ST.

JOSEPH’S DEGREE & PG COLLEGE

(Autonomous), Affiliated to Osmania University
Re-accredited by NAAC (3rd Cycle) with B++
King Koti Road, Hyderabad
Course : Busines Law Unit - I Faculty : Mrs.Aarati Samala

Q)Define offer . Explain the essentials of a valid offer with case law?

i)Meaning of an offer : Refer Notes

ii)Definition of an offer : Refer Notes

iii)Essentials of a valid offer :

1) Offer should be voluntary : A person is said to make an offer , when he signifies his
willingness to another to do or to abstain from doing anything . Hence, an answer given to
a question or a reply given to an enquiry will not become a valid offer or a proposal .

Case Law : Harvey vs Facey .

Case Facts : (Refer)

2) Offer should be communicated : According to section 4 of Indian contract 1872 , “The

communication of an offer is complete when it comes to the knowledge of the person to
whom it was made .

Case Law : Lalman Shukla vs Gauri Dutt .

Case Facts : In this case a trader nephew (4 years) had absconded from his house . so the trader
sent his munim to trace his missing nephew . The trader announced a reward of $500
whoever traced the boy . The reward was announced after the munim left in search of the
boy. Munim traced the boy without the knowledge of reward . When the munim came to
know about the reward , he brought an action against the trader to recover the same . The
court of law held that Munim was not eligible for the reward because he traced the boy
without receiving the communication about the reward.

3) An offer must be made with willingness : The word ‘willingness’ used in the legal definition of
an offer does not convey the meaning of ‘mare desire of a person to do something’. It
should be coupled with his capacity to do what he is desiring or proposing .

For example: own example

4) offer may be positive or negative : Refer Notes

5) obtaining the assent of the promise : As per the legal definition , an offer should be made with
a view to obtaining the assent of the others , that means , the promisor should expect a reply
or acceptance of the promise to the proposal made by him .
Case Fax: Farina vs Ficus
Case Facts : In this case , a person wrote a casual letter to his would-be son –in-law and expressed
his intention that his daughter will become a real owner of all his property after his death ,
because she was the only child he had . Later he wanted to sell the property due to certain
 ST. JOSEPH’S DEGREE & PG COLLEGE
(Autonomous), Affiliated to Osmania University
Re-accredited by NAAC (3rd Cycle) with B++
King Koti Road, Hyderabad
Course : Busines Law Unit - I Faculty : Mrs.Aarati Samala

unforeseen circumstances . It was objected to by would be son-in-law . The court of law

held that this letter cannot be considered as an offer because it was not written with a view
to obtain the consent of the other party .

6)offer must create legal obligations : Agreements which do not create legal obligations between
the parties cannot be enforced in the court of law . friendly proposals , social proposals ,
domestic proposals will not create legal obligations.

Case Law : Balfour vs Balfour

Case Facts :

7) offer must be definite and certain : The term of an offer must be definite , clear , certain . If the
terms of the offer are uncertain , no contract will come into existence . Both the parties
should be clear about the legal consequences arising out of the contract . For example :
Mr. A offered to sell Mr. b hundred tons of oil . but Mr. A who is a trader who is dealing
with 10 different types of oil . The offer is uncertain as there is nothing to show what kind
of oil is intended to be sold .
8) Lapse of an offer :
a) If either offeror or offeree dies before acceptance .
b) If it is not accepted within a specified time or reasonable time , if no time is specified .
c) If the offeree does not make a valid acceptance .
d) An offer can also lapse by revocation .

Q. What is a valid acceptance? Give legal rules regarding acceptance.

I.Meaning of acceptance – Acceptance is the second stage in the formation of a contract. A
proposal becomes a promise only when it is properly accepted by the promisee. Every proposal
may not be accepted , therefore every proposal will not create an agreement. Accepted proposal
only will create legal obligations between the promisor and promisee. An acceptance is the
manifestation by the offeree of his willingness to be bound by the terms of the offer.
II.Definition of acceptance- According to Sec 2(b) of Indian Contract Act 1872, “
when the person to whom the proposal is made signifies his assent to, the proposal is
said to be accepted. A proposal when accepted becomes a promise.”
III .Essentials of a valid acceptance or rules regarding acceptance-
1. Acceptance must be unconditional- The terms of the offer must be accepted by the
acceptor without any condition. Accepting an offer with conditions amounts to
counter offer and rejection of the original offer.
CASE LAW- HYDE Vs WRENCH
CASE FACTS- REFER
 ST. JOSEPH’S DEGREE & PG COLLEGE
(Autonomous), Affiliated to Osmania University
Re-accredited by NAAC (3rd Cycle) with B++
King Koti Road, Hyderabad
Course : Busines Law Unit - I Faculty : Mrs.Aarati Samala

2. Acceptance must be communicated- The acceptance is completed only when it has been
communicated to the offeror until the acceptance is communicated, it does not create a legal
relation.
CASE LAW- POWELL Vs LEE
CASE FACTS- REFER
3. Acceptance may be expressed or implied- Acceptance can be given either by words
spoken or written. Such acceptance is called an expressed acceptance. It can also be given by the
actions of the promisee. It is called an implied acceptance.

CASE LAW- HARCHARAN Vs HARBHAJAN

CASE FACTS- In this case a person was sitting at a dharmashala , heard an

announcement about a lost boy. A reward of 500 was announced for tracing the boy. He
found the boy at the dharmashalla and caught him. In this process he could not hear the
address so he handed over the boy to the local police station. Later he went to that
address to claim the reward. The court of law held that he was eligible for the reward on
account of implied acceptance.

4. Acceptance must be made within a reasonable time- If no time is specified, acceptance

must be given within the reasonable time. If any time is specified acceptance must be given
within the specified time only.
For example- Movie in a theater.
5. Silence is not acceptance- Silence of a promise in respect of a proposal is taken as non-
acceptance or rejection of a proposal. Even though silence is considered as half acceptance in the
Indian traditions it is not recognized by law.

6. Mental acceptance is no acceptance- Sometimes the promisee may accept a proposal

mentally and informs it to any other person but not to the offeror then it is called as mental
acceptance. It is invalid and no agreement comes into existence between the promisor and the
promisee in such cases.
CASE LAW- FELT HOUSE Vs BINDLEY

CASE FACTS- In this case Mr. Felt House wrote a letter to his nephew that he was
willing to buy the nephew’s horse for 30 pounds and if he receives no communication
within 3 days he will deem it as acceptance and will collect the horse. His nephew
decided to sell the horse to his uncle and instructed his auctioneer Mr. Bindley not to
sell the horse in auction, but the auctioneer sold it by mistake. The court of law held
that the auctioneer cannot be held liable for damages because no agreement came into
existence between the uncle and his nephew because of lack of communication of
acceptance.
 ST. JOSEPH’S DEGREE & PG COLLEGE
(Autonomous), Affiliated to Osmania University
Re-accredited by NAAC (3rd Cycle) with B++
King Koti Road, Hyderabad
Course : Busines Law Unit - I Faculty : Mrs.Aarati Samala

7. Acceptance should be communicated in a reasonable mode- Sometimes the promisor

prescribes a particular mode of communication of acceptance. In such cases, the promisee should
communicate his acceptance in that particular mode only, otherwise it may be rejected by the
promisor. When no particular mode is prescribed, it should be communicated through a
reasonable mode. Every mode of communication recognized by the government of a country is
deemed to be a reasonable mode of communication. Therefore, acceptance given by postal
letters, courier services, telephone conversations, etc becomes valid in india.

CASE LAW- NARENDRANATH Vs KEDARNATH

CASE FACTS- In this case Mr. Kedarnath offers his house to narendranath for some
consideration and instructs him to send his acceptance in writing through a post. But
Mr. Narendranath sent an oral message through a messenger that he is willing to buy
the house. But kedarnath sold his house to some other person and narendranath filed a
suit on him for refusing the acceptance. The court of law held that he can do so
because the promisee/offeree did not follow the prescribed mode of communication
of acceptance.

8. Acceptance should be given by promise only- As per the legal definition, “ the person to
whom a proposal is made should signify his assent, there to express his acceptance.” That means
the promisee only should give the acceptance. If it is given by any third party it becomes invalid
and no obligations are created between the parties and no agreement comes into existence.

Q8. When does communication and revocation of offer and acceptance complete? Explain
modes of revocation of offer.
OR
When does the communication of a proposal become complete? How is the proposal
revoked?

A. When the parties to a contract are face to face the acceptance is said to be communicated
as soon as the acceptor gives his acceptance. But the parties are not near but at different places
then they need to send an offer and acceptance in any mode of communication like letter,
telegram, courier etc. Sec 3 to Sec 5 of Indian Contract Act 1872, deals with the rules relating to
communication of offer, acceptance and their revocation.

1. Communication of offer- According to Sec 4, An offer is said to be communicated or

completed when it comes to the knowledge of the person to whom it is made. When an

Course : Busines Law
ST. JOSEPH’S DEGREE & PG COLLEGE
(Autonomous), Affiliated to Osmania University
Re-accredited by NAAC (3rd Cycle) with B++
King Koti Road, Hyderabad
Unit - I Faculty : Mrs.Aarati Samala

offer is sent by post then the offer is said to be completed when the letter reaches the
offeree.
For example- Mr. Anil of Hyderabad sends a letter to Mr. Sunil of Delhi offering to sell
his house for 18 lakhs. The letter was posted on 1st Feb and this letter reaches on 7th Feb.
The communication of offer is said to be complete on 7th Feb.
2. Communication of acceptance- According to Sec 4, An acceptance is said to be
communicated in 2 situations. The first is from the side of the offeror and the other is from the
side of the acceptor, (or) It can also be said as against offeror and against acceptor.
For example- (continuation of ex 1) Mr. Sunil accepted this proposal and sent his
acceptance on 10th Feb and Mr. Anil received a letter on 17th Feb.

(i) (ii)

against acceptor against offeror

i.Against acceptor- The acceptance is said to be complete against the acceptor when it comes to
the knowledge of the offeror.
ii.Against offeror- The acceptance is said to be complete when the acceptance letter is put in
course of transmission to the offeror, so that the letter is out of reach of the acceptor to take back.
3. Revocation of offer- According to Sec 5, Revocation means cancellation /taking back /
withdrawal. An offer can be revoked at any time before the communication of its acceptance is
complete as against an offeror but not afterwards, which means an offer can be withdrawn before
the offeree posts his letter of acceptance, but not afterwards.
For example- (continuation of ex 1 & 2) If the offeror (Mr. Anil) wants to revoke his
offer he needs to send his revocation before 10th FEB.
4. Revocation of acceptance- According to Sec 5, An acceptance can be revoked at any time
before the communication of the acceptance is complete as against the acceptor but not
afterwards, which means acceptance can be withdrawn before acceptance letter is received by the
offeror.
For example- (continuation of ex 1, 2 & 3) If Mr. Sunil wants to revoke his acceptance he
needs to send his letter of revocation before 17th FEB, it must reach Mr. Anil.
5. Modes of revocation of offer- According to Sec 6,
i.By notice of revocation- Offer may be revoked by a communication of a notice of revocation by
the offeror to the other party before acceptance is complete against the offeror himself. An offer
made in writing may be revoked by words of mouth. A notice of revocation to be effective must
be communicated to the offeree.
ii.By lapse of time- An offer will come to an end by a lapse of time prescribed in such an offer for
its acceptance as if no time is prescribed, by the lapse of reasonable time.
iii.By counter offer- An offer comes to an end when the offeree makes a counter offer. Where an
offer is accepted with some modifications in the terms of the offer. Such acceptance amounts to a
counter offer.
CASE LAW- HYDE Vs WRENCH
 ST. JOSEPH’S DEGREE & PG COLLEGE
(Autonomous), Affiliated to Osmania University
Re-accredited by NAAC (3rd Cycle) with B++
King Koti Road, Hyderabad
Course : Busines Law Unit - I Faculty : Mrs.Aarati Samala

CASE FACTS- REFER

iv. By death or insanity- 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.
v.By non-fulfilment of condition precedent- A proposal is revoked when the acceptor fails to fulfill
a condition precedent to the acceptance of the proposal which was conditional offer.
For example- X may offer to sell certain goods to Y on a condition that Y pays a
certain amount before a certain date. The proposal is revoked if Y fails to pay the
requested amount within a given time.