OFFER &

ACCEPTANCE

OFFER OR PROPOSAL :

Section 2(a) of Indian Contract Act 1872 defines the term ‘offer or proposal’. It provides that “when one person (offeror) signifies to another person (offeree ) 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 or offer.”

How an offer is made 1. Express offer2. Implied offer

To whom offer is made 1. Specific offer 2. General offer

ESSENTIALS OF A VALID OFFER

1. Intention to obtain acceptance

2. Intention to create legal relationship

3. Certainty

4. Communication

5. Should not contain a term the non compliance of which would amount to acceptance

6. A mere statement of price is not an offer to sell

7. An offer is different from invitation to an offer

8. An offer may be expressed or implied

9. An offer may be conditional or unconditional

• Meaning of cross offer

Two offers which are similar in all respects made by two parties to each other, in ignorance of each other’s offer are known as ‘cross offer.’ Cross offers do not amount to acceptance of one’s offer by the other. Hence, no contract is entered into on cross offers.

Example: X of Agra sends a letter by post to Y of Delhi offering to sell his car for Rs.1 lakh. The letter is posted on 1st January and the same day, Y of Delhi sends a letter by post to X of Agra offering to buy X’s car for Rs. 1 lakh. These two letter cross each other. Y’s letter is merely an offer and not the acceptance of X’s letter. Here, both the parties are making offer and no party has accepted the offer. Therefore, no contract has been entered into, if they want to entered into contract, at least one of them must send his acceptance to the offer made by other.

• Meaning of standing offer: An offer of continuous nature is known as ‘standing offer.’

A standing offer is in nature of a tender. It is the same thing as an invitation to an offer. A contract is said to have been entered into only when an order is placed on the basis of the tender.

Example:

X Ltd requires a large quantity of certain goods during the 12 months period and gives an advertisement inviting tender in the leading newspaper. Z submitted the tender to supply those goods at a specific rate. Z’s tender is accepted or approved. Now, Z’s tender becomes a standing offer. Each order given by X Ltd will be an acceptance of the offer.

LAPSE OF OFFER OR REVOCATION OF OFFER

• An offer is revoked in the following ways:

1. If the revocation is communicated by the offeror to the offeree before its acceptance;

2. If it is not accepted within the specified time, if any, or after a reasonable time if no time is specified;

3. If the offeree fails to fulfill a condition precedent to acceptance ; or

4. If the offeror dies or becomes insane and the fact of his death or insanity comes to the knowledge of the offeree before acceptance.

• Difference between Offer and Invitation of Offer:

1. In invitation to an offer one party invites the other party to make an offer whereas in offer one party makes a definite proposal to another party with a view to obtain the consent of the other party.

2. Invitation to an offer is an initial intention whereas offer is final willingness.

3. Invitation to an offer leads towards offer whereas offer leads towards acceptance of offer.

• ACCEPTANCE:

Section 2(b) of Indian Contract Act,1872 defines the term ‘acceptance’. It provides that “when the person, to whom the proposal or offer is made, signifies his assent thereto, the proposal or offer is said to accepted.”

• Essentials of a Valid Acceptance:A valid acceptance must comply with the following rules:

1.Must be absolute and unqualified.

2.Must be communicated to the offeror.

3.Must be according to the mode prescribed.

4.Must be given within a specified time.

5.Acceptance cannot precede an offer.

6.It must show an intention on the part of the acceptor to fulfil the terms of promise.

7.It must be made only by the party or parties to whom the offer is made.

8.It must be made before the offer lapses or before the offer is withdrawn.

9.Silence cannot be the mode of acceptance.

10.Acceptance may be expressed or implied.

• Communication of Offer, Acceptance and Revocation:According to Section 4, “The communication of an offer is complete when it comes to the knowledge of the person to whom it is made.”

The communication of ACCEPTANCE is complete:

• As against the proposer, when it is put into a course of transmission to him, so as to be out of the power of the acceptor;

• As against the acceptor, when it comes to the knowledge of the proposer.

Communication of REVOCATION:According to Section 5, “ the proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.” An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor but not afterwards.

• Consideration:

The term ‘consideration’ is defined under Section 2(d) of the Indian Contract Act,1872. It provides that “ when at desire of the promisor, the promisee (offeree) or any other person,

1.Has done or abstained from doing something or;

2.Does or abstains from doing something or;

3.Promises to do or to abstain from doing something,

such act, abstinence or promise is called consideration for the agreement.”

Types of Consideration:

The Consideration may be of three kinds. It may be past consideration, executed or present consideration and executory or future consideration. On the basis of this, contracts are also called past, executed and executory contracts.

• Rules governing Consideration:

1.Consideration may be an act, abstinence or promise.

2.There must be mutuality i.e. each party must do or agree to do something.

3.Consideration must be real and definite and not vague.

4.Although consideration must have some value, it need not be adequate i.e., a full return for the promise.

• When Consideration not necessary:

The general rule is that an agreement made without consideration is void.

EXCEPTIONS (Section 25):

1.Agreement out of natural love and affection between closely related parties.2.Agreement made voluntarily.3.Agreement to pay time barred debt.4.Agreement of agency.5.Gifts.

• The consideration and object of the agreement is legalSection 23 of the Act, provides that the consideration or object of an agreement is lawful unless it is:

1. forbidden by law or;

2. it is of such nature, if permitted, it would defeat the provision of any law or;

3. is fraudulent or;

4. involves or implies injury to the person or property of another or;

5. the court regards it as immoral or opposed to public policy.