Lesson 4

OFFER AND ACEPTANCE In our last lectures, which were in introductory in nature, we have discussed:1. What is an Contract under the Indian Contract Act, 1872 2. The essential part of contract i.e. an agreement signifying Offer, Consideration and Acceptance 3. The distinction between agreement and contract 4. Essential element of a valid contract 5. Classification of contracts etc. Now to have more knowledge of the Indian Contract Act, 1872 and the provisions laid down in the said act, we will discuss offer and acceptance. Our discussion shall be based on the following points. 1. What is an offer and how it can be identified amongst different statements? 2. What constitute a valid offer and Valid Acceptance / 3. When and how offer and acceptance can be revoked/ 4. When the communication of offer, acceptance and revocation is complete. To cover discussions of offer and acceptance, we shall discuss the following sections of Indian Contract Act, 1872 Section 2 (a)(b)(c)- This section defines Proposal/Offer and conveys that when an offer is accepted and becomes Proposal. Section 3 Provides that the communication of a proposal/offer, its acceptance or revocation can be made by an act of omission.

Section 4 Provide when the communication of proposal, an acceptance and revocation is complete. Section 5 Provide when a proposal and acceptance can be revoked. Section 6. Provide how a proposal can be revoked, Section 7. Provide that acceptance must be unconditional and should be accepted in the manner prescribed in the offer. Section 8. Provides certain acts which amounts to acceptance of the offer. Section 9 Conveys that the promises may be expressed or implied.

OFFER An offer is statement of terms, which it appears you are willing to stand by. Under the Indian Contract Act, 1872, the offer is made must be lawful and meet and satisfy the conditions as prescribed by the law. The offer/proposal has been defined under the act as:When a person signified to another is willing to do or abstains from doing any thing with a view to obtaining the assent of the other to such act or abstinence, he is said to make proposal. We can discuss the above definition by having following break up:

1. When a person signifies- may be express in words written or spoken (a) Offer must be communicated to the Offeree (b) Communication of complete offer. 2. His willingness to do or abstain something 3. To the other person 4. In order to obtain assent to such an act or abstinence. (a) Offer must be communicated to the Offeree Section 4 of the Act lays down, The communication of offer is complete when it comes to the knowledge of the person to whom it is made. It means, there cannot be acceptance of the proposal, which has not be communicated to the Offerer Example 1 : Rams nephew was missing, Shyam who was Munim of Ram volunteered his services to search the nephew of Ram. In the mean time, Ram Issued hand bills offering reward of Rs. 50000/- to anyone who traced the boy. Shyam traced the nephew of Ram and brought him to Ram. Shyam claimed the reward, which was denied by Ram. The court held Shyam the Munim of Ram was ignorant of the award of Rs.50000/ and as such not entitled. Example 2: C published in newspaper announcing a reward of Rs. One lac, for giving information, which may lead to finding of murderer of his brother. M sister of culprit gave a statement according to her conscience and the culprit was caught. Later on, she claimed the reward. It was held that since the culprit was caught after release of advertisement, she is entitled for the reward. (b) Communication of Complete Offer

It is necessary on the part of the Offerer to communicate all the terms of his offer. In case the Offerer doesnt communicate the disputed terms of offer, these do not form part of the agreement, which is converted into contract. Example 1.B an illiterate passenger purchased a railway ticket, on the front of the ticket was printed, for conditions, see back. The conditions were, that the railway is not responsible for the loss of luggage, injury due to accident and its compensation thereto. B was injured by a railway accident and claimed compensation. It was held that it was clearly written on the face of the ticket for conditions, for conditions see back of the ticket and as such B is not entitled for the compensation, which he has claimed. It was the duty of B to understand the conditions from co-passengers. Example 2. P purchased a ticket from Steamer Company. On the face of the ticket, Mumbai to Goa was written only. On the face of the ticket, it was not written for conditions see back. Due to negligence of the servants of the Steamer Company, the luggage of P was lost. P claimed the amount on the basis that he has not seen the conditions. It was held by the court that P is entitled for the loss and the plea of Steamer Company was disallowed. 2. Offer constitute s willingness to do some act or abstinence. Offer is promise to do or not to do something on which the Offeree gave assents. If there is not willingness there is not willingness 1. The Offer should be made to some other person- Offer cannot be made to himself or herself. On this basis the offer can be categorized as under:-

(1) One particular person (2) A particular group pf person (3) The whole world
(1)

- Specific offer - Specific Offer - General Offer

One particular person The rule was illustrated by the case of Boulton Vs. Jones- J offered to purchase Leather from B for which B gave his acceptance. J sold his business to K. Thereafter K supplied leather to B. B refused to take leather from K. It was held that since the contract was between J and B and as such Ks acceptance does not carry any significance because K is not part of the contract. A particular group of persons The case of Shipton V/s Cardiff Corporation (1917) in which the Cardiff Corporation offered their employees whoever will join the forces will be paid difference of his pay as the member of the forces. Shipton enlisted himself in the armed forces. It was held that the corporation was bound to make payment of the difference of pay between Cardiff Corporation and Armed Forces. The case was filed because Shipton was getting higher amount of salary at Cardiff Corporation.
(2)

Offer to whole world or in general- When such an offer is made, it can be accepted by anyone who is aware of its existence. The case of Carlill V/sThe Carbolic Smoke Ball Co. is important. The Carbolic Smoke Ball Co. advertised that in case any person contracted influenza after taking Smoke ball (the medicine), the company shall pay #100 pounds. Mrs. Carlill purchased smoke ball and afterwards contracted influenza. It was held that such advertisement constituted offer which was accepted by Mrs. Carlill and hence she is entitled for payment of #100..
(3)

The offer must be made with a view of obtaining the assent of the other- It means that the offer is not just like
(4)

an expression of intention or enquiry. Thus a casual inquiry Do you intend to sell you car is not proposal. As explained earlier an offer may be express or implied. An Offer may be conditional- The offer may attach certain conditions which are to be fulfilled by the Offeree. Under Section 7(2) , the proposal prescribed the manner in which it is ti be accepted.
(5)

Example- A gave an offer to sell his car for Rs.50000/- to B and asked him to advise acceptance by telegram. The acceptance by letter means the offerers condition is not met hence he can refuse the proposal. The Offer must be capable of creating Legal Relationship- If the parties dont intend to create legal relationship, the offer cannot be treated as offer under the Indian Contract Act, 1872. Offers made under social obligations or on moral grounds are not treated as offer under the Act whereas offer made for business transaction are made for creating legal relationship. (7) The terms of offer must be certain- A vague offer does not convey what it means e.g.
(6)

o An offer to sell house without mentioning its price o A horse, if proved lucky o An offer for sale of oil, without mentioning, what kind of oil. o Leasing the premises on rent, mentioning reasonable rent. Limitation of the rule- should not put baseless conditions. Offer should be distinguished from:Cross Offer Cross offer can be treated as cross offer only.

Counter Offer- Acceptance to an offer with a variation is no acceptance. It can be treated as offer only if Offerer accept the variance. Termination of an Offer Sec. 6 of the Indian Contract Act, 1872 defines- A proposal is revoked (1) By the communication of the notice of revocation by the proper to the party. (2) By the lapse of the time prescribed in such proposal for its acceptance or if no time is prescribed, the lapse of reasonable time without communication of the acceptance. (3) By the failure of the acceptor to fulfill a condition precedent to acceptance or (4) By the death or insanity of the proposer, if the fact of death or insanity comes to the knowledge of acceptor before acceptance. Other instances Rejection by the offeree Counter offer by offeree Failure to accept according to mode prescribed Subsequent illegality or destruction of subject matter.