Offer and Acceptance: Definition of Offer [Sec 2(a)] “When one person signifies to another his willingness to do or to abstain fr…
Offer and Acceptance:
Definition of Offer
[Sec 2(a)]
[Sec 2(a)]
“When one person
signifies to another his willingness to do or to 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.”
signifies to another his willingness to do or to 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.”
Thus an offer involves:
a) It must be made
by one person to another person
by one person to another person
b) It must be an
expression of willingness to do or abstain from doing something
expression of willingness to do or abstain from doing something
c) It must be made
with a view to obtain the consent of the other person to the proposed act or
abstinence.
with a view to obtain the consent of the other person to the proposed act or
abstinence.
Rules related to
Offer
Offer
Rule 1: Intention to create legal obligation
There is no
requirement under the Indian Contract Act that the offer and acceptance must be
made with an intention of entering into a legal relationship. However it is a
principle under the English Law that “to create a contract there must be a
common intention of the parties to enter into legal obligation”.
requirement under the Indian Contract Act that the offer and acceptance must be
made with an intention of entering into a legal relationship. However it is a
principle under the English Law that “to create a contract there must be a
common intention of the parties to enter into legal obligation”.
Case Law: Balfour v.
Mrs. Balfour
Mrs. Balfour
A husband agrees
to send his wife 30 ponds every month, while he was away. After a year he
failed to pay the amount, his wife brought an action against him for not
keeping his promise. It was a question before the court to decide whether
agreement was social agreement or agreement under the contract law. Court
verdict in favor of Mr. Balfour and held that he is not liable for the promise
he made as it is not a contract. There was no intention of creating a legal
obligation.
to send his wife 30 ponds every month, while he was away. After a year he
failed to pay the amount, his wife brought an action against him for not
keeping his promise. It was a question before the court to decide whether
agreement was social agreement or agreement under the contract law. Court
verdict in favor of Mr. Balfour and held that he is not liable for the promise
he made as it is not a contract. There was no intention of creating a legal
obligation.
Rule 2: A statement
of intention is not an offer.
of intention is not an offer.
At times, it has been
seen that many people give statements, to do something in the future, on
happening of an event. Such statements are merely an intention, which should
not be mistaken for an offer.
seen that many people give statements, to do something in the future, on
happening of an event. Such statements are merely an intention, which should
not be mistaken for an offer.
Example: A in the course of his
conversation with B, say that he is planning to give Rs.1 crore to the groom
marrying his daughter with his consent.
The statement given by A is an intention not an offer.
conversation with B, say that he is planning to give Rs.1 crore to the groom
marrying his daughter with his consent.
The statement given by A is an intention not an offer.
Rule 3: A mere exchange of information is not an
offer.
offer.
Counter offers and Invitation to offer is not an offer.
An invitation to
an offer is different form offer as in offer if it is accepted by the other
party it give rise to legal consequence but invitation to offer is an situation
where offer is invited from the other party and it is on the party inviting
offers either to accept the offer made by opposite party or not to accept it.
an offer is different form offer as in offer if it is accepted by the other
party it give rise to legal consequence but invitation to offer is an situation
where offer is invited from the other party and it is on the party inviting
offers either to accept the offer made by opposite party or not to accept it.
Example:
Catalogue of books, goods disclosed in showcase, auction sale, quotation,
tenders etc. are example of invitation to offer.
Catalogue of books, goods disclosed in showcase, auction sale, quotation,
tenders etc. are example of invitation to offer.
Case law: Harvey v. Facey
X sent a telegram
to Y asking, “Will you sell Bumper Hall Pen? Quote the lowest price”. Y replied
through a telegram “Lowest price for Bumper Hall Pen is 900 pounds”. X replied
stating “I agree to buy Bumper Hall Pen for 900 pounds”. In a suit brought by X
against Y, the Court held that quoting of price by Y is a merely a supply of
information and not an offer.
to Y asking, “Will you sell Bumper Hall Pen? Quote the lowest price”. Y replied
through a telegram “Lowest price for Bumper Hall Pen is 900 pounds”. X replied
stating “I agree to buy Bumper Hall Pen for 900 pounds”. In a suit brought by X
against Y, the Court held that quoting of price by Y is a merely a supply of
information and not an offer.
Note: Bumper hall
pen is a triangular shape plot (piece of land).
pen is a triangular shape plot (piece of land).
A counter offer
is where the original offer is rejected by the creation of a new offer. For
Example if A offers to sell a land for 5 Lakh Rupees and B negotiates to 3 Lakh
Rupees then B’s negotiation will be considered as a counter offer. The counter
offer nullifies the original offer made by A.
is where the original offer is rejected by the creation of a new offer. For
Example if A offers to sell a land for 5 Lakh Rupees and B negotiates to 3 Lakh
Rupees then B’s negotiation will be considered as a counter offer. The counter
offer nullifies the original offer made by A.
Is there is any
difference between General offer and specific offer?
difference between General offer and specific offer?
Yes a general offer
is an offer to world at large whereas a specific offer is an offer to a
specific person.
is an offer to world at large whereas a specific offer is an offer to a
specific person.
Example of General
offer
offer
Case law: Carlill v.
Carbolic Smoke Ball Company
Carbolic Smoke Ball Company
Carbolic smoke
Ball company, a pharmaceutical company, was interested in testing a new drug in
the market. They advertised in the paper promising a reward of 100 pounds to
anyone, who used the drug and contracted the disorder called influenza. One,
Mrs. Carlill bought it and used it as per the instructions printed on
the label. Upon contracting influenza, she contacted the company to claim the
reward.
Ball company, a pharmaceutical company, was interested in testing a new drug in
the market. They advertised in the paper promising a reward of 100 pounds to
anyone, who used the drug and contracted the disorder called influenza. One,
Mrs. Carlill bought it and used it as per the instructions printed on
the label. Upon contracting influenza, she contacted the company to claim the
reward.
The company
refused to pay her the promised sum. The Court held that the company was liable
to pay Mrs. Carlill, as there arose a contract between the lady and the
company, as soon as she fulfilled the condition.
refused to pay her the promised sum. The Court held that the company was liable
to pay Mrs. Carlill, as there arose a contract between the lady and the
company, as soon as she fulfilled the condition.
Rule: 5 An offer must
be communicated to the offeree (Promissee)
be communicated to the offeree (Promissee)
An offer must be
communicated, if not communicated then the question of acceptance does not
arise. The best example is of Lalman Shukla V. Gauri Dutt in which a servant
founds the lost boy of his master but the servant was not awarded.
communicated, if not communicated then the question of acceptance does not
arise. The best example is of Lalman Shukla V. Gauri Dutt in which a servant
founds the lost boy of his master but the servant was not awarded.
Case law: Lalman Shukla
v. Gauri Dutt
v. Gauri Dutt
A master sent his
servant in search of his missing nephew. In the meantime, the master advertised
in the newspaper, promising a reward of Rs. 500 to anyone who traces the boy.
servant in search of his missing nephew. In the meantime, the master advertised
in the newspaper, promising a reward of Rs. 500 to anyone who traces the boy.
The servant
brought back the boy. After a couple of days the servant came to know about the
reward and claimed it.
brought back the boy. After a couple of days the servant came to know about the
reward and claimed it.
Held:
The servant was not entitled to the reward, for doing something
but in ignorance of an offer cannot be construed as acceptance.
The servant was not entitled to the reward, for doing something
but in ignorance of an offer cannot be construed as acceptance.
Rule : 6 Terms of
offer must be certain.
offer must be certain.
Uncertainly in terms of offer makes it vague and ambiguous.
It will not give
rise to any legal consequence, as uncertain, vague, indefinite and ambiguous
offers are not valid offers.
rise to any legal consequence, as uncertain, vague, indefinite and ambiguous
offers are not valid offers.
Example (1): X offers to sell some
wheat to B for some price. X did not specify the quantity, quality or money for
the wheat, hence it is not a valid offer.
wheat to B for some price. X did not specify the quantity, quality or money for
the wheat, hence it is not a valid offer.
Contract by Post:
Contracts through
post differ from contracts made in person. When parties sit across a table and
enter into a contract, the offer and acceptance are almost instantaneous. So,
the question of revocation of offer and acceptance does not arise. But, in
contracts made through post, the offeror and acceptor may revoke their offer
and acceptance, respectively. This topic is explained by a simple illustration
with the reasoning.
post differ from contracts made in person. When parties sit across a table and
enter into a contract, the offer and acceptance are almost instantaneous. So,
the question of revocation of offer and acceptance does not arise. But, in
contracts made through post, the offeror and acceptor may revoke their offer
and acceptance, respectively. This topic is explained by a simple illustration
with the reasoning.
Presume A is the
offer or and B is the offeree / acceptor. Five situations may arise:
offer or and B is the offeree / acceptor. Five situations may arise:
Situation No:
1: A posts a letter of offer to B. B can accept the offer, when the letter
of offer reaches him. Offer should be communicated to the offeree.
1: A posts a letter of offer to B. B can accept the offer, when the letter
of offer reaches him. Offer should be communicated to the offeree.
Situation No:
2: B posts the letter of acceptance. Now, B has done whatever is necessary
and within his power to conclude the contract. The letter is now out of the
reach of B. So, a contract has come into existence of which B ALONE can enforce
against A.
2: B posts the letter of acceptance. Now, B has done whatever is necessary
and within his power to conclude the contract. The letter is now out of the
reach of B. So, a contract has come into existence of which B ALONE can enforce
against A.
Situation No:
3: The letter of acceptance reaches A. Acceptance having been communicated
A can NOW enforce the contract against B.
3: The letter of acceptance reaches A. Acceptance having been communicated
A can NOW enforce the contract against B.
Note: Even if the letter of acceptance does not reach
A, B can enforce the contract against A.
A, B can enforce the contract against A.
Case Law: House Hold Fire and Carriage
Accident Insurance Company Ltd. v. Grant.
Accident Insurance Company Ltd. v. Grant.
The defendant
applied for allotment of shares in a company. This was the offer. The Company
allotted shares to the defendant and the letter of allotment (i.e. acceptance
of the offer) was posted. The letter did not reach the defendant. Later on the
defendant was called upon to pay for the shares. It was held that the defendant
had to pay for the shares though the letter of allotment of shares had not
reached him.
applied for allotment of shares in a company. This was the offer. The Company
allotted shares to the defendant and the letter of allotment (i.e. acceptance
of the offer) was posted. The letter did not reach the defendant. Later on the
defendant was called upon to pay for the shares. It was held that the defendant
had to pay for the shares though the letter of allotment of shares had not
reached him.
Situation No:
4: Revocation of Offer: If A wants to revoke the offer, he should do
so before B can enforce the contract against A. B gets a right under the
contract the moment B posts the letter of acceptance. Hence, for the revocation
of offer to be effective, the letter of revocation of offer should reach B
before B posts the letter of acceptance.
4: Revocation of Offer: If A wants to revoke the offer, he should do
so before B can enforce the contract against A. B gets a right under the
contract the moment B posts the letter of acceptance. Hence, for the revocation
of offer to be effective, the letter of revocation of offer should reach B
before B posts the letter of acceptance.
Situation No:
5: Revocation of Acceptance: If B wants to revoke the acceptance; he should
do so before A can enforce the contract against B. A gets the right under the
contract when the letter of acceptance reaches A. Hence, for the revocation of
acceptance, the letter conveying the same should reach A, earlier than the
letter of acceptance itself. In other words, the letter of revocation of
acceptance should overtake the letter of acceptance.
5: Revocation of Acceptance: If B wants to revoke the acceptance; he should
do so before A can enforce the contract against B. A gets the right under the
contract when the letter of acceptance reaches A. Hence, for the revocation of
acceptance, the letter conveying the same should reach A, earlier than the
letter of acceptance itself. In other words, the letter of revocation of
acceptance should overtake the letter of acceptance.
According to
Section 2(b), “When the person to whom the proposal is made signifies his
assent there to, the proposal is said to be accepted.”
Section 2(b), “When the person to whom the proposal is made signifies his
assent there to, the proposal is said to be accepted.”
Rules Pertaining To Acceptance:
Rule
1: Acceptance must be absolute and unqualified (Sec. 7)
1: Acceptance must be absolute and unqualified (Sec. 7)
In order to be legally effective it must be an
absolute and unqualified acceptance of all the terms of the offer. Even the
slightest deviation from the terms of the offer makes the acceptance invalid.
absolute and unqualified acceptance of all the terms of the offer. Even the
slightest deviation from the terms of the offer makes the acceptance invalid.
Rule 2: Acceptance
must be given only by the person to whom the offer is made.
must be given only by the person to whom the offer is made.
Case law: Boulton v.
Jones
Jones
A sold his
business to his manager B without disclosing the fact to his customers. C, a
customer, who had a running account with A, sent an order for the supply of
goods to A by name. B received the order and executed the same. C refused to
pay the price. It was held that there was no contract between B and C because C
never made any offer to B and as such C was not liable to pay the price to B.
business to his manager B without disclosing the fact to his customers. C, a
customer, who had a running account with A, sent an order for the supply of
goods to A by name. B received the order and executed the same. C refused to
pay the price. It was held that there was no contract between B and C because C
never made any offer to B and as such C was not liable to pay the price to B.
Rule 3: Silence
doesn’t amount to acceptance
doesn’t amount to acceptance
Mental acceptance
or quiet assent not evidenced by words or conduct does not amount to a valid
acceptance; and this is so even where the offeror has said that such a mode of
acceptance will suffice. Acceptance must be communicated to the offeror,
otherwise it has no effect. There are a few exceptions to this rule. However,
it must be kept in mind that whether silence amounts to agreement is still an
issue that the law will be determined based on the given facts of the case.
or quiet assent not evidenced by words or conduct does not amount to a valid
acceptance; and this is so even where the offeror has said that such a mode of
acceptance will suffice. Acceptance must be communicated to the offeror,
otherwise it has no effect. There are a few exceptions to this rule. However,
it must be kept in mind that whether silence amounts to agreement is still an
issue that the law will be determined based on the given facts of the case.
Case Law: Felthouse v.
Bindley
Bindley
F offered by a
letter to buy his nephew’s horse for $30 stating “If I hear no more from you, I
shall consider the horse mine.” The nephew sent no reply as suggested by F, but
told B his auctioneer, not to sell that particular horse, as he intended to
sell that horse to F. B sold the horse by mistake. It was held, F could not
succeed because his nephew had not communicated his acceptance to him.
letter to buy his nephew’s horse for $30 stating “If I hear no more from you, I
shall consider the horse mine.” The nephew sent no reply as suggested by F, but
told B his auctioneer, not to sell that particular horse, as he intended to
sell that horse to F. B sold the horse by mistake. It was held, F could not
succeed because his nephew had not communicated his acceptance to him.
Rule 4: Acceptance
must be given within a reasonable time and before the offer lapses.
must be given within a reasonable time and before the offer lapses.
To be legally
effective acceptance must be given within the specified time limit, if any, and
if no time is stipulated, acceptance must be given within a reasonable time.
effective acceptance must be given within the specified time limit, if any, and
if no time is stipulated, acceptance must be given within a reasonable time.
Note: What is a
reasonable time depends on the facts and circumstance of case.
reasonable time depends on the facts and circumstance of case.
Practice exercise:
1. Sec 2(a) of The Indian
Contract Act,1872 deals with?
Contract Act,1872 deals with?
A. Offer/Proposal
B. Acceptance
C. Consideration
D. Agency
Ans: A
2. When one person signifies to another his willingness to do or to
abstain from doing anything with a view to obtaining the assent of that other
person to such act or abstinence he is said to make a
abstain from doing anything with a view to obtaining the assent of that other
person to such act or abstinence he is said to make a
A. Proposal
B. Promise
C. Both (a) and (b)
D. None of these
Ans: A
3. The person making the proposal/offer is called
A. Promisor/ Offeror
B. Promisee/ Offeree
C. Both of above
D. None of the above
Ans: A
4. The person to whom proposal is made is called
A. Promisor/ Offeror
B. Promisee/ Offeree
C. Both of above
D. None of the above
Ans: B
5. A proposes to sell a house to
B. The Communication of the proposal is complete
B. The Communication of the proposal is complete
A. When A makes such proposal
B. When B accepts the proposal
C. Both (a) and (b)
D. None of the above
Ans: B
6. An agreement consists of reciprocal promises between at least
A. Four parties.
B. Six parties.
C. Three parties.
D. Two parties.
Ans: D
7. Promises which form the consideration or part of the consideration
for each other are called
for each other are called
A. Reciprocal promises
B. Cross offers
C. Conditional offer
D. Conditional promises
Ans: B
8. The mere exchange of
information is
information is
A. Offer
B. Not an offer
C. Acceptance
D. None of the above
Ans: B
9. Under section 2(c) promisor is the
A. person who makes the proposal
B. person who accepts the proposal
C. person who makes the promise
D. person to whom the proposal is made.
Ans: A
10. Under section 2(c) promisee is the
A. person who makes the proposal
B. person who accepts the proposal
C. person who makes the promise
D. person to whom proposal is made
Ans: B
11. An offer made to the world at large is known as
A. Specific offer
B. Counter offer
C. General offer
D. Cross offer
Ans: C
12. ‘A’ offers to sell his house to ‘B’ for some price. Is this a valid
offer?
offer?
A. Yes
B. No
C. Maybe
D. All of the above
Ans: B
13. Goods displayed in a shop with a price tag is an
A. offer
B. invitation to offer
C. counter offer
D. none of the above
Ans: B
14. Tender is
A. an offer
B. an invitation to offer
C. a counter offer
D. a promise
Ans: B
15. ________ nullifies the original offer and creates a new offer.
A. offer
B. invitation to offer
C. counter offer
D. none of the above
Ans: C
16. Communication of a proposal is complete
A. when it is put in the course of transmission
B. when it comes to the knowledge of the person to whom it is made
C. when the proposal is communicated to the person to whom it is made
D. all the above
Ans: D
17. Communication of acceptance is complete as against the proposer
A. when it comes to the knowledge of the proposer
B. when it is put in the course of transmission to him so as to be out
of power of the acceptor
of power of the acceptor
C. when the acceptance is communicated to the proposer
D. all the above
Ans: B
18. Communication of acceptance is complete as against the acceptor
A. when it comes to the knowledge of the proposer
B. when it is put in the course of transmission
C. when it is communicated to the acceptor that the acceptance has
reached the proposer
reached the proposer
D. when the proposer conveys the acceptance to the acceptor
Ans: A
19. Revocation of offer by letter or telegram can be complete
A. When it is despatched
B. When it is received by the offeree
C. When it reaches the offeree
D. Both (a) and (c).
Ans: D
20. Revocation is complete as against the person who makes it when
A. it is put in the course of transmission
B. it is received by the other party
C. it reaches the other party
D. None of the above
Ans: A
21. Revocation is complete as against the person to whom it is made when
A. it is put in the course of transmission
B. it comes to the persons knowledge
C. All of the above
D. None of the above
Ans: B
A makes an offer to B and posts the letter at 2:30 PM on 21st
Feb 2015 and B receives the letter at 11:30AM on 24th Feb 2015. B
posts his letter of acceptance at 4:30PM on 24th Feb 2015. A
receives it at 10:30AM on 26th Feb.
Feb 2015 and B receives the letter at 11:30AM on 24th Feb 2015. B
posts his letter of acceptance at 4:30PM on 24th Feb 2015. A
receives it at 10:30AM on 26th Feb.
22. When is the offer complete against A?
A. 11:30AM on 24th Feb
B. 2:30 PM on 21st Feb
C. 4:30 PM on 24th Feb
D. 10:30AM on 26th Feb
Ans: B
23. When is the offer complete as against B?
A. 11:30AM on 24th Feb
B. 2:30 PM on 21st Feb
C. 4:30 PM on 24th Feb
D. 10:30AM on 26th Feb
Ans: A
24. When is the acceptance complete as against A?
A. 11:30AM on 24th Feb
B. 2:30 PM on 21st Feb
C. 4:30 PM on 24th Feb
D. 10:30AM on 26th Feb
Ans: C
25. When is the acceptance complete as against B?
A. 11:30AM on 24th Feb
B. 2:30 PM on 21st Feb
C. 4:30 PM on 24th Feb
D. 10:30AM on 26th Feb
Ans: D
26. Acceptance to be valid must
A. be absolute
B. be unqualified
C. both be absolute & unqualified
D. be conditional
Ans: C
27. Which Sec. of The Indian
Contract Act deals with acceptance being absolute?
Contract Act deals with acceptance being absolute?
A. Sec. 2
B. Sec. 4
C. Sec. 7
D. Sec. 6
Ans: C
28. Section 5, of the Contract Act, deals with
A. Communication of contract
B. Acceptance of contracts
C. Revocation of proposals and acceptances
D. None of the above
Ans: C
29. A offers to sell his house to B for 5 Lakh Rupees. B agrees to buy
the house for 3 Lakh Rupees. What B made is?
the house for 3 Lakh Rupees. What B made is?
A. Acceptance
B. Cross offer
C. Counter offer
D. Consideration
Ans: C
30. X offers to buy Y’s horse for 50 thousand Rupees. Y thinks of
selling his horse to X but doesn’t mention it to him. Does this amount to
acceptance?
selling his horse to X but doesn’t mention it to him. Does this amount to
acceptance?
A. Yes
B. No
C. Maybe
D. None of the above
Ans:
B
B
