Business Law

Topic: Offer and Acceptance

By: Riaz Hussain Ansari

Lecturer Department of Business Administration
University of Sahiwal

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1.Learning Objectives

You will be able:

On the successful completion of this paper,
candidates will be able to demonstrate knowledge
of laws relating to offer and acceptance of a
contract.
Define offer and acceptance

Identify different types of offers

Explain how offer is different from invitation of an

offer
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2.Learning Objectives
 Identify essential elements of offer and
acceptance
 Understand the timing of revocation and its
communication
 Identify circumstances when an offer lapses.

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 What is Offer?
 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.
 Thus, an offer is a proposal by one person to another for
entering into a legally binding agreement with him.

Example
 A offer to sell his car to B for Rs. 3 Lac A makes an
offer to B.

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 Essentials of Valid Offer
1. Express or Implied
2. Legal and Relations
3. Definition and Clear
4. Invitation to Offer
5. Specific or General
6. Communication to Offer
7. Negative Condition
8. Condition in Offer
9. Cross Offer

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 1. Essentials of Valid Offer

 Express or Implied
 An offer created by words i.e. verbally or in writing

 Example
 A says N that he will sell his motorcycle to him for Rs.
40,000. It is an express offer

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2. Essentials of Valid Offer
 Legal Relations
 A contract to become valid must have a legal relationship. In case of
social or domestic agreements, the usual presumption is that the
parties do not intend to create legal relationship but in commercial or
business agreements, the usual presumption is that the parties intend
to create legal relationship unless otherwise agreed upon.

 Example
 A invited B on a dinner at his home. B accepted the invitation. It is
a social agreement. If A fails to serve dinner to B than B cannot go
to court for enforcing the agreement and similarly if B did not turn
up than A cannot go to court for enforcing the agreement.

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3. Essentials of Valid Offer
 Definition and Clear
 A valid offer is one which is certain and definite. Thus, no contract
can come into existence if offer is uncertain.

 Example
 A has two motorcycles. He offer to sell one motorcycle to B for Rs.
27000. it is not a valid offer because it is not clear which
motorcycle A want to sell.

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4. Essentials of Valid Offer
 Invitation to Offer
 An offer is different from an invitation of an offer. The intention in
invitation of an offer is to circulate information of his readiness to
do the transaction. Such intentions are not offers and do not
tantamount to promise on acceptance.

 Example
 Goods were displayed in a departmental store for sale and self-
service system was there. One customer selected an item. Here
the display of goods is an invitation to offer and selection by the
customer is an offer to buy.

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5. Essentials of Valid Offer
 Specific or General
 If an offer is made to definite or a particular person or specific
group of persons it is said to be specific offer. Such offer can be
accepted only by that definite person or that specific group of
persons.

 Example
 A offers to buy bike from B for Rs.50,000.

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6. Essentials of Valid Offer
 Communication to Offer
 The offer must be communicated to the offeree. The
communication is complete when it comes to the knowledge of the
person to whom it is made. In case an offer is made by post, its
communication will complete when the letter reaches the offeree.
An offer can be made by words spoken or written or through
conduct of the person. [Section 4]

 Example
 (a) A, without knowing that a reward has been offered for the arrest
of a particular criminal, catches the criminal and gives the
information to the superintendent of police. A, cannot recover the
reward as he cannot be said to have accepted the offer when he
was not at all aware of it..

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7. Essentials of Valid Offer
 Negative Condition
 Negative confirmation An offer cannot be in the form of negative
confirmation i.e. if it is not accepted within a specific time then it
will be presumed to have been accepted.

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8. Essentials of Valid Offer

 Condition in Offer
 An offer may be subject to some condition. It is on the sole
discretion of the person to whom such offer is made to either
accept or reject it. A conditional offer lapses when condition is not
accepted.

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9. Essentials of Valid Offer
 Cross Offer
 If two parties ignorant of each other’s offer made similar offers to
each other they are called cross offers. Cross offers are not equal
to acceptance.

 Example
 A of Karachi sends by post to B of Lahore offering to sell his bike
for Rs.50,000. The letter is posted on 1st December and on same
day, B of Lahore sends a letter by post to A of Karachi offering to
buy A’s bike for Rs.50,000

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Revocation and lapse of offer
1. An offer lapses after stipulated or reasonable time.
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.
4. An offer lapses by the death or insanity of the offeror or the
offeree before acceptance.
5. An offer lapses by revocation.
6. Revocation by non-fulfilment of a condition precedent to
acceptance.
7. An offer lapses by subsequent illegality or destruction of
subject matter

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 What is Accept?
 When the person to whom the proposal is made
signifies his assent to it, the proposal is said to be
accepted. [Section 2(b)].
 Thus, an acceptance means assenting to an offer made.
An offer when accepted becomes a promise.

Example
 A offer to sell his house to B for Rs. 5 Lac. B accepts
the offer. This is an acceptance.

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Essentials of acceptance Offer
1. Acceptance by Offer
2. Absolute and Un-condition
3. Prescribed Manner
4. Communication with Offeror
5. Express or Implied
6. Acceptance after Offer
7. Reasonable Time

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1. Essentials of acceptance Offer
 Acceptance by Offer
 An offer can be accepted only by the person to whom it
is made. It cannot be accepted by the another person
without the consent of offeror. When an offer is made to
a particular group, it can be accepted by any member of
the group. If the group offer is made to general public, it
can be accepted by any person who has knowledge of
the other
 Example
 X offered to sell his house to Y. Z who was aware of
such offer said that he ready to buy X’s house. There is
no contract with Z
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2. Essentials of acceptance Offer
 Absolute and Un-Conditional
 An offer should be accepted without any
condition. If any condition is imposed on an offer
then it turns out to be counter offer instead of
acceptance. [Section 7]

 Example
 A offers to sell his watch to B for Rs. 500. B replies that
he can buy it for Rs. 300. There is no acceptance on the
part of B.

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3. Essentials of acceptance Offer
 Prescribed Manner
 If the offeree does not accept the offer according to the
mode prescribed, the offer does not lapse automatically. It
is for the offeror to insist that his proposal shall be accepted
only in the prescribed manner, and if he fails to do so he is
deemed to have accepted the acceptance.

 Example
 A makes an offer to B and asks him to accept the offer
by telegram. B sends his acceptance by post. It is not a
valid acceptance.

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4. Essentials of acceptance Offer
 Communication with offeror
 The acceptance may be complete when it is communicated
to the offeror. An offer can be accepted by words spoken or
written or through conduct of the person. Further, a valid
acceptance is communicated either by the offeree himself
or any person authorized by him to communicate to the
offeror.

 Example
 A offer by letter to purchase B’s house, B expresses his
intention to sell it but does not reply. B sells to C . A has
no legal remedy against B.

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5. Essentials of acceptance Offer
 Express Acceptance
 When an acceptance is given by words spoken or written, it
is called express acceptance.

 Example
 A offered by letter to sell his cycle to B for Rs. 2,000. B
accepted his offer and sent a letter of acceptance. It is
an express acceptance.

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6. Essentials of acceptance Offer
 Express after Offer
 Acceptance must be given after receiving an offer.
Acceptance cannot precede the offer. If acceptance is made
without having knowledge of the offer, there is no contract
because no acceptance can be made without an offer.

 Example
 A offered reward for anyone who finds his lost dog. B, in
ignorance of the offer, finds and returns the dog. B
cannot claim the reward.

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7. Essentials of acceptance Offer
 Reasonable Time
 A valid acceptance is when it is accepted within the time
specified or within a reasonable time where no time is
specified.

 Example
 A applied for shares of a company in June but allotment
was made in November. M refused to take delivery of
shares. It was held that M could refuse because the offer
had lapsed after expiry of a reasonable time.

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Communication to offer, acc & revo

1. Communication of an offer
2. Communication of an Acceptance
3. Communication of a Revocation
A. Time during which an offer or acceptance can be
revoked
B. Effect delay or loss of letter of acceptance in postal
transmit
C. Accidental formation of Contract
D. Contract over the Telephone

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Any Question?

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Many Thanks

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