CONTRACT LAW I
Q.1 OFFER AND ACCEPTANCE
Offer
The term “proposal” has been defined in Section 2(a) of the act, as “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”. For e.g. A’s willingness to sell his
radio set to B for Rs. 500 with intention to consent of B. But if a statement is
made without any intention to obtain the assent of the other party thereto,
that cannot be termed as proposal.
Elements of proposal
•Expression of willingness to do or abstain from doing something
•Made with the object of obtaining assent of the other
Thus, the person making the proposal is called the ‘proposer’, or ‘offeror’ or
‘promisor’ and the person to whom the proposal is made is called as the
‘proposee’, or ‘offeree’, or ‘promisee’.
Essentials of an Offer
Section 2(a) of the Act explains that a person is said to make a proposal “when
he signifies to another person his willingness to do or to abstain from doing
something”. The emphasis, here, is upon the requirement that the willingness
to make a proposal should be “signified”. The terms signify means to or
communicate to make known. It thus requires that the offer must be
communicated to the other person.
[Link] or Implied
Offer is either express or implied. When the offer is made by express
communication then the offer is said to be an express offer. The express offer
can be either in words or in written format. Whereas when the offer is not
communicated expressly but communicated by conduct or by the
circumstances of the case, the offer is called an implied offer. For e.g. A
says to B that he will sell his bike to B for Rs.30, 000, it is an express offer. For
e.g., a bid at an auction is an implied offer.
[Link] of Communication
S. 4 The communication of a proposal is complete when it comes to the
knowledge of the person to whom it is made. An offer cannot be accepted
unless and until it has been brought to the knowledge of the person to whom
it is made. For e.g. A cannot be said to make an offer to B unless A brings the
offer to the knowledge of B. Thus, acting in ignorance of an offer does not
amount to acceptance of the offer.
4. Intention to Contract
In order that an offer, after acceptance, can result in valid contract, it is
necessary that then offer should be made with an intention to create legal
relationship. Promise in case of social engagements is generally without an
intention to create legal relationships. Such an agreement, therefore, cannot
be considered to be a contract. For e.g. An agreement to go for movies, for a
walk, to play some game, cannot be enforced in a court of law.
5. Offer may be general of specific
When the offer is made to a specific or ascertained person, it is known as
specific offer. It can be only accepted by the person to whom the offer is made
or to the person duly authorized by him. When the same is made to any
particular person but to the public at large, it is known as general offer. A
general offer can be accepted by any person. In Carlill v. Carbolic Smoke ball
Co., The smoke ball company offered by advertisement a reward of $100 as
reward to anyone who contacted influenza after having used the Smoke Ball
with the printed directions. Mrs. Carlill (plaintiff) relying on the advertisement
purchased a smoke ball from a chemist, used the same in accordance with the
directions of the defendants, but still caught influenza. She sued the defendant
to claim the reward of $100 advertised by them. There may be general offer
and acceptance of the general offer may not be communicated. By fulfilling the
conditions of such offer the offeree is said to accept the offer.
Offer and Invitation to offer
A proposal or an offer has to be distinguished from an invitation to offer or
treat. A person may not offer to sell his goods, but makes some statement or
give some information with a view to inviting others to make offers on that
basis. For e.g. Displaying goods or dress or books in window of the shop. This is
an invitation to offer. It is on the discretion of the shopkeeper if he wants to
sell his article or not. An invitation to offer is not the final willingness but the
interest of the party to invite the public to offer him.
Classification of Offer
There can be many types of offers based on their nature, timing, intention, etc.
Let us take a look at the classifications of offers.
[Link] Offer
A general offer is one that is made to the public at large. It is not made any
specified parties. So, any member of the public can accept the offer and be
entitled to the rewards/consideration. Say for example you put out a reward
for solving a puzzle. So, if any member of the public can accept the offer and
be entitled to the reward if he finishes the act (solves the puzzle.)
[Link] Offer
A specific offer, on the other hand, is only made to specific parties, and so only
they can accept the said offer or proposal. They are also sometimes known as
special offers. Like for example, A offers to sell his horse to B for Rs 5000/-.
Then only B can accept such an offer because it is specific to him.
[Link] Offer
In certain circumstances, two parties can make a cross offer. This means both
make an identical offer to each other at the exact same time. However, such a
cross offer will not amount to acceptance of the offer in either case.
For example, both A and B send letters to each other offering to sell and buy
A’s horse for Rs 5000/-. This is a cross offer, but it will be considered as
acceptable for either of them.
[Link] Offer
There may be times when a promise will only accept parts of an offer, and
change certain terms of the offer. This will be a qualified acceptance. He will
want changes or modifications in the terms of the original offer. This is known
as a counteroffer. A counteroffer amounts to a rejection of the original offer.
Acceptance
S. 2(b) When the person to whom the proposal is made signifies his assent
thereto, the offer is said to be accepted. Thus, the proposal when accepted
becomes a promise.” An offer can be revoked before it is accepted. As
specified in the definition, if the offer is accepted unconditionally by the
offeree to whom the request is made, it will amount to acceptance.
Essentials of Valid Acceptance
1] Acceptance can only be given to whom the offer was made
In the case of a specific proposal or offer, it can only be accepted by the person
it was made to. No third person without the knowledge of the offeree can
accept the offer. Let us take the example of the case study of Boulton v. Jones.
Boulton bought Brocklehurst’s business but Brocklehurst did not inform all his
creditors about the same. Jones, a creditor of Brocklehurst placed an order
with him. Boulton accepted and supplied the goods. Jones refused to pay since
he had debts to settle with Brocklehurst. It was held that since the offer was
never made to Boulton, he cannot accept the offer and there is no contract.
When the proposal is a general offer, then anyone with knowledge of the offer
can accept it.
2] It has to be absolute and unqualified
Acceptance must be unconditional and absolute. There cannot be conditional
acceptance, that would amount to a counteroffer which nullifies the original
offer. Let us see an example. A offers to sell his cycle to B for 2000/-. B says he
accepts if A will sell it for 1500/-. This does not amount to the offer being
accepted, it will count as a counteroffer. Also, it must be expressed in a
prescribed manner. If no such prescribed manner is described then it must be
expressed in the normal and reasonable manner, i.e. as it would be in the
normal course of business. Implied acceptance can also be given through some
conduct, act, etc. However, the law does not allow silence to be a form of
acceptance. So, the offeror cannot say if no answer is received the offer will be
deemed as accepted.
3] Acceptance must be communicated
For a proposal to become a contract, the acceptance of such a proposal must
be communicated to the promisor. The communication must occur in the
prescribed form, or any such form in the normal course of business if no
specific form has been prescribed. Further, when the offeree accepts the
proposal, he must have known that an offer was made. He cannot
communicate acceptance without knowledge of the offer.
So, when A offers to supply B with goods, and B is agreeable to all the terms.
He writes a letter to accept the offer but forgets to post the letter. So, since the
acceptance is not communicated, it is not valid.
4] It must be in the prescribed mode
Acceptance of the offer must be in the prescribed manner that is demanded by
the offeror. If no such manner is prescribed, it must be in a reasonable manner
that would be employed in the normal course of business.
But if the offeror does not insist on the manner after the offer has been
accepted in another manner, it will be presumed he has consented to such
acceptance.
So, A offers to sell his farm to B for ten lakhs. He asks B to communicate his
answer via post. B e-mails A accepting his offer. Now A can ask B to send the
answer through the prescribed manner. But if A fails to do so, it means he has
accepted the acceptance of B and a promise is made.
5] Implied Acceptance
Section 8 of the Indian Contract Act 1872, provides that acceptance by conduct
or actions of the promisee is acceptable. So, if a person performs certain
actions that communicate that he has accepted the offer, such implied
acceptance is permissible. So, if A agrees to buy from B 100 bales of hay for
1000/- and B sends over the goods, his actions will imply he has accepted the
offer.