OFFER AND ACCEPTANCE

The first essential of a valid contract is an agreement, i.e. offer and

acceptance. An agreement arises when one party makes an offer and

the other party accepts it.

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 OFFER AND ACCEPTANCE
OFFER

Section 2(a) defines a offer as, “When one person signifies to another his
willingness to do or to abstain from doing any thing, with a view to obtaining
the assent of that other to such act or abstinence, he is said to make a
proposal.”

It means that when a person shows his willingness to do or not to do

something to obtain the consent of other person, it is considered an
offer.

The word offer in English Law is similar to the word proposal in

Pakistani law but the word offer is usually used in our practical life.
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 OFFER AND ACCEPTANCE
The person making the offer is called the offeror or promisor. The
person to whom the offer is made is called the offeree. The person
accepting the offer is called the promisee or acceptor.

Example
a) A offers to sell his watch to B for £100. A makes an offer to B.
b) A promises to sell his car to B for Rs. £500. A makes an offer to B.

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Essential of a Valid Offer

1. It May be Express or Implied

An offer may be made by words or by conduct. An offer which is made by

words spoken or written is called an express offer. The implied offer
appears from the actions, conduct of parties, course of dealings or
circumstances of the case.

a) M says to N that he will sell his motorcycle to him for £400. It is an

express offer.

b) A railway coolie carries the luggage of B without asking to do so. B

allows him to do so. It is an implied offer.

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2. It Must Create Legal Relation

The offer must be made to create legal relations otherwise there will be no
agreement. If an offer does not give rise to legal obligations between the
parties, it is not a valid offer. In business transactions there is a
presumption that the parties intend to create legal relations.

Examples

a) A invites B to dinner and B accepts the invitation. It does not create

legal relations, so there is no agreement.

b) A offers to sell his watch to B for £200 and B agrees. There is an

agreement because the parties intend to create legal relations.

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3. It Must be Definite & Clear
An offer must be definite and clear. If the terms of an offer are not
definite and clear. It cannot be called a valid offer. If such offer is
accepted, it cannot create a binding contract. An agreement to agree in
future is not a contract because the terms of an agreement are not clear.
Examples
a) A has two motorcycles. He offers B to sell one motorcycle for £500.
It is a not a valid offer because it is not clear which motor cycle A
wants to sell.
b) X purchased a horse from Y and promised to buy another, if the
first one proved lucky. X refused to buy the second horse. Y could
not enforce the agreement, as it is unclear.

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 OFFER AND ACCEPTANCE
4. It is Different from Invitation to Offer
An offer is different from an invitation to offer. In an invitation to offer,
the person making the invitation does not make an offer but only
invites the other party to make an offer. His object is to inform that he
is willing to deal with anybody who is willing to deal with him.
Examples
a) X displays goods for an auction sale. It is not an offer. The offer will
come from the buyer in the form of bid.
b) N advertised to sell his furniture at Bury on specified day. H came
from London to attend the auction but all furniture was withdrawn
from sale. H sued N for loss of time and expenses. Held, H could
not recover expenses because the advertisement was an invitation
to offer. (Haris vs. Nickerson)

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 OFFER AND ACCEPTANCE

5. It May be Specific or General

When an offer is made to a specific person or group of persons, it is called

specific offer. Such an offer can be accepted only by the person or persons to

whom it is made. A general offer is one which is made to public in general and it

may be accepted by any person who fulfills the conditions mentioned in it.

a) M makes an offer to N to sell his bicycle for £100. It is a specific offer hence
only N can accept it.
b) The CSB Co. advertised to pay $100 to any person who contracts flue after
using their medicine. Mrs. Carlill used the medicine but suffered from flue.
She sued for the reward. The company was held liable. (Carlill vs Carbolic
Smoke Co)
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6. It must be communicated to the Offeree

An offer is effective only when it is communicated to the offeree. If an offer is not

communicated to the offeree, it cannot be accepted. An acceptance of offer, in ignorance of it is

not a valid acceptance and does not create any legal obligations. Thus, an offer which is not

communicated is not a valid offer.

G’s nephew was missing from home. He sent his servant Lalman, in search of the boy. When

the servant left, G announced a reward of Rs. 501 for anyone who gives information about the

boy. The servant before the announcement found the boy and informed G. later, he claimed for

the reward. He failed on the grounds that he could not accept the offer unless he had the

knowledge of it. (Lalman vs. Gauri Datt)

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7. It should not Contain Negative Condition

An offer cannot specify the condition that if acceptance is not

communicated up to a certain date, the offer would be considered as
accepted. If the offeree does not reply, there is no contract because no
obligation to reply can be imposed on him on the grounds of justice.

Examples

A wrote to B to sell his book adding that if he did not reply within 5
days, the offer would be considered as accepted. Thee is not contract.
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8. It may be Subject to any Conditions

An offeror may include any condition in his offer. There is no

contract unless all the conditions of the offer are accepted. If the offeror
prescribes a specific mode of acceptance, the offeror must adopt the
same mode of acceptance. The offeror must inform the offeree
regarding the rejection, if the offeree has not followed the prescribed
mode; otherwise he is considered to have accepted the acceptance.

Example

A asks B to send the reply of his offer by telegram but B sends reply be
letter. A may reject such acceptance.

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9. It must not Contain Cross Offers

When two parties make similar offers to each other, in ignorance of

each other’s offer, the offers are called cross offer. The acceptance of
cross offers do not result in complete agreement.

Example

A wrote to B to sell him 1 ton of iron for £1500. On the same day B
wrote to A to buy 1 ton of iron for Rs. £1500. There is no contract.

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Revocation of Offer

Section 6 of the Contract Act:

“an offer may be revoked:

1. by the communication of notice of revocation by the proposer to the other party;
2. by the laps 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 fulfil a condition precedent to acceptance;
4. by the death or insanity of the proposer, if the fact of his death or insanity comes
to the knowledge of the acceptor before acceptance.”

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1. Notice of Revocation

An offer can be revoked by sending a notice of revocation to the other party. It

means that the offeror may revoke his offer at any time before party. It means that
the offeror may revoke his offer at any time before acceptance, even though the
period for which the offer was kept open has not yet expired. In this way the
offeree cannot create a contract by accepting the revoked offer.

Example

A at an auction gives the highest bid to buy B’s goods. He withdraws the bid before

the fall of gavel. The offer is revoked.

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2. Lapse of Time

When the offer is kept open until a specified time, it terminates if it is

not accepted by that time. If the offer does not specify the time, it
terminates after the lapse of a reasonable time. The reasonable time
depends upon the circumstances of each case. If the commodity is
perishable, the reasonable time will be relatively shorter.

Example

M offered to buy shares of a company R, on 8th June. R allotted shares

to M on 23rd November, M refused to accept them. Held, that the offer
had lapsed by delay in accepting. (R.V. Hotel Co)

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3. Failure to Fulfill Condition

An offer is revoked if the offeree fails to fulfill the conditions

mentioned in it. If an offer contains some conditions and the offeree
fails to fulfill such conditions, the offer terminates.

Example

A offers to sell his scooter to B, for Rs. 50,000 if B gets admission in

medical college. B fails to get admission, the offer is revoked.

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4. Death or Insanity of the Offeror

An offer is revoked by the death or insanity of the offeror if the fact of his death or
insanity comes to the knowledge of the acceptor before acceptance. If the offeree
does not know that the offeror has died or become insane and gives his acceptance,
it is valid acceptance. It will result in a valid contract and legal representatives of
the deceased offeror shall be bound by the contract.

Example

X requested D, to give credit to Y and guaranteed payment up to Rs. 1 Lac. X died

and D in ignorance of this fact continued to give credit to Y. D sued X’s legal
representatives on the guarantee. Held, that the legal representatives were liable.

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5. Revocation by Offeree
(Offeree rejects the offer)

6. Counter Offer
(Offeree makes a counter offer to Offerer)

7. Death or Insanity of Offeree

(Offeree dies before accepting the offer or becomes insane)

8. Subsequent illegality
(Govt bans such contract)

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ACCEPTANCE

Section 2(b) defines acceptance as:

“When the person to whom the proposal is made signifies his assent

thereto, the proposal is said to be accepted.”

Example

A offers to sell his house to B for Rs. 5 Lac. B accepts the offer. This is

an acceptance.

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Essentials of Valid Acceptance

Section 7 & 8 of the Contract Act.

1. It must be given by the Offeree

An offer can be accepted only by the person to whom it is made. It

cannot be accepted by another person without the consent of offeror.
When an offer is made to a particular group, it can be accepted by any
member of that group. If the offer is made to a general public, it can be
accepted by any person who has knowledge of the offer.

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Examples

a) X offered to sell his house to Y. Z who was aware of such offer said that he

is ready to buy X house. There is no contract with Z.

b) A sold his business to B without informing his customers. J sent an order

for the supply of goods to A by name. B received the order and supplied the

goods. It was held that there was no contract because J never made any

offer to B (Boulton vs Jones)

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2. It must be Absolute & Unconditional

For a valid agreement, the acceptance must be absolute and

unconditional. If the offeree imposes any condition in his acceptance, it
is not a valid acceptance but a counter offer. There will be no contract
until the counter offer is accepted by the original offeror.
Examples
a) A offers to sell his watch to B for £500. B replies that he can buy it
for £300. There is no acceptance on the part of A.
b) M offered to sell land to N for $280. N accepted and enclosed $80
with a promise to pay the balance by monthly installments of $50
each. Held, there was no contract as the acceptance was conditional
(Neale vs Merret)

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3. It must be in a Prescribed Manner
If the offeror has prescribed any particular manner of acceptance. It
must be given according to that particular manner. If no particular
manner is prescribed in the offer then acceptance should be made in a
reasonable manner. If acceptance is not made according to the
prescribed manner, the offeror may reject it.
Examples
a) A offers to B and asks to accept the offer by telegram. B sends his
acceptance by post. It is not a valid acceptance.
b) A offered to buy flour from B and requested to send acceptance by
messenger who had brought the order, B sent his acceptance by
post thinking that this would reach A earlier than messenger. Held,
A was not bound by the acceptance. (Eliason vs Henshaw)

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4. It must be Communicated to the Offeror
The acceptance must be communicated to the offeror in a clear manner by
the offeree or his agent. Mere expression of intention to accept an offer is
not a valid acceptance. If the offeree does not show that he has accepted the
offer, no contract is formed. When a person accepts an offer but fails to
clearly communicate, it is not an acceptance.
Examples
a) A offers to B and asks to accept the offer by telegram. B sends his
acceptance by post. It is not a valid acceptance.
b) A offered to buy flour from B and requested to send acceptance by
messenger who had brought the order, B sent his acceptance by post
thinking that this would reach A earlier than messenger. Held, A was
not bound by the acceptance. (Eliason vs Henshaw)

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