Offer(i.e. Proposal) [section 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 person either to such act or abstinence, he is said to make a proposal.
To form an agreement, there must be at least two elements – one offer and the other acceptance. Thus offer is the foundation of any agreement.
“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 who makes an offer is called “Offeror” or “ Promisor” and the person to whom the offer is made is called the Offeree” or “Promisee”.
Essentials elements of an offer:-
(1) There must be two parties.
(2) The offer must be communicated to the offeree.
(3) The offer must show the willingness of offeror. Mere telling the plan is not offer.
(4) The offer must be made with a view to obtaining the assent of the offeree.
(5) A statement made jokingly does not amount to an offer.
(6) An offer may involve a positive act or abstinence by the offeree.
(7) Mere expression of willingness does not constitute an offer.
Legal Rules as to valid offer:-
- Offer must be communicated to the offeree: The offer is completed only when it has been communicated to the offeree. Until the offer is communicated, it cannot be accepted. Thus, an offer accepted without its knowledge, does not confer any legal rights on the acceptor.
Servant was not entitled to the reward because he did not know about the offer when the discovered the missing boy.
[Lalman Shukla v. Gauri Datt (1913) All LJ 489]
- The offer must be certain definite and not vague unambiguous and certain.
- The offer must be capable of creating legal relation. A social invitation is not create legal relation.
- Offer may be express and implied
The offer may be express or implied; An offer may be express as well as implied. An offer which is expressed by words, written or spoken, is called an express offer. The offer which is expressed by conduct, is called an implied offer [Section 9].
- Communication of complete offer
- Counter offer – A counter offer amounts to rejection of the original offer
- Cross offer do not conclude a contract
- An offer must not thrust the burden of acceptance on the offeree.
The acceptance cannot be presumed from silence.
Acceptance is valid only if it is communicated to the offeror.
- Offer must be distinguished from invitation to offer.
- Offeror should have an intention to obtain the consent of the offeree.
- An answer to a question is not a offer
Invitation to offer
Show his readiness to enter into a contract, it is called as an offer
Purpose of entering contract
Results in a contract
Person invites offer to make an offer to him.
Purpose of enter offer
Results in offer.
KINDS OF OFFER
Express offer – When the offeror expressly communication the offer the offer is said to be an express offer the express communication of the offer may be made by
Implied offer – when the offer is not communicate expressly. An offer may be implied from:-
The conduct of the parties or
The circumstances of the case
Specific:- It means an offer made in
a particular person or
a group of person: It can be accepted only by that person to whom it is made communication of acceptance is necessary in case of specific offer.
General offer: – It means on offer which is made to the public in general.
General offer can be accepted by anyone.
If offeree fulfill the term and condition which is given in offer then offer is accepted.
Communication of acceptance is not necessary is case of general offer
Case- Carlill v Carbilic Smoke Ball Co. 1893
Cross offer:- When two parties exchange identical offers in ignorance at the time of each other’s offer the offer’s are called cross offer.
Two cross offer does not conclude a contract. Two offer are said to be cross offer if
They are made by the same parties to one another
Each offer made in ignorance of the offer made by the
The terms and conditions contained in both the offers’ are same.
When does a contract come into existence: – A contract comes into existence when any of the parties, accept the cross offer made by the other party.
Counter offer :- when the offeree give qualified acceptance of the offer subject to modified and variations in the terms of original offer. Counter offer amounts to rejection of the original offer.
Legal effect of counter offer:-
Rejection of original offer
The original offer is lapsed
A counter offer result is a new offer.
In other words an offer made by the offeree in return of the original offer is called as a counter offer.
Standing, open and continuous offer:- An offer is allowed to remain open for acceptance over a period of time is known as standing, open or continually offer. Tender for supply of goods is a kind of standing offer.
LAPSE OF OFFER
An offer should be accepted before it lapses (i.e. comes to an end). An offer may come to an end in any of the following ways stated in Section 6 of the Indian Contract Act:
By communication of notice of revocation: An offer may come to an end by communication of notice of revocation by the offeror. It may be noted that an offer can be revoked only before its acceptance is complete for the offeror. In other words, an offeror can revoke his offer at any time before he becomes before bound by it. Thus, the communication of revocation of offer should reach the offeree before the acceptance is communicated.
By lapse of time; Where time is fixed for the acceptance of the offer, and it is not acceptance within the fixed time, the offer comes to an end automatically on the expiry of fixed time. Where no time for acceptance is prescribed, the offer has to be accepted within reasonable time. The offer lapses if it is not accepted within that time. The term ‘reasonable time’ will depend upon the facts and circumstances of each case.
By failure to accept condition precedent: Where, the offer requires that some condition must, be fulfilled before the acceptance of the offer, the offer lapses, if it is accepted without fulfilling the condition.
By the death or insanity of the offeror: Where, the offeror dies or becomes, insane, the offer comes to an end if the fact of his death or insanity comes to the knowledge of the acceptor before he makes his acceptance. But if the offer is accepted in ignorance of the fact of death or insanity of the offeror, the acceptance is valied. This will result in a valid contract, and legal representatives of the deceased offeror shall be bound by the contract. On the death of offeree before acceptance, the offer also comes to an end by operation of law.
By counter – offer by the offeree: Where, a counter – offer is made by the offeree, and then the original offer automatically comes to an end, as the counter – offer amounts to rejections of the original offer.
By not accepting the offer, according to the prescribed or usual mode: Where some manner of acceptance is prescribed in the offer, the offeror can revoke the offer if it is not accepted according to the prescribed manner.
By rejection of offer by the offeree: Where, the offeree rejects the offer, the offer comes to an end. Once the offeree rejects the offer, he cannot revive the offer by subsequently attempting to accept it. The rejection of offer may be express or implied.
By change in law: Sometimes, there is a change in law which makes the offer illegal or incapable of performance. In such cases also, the offer comes to an end.
Acceptance must be absolute and unqualified
Acceptance must be communicated: Mere mental acceptance is no acceptance, But there is no requirement of communication of acceptance of general offer.
Manner of acceptance-General rule say that it must be as per the manner prescribed by offeror. If no mode is prescribed in which it can be accepted, then it must be in some usual and reasonable manner.
If there is deviation in communication of an acceptance of offer, offeror may reject such acceptance by sending notice within reasonable time. If the offeror doesn’t send notice or rejection, he accepted acceptance of offer.
Acceptance of offer must be made by offeror.
Acceptance must be communicated to offeror
Time limit for acceptance
If the offer prescribes the time limit, it must be accepted within specified time.
If the offer does not prescribe the time limit, it must be accepted within reasonable time.
Acceptance of offer may be expressly (by words spoken or written); or impliedly (by acceptance of consideration); or by performance of conditions (e.g.in case of a general offer)
Mere silence is not acceptance of the offer
However, following are the two exceptions to the above rule. It means silence amounts as acceptance of offer.
Where offeree agrees that non – refusal by him within specified time shall amount to acceptance of offer.
When there is custom or usage of trade which specified that silence shall amount to acceptance.
Acceptance subject to the contract is no acceptance-If the acceptance has been given ‘subject to the contract” or subject to approval by certain persons, it has not effect at all. Such an acceptance will not create binding contract until a formal contract is prepared and signed by all the parties.
General Rules as to Communication of Acceptance
- In case of acceptance by post-Where the acceptance is given by post, the communication of acceptance is complete as against the proposer when the letter of acceptance is posted. Thus, mere posting of letter of acceptance is sufficient to conclude a contract. However, the letter must be properly addressed and stamped.
- Delayed or no delivery of letter-Where the letter of acceptance is posted by the acceptor but it never reaches the offeror, or it is delayed in transit, it will not affect the validity of acceptance. The offeror is bound by the acceptance.
- Acceptance by telephones telex or tax-If the communication of an acceptance is made by telephone, tele-printer, telex, fax machines, etc, it completes when the acceptance is received by the offeror. The contract is concluded as soon as the offeror receives not hears the acceptance.
- The place of Contract-In case of acceptance by the post, the place where the letter is posted is the place of contract. Where the acceptance is given by instantaneous means of communication (telephone, fax, tele-printer, telex etc.), the contract is made at the place where the acceptance is received,
- The time of Contract-In case of acceptance by post, the time of posting the letter of acceptance to the time of contract. But in case of acceptance by instantaneous means of communication, the time of contract is the time when the offeror gets the communication, the time of contract is the time when offeror gets the communication of acceptance.
- Communication of acceptance in case of an agent-Where the offer has been made through an agent, the communication of acceptance is completed when the acceptance is given either to the agent or to the principal. In such a case, if the agent fails to convey the acceptance received from offeree, still the principal is bound by the acceptance.
- Acceptance on loudspeakers- Acceptance given on loudspeaker is not a valid a acceptance.
Table no. 1-
When Communication is complete [Sec.4]
Communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
As against the offerer/ Proposer: When it is put in a course of transmission to him so as to be out of the power of the Acceptor.
As against the Offeree/Acceptor: When it comes to the knowledge of the Proposer. (See separate question above)
When Revocation can be made [Sec.5]
Offer/proposal may be revoked at any time before the communication of its acceptance is complete, as against the proposer, but not afterwards.
Acceptance may be revoked at any time before the communication of acceptor, but not afterwards.
When communication of revocation is complete [Sec.4]
As against the offeror: 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 Offeree: When it comes to his knowledge.
Revocation of proposal and acceptance (Sn.6)-The communication of revocation is complete :
as against the person who makes the revocation, when it is put into communication 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.
Revocation of a proposal:
By issuing notice of revocation by the proposer to the other party.
By efflux of time prescribed.
If no time is prescribed, by the lapse of a reasonable time.
By the failure of the acceptor to fulfil some condition
precedent (prior condition).
By the death or insanity of the proposer.
Leading case : Dickinson V. Dodds.
On 10th June, Dodds made an offer to sell his dwelling house for £ 800 to Dickinson. “The offer was left open upto 9 a.m. 12th June”. But, on llth itself he contracted to sell the house to ‘A’. Dickinson handed over his letter of acceptance before 9 a.m. on 12th. Dodd said “you are too late. I have sold my property”.
Held, there was no contract.
[Comment: Anson has doubted this decision.]
This is no longer good law in India. In India, a proposal is revoked by notice of revocation by the proposer to the other party, or on the efflux of time if time is prescribed, or by lapse of a reasonable time if no time is fixed.