Offer and Acceptance

There must be two parties to an agreement, i.e., one party making the offer and the other party accepting it. The terms of the offer must be definite and the acceptance of the offer must be absolute and unconditional. The acceptance must also be according to the mode prescribed and must be communicated to the offeror.

A person is said to have made a proposal, when he 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 {Section 2(a)}

A person making the offer is called “Offeror, Proposer or Promiser” and the person to whom the offer is made is called as the “Offeree or Proposee and when the offer is accepted by the offeree then he is called Acceptor or Promisee.

Kinds of offer:

Expressed offer: when the offer is made by express words, spoken or written. E.g., when A says: will you buy my car for Rs.15000/-? Or advertises the same in the News Paper, This is an express offer.

Implied offer: an offer may be implied by the conducts of the parties or the circumstance of the case. E.g., - Getting into a Public bus.

- Taking a cup of tea in a restaurant - Weighing machine at the Railway Station.

Specific offer: when the offer is made to a specific person then such offer is called specific offer. The acceptance to such offer can be given by the person to whom the offer is made and not by any one else.

General offer: when the offer is made to the world at large. E.g., Advertisements

A company advertises in several Newspapers that a reward of $100 would be given to any person who contracted with the influenza after using the smoke balls of the company in accordance with the printed instructions. One Mrs. Carlill used the smoke ball as per the instructions given by the company but contracted influenza. Held, she could recover the amount as by using the smoke balls she accepted the offer. (Carlill v/s Carbolic Smoke Ball Co.,)

Essential Requirements of a Valid Offer1. Must be made with a view to obtain acceptance.2. Must be made with the intention of creating legal relations.3. Terms of offer must be definite, unambigous and certain or capable of being made certain.4. It must be distinguished from mere declaration of intention or an invitation to offer.5. It must be communicated to the offeree.6. The offer must not contain a term the non-compliance of which may be assumed to amount to acceptance.7. A tender is an offer as it is in response to an invitation to offer.8. The Special terms, forming part of the offer, must be duly brought to the notice of the offeree at the time the offer is made.9. Two identical cross-offers do not make a contract.

Legal rules to offer

The offer must be given with an intention to create legal relationship: a proposal will not become a promise even after it has been accepted unless it was made with an intention to created legal relationship. A social invitation even if it is accepted, does not create a legal relationship because it is not intended so.

The terms of the offer must be definite: the terms of the offer must be definite and certain and must not unambiguous or vague. The offer must contain certain terms on which the proposer is willing to act, even though the proposer is free to lay down any terms and conditions in his offer, but they should be certain and legal. Otherwise the acceptance cannot create any legal relationship.

Case law: A offered to take a house on lease for three years at $ 285 per annum if the house was “put into through repair and drawing room handsomely decorated according to the present style.” Held, the offer was too vague to result in a contract relationship. (Taylor v/s Portington)

There is a clear difference between offer, invitation to offer or an announcement: An announcement: a declaration by a person that he intends to do something gives no right of action to another. Such a declaration only means that an offer will be made or invited in the future and not that an offer is made now. E.g., Auction sale, will, etc.

CL: An auctioneer advertised in a newspaper that a sale of office furniture would be held. A broker comes from a distinct place to attend that auction, but all the furniture was withdrawn from the auction. The broker thereupon sued the auctioneer for his loss of time and expenses. Held, a declaration of intention to do a thing did not create a binding contract with those who acted upon it, so that the broker could not recover. (Harris vs. Nickerson)

An invitation to make offer: display of good by the shopkeeper with a price marked on it does not make an offer, but merely gives an invitation to the public to make an offer to buy the goods at the price marked on it. E.g., quotations, catalogues, advertisements, prospectus issued by the company, etc.

Case law: good are sold in shop under the self-service system. The Customers select the goods in the shop and take them to the cashier for payment of the price. The contract, in this case, is made, not when the customer selects the goods, but when the cahier accepts the offer to buyer and accepts the price. (Pharmaceutical Society of Great Britain v/s Boot Cash Chemist)

Offer must be communicated: an offer to be complete must be communicated to the person to whom the offer is made. Mere by acting to the terms of the offer without knowledge, the offer cannot be treated as accepted. An acceptance of offer in ignorance of offer is no acceptance and does can not confer any right on the acceptor.

Case law: S sent his servant, L to trace his missing nephew. He than announced that anybody who traced his nephew would be entitled to a certain reward. L traced the boy in ignorance of this announcement. Subsequently when he come to know of the reward, he claimed it. Held, he was not entitled to reward. (Lalman v/s Gauri Dutt)

A statement of price is not an offer: a mere statement of price is not construed as an offer to sell.

Case law: three telegrams were exchanged between Harvey and facey.1. “Will you sell your bumper hall pen? Telegraph lowest cash price – answer paid”2. “Lowest price for bumper hall pen $900” (Facey to Harvey)3. “We agree to buy bumper hall pen for the sum of $900 asked by you” (Harvey to Facey)

Held, there was no concluded contract between Harvey and facey. (Harvey v/s Facey)

Offer must not contain a term the non-compliance of which may be assumed to amount to acceptance: the person making the offer cannot say that if acceptance is not communicated by a certain time, the offer would be considered as accepted

Legal rules as to acceptance

Acceptance is defined under Section 2(b) as “When a 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”.

Acceptance may be implied or expressed. In express acceptance, while that given by conduct is termed as implied acceptance.

A lady invited her niece to stay with her in the same house and promised to settle on her immovable property. The niece stayed with her residence till the time of her death. Niece was held to be entitled to property because she has accepted the offer of the aunt by conduct i.e., by going to her house and staying with her as desired. (V. Rao v/s A. Rao)

Acceptance How Made?As mentioned above, the offeree is deemed to have given his acceptance when he gives his assent to the proposal. The assent may be express or implied. It is express when the acceptance has been signified either in writing, or by word of mouth, or by performance of some required act. The first two kinds of acceptance are self-explanatory. Acceptance by performing the required act is exemplified in the case of Carlill v. Carbolic Smoke Ball Co.*Examples(1) A trader receives an order from a customer and executes the order by sending the goods. The customer’s order for goods constitutes the offer which was accepted by the trader by sending the goods. It is a case of acceptance by conduct. Here the trader is accepting the offer by the performance of the act.(2) A loses his dog and announces a reward of Rs. 50 to anyone who brings his dog to him. B need not convey his acceptance of the general offer. If he finds the dog and gives it to A, he is entitled to the reward as he accepted the offer by doing the required act.

Acceptance is implied when it is to be gathered from the surrounding circumstances or the conduct of the parties.Examples(1) A enters into a bus for going to his destination and takes a seat. From the very nature of the circumstance, the law will imply acceptance on the part of A.(2) A’s scooter goes out of order and he was stranded on a lonely road. B, who was standing nearby, starts correcting the fault. A allows B to do the same. From the nature of the circumstances, A has given his acceptance to the offer by B.Who can Accept ?In the case of a specific offer, it can be accepted only by that person to whom it is made. The rule of law is that if A wants to enter into a contract with B, then C cannot substitute himself for B without A’s consent.ExampleBoulton v. Jones. The facts of this case were as follows: B, who was a manager with X, purchased his business. J, to whom, X owed a debt, placed an order with X for the supply of certain goods. B supplied the goods even though the order was not addressed to him. J refused to pay B for the goods because he, by entering into contract with X, intended to set-off his debt against X.Held: The offer was made to X and it was not in the power of B to have accepted the same. In the case of a general offer, it can be accepted by anyone by complying with the terms of the offer Essentials of a Valid Acceptance1. Acceptance must be absolute and unqualified.2. It must be communicated.3. It must be according to the mode prescribed.4. It must be given within the time specified or within reasonable time.5. It must be in response to offer.6. It must be made before the offer lapses.7. It must be given by the person to whom the offer is made.

Acceptance must be Unconditional: an acceptance in order to be binding must be absolute and unconditional. The acceptance must be to all term of offer, whether material or immaterial to the contract. If the parties are not consensus-ad-idem to all the terms and conditions of the contract, there is no contract.

Case law: A made an offer to B to purchase a house with possession from 25th July, the offer was followed by an acceptance suggesting possession from 1st August. Held there was no concluded contract (Routledge v/s grant)

It must be communicated to the offeror: to conclude a contract between the parties, the acceptance must be communicated in some perceptible (noticeable) form. A mere resolve or mental determination on the part of the offeree to accept the offer is not sufficient and does not result in contract.

Case law: a draft agreement relating to supply of coal was sent to the manager of a railway company for his acceptance. The manager wrote the ward “Approve” and put the draft in the drawer of his table intending it to send it to the company’s solicitor for a formal contract to be drawn up. By some oversight the document remained in the drawer. Held, there is no contract. (Brogden v/s Metropolitan Rail Co.,)

Acceptance must be given in the mode prescribed by the offeror: if the acceptance is not according to mode prescribed, or some usual or reasonable, there is no contract. Where the offeror has not prescribed any mode, than, it must by a reasonable mode, which depends upon the facts of the case. If the acceptance is not according to the mode prescribed by the offeror, than the may insist the offeree to communicate the acceptance as per the mode prescribed.

A makes an offer to B and says: “if you accept the offer, reply by wire. B sends the reply by post. It will be a valid acceptance unless A informs B that the acceptance is not according to the mode prescribed.

It must be given in a reasonable time: if any time limit is specified, the acceptance must be given with in that time. If no time limit is specified by the offeror, than it must be given with in a reasonable time and it depends on the facts of the case

CL: on 08th June, Mr. M offered to take shares in R Company. He received a letter of acceptance on November 23. He refuses to take the shares. Held, Mr. M, was entitled to refuse as his offer has lapsed as the reasonable period during which it could be accepted had elapsed (Ramsgate Victoria Hotel Co., vs. Monteflore)

It cannot precede an offer: if the acceptances precede an offer, it is not a valid acceptance and does not result in any contract.

It must be given by the party or parties, to whom the offer is made: when an offer is made to a particular person, it can be accepted by him alone. If it is accepted by another person, there is no valid acceptance

CL: Boulton brought a hose-pipe business from Brocklehurst. Jones to whom Brocklehurst owed a debt, place an order with Brocklehurst for the supply of certain goods. Boulton supplied the goods even though the order was not addressed to him. Jones refused to pay Boulton for the goods because he, by entering into contract with Brocklehurst, intended to set off his debt against Brocklehurst. Held, the offer was made to Brocklehurst and it was not in the power of Boulton to step in and accept and therefore there was no consent (Boulton vs. Jones)

It must be given before the offer lapses or withdrawn.

It cannot be implied for the silence: the acceptance of an offer cannot be implied from the silence of the offeree, unless the offeree has, by his previous conduct inducted that his silence means the acceptance.

Once the offer is rejected it can not be accepted by the offeree, unless the offeror renews the offer.

COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS

When the contracting parties are face to face and negotiate in person, a contract comes in existence the movement the offeree gives his absolute and unqualified acceptance to the proposal made by the offeror. When the parties are at the distance and the offer and the acceptance and their revocation are made through post, i.e., by letter or telegram. The rules are as follows

Mode of communication:The communication of proposals, the acceptance of proposals, and the revocation of proposals respectively, are deemed to be made by any (a) act or (b) omission of the party proposing, accepting or revoking. Such act or omission must however have the effect of communicating such offer, acceptance or revocation. Thus installation of a weighing machine at a public place is an offer, putting a coin in the slot of the machine is the acceptance of the offer, and switching off the machine amounts to revocation of the offer.

Communication when completeThe communication of a proposal is complete- when it comes to the knowledge of the person to whom it is made.

E.g., A Proposes, by a letter, to sell a house to B at a certain price. The letter is posted 10 th July. It reaches B on 12th July. The communication of the offer is complete when B receives the letter, i.e., on 12th July.

The communication of an acceptance is complete -as against the proposer, when it is put in a course of transmission to him so at to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer.

E.g., in the above case, when B accepts A’s Proposal, by a letter sent by post on 13 th instant. The letter reaches on 15th instant. The communication of acceptance is complete, as against A, when the letter is posted, i.e., on 13 th, as against B, when the letter is received by A, i.e., on 15th. (Case of NT Rama Rao)

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.

E.g., A Proposes, by a letter, to sell a house to B at a certain price. The letter is posted 15 th May. It reaches B on 20th May. A revokes his offer by a telegram on 19th May. The telegram reaches B on 21st May. The revocation is complete as against A when the telegram is dispatched, i.e., on 19 th May. It is complete as against B when he receives it, i.e., on 21st May.

Time for Revocation of Proposals and Acceptance o A proposal may be revoked at any time before the communication of its acceptance is complete as

against the proposer, but not afterwards.o An acceptance may be revoked at any time before the communication of the acceptance is complete as

against the acceptor, but no afterwards.

Ex: Mr. A proposes by a letter sent by post to sell his house to Mr. B. the letter is posted on the 01 st of the month. Mr. B accepts the proposal by a letter sent by post on the 04th. The letter reaches Mr. A on the 06th.Mr. A may revoke his offer at any time before Mr. B posts his letter of acceptance, i.e., 04th but not afterwardsMr. B may revoke his acceptance at any time before the letter of acceptance reaches Mr. A, i.e., 06 th, but not afterwards

Loss of letter of acceptance in postal transit:

Acceptance is complete as against the offeror as soon as the letter of acceptance is posted. The contract is complete even if the letter of acceptance goes astray or is lost through an accident in the post. But in order to bind the offeror, it is important that the letter of acceptance is correctly addressed, adequately stamped and posted, otherwise the acceptance is not complete as per section 04 of the Act.

Revocation how made 

A proposal is revoked –(1) by the communication of notice of revocation by the proposer to the other party;(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the

lapse of a 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 the death or insanity comes to the knowledge of the

acceptor before acceptance.