Contract Act 1872 Question #03 Define offer/proposal? Explain its valid features. INTRODUCTION The first essential element of contract is an agreement. An agreement arises when one party makes an offer and the other party accepts it. For a valid contract it is necessary that the party makes an offer in a law full manner and the other party accept the offer according the nules laid down in Contract Act 1872, DEKINITION According to Contract Act 1872 Section 2(a) ‘When one person signifies to another his willingness to do, or to abstain fiom doing anything with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. EXAMPLE A offers to sell his watch to B for Rs. 1000. A makes an offer to B. Offeror: The person who makes the proposal or offer is called offeror Offeree: The person to whom the proposal is made called offeree. ESSENTIALS OF A VALID OFFER / LEGAL REQUIREMENT 1. Express or Implied The offer may be express or implied. When the proposal is communicated by words spoken or in written form itis called express proposal. When the proposal is expressed by the conduct or actions it is called implied proposal Example a. Withdrawal of money by ATM cardholder from ATM machine. It creates an implied contract between the cardholder and the bank. b. M says to N, will you purchase my car. For Rs, 600,000, it is an express offer. 2. Legal Relation ‘A valid offer ust create legal relations otherwise there is uo agreement. If an offer does not give rise to legal obligations between the parties, it is not a valid offer Examples ‘A accepts an invitations of dinner at B’s place on a certain date. But A fails to join on the appointed date, B cannot take legal action against B for breach of contract, because it is a social or domestic arrangement not a legal regulation. 3. Definite and Clear The terms of offer nmst be definite, simple, understandable and clear. If the terms of an offer are not definite and clear it cannot be called a valid offer. Both the parties should clear about the terms of offer Example ‘Ali has two cars. He offers Babar to sells one ear for Rs. 250,000. It is uot a valid offer because it is not clear which car A wants to sell 4. Different from Invitation to Offer An offer must be different from invitation to offer. Invitation to offer is just inviting the other party to make an offer. Such invitations are not offer in the eyes of law and do not become promises on acceptance. In the case of an “invitation to offer” the aim is merely to circulate information, By: Jamshaid Ifikhar MPhil Commerce & Finance Cell # 0330 — 22 422 99Contract Act 1872 8 ‘Example a. An advertisement of sale of car by auction b, Issuance of prospectus to general public for selling shares c. Price tags attached with the goods displayed in the showroom or supermarkets Is only invitation to offer not offer 5. Specific or General Offer may be specific or general. When an offer is made to a specifie person or elass of persons, it is called a specific offer. When an offer is made to a public at large is known as general proposal. Examples a. M makes an offer to K to sell his bicycle for Rs, 2000. Itis a specific offer. b. A announces in a newspaper a reward of Rs. 1000 for anyone who will return his lost file. It is general offer 6. Communicate to Offeree A communication of offer and communication of terms and conditions of offer are two separate things. An offer is effective only when it is properly and completely communicated to the offeree with terms and conditions. If the terms and condition are communicated after the offer is made or after the contract, it is not a valid offer and not binding to the offeree. 7. Negative Conditions An offer should not contain a negative condition, It means that while making the offer, the offeror cannot say that if offer is not accepted before a certain date, it will be presumed to have been accepted, Example A writes to B, “I offer to sell my house for Rs. 40000. IfI do not receive a reply by Monday next, I shall assume that you have accepted the offer.” There will be no contract if B does not reply. 8 Conditions in Offer ‘An offeror may include any condition in his offer: There is no contract unless all the conditions of the offer are accepted. 9. Prescribed mode for Acceptance Prescribes means to set down the rules, directions etc. If the offeror prescribes specific rules for acceptance, the offeree must adopt the same mode of acceptance. If the offeree does not follow the prescribed mode or rules, then it will not be a valid acceptance. Example A.ask B to send the reply of his offer by telegram but B sends reply by letter. A may reject such acceptance 10. Cross Offers ‘When two parties make similar offers to each other in ignorance of each other’s offer, such offer are called cross offers. Tens and conditions in both the offers are same. Acceptance of cross offer does not result in formation of contract. Example A offers by a letter to 100 tons of steel at Rs. 1000 per tou. On the same day B also writes to A offering to buy 100 tons of steel at Rs. 1000 per ton. KKINDS OF OFFER Express offer Implied offer Specific offer General offer Cross offer Counter offer By: Jamshaid Ifikhar MPhil Commerce & Finance Cell # 0330 — 22 422 99