and conditions.

9. Two identical cross-offers do not make acontract.

Rules Regarding a Valid Offer,Contd.,


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An offer may be express or

implied Example 1 X writes to Y that he offers to sell his house

to him for tk. 80,000. There is an expressoffer.

Example 2

The Citi Bus Company runs buses on differentroutes to carry passengers at thescheduled fares. This is an implied offer bythe Citi Bus.


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An offer must contemplate togive rise to legal consequences

and be capable of creating legalrelations

Example

An offer to a friend to dine at theofferors place, or an offer to ones wifeto show her a movie is not a valid offer

and as such cannot rise to bindingagreement.


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The terms of the offer must becertain and not loose or vague

Example

X purchased a horse from Y and promisedto buy another, if the first one proveslucky. X refused to buy the second one.

Y could not enforce the agreement, as itis loose and vague. (Taylor vs. Portington)


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An invitation to offer is not anoffer

Example

There is a self -service system in a shop.A customer selects the goods and takesthem to the cashier for payment. Thecashier totals the price and accepts the

amount. The contract, in this case is made,not when the customer selects the goods,but when the cashier accepts the offerby accepting the payment.


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An invitation to offer is not anoffer, Contd.,

More Example

An advertisement for sale of goods byauction does not amount to an offer tohold such sale.(Case: Harries vs Nickerson)

Quotations, catalogues of prices or displayof goods with prices marked thereon donot constitute an offer.(Case: Grainger &Son vs Gough)


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An invitation to offer is not anoffer, Contd.,

More Example(s)

A notice that goods will be sold by tenderdoes not amount to an offer.

It is only an attempt to ascertain whetheran offer can be obtained within such amargin as the seller is willing to adopt.(Case: Spencer vs Harding).


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An offer may be specific orgeneral

Example 1

M makes an offer to N to sell his bicyclefor tk. 500, there is an specific offer and Nalone can accept it.

A general offer is one which is made tothe world at large or public in general andmay be accepted by any person.


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An offer may be specific orgeneral, Contd.,

Example 2

Carbolic Smoke Ball Company issued anadvertisement in which the company offered topay $100 to any person who contracts influenza,after having used their Smoke Balls threetimes daily for two weeks. Mrs Carlill, on the faithof the advertisement, bought and used the Ballsaccording to the directions, but she neverthelesssubsequently suffered from influenza. She suedthe company for the promised reward. Thecompany was held liable.


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An offer must be communicatedto the offeree

ExampleG sent his servant L in search of his

missing nephew. Subsequently Gannounced a reward for informationconcerning the boy. L brought back themissing boy and claimed the reward,

without having known of the reward. Held,there was no contract between L and G andthe reward cannot be claimed.(Case:Lanmon vs Gouri Dutt)


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An offer should not contain aterm the non-compliance of which

would amount to acceptance ExampleAn offeror cannot say that if acceptance isnot communicated up to a certain date, theoffer would be presumed to have beenaccepted. If the offeree does not reply,there is no contract, because no obligationto reply can be imposed on him, on theground of justice.


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An offer can be conditional Example 1T, who could not read, took an excursionticket on the railway. On the front of theticket was printed for conditions seeback. One of the conditions was that therailway authority would not be liable forpersonal injuries to passengers. T wasinjured by a railway accident.Held, T was bound by the conditions andcould not recover any damages.


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An offer can be conditional,Contd.,

Example 2M delivered one new sari to a laundry forwashing. On the back of the printed receipt itwas stated that the customer would beentitled to recover only 15% of the market-price of the article in case of loss. The sariwas lost owing to the negligence of thelaundry.

In a suit by M, it was held that the termwas unreadable. Such a term would give apremium on dishonesty and its against thepublic interest.


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Two identical cross-offers do not

make contract ExampleOn 15 October, 1989 A wrote to Boffering to sell him 100 tons of iron at tk.8 ,800 per ton. On the same day, B wroteto A offering to buy 100 tons of iron at tk.8 ,800 per ton. The letters crossed in thepost.There was no contract between A & B.


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Lapse and Revocation of Offer

1. An offer lapses after stipulated orreasonable time.

2. An offer lapses by not being accepted

in the mode prescribed, or if no mode isprescribed, in some usual andreasonable manner.

3. An offer lapses by rejection.4. An offer lapses by the death or

insanity of the offeror or the offereebefore acceptance.


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Lapse and Revocation of Offer.

Contd., 5. An offer lapses by notice or

revocation.6. Revocation by non-fulfillment of acondition precedent to acceptance.

7. An offer lapses by subsequent illegalityor destruction of subject matter.


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After the expiry of reasonabletime

Example 1

On 8th June, M offered to take shares in Rcompany. He received a letter of allotmenton 23rd November. M refused to take theshares.

Held, M was entitled to refuse as the offerhad lapsed by delay in acceptance.(Ramsgate Victoria Hotel Co. vs Montefiore)


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After the expiry of reasonabletime, Contd.,

Example 2

An offer made by telegram suggests that areply is required urgently and if the ofereedelays the communication of his acceptanceeven by day or two, the offer will be

considered to have lapsed.


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An offer lapses by rejection

An offer lapses if it is rejected by theofferee.

The rejection may be express or implied. Implied rejection is one:

(a) where either the offeree makes acounter offer or (b) where the offeree gives aconditional acceptance.


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An offer lapses by rejection ,

Contd.,Example

A offered to sell his house to B for tk.50,000. B said that he accepted the offerif he was appointed as General Manager ofAs factory. Bs acceptance is a

conditional acceptance which amounts torejection of As offer and there is nocontract.


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An offer lapses by death orinsanity

Example

An offer lapses by the death or insanityof the proposer, if the fact of his deathor insanity comes to the knowledge of

the acceptor before acceptance.(Ronalds vs Atherton).


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An offer lapses by revocation

Example

A proposal is sent by X to Y and is

accepted by Y by letter. The proposalmight have been revoked any time beforethe letter of acceptance was posted butit cannot be revoked after the letter isposted.


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Example

A offers to sell his scooter to B, for tk.4,000, if B joins the Lions Club within aweek. The offer stands revoked andcannot be accepted by B, if B fails to jointhe Lions Club.

Revocation by non- fulfillment of

a precedent to acceptance


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The Acceptance

Section 2(b) defines acceptance aswhen the person to whom the proposal ismade signifies his assent there to, theproposal is said to be accepted.

Thus acceptance is the manifestation by

the offeree of his assent to the termsof the offer.


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Legal Rules Regarding a ValidAcceptance

1. Acceptance must be given only by theperson to whom the offer is made.

2. Acceptance must be absolute andunqualified.3. Acceptance must be expressed in some

usual and reasonable manner.4. Acceptance must be communicated by the

acceptor.


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Legal Rules Regarding a ValidAcceptance

5. Acceptance must be given within areasonable time and before the offer

lapses and/or is revoked.6. Acceptance must succeed the offer.7. Rejected offers can be accepted only,

if renewed.


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Acceptance must be given only bythe person to whom the offer is

made Example

A sold his business to his manager B withoutdisclosing the fact to his customers. C, acustomer, who had a running account with A,sent an order for the supply of goods to A

by name. B received the order and executedthe same. C refused to pay the price. Held,there was no contract between B and C.


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Acceptance must be absolute and

unqualified

Example

M offered land to N at tk. 5,000. N repliedaccepted and enclosing, tk. 4,000, andpromising to pay the balance by monthlyinstallments of tk. 1,000. Held, there was no

contract, as there was no unqualifiedacceptance. (Neale vs Merrett).


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Acceptance must be expressed in

some usual and reasonable manner

Example

If the offeror prescribes acceptance bytelegram and the offeree sends acceptancethrough a messenger, there is noacceptance of the offer.


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Mental acceptance is not an

acceptance

Example

A person received an offer by letter. Inreply he wrote a letter of acceptance, putthe letter in his drawer and forgot all aboutit. Held, this uncommunicated acceptance did

not amount to acceptance and so did notcomplete the contract. (Brogden vsMetropolitan Rly Co.)


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Acceptance must be communicated

by the acceptor

Example

P was a candidate for the post of headmaster in a school. The managing committeeof the school selected him. One of themembers informed it to P. But before

preparing letter, his appointment wascancelled by the committee. P filled a suitagainst the committee. Held, there was nocontract. (Powell vs Lee)


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Acceptance must succeed the offer

Example

Acceptance must be given after

receiving the offer.It should not precede the offer.In a company shares were allotted to a

person who had not applied for them.Subsequently, he applied for theshares. Held, the allotment is invalid.


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Rejected offers can be accepted

only, if renewed

Example

Offer once rejected cannot beaccepted again unless a fresh offer ismade (Hyde vs Wrench).


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Communication of an offer

The communication of an offer iscomplete when it comes to theknowledge of the person to whom it ismade.i.e., when the letter containing the

offer reaches the offeree.


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Communication of an offer, Contd.,

Example

A proposes, by letter, to sell a house to Bfor tk. 80,000. The letter is posted on6th instant. The letter reaches B on 8 th instant. The communication of the offeris complete when B, the offeree,

receives the letter i.e., 8th

.


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Communication of an acceptance

The communication of an acceptance iscomplete

(a) as against the offeror , when it is put ina course of transmission to him, so as tobe out of power of the acceptor and

(b) as against the acceptor , when it comes

to the knowledge of the proposer, i.e.,when the letter of acceptance isreceived by the offeror.


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Communication of an acceptance,Contd.,

Example

B accepts As offer by letter sent bypost 9 th instant. The letter reaches Aon 11th instant. The communication ofthe acceptance is complete:as against A, when the letter is posted,

i.e., 9th

, andas against B, when the letter is receivedby A, i,e., on 11th .


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Communication of a revocation

The communication of a revocation iscomplete:(a) as against the person who makes it , when

it is put into a course of transmission tothe person to whom it is made, so as tobe out of the power of the personrevoking, i.e., when the letter ofrevocation is posted, and

(b) as against the person to whom it is made ,when it comes to his knowledge, i.e., whenthe letter of revocation is received by

him.


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Communication of a revocation,contd.,

Example 1A revokes his offer by letter on 8 th instant. The letter reaches B on 10 th instant. The revocation is complete asagainst A on 8th , when the letter ofrevocation is posted. It is complete asagainst B on 10the, the date on which theletter of revocation is received by him.


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Communication of a revocation,contd.,

Example 2B revokes his acceptance by letter on 10 th instant. The letter reaches A on 12 th instant. The revocation is complete asagainst B on 10th , the date on which theletter of revocation is posted and asagainst A on 12th , the date on which theletter reaches him.


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Time during which an offer oracceptance can be revoked

- A proposal may be revoked at any timebefore the communication of itsacceptance is complete as against theproposer, but not afterwards.- An acceptance may be revoked at anytime before the communication of the

acceptance is complete as against theacceptor but not afterwards.


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Effect of delay or loss of letter ofacceptance in postal transit

So far as the offeror is concerned , he isbound by the acceptance the moment theletter of acceptance is posted, although

the letter is delayed or wholly lost throughan accident of the post and the letternever in fact reaches him.

So far as the acceptor is concerned , he isnot bound by the letter of acceptance till itreaches the offeror.


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Contracts over the Telephone

- Each party is able hear the voice of the other.There is instantaneous communication of offerand acceptance, rejection and counter offer.

- The contract is complete only when the

acceptance is received by the offeror also appliesto contracts made over the telephone.

- If the acceptance is not in fact communicated tothe offeror because the telephone suddenly goesdead, there will be no contract. - No question of revocation arises in such

instantaneous communication.

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Presentation on Offer & Acceptance