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Business Law

Offer and Acceptance

UOG COLLEGE FOR BOYS May 11, 2011 Authored by: Shoaib Waqas

Business Law
Offer and Acceptance

What is proposal/offer? The words proposal and offer are synonymous and are used interchangeably. Definition: 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. (sec 2(a) 2. Essential of an Offer i. Must be an expression of willingness to do or to abstain from doing something. ii. Must be to another person. iii. Must be made with a view to obtaining the assent of the other person to such act or abstinence. Example Do you intend to sell your motorbike? is not a proposal. If A says to B, will you buy my motorbike for Rs. 40,000, is a proposal. Legal Rules Regarding a Valid Offer 1. An offer may be express or implied. Examples: X writes to Y that he offers to sell his house to him for Rs.80, 000. (Express) A Transport Corporation runs buses on different routes to carry passengers at the scheduled fares. Its an implied offer by T.C. 2. An offer must be capable of creating legal relations. (Again, moral and domestic agreements excluded). 3. Terms of the offer must be certain and not loose/vague. 4. An invitation to offer is not an offer. In the case of an invitation to treat, the person sending out the invitation does not make an offer but only invites the other party to make an offer. Quotations, catalogues of prices or display of goods with prices marked thereon do not constitute an offer. 5. An offer may be specific or general. Illustrations:a. Where A makes an offer to B to sell his bicycle for Rs.2000, there is specific offer.

Business Law | 5/11/2011

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b. An offer made to the world at large, i-e offers of reward made by way of advertisement to general public, for rendering of certain services, or the restoration of lost article. 6. An offer must be communicated to the Offeree. a. An offer is effective only when it is communicated to the Offeree. b. Doing anything on ignorance of offer can never be treated as its acceptance due to lack of consensus of will. 7. An offer can be made subject to any terms and conditions. An offeror may attach any terms and conditions (permitted by law) e.g. mode of acceptance to the offer he makes. The Offeree will have to accept all the terms of the offer. 8. Two identical cross-offers do not make a contract. When two parties make identical offers to each other, in ignorance of each others offer, the offers are cross-offers. Cross-offers do not constitute acceptance of ones offer by the other and as such there is no completed contract. Illustration: On 15 Oct, 1998, A wrote to B offering to sell his 100 tons of iron at 10,000 per ton. On the same day, B wrote to A offering to buy 100 tons of iron at 10, 00 per ton. The letter crossed in the post. Contract was not concluded b/w A and, because the offers were simultaneous, so no acceptance of each others offer. Lapse and Revocation of Offer 1. An offer lapses after stipulated or reasonable time period. (sec 6(2) (Ramsgate Victoria Hotel) 2. An offer lapses by not being accepted in the mode prescribed, or if no mode is prescribed, in some usual and reasonable manner. 3. An offer lapses by rejection. a. Express:- by words spoken or written, b. Implied: - i- counter offer by Offeree, ii- conditional acceptance by offeree. 4. An offer lapses by the death or insanity of the offeror or the offeree before acceptance. If the offeror dies or becomes insane before acceptance, the offer lapses provided that the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. (sec 6(4) 5. An offer lapses by revocation.

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Business Law | 5/11/2011

An offer may be revoked, at any time before acceptance, by the communication of notice of revocation by the offeror to the other party. (Sec 6(1) 6. Revocation by non-fulfillment of a condition precedent to acceptance An offer stands revoked if the offeree fails to fulfill a condition precedent to acceptance. (Sec 6 (3) 7. An offer lapses by subsequent illegality or destruction of subject matter. Illustration: - where an offer is made to sell 10 bags of sugar 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. Acceptance Sec 2(b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Manifestation by the offeree of his assent to the terms of the offer Legal Rules Regarding a Valid Acceptance 1. Acceptance must be given by the person to whom the offer is made. The rule of law is clear that if you propose to make a contract with A, then B cant substitute himself for A without your consent. 2. Acceptance must be absolute and unqualified. (sec 7(1) Acceptance of all the terms of the offer. Even a slightest deviation is not allowed. 3. Acceptance must be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. (sec7(2) Mental acceptance ineffectual. Example: (Brogden Vs Metropolitan Co) 4. Acceptance must be communicated to the acceptor. Must not only be made by the offeree but must also be communicated by, or with the authority of the offeree/acceptor. Example: Powell vs. Lee 4. Acceptance must be given within a reasonable time and before the offer lapses/revoked. Must be given within the specified time limit, if any and within a reasonable time, if no time is stipulated. Example:- Ramsgate Victoria Hotel Co Vs Montifiore 6. Acceptance must succeed the offer.

Business Law | 5/11/2011

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Must be given after receiving the offer. Example:- allotment of shares previous to application invalid

7. Rejected offers can be accepted only, if renewed.

C OMMUNICATION OF O FFER , A CCEPTANCE AND R EVOCATION ( SEC 4 & 5)

1. Communication of an offer:Is complete when it comes to the knowledge of the person to whom it is made. 2. Communication of an Acceptance:(a) As against the proposer, when it is put into a course o transmission to him, (b) as against the acceptor, when it comes to the knowledge of the proposer. 3. Communication of a revocation, Is complete; (a) As against the person who makes it, when it is put into course of transmission to the person to whom it is made, (b) As against the person to whom it is made, when it comes to his knowledge

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Business Law | 5/11/2011