BRF Lesson 2

 Lesson 2

OFFER AND ACCEPTANCE

 OFFER OR PROPOSAL

 ‘Offer’ and ‘Proposal’ are synonymous terms. According to 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”. The person making the proposal is called the ‘offeror’  and the person to whom the offer is made is called the ‘offeree’.  It is important to note that the offer must be made with the object of obtaining the assent of the other party.

Express and Implied Offer

An express offer is made by words written or spoken.

An implied offer is made by conduct or acts of parties. Eg. A bus service on a particular route is making an implied offer to carry passengers at prescribed fares.

Specific and General Offer

When the offer is made to a specific  person or group of persons, it is called a specific offer. A general offer is made to the public at large.i.e. It can be accepted by any member of the general public by fulfilling the condition laid down in the offer.

 In Carlill Vs. Carbolic Smoke Ball Co., the defendant  company advertised that it would give a reward of £100 to anyone who contacted influenza after using smoke balls of the company for a certain period according to the printed directions. Mrs. Carlill purchased the the smoke ball and contacted influenza inspite of using the same according to the printed directions. She claimed the reward of £100. The company refused the payment of the claim on the ground that  it had no intention to create legal relationship. It  argued further that no offer was made to her, and that in any case she had not  communicated her acceptance. She filed a suit for the recovery of the reward. Held that she could recover the reward as it was a public offer and she had accepted the offer by complying with the terms of the offer.

 LEGAL RULES AS TO OFFER

 The following are the essential requirements of a valid offer:

(1) Offer should be made with an intention to create legal relationship: In the absence of such intention no obligation can arise. Absence of such intention may be express or implied. Example: Where A proposes to sell his ‘Television’ to B for Rs.10000 but tells him that the breach of promise by either party would not create legal rights, no binding contract would arise in that case even if the agreement is in writing.

(2) Terms of an offer should be definite or should be capable of being made certain. (Taylor Vs. Portington).

(3)  Offer must be communicated: The offer must be brought to the knowledge of the person to whom it is made. If an offer is not communicated to the offeree, the latter cannot accept it. (Lalman Shukla Vs. Gauri Dutt)

(4)  An offer is to be distinguished from an invitation to offer.

A prospectus issued by  a company is not an offer for sale of its shares. An auctioneer, N, advertised that a sale of certain furniture would be sold by auction  at a particular place on a stated day. H travelled down about 100 km. to attend the sale but found that the auction was cancelled. He claimed compensation from the auctioneer. Held, that auctioneer was not liable.(Harris Vs. Nickerson) Price lists, catalogues and inviting tenders and quotations are mere invitations to offer. Likewise a display of goods with a price tag on them in a shop window is construed an invitation to offer and not an offer to sell.

(5)A statement of price is not an offer.(Harvey Vs. Facey)

(6) Offer should not contain a term the non-compliance of which would amount to acceptance.  

Example: A writes to B “I shall buy your furniture for Rs, 10,000, if you do not reply I shall assume that you have accepted my offer”. This is not a valid offer.

(7)Special Terms in a Contract must be communicated

Any  special terms, which form part of the offer must be brought to the notice of the offeree  at the time the offer is made.

(8)Offer may be express or implied: An offer is express when it is stated in words, written or spoken.

(9)Offer is different from counter offer- a counter offer is a variation in the terms by the offeree: Example: A offers B to sell his property for Rs. 10,000. B says, “I shall buy it for Rs.9,000.” it is a counter offer from B which A may accept or reject it. Later  B changes his mind and agrees to buy it for Rs. 10,000.  A is not bound to sell the property, when a counter offer is made the original offer lapses and there is nothing for the offeree to accept.

TENDER (STANDING OFFER)

A tender is an offer made in response to an invitation to offer. The party inviting tenders may require a definite quantity of goods or services to be supplied, in that event the person who responds to that invitation is said to have made a definite offer and would become bound by it if it is accepted.

 CROSS OFFERS

Where two parties make offers to each other with identical terms, without knowing each other’s offer. These offers are called ‘cross offers”.

Cross offers do not make a contract.(Tinn Vs. Hoffman)

LAPSE OF AN OFFER/ TERMINATION OF OFFER

 An offer comes to an end in the following circumstances.

(1) Revocation- An offer comes to an end when the offerer revokes his offer before it is accepted.

(2) Rejection - by the offeree

(3) When the stipulated or reasonable time has expired

(4) Where the offerer or offeree dies or becomes insane before the offer is accepted

(5) Where the offeree does not accept the offer in the mode  prescribed

(6) An offer lapses by a counter offer made by offeree.

(7) Where an offer is made with a condition precedent to, the offer lapses if the condition is not fulfilled.

ACCEPTANCE

 “When the person to whom the proposal is made signifies his assent thereto the proposal is said to be accepted. A proposal when accepted becomes a promise.” (Section 2 (b). Thus, acceptance is the act of giving consent to the proposal. The offeree is deemed to have given his acceptance when he gives his assent to the proposal. The acceptance of an offer may be express or implied. It is express when the acceptance has been signified either in writing or by word of mouth or by the performance of some required act of the offeree.

Implied acceptance. Acceptance is implied when it is said to be gathered from the circumstances or the conduct of the parties. Example: (i) A enters into a public bus occupies a seat. It is an implied acceptance on the part of A.

Who can accept?

Where an offer is made to a specified person, only that specified person can accept it and nobody else. But where the offer is made to an uncertain body of persons, anybody can accept the offer.

 RULES REGARDING ACCEPTANCE

(1) Acceptance must be made by the offeree and not by a third party. (Boulton Vs. Jones)

(2) Acceptance must be absolute and unqualified: The offeree must accept unconditionally all the terms of the offer without any change in any of them.

(3) The Acceptance must be in the prescribed mode. Where no mode is prescribed it must be  in some usual or reasonable mode.

(4) It must be made within the prescribed time period or where no time period is mentioned it must be within a reasonable time.

(5) Knowledge of offer- at the time of acceptance the offeree should have the knowledge of the offer. (Lalman Shukla Vs, Gauri Dutt)

(6) Acceptance must be communicated: Unless acceptance is communicated it would not turn the offer into a contract. However, if the offeree posts the acceptance but it does not reach the offerer, it would be deemed to be communicated.

(7) Acceptance should be given  before the offer is revoked: If the offer lapses before acceptance is given the acceptance would not result into a contract.  

(7) Where an offeree accepts an offer knowing that it has been made by the offeror under a mistake, the contract is not binding upon the offeror.

 COMMUNICATION OF OFFER AND ACCEPTANCE

 The problem of communication arises when the parties to the contract do not face to face with each other. It arises in the following cases:

 (A) Contracts through Telephones: (B) Contracts through Post: Offer and acceptance are generally made through letters and telegrams. The rules of communication regarding them are as follows:

 (1) “The communication of a proposal is complete When it comes to the knowledge of the person to whom it is made…” (sec. 4)

(2) “….The communication of an acceptance is complete

(i) as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of acceptor; and

(ii)as against the acceptor, when it comes to the knowledge of the proposer…” (Sec.4)

From the above, it is clear that an offer may be revoked at any time before the acceptance is put in course of transmission to the proposer.

 REVOCATION OF PROPOSAL AND ACCEPTANCE

 “A proposal may be revoked at any time before that communication of its acceptance is complete as against the proposer, but not afterwards.”

 COMMUNICATION OF REVOCATION

“The communication of a revocation is complete… As against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it as against the person to whom it is made, when it comes to his knowledge.”