OFFER & ACCEPTANCE

Offer & Acceptance

OFFER

OFFER = PROPOSAL
 Offer

Person
Offeror
making
‘Proposal’
or ‘Offer’
Promisor
 Offer

Person to
whom offer Offeree
is made
 Offer

Person
Acceptor
accepting
‘Proposal’
or ‘Offer’
Promisee
Definition of Proposal or Offer

Indian Contract Act defines a

proposal / Offer,

“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”.
 Offer

4 Essential Constituents of an Offer

Expression of the willingness.

Definite Offer.
Offer must be made to another person.
Communicated to the Oferee.
other
Offer must be given with intention to gain assent of
party.
How an offer is made?
Offer made by

Expressing words
Express
Express
Spoken Offer
Offer
Written
 Express Offer

When A says to B,

“ Will you purchase my

house at Meerut for
Rs. 50,000?”
 Express Offer

A advertisement in a
news paper offering
Rs. $1000.00 to any
one who returns his
lost dog.
 How an offer is made contd……

• Offer made by

Conduct of Parties Implied

Implied
Circumstances Offer
Offer
 Implied Offer

 When a weighing
machine or Public phone
is installed on a railway
platform or a public
place, there is an
implied offer by the
owner of the
machine/phone. Any one
by putting coin in the
slot of the machine can
avail this offer.
 How an offer is made contd……

• Offer made to

Definite Person Specific

Specific
Offer
Offer

World at large General

General
Offer
Offer
 How an offer is made contd……

Specific Offers
How an offer is made contd……

General Offers
 Case on General offer

 Carlill vs Carbolic Smoke Ball Co.

Carbolic Smoke Ball Co. issued an

advertisement in which the Company offered
to pay 100 ponds to any person who contracts
influenza, after having used their smoke balls
3 times daily for 2 weeks, according to the
printed directions.
 Case on General offer

Mrs. Carlill, on the faith of the ad bought and

used the Balls according to the directions, but
she nevertheless subsequently suffered from
influenza. She sued the company for the
promised reward

Verdict:- The company was held liable and

were ask to pay
promised reward to Mrs. Carlill.
Legal Rules Regarding a Valid Offer

1.
1. An
An offer
offer may
may be
be ‘express’
‘express’ &&
‘Implied’.
‘Implied’.
2.
2.Competent
Competent to to give
give rise
rise to
to legal
legal
consequences.
consequences.
3.
3.Definite
Definite terms.
terms.
4.
4.Invitation
Invitation to
to offer
offer isis not
not an
an offer.
offer.
Legal Rules Regarding a Valid Offer

5.
5. An
An Offer
Offer may
may bebe ‘Specific’
‘Specific’ or
or ‘General’.
‘General’.
6.
6. Offer
Offer must
must be
be Communicated
Communicated to to
offeree.
offeree.
7.
7. Non-
Non- Compliance=
Compliance= Acceptance
Acceptance isis not
not
accepted
accepted
8.
8. Any
Any terms
terms and
and condition.
condition.
9.
9. Cross
Cross offers
offers == No
No Contract.
Contract.
1. An offer may be ‘express’ or ‘implied’

An offer may be made either by words or by

conduct. An offer which is expressed by
words, spoken or written, is called an ‘express
offer’ and the one which is inferred from the
conduct of a person or the circumstances of
the case is called an ‘implied offer’.
 2.Offer Must be Competent to give rise to
legal consequences.
 If the offer does not intend to give rise to
legal consequences, it is not a valid offer in
the eye of law.
(An offer to a friend to dine at the oferor’s place is not a legal
binding hence no valid offer.)

 Even if in business agreement if the parties

agrees that the breach of the agreement
would not confer on either parties a right to
enforce the agreement in a court of law,
there is no contract.
(Rose & Frank Co. vs Crompton & Brothers Ltd.
 3. The terms of offer must be certain and
not loose or vague.

 To be a valid offer all the terms of the offer

must be definite and certain.
 Absence of which creates no binding
obligation
 Thus an agreement to agree in future is not
a contract, because the term of agreement
are uncertain as they are yet to be settled.
 Illustration
Taylor vs Portington, (1855)

A offered to take a house on lease for the

three years at 285 ponds per annum if the
house was “ put into through repair and
drawing rooms handsomely decorated
according to the present style”.

Verdict:- The offer was too vague to result in a

contractual relation.
4. An invitation to offer is not an offer

Invitation to Offer
 Legal Rules Regarding Valid Offer

Offer
 Invitation to offer is not an offer

• An offer must be distinguished from ‘invitation

to receive offer’.

• In an invitation to offer/ treat, the party is

merely inviting offers from others, that is, he is
willing to deal with anybody who, on such
information, is willing to deal with anybody who,
on such information, is willing to negotiation
with him.
 Invitation to offer is not an offer

Such invitations are not consider a lawful

offer and thus not turn into agreement
on its acceptance.
E.g.
1. An auctioneer's announcement for auctioning
of certain good is not an offer it is just
invitation for offers.
2. An advertisement inviting tenders is not
an offer but a mere invitation to offer.
 Invitation to offer is not an offer

• Generally, advertisements are invitations to

treat, so the person advertising is not
compelled to sell to every customer. In
Partridge v Crittenden [1968] 1 WLR 1204, it
was held that where the appellant advertised
to sell wild birds, was not offering to sell
them. Lord Parker CJ commented that it did
not make "business sense" for advertisements
to be offers, as the person making the
advertisement may find himself in a situation
where he would be contractually obliged to
sell more goods than he actually owned.
 Invitation to offer is not an offer

• In certain circumstances however, an

advertisement can be an offer, a well known
example being the case of Carlill
v Carbolic Smoke Ball Company [1893] 1 QB
256, where it was held that the defendants,
who advertised that they would pay anyone who
used their product in the prescribed manner
and caught influenza £100 and said that they
had deposited £1,000 in the bank to show
their good faith, has made an offer to the
whole world and were contractually obliged to
pay £100 to whoever accepted it by
performing the requested acts.
 Invitation to offer is not an offer

Thus, the basic difference between an offer

and an invitation to offer is that in case of an
offer and the offerer shows his willingness to
be bound by his offer if the other party
accepts his offer, but in case of an invitation
to offer he is only informing others the terms
on which he is willing to negotiate.
 Invitation to offer is not an offer

Note:-
A declaration of intention and an
announcement is not a offer:-
(Haris v Nickerson(1873)):-
An auctioneer advertised in newspaper about sale of
old office furniture to be held. A broker came from
distant place but all the furniture was withdrawn. The
broker sued the auctioneer for his loss of time and
expense
Verdict :- A declaration of intention to to do a thing did
not create a binding contract with those who acted
upon it and thus can not claim for anything.
 Invitation to offer is not an offer

Rooke v Dawson (1895)):-

A announcement made by a college for some

scholarship examination is not an offer.
5. An offer may be specific or general

An offer is said to be ‘specific’ when it is

made to a definite person or persons. Such an
offer can be accepted only by the person or
persons to whom it is made.

A ‘General offer’ , on the other hand, is one

which is made to the world at large or public
in general and may be accepted by any person
who fulfills the requisite conditions.
6. An offer must be communicated to
the offeree.
The offer must be communicated to the
person to whom it is made. An offer becomes
effective only when it is communicated to the
offeree.
Untill the offer is made known to the offeree,
there can be no acceptance and no contract.
Doing anything in ignorance of the offer can
never be treated as its acceptance for there
was never a consensus of will.
 Communication of offer

Lalman Shukla vs Gauri Datt :-

“the defendant’s nephew absconded from home. He

sent his servant, the plaintiff to search him.
After the servant left the defendant announced
for Rs.501 as reward to any body giving
information relating to the boy. The servant
unaware about the reward informed the
defendant about the boy. Latter on reading the
notice the servant claimed the reward.
 Communication of offer

Verdict:- His suit was dismissed on the

ground that he could not accept the offer
unless he had knowledge of this.

 Communication of special term if any is also

necessary to make a valid offer.
7. An offer should not contain a term the
non-compliance of which would
amount to acceptance
An offeror cannot say that if
acceptance is not communicated up to
certain date, offer would be presumed
to have been accepted.
It the offeree does not reply, there is
no contract, because no obligation to
reply can be imposed on him, on the
grounds or justice.
8. An offer can be made subject to any
terms and conditions.
 An offeror may attach any terms and
conditions to the offer he makes. He may
even prescribe the mode of acceptance.

 Unless all the terms are agreed and accepted

contract do not come into existence.
9. Two Identical cross- offers do not make a
contract

 When two parties make identical offers to

each other, in ignorance of each other’s offer,
the offers are ‘ Cross-Offers’.

 Cross-Offers do not constitute acceptance of

one’s offer by the other and as such there is
no completed agreement.
 Cross offers

On 15th October, 1989 A wrote to B offering

to sell him 100 tons of iron at Rs. 8,800 per
ton.
On the same day, B wrote to A offering to by
100 tons of iron at Rs. 8,800 per ton. The
letters crossed in the post. There is no
concluded contract between A and B, because
the offers were simultaneous, each being
made in ignorance of the other, and there is
no acceptance of each other’s offer.
 Cross Offers and Counter
Offer
• Cross offers are different from counter offer

• Counter Offer:-
The party being offered the agreement (contract)
must accept the EXACT terms of the offer. If he
introduces new terms (eg an item is being offered
for £50 but the buyer offers £40 instead) then
this is a counter offer.
 Laps and Revocation of Offer

• Laps and Revocation of offer means

taking back or withdrawal of the
offer.
Laps and Revocation of Offer
 Laps and Revocation of Offer

1. By laps of time
2. Lapse by Rejection
3. Lapse due to insanity or death of offeror.
4. Lapse due to acceptance of offer in non prescribed
mode.
5. Lapse by revocation.
6. Non-fulfillment of a condition
7. Lapse due to illegality or destruction of subject
matter.
 1.An offer lapses after reasonable
time

An offer lapses if acceptance is not

communicated within the time prescribed
in the offer, or if no time is prescribed,
within a reasonable time.
In Ramsgate Victoria Hotel Co. vs Montifore
An application for allotment of shares was made
on 8th June. The applicant was informed on the 23rd
November that shares were allotted to him. He
refused to accept them. It was held that his offer
had lapsed by reason of the delay of the company
in notifying their acceptance, and that he was not
bound to accept the shares.
 2. An offer lapses by not being
accepted in the mode prescribed
An offer lapses by not being accepted in the
mode prescribed, or if no mode is prescribed,
in some usual and reasonable manner.

• But if the mode of acceptance is not been

conveyed than the offer do not lapse
automatically.

• If he fails to do so he is deemed to have

accepted the acceptance.
 3. An offer lapses by rejection

An offer lapses if it has been rejected by the

offeree. The rejection may be:-

Express
Express
(words
(words spoken
spoken or
or written)
written)

Implied
Implied
1.
1.Counter
Counter Offer
Offer
2.
2.Conditional
Conditional acceptance
acceptance
 4. An offer lapses by the death or insanity
of the offeror or offeree before acceptance

 If the offeror dies or become insane before

acceptance, the offer lapses provided that the fact
of his death or insanity comes to the knowledge of
the acceptor before acceptance.
 An acceptance in ignorance of the death or insanity
of offeror leads to a valid contract.
 Death or insanity of the offeror would not put an end
to the offer untill it comes to the notice of the
acceptor before acceptance
 An offeree’s death or insanity before accepting the
offer puts an end to the offer and his heirs cannot
accept for him.
 5. An offer lapses by revocation

An offer is revoked when it is retracted

back by the offeror. An offer may be
revoked at any time before acceptance,
by the communication of notice of
revocation by the offeror to the other
party.
 An offer lapses by revocation

• A revocation of an offer must be

communicated or made known to the offeree,
otherwise the revocation does not prevent
acceptance. Revocation of “general offer”
must be made through the same channel by
which the original offer was made.

• Revocation must always be expressed and

communicated by the offeror himself or his
duly authorized agent to the other party.
6. Revocation by non-fulfilment of a
condition precedent to acceptance

An offer stands revoked if the offer fails to

fullfill a condition precedent to acceptance.

A offers to sell his car to B at Rs.75,000, if B

joins Lions club with in a week. The offer can
be revoked by A if B do not join Lions Club
with in a week.
 7. An offer lapses by subsequent
illegality or destruction of subject
matter.

An offer lapses if it becomes illegal after

it is made, and before it is accepted.
Thus, where an offer is made to sell 10
bags of wheat for Rs. 6,500, and
before it is accepted, a law prohibiting
the sale of wheat by private individuals
is enacted, the offer comes to an end.