Offer
2.1 Rules regarding Offer
Meaning of Offer: An offer is a proposal made by any person to another (a party to another) with a view to obtain assent to do or not to do certain action. It is an expression of willingness. Offer is the first step for an agreement. An offer can create a legal obligation if it is accepted by the offeree. Sec. 2 (a) of Indian Contract Act 1872 defines offer: "When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtain the assent of that other to such act or abstinence, he is said to make an offer / a proposal".
ESSENTIAL ELEMENTS FOR A VALID OFFER
The very essential elements for a valid offer are:
(a) Expression of willingness to do or to abstain from doing something.
(b) Expression of willingness by one person to another.
(c) Expression of willingness must be with a view to get assent of another person.
(d) A mere intention is not an offer. (Intention, desire inquiry, quotation cannot be treated as a valid offer.)
(e) Invitation to make an offer is no offer: Any notice, circulation or invitations are no offer. Tender, Price list, Railway time table, Prospectus, Inquiry and Quotations, check-list of publishers or mail-order houses are not offer.
LEGAL RULES RELATING TO OFFER
A valid offer must obey the following rules:
1. An Offer may be Expressed or Implied from the Circumstances:
An offer may be made either by words (spoken or written) or by conduct of the party. If offer is made by words or in written form it is express offer and if it is inferred from the conduct of a person or the circumstances of the case it is implied offer. Example is:
(I) A says to B that he wants to sale his property to B.(Expresses)
(II) M announces reward for lost goods through written Ads. .(Expresses)
(III) Transport co. runs buses in different routes to carry passengers at the scheduled fares.(Implied)
2.An Offer may be Made to a Definite Person, To Some Definite Class of Persons or to The World At Large.
Another rule relating to offer envisage that an offer may be made to a person , to a person of definite class, section, group, profession etc. and / or to the world at large in which whosoever may be included.
(I) Sudesh's offer to Hari (definite person)
(II) Ram's offer to a building contractor (definite class of person).
(III) Transport co. offers to passengers (world at large).
3. The Term of Offer Must be Certain and Not Loose and Vague
The term, meaning and subject matter of an offer must be certain and give certain definite meaning. It must not be vague and ambiguous. If the meaning of the offer is not clear and definite, no contract will be formed.
Case: I. GUTHING vs. LYNN (1831)
In this case, Lynn purchased a horse from Guthing and promised to buy another horse if first purchased horse is proved lucky. However, latterly Lynn did not purchase. When Guthing asked for the same, Lynn refused to purchase the second horse. There is no legal binding upon Lynn, because offer made by him was vague. "LUCKY" cannot be certain and meaningful in giving a definite sense.
II. A promises B to pay "something" for his nice performance in a music program.. This "something" is not definite, it is vague.
4. An Offer Must Contemplate to Give Rise to Legal Consequences and be Capable of Creating Legal Relation
Offer must be such which commands to give or to create legal effects and establish legal relations between the parties. A valid offer must intend to create legal relations.
Case: BALFOUR vs. BALFOUR (1919)
Mr. Balfour, serving the government of Ceylon, went to England with his wife on leave. After the expiry of leave, he had to back to Ceylon but his wife was sick and could not back. Under that circumstance, he promised orally to pay an allowance of £30 per month for her maintenance until she rejoined him. But Mr. Balfour failed to make the payment.
Mrs. Balfour sued against her husband for the payment (recovery of the amount).
Court decided that it was not a binding agreement but it was only family arrangement and never intended to create legal relation for the performance.
5. An Offer may be Specific or General
Specific offer means offer made to a definite person or individual while general offer means offer made to the world at large. Specific offer is to be accepted by the person to whom offer is made. But in the case of general offer, any person can accept the offer. In this case, offer need not to be made to an ascertained person.
CASE: CARLILL vs. CARBOLIC SMOKE BALL CO. (1893)
Carbolic smoke Ball co. – the manufacturer of smoke ball-advertised in a newspaper that whosoever would take smoke balls, according to the printed instruction, would not contact influenza. In the same advertising co. also offered a reward of £ 100 to anyone, stating "after taking smoke ball as per instruction, if persons are found contacted by influenza will be compensated by £100".
Mrs. Carlill used the smoke ball but contacted influenza.
It was held by the court that the offer was general. Carlill accepted it and suffered. Carbolic Co. was held responsible for the compensation.
6. An Offer must be communicated to the Offeree
The offer must be communicated means it must come in the knowledge of the offeree. The person, to whom offer is made, must know that the offer is made. Having no knowledge, if person acts or performs, may not create obligation and legal relation. A valid offer must be communicated to the person concern.
CASE: LALMAN SHUKLA vs. GAURI DUTTA (1913)
The nephew of Gauri Dutta was missing. He sent his servant Lalman to find the child out. In the mean time Gauri Dutta announced a reward or Rs. 501 to anyone who would find out the boy.
Lalman found out the missing boy. The fact about the offer of reward was not known to Lalman. Later on, he came to know. He sued against Gauri Dutta for the reward.
LORD LINDLAY, in this case, puts that, "The state of mind not communicated cannot be regarded as dealings between man and man". It was held in this case that Lalman could not claim the reward as he could not know of the offer.
Some facts about communication: – (i) communication must be clear and definite and (ii) It must be visible.
7. An Offer may be Conditional
An offer may contain certain conditions. The legal requirement is that the terms and conditions of an offer must be clear and communicate its definite meaning. If conditions of an offer are not clear and it bears two separate meaning and intention, then, though it is accepted, cannot be enforced by the offerer. But, if conditions are clear and bear a single meaning, the promisee cannot claim for vagueness of conditions.
CASE: THOMSON vs. L.M. & S RAILWAYS
Thomson purchased a railway ticket and could not read in ticket "FOR CONDITIONS – SEE BACK." 'No responsibility for personal injuries and accident' was written there. Thomson could not recover any damage.
However, conditions must be written in such a manner that attention is drawn to them.
8. Reasonable Time For The Openness of An Offer
The question arises, how long an offer be remaining open. An offer remains open or in effective till:
(a) The time prescribed by the offerer to the offeree for the acceptance.
(b) A reasonable time if time is not specified by the offerer to the offeree for the acceptance. The reasonability of time is subject to be justified by the court if dispute arises.
CASE: RAMSGATE VICTORIA HOTEL CO. vs. MONTEFIORE
Application for the allotment of share was made by Montefiore on 8th June. The applicant was informed by Ramsgate Victoria Hotel Co. on 23rd Nov. that shares were allotted to him. Montefiore refused to accept them. It was held by the court that Montefiore's offer had lapsed by reason of the delay of the RVH Co. in notifying acceptance. Thus, Montefiore was not bound to accept the shares.
REVOCATION OF AN OFFER / LAPSE OF AN OFFER
Revocation means cancellation or withdrawal or taking back or recalling. Revocation of an offer is taking back of the offer by the offerer himself or herself. Thus a person making an offer can revoke it. An offerer can recall the offer before it is accepted.
Similarly, lapse of an offer means to a condition under which the offer automatically goes terminated. It generally does not depend upon the willingness or desire of the offerer. In case of lapse of an offer communication may not be necessary.
According to sec. 5 of Indian Contract Act 1872, an offer / proposal may be revoked any time before its acceptance is complete as against the proposer but not afterwards. Revocation of a proposal after its acceptance is ineffective.
The circumstances in which an offer may be revoked are:
1. By the Notice of Withdrawal or Revocation
Sec. 6 (1) of the Indian Contract Act describes that if the proposer gives notice of revocation to the proposee, the proposal may be revoked. Here, the notice must be given for expressly withdrawal of the proposal sent to the proposee. But notice of revocation may not take effect until it comes within the knowledge of the proposee. This provision is there at Sec 8.1 of the Nepalese Contract Act 2056
2. By The Expiry of (a) Prescribed (b) Reasonable Time
According to Sec 9 (a) of the Nepalese Contract Act 2056 a proposal prescribes a time within which the proposal must be accepted, and the proposal lapses as soon as the time expires.
Similarly if time for the acceptance is not prescribed in the proposal, after a reasonable time proposal lapses (9.b Nepalese contract Act) due to non acceptance and becomes ineffective.
Similar legal provision is made in the sec. 6, sub sec. 2 of Indian Contract Act 1872.
CASE: RAMSGATE VICTORIA HOTEL CO. vs. MONTEFIORE
3. By Modification or Alteration in Or Failure to Fulfill the Given Condition
Sec. 6 (3) of the Indian Contract Act codifies that if the conditions given in proposal are modified or altered or changed or not fulfilled by the offeree, the offer is treated as revoked. It must be accepted by the offeree in its conditions stated by the offerer.
CASE: (1) A says to B – I will sell my house to you for Rs. 8, 00,000 if you are married. The offer cannot be accepted until and unless B is married.
(2) M offers to sell his horse to H for sum of Rs. 15,000 provided H sends in advance Rs.1000 with acceptance. H accepts the offer but does not send the advance. Offer is taken as revoked.
4. By Death or Insanity
According to Sec 9 (c) of the Nepalese Contract Act 2056 an offer lapses by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of offeree before acceptance. But, in case proposor dies after the acceptance of the offer, the legal representatives of the proposer shall be bound and the offer will not be taken to be revoked. (Sec. 6 (4) Indian Contract Act 1872)
5. By Rejection or Counter Offer
An offer lapses if it has been rejected by the offeree. The rejection may be express, i.e. words spoken or written or implied. Implied rejection includes:
(a) If the offeree makes a counter offer
(b) If the offree gives a conditional acceptance.
In both cases, the offer is rejected by the offree and thus offerer is not bound for his words and promise.
CASE: NIHALCHAN vs. AMARNATH (1926)
Amarnath offered Nihalchand to sell 200 mons of wheat @ Rs. 15 per mon. Observing bearish tendency of price in wheat market, Nihalchand asked for Rs. 14. Here, the offer was lapsed. Latterly, the wheat price rises in the market and Nihalchand approached Amarnath and signified the offer to purchase 200 mons of wheat. Amarnath refused to accept it.
Hence, a proposal once refused is dead and cannot be revived by its subsequent acceptance.
2.2 Rules regarding Acceptance
Meaning of Acceptance
Acceptance is one of the important essentials of a valid contract. Creation of legal rights and liability between the parties is possible only through the combination of offer and acceptance.
Acceptance means giving assent upon the proposal, giving words of one's own upon other's willingness or manifesting by the offeree of his consent to the terms of the offer.
Nepalese Contract Act 2056 has defined the term acceptance in Section 2(C). Accordingly, "Acceptance means the consent of the offer over the subject matter in the same sense which is taken by the offerer."
Indian Contract Act 1872 sec. 2 (b) defines acceptance as "when the person to whom proposal is made signifies his assent thereto, the proposal is said to be accepted". A proposal when accepted becomes a promise, and this is the second stage for a valid contract.
Now let us discuss:
(a) Who can accept an offer?
(b) How an offer can be accepted?
Here, only the person to whom offer is made, can give his consent and accept the offer. However, if offer is made to a group of persons, offer can be accepted by all or some of them or anyone of them representing all.
CASE: BOULTON vs. JONES
Mr. A sold his business to B (Boulton) – the manager of A. C (Jones) - An old and permanent customer of Mr. A's business firm who had running account with A, sent an order for the supply of goods to A by name. B received the order and executed the same without giving notice of change of ownership. Latterly, C refused to make the payment of the price. It was held in this case that there was no contract between B and Jones because offer was made by C to A not to B and B was not the right person to accept the offer.
MODES AND RULES FOR THE VALID ACCEPTANCE
Now, in second stage, let us discuss how an offer can be accepted. There are certain modes and rules for the valid acceptance:
1. It Must be Absolute and Unqualified Acceptance of All the Terms of The Offer
For a valid acceptance, the offer must be accepted by the offeree absolutely. Qualified acceptance makes the offer dead. It must be unqualified, unconditional and without any modification, otherwise, it will be case of counter offer. (Sec. 7 subsection 1 of Indian Contract Act 1872)
2. The Acceptance Must be Expressed in Some Usual or Reasonable Manner
If offeror prescribes the mode of acceptance, then offeree should accept the offer accordingly. If mode of acceptance is not prescribed by the offeror, in such case, the acceptance must be given in some usual and reasonable manner. (As codified in sec. 7 (2), Indian Contract Act1872)
(a) Acceptance as prescribed and expressed in offer.
(b) Usual manner / reasonable manner that depends upon the nature of offer.
(i) Acceptance is to be communicated by post
(ii) Acceptance is to be sent through telegraph
(iii) Acceptance is to be made with payment of reasonable amount as advance.
(c) Acceptance by performance
Case: Carlill vs. Carbolic smoke Ball Co.
It should be clear that any acceptance must be in the mode required by the offer whether that mode is expressed or left to be understood in usual or reasonable manner.
3. The Acceptance must be made Before the Lapse of the Offer
If the time for the acceptance is stipulated by offeror, acceptance must be given within that limit of time. If time is not prescribed, then, acceptance must be given before its lapse, i.e. within a reasonable time. After the expiry of reasonable time, offer will be treated as revoked. A proposal once revoked is dead and cannot be revived by its subsequent acceptance.
4. Mental Acceptance / Tacit Acceptance / non-communicated Acceptance or Assent Does Not Result
Acceptance must be expressed either by words of mouth or in written form. Sometimes acceptance may be expressed through the action or conduct of the offeree. It means, acceptance or consent or assent must be expressed. But mental acceptance, acceptance by silence, tacit acceptance (Unspoken acceptance) cannot be evidenced and considered as valid acceptance. If acceptance is expressed in any form or mode, only then, there will be consensus ad idem, in other words, identify of minds.
However, ANSON considers that tacit acceptance may be considered as valid acceptance. It depends upon the nature of offer, customs and usage and nature of dealings and transactions. Example: "A sales a Radio to B", in this case, even no single word is needed either for offer and acceptance.
5. Acceptance by Performance of the Conditions of Proposal
It is not always necessary that offer must be accepted by the offeree expressing his willingness in words of mouth or in written form. Acceptance can be given through action, conduct and fulfillment of the conditions.
Sec. 8 of Indian Contract Act 1872, clearly indicates that acceptance is said to be given by the offeree by performing the terms and conditions of the offer. It depends upon the nature of an offer.
Example: i. Offer to give reward to the finder of lost goods
ii. Compensation or reward to those who performs the terms and conditions of offer.
6. COMMUNICATION OF AN ACCEPTANCE
Communication of acceptance is a basic rule of acceptance. If the offeree accepts the offer made to him, he must communicate the same to the offerer. The acceptance will be treated as completed when the acceptance becomes out of the power of offeree to keep hold of it or when it comes to the knowledge of offeror. (Sec. 4 of Indian Contract Act 1872)
Modes of Communication of Acceptance
Modes of acceptance may be of three types:
(a) Oral: Simply, acceptance can be given or communicated by words of mouth.
(b) Written Form: If required legally or as per offer, acceptance is to be given in written form.
(c) Action or Conduct: If the terms and conditions and nature of the offer requires acceptance to be given by performance, it is suggested that there is no need to communicate acceptance. Only by performing the subject-matter or object, one can bind other.
Case: Carlill vs. Carbolic Smoke Ball Co.
Rules for communication of acceptance:
There are several rules dealing with the communication of acceptance:
· The acceptance must be communicated prior to revocation or lapse, an offer may be withdrawn.
· An exception exists in the case of unilateral contracts, in which the offeror makes an offer to the world which can be accepted by some act.(A classic instance of this is the case of Carlill v. Carbolic Smoke Ball Co. [1892] 2 Q.B. 484 in which there was no need to communicate acceptance. Typical cases of unilateral offers are advertisements of rewards e.g., for the return of a lost dog).
- An offer can only be accepted by the offeree, that is, the person to whom the offer is made.
- An offeree is not usually bound if another person accepts the offer on his behalf without his authorization, the exceptions to which are found in the law of agency, where an agent may have apparent or ostensible authority, or the usual authority of an agent in the particular market, even if the principal did not realize what the extent of this authority was, and someone on whose behalf an offer has been purportedly accepted it may also ratify the contract within a reasonable time, binding both parties.
- It may be implied from the construction of the contract that the offeror has dispensed with the requirement of communication of acceptance (called waiver of communication - which is generally implied in unilateral contracts.
- If the offer specifies a method of acceptance (such as by post or fax), acceptance must be by a method that is no less effective from the offeror's point of view than the method specified. The exact method prescribed may have to be used in some cases but probably only where the offeror has used very explicit words such as "by registered post, and by that method only".
- However, acceptance may be inferred from conduct.
Revocation of Acceptance
According to English Contract Act- if an offer is accepted it becomes contract and the acceptor, in no way, can revoke the acceptance. No matter, whether the letter of acceptance is received by the offeror or not.
But, Indian Contract Act 1872 has made provision for the revocation of acceptance. According to sec. 5, an acceptance can be revoked anytime before the acceptance comes to the knowledge of the promisor but not afterwards.
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