OFFER AND ACCEPTANCE
OFFER (OR PROPOSAL) AND ACCEPTANCE
In the formation of a contract the essential requirement is that there should be a consensus between the contracting parties by means of offer (i.e. proposal) and acceptance. There must be a definite offer by one party to other and an unqualified acceptance by the other party. In its general term an offer (or proposal) is a statement by the offeror that he desires to do some act or give some thing in return for an act, abstinence or promise of the offeree.
Offer (or Proposal) defined-Section 2(a)
Section 2(a) of the Contract Act defines an offer (or proposal) as:
“Proposal is the signification by one person to another of 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.”
An offer is a proposal by one person to another, whereby he expresses his willingness to create a contractual obligation, in return of a promise or an act, or forbearance Thus, A says to B, “Will you buy my car for Rs.80,000.” Here A makes an offer to B by signifying his willingness to sell his car to B for Rs.80,000, with a view to obtaining B’s assent to buy the car.
Parties-Section 2(d): The person making the offer is called an offeror (or proposer or promisor) and the person to whom proposal is made is known as offeree (or proposee). When the offeree accepts the offer (proposal) he is called the aeceptor (i.e. promisee).
Offer how made
An offer may be made as:
(a) According to section 2(a) a person is said to make an offer when he signifies to another his willingness to do or to abstinence from doing any thing with a view to obtaining the assent of that other to such act or abstinence (b) An offer may be made by express words, spoken or written.
(e) An offer may also be made by the conduct of the parties or the circumstances of the case.
An offer may be made to a definite person or group of persons, or to the public at large.
Types of offer
(i) Express offer is one which is made by words spoken or written. Oral offer can be made either in person or over telephone. Written offer may be made by letter, telegram, telex or fax message, advertisement, etc.
(a): A offers, face to face, to sell his car to B for a certain price. This is an offer by oral words.
(b): A offers, by letter, to sell his car to B for a certain price. This is offer by written words.
(c): A offers, over telephone, not to file a suit against B, if B pays him the amount due. This is an abstinence or omission to do something.
(ii) Implied offer is that which is made by the conduct of the offeror i.e. by a positive act or forbearance or the circumstances of a case.
Example: A transport company runs bus service on a particular route to carry passenger for a certain fare. This is an offer by conduct.
(iii) Specific offer is that when the offeror makes an offer to a particular person because he wants that person only to do what he has he has in mind.
A offered to sell his house to B at certain price. This offer has been made to a definite person i.e. B only. It can be accepted by B only.
(iv) General offer is that where an offerer makes an offer to the public at large as he does not care by whom the required act is done so long as it is done. Offer made by advertisement is the common form of gereral offer made to the general public e.g. an offer to reward to public for the return of lost property.
(v) Standing Offer:
Standing offer is a continous offer or promise e.g. a promise by a banker to discount a customer’s bills upto a certain limit, or a promise by a dealer to supply goods to a party for a fixed period at a particular price, are merely series of continuous offers made by the party concerned which only become binding promises when the party to whom they are made accepts the same by drawing a bill or placing an order, as the case may be, in accordance with the terms of such offers.
A public offer of a reward for doing something is a standing offer.
(vi) Cross offers:
Cross offers may be defined as two identical offers made by two different parties to each other, in ignorance of each other’s offer. In such a case neither offer can be regarded as the acceptance of the other. Hence, there is no contract.
When in place of accepting the terms of an offer as they are, the offeree accepts the same subject to certain conditions or qualification, he is said to make a counter-offer. The following have been held to be counter-offer.
Essentials of an offer
An offer must have certain essentials in order to constitute a valid offer namely:
1. Offer must be made with a view to obtain acceptance, Section 2(a).
2. Offer must be made with the intention of creating legal relations.
3. Offer must be definite, unambiguous and certain or capable of being made certain, i.e. must not be loose, vague or ambiguous Section 29.
4. Offer must be distinguished from (a) a mere declaration of intention, or (b) an invitation to offer or to treat.
5. Ordinary social invitation is not an offer in the eyes of law.
6. Offer made by a person under stress of great emotion or excitement is no offer.
7. First statement in the nature of preliminary discussion or an invitation to negotiate or talk in net an offer.
8. Marked prices on articles in a shop do not constitute offer.
9. Offer not communicated to the offeree is no offer.
10. Offer must contain the terms on which the offerer is,willing to act.
11. Offer must be something in the nature of request and not an order.
1. Contractual Intention:
An offer must be such as is capable of being accepted and giving rise to legal relationship. A social invitation even if accepted does not create legal relation as the idea of bargain is missing and the offeror does not intend to create a legal relationship. So the following are not offers in the eyes of law:
a. an agreement to go together to picture or for a walk.
b. an invitation to a dinner.
c. agreement between husband and wife living together are domestic agreements.
2. Terms of offer (or proposal):
The terms of an offer (or proposal) must be definite, unambiguous and certain and must net be loose, vague, ambiguous or indefinite, Acceptance of vague offer shall net result in a valid contract.
3. Offer under emotion and excitement:
Where a person makes an offer (or proposal) under the stress of great excitement or emotion there is no offer. Likewise offers over loudspeakers are not offers.
4. Invitation to negotiate:
An offer in the nature of a preliminary discussion or an invitation to negotiate or a business talk is not an offer.
5. Invitation to offer:
Invitation to offer is merely a circulation of information by a person of his willingness to treat with any person who, on such information is willing to open negotiations with him and is not an offer. In such invitation there is no intention on the part of the person sending out the invitation to obtain the assent of the other person to such invitation. Such invitation to offer is not offer and does not become promise by its acceptance.
The following are invitation to offer and are not offers:
a. Prospectus issued by an educational institution for admission.
b. Display of goods with price tickets in a shop window.
c. Prospectus issued by a company for subscription of its shares.
d. Price list, catalogue, quotation.
f. Circulars inviting tenders.
g. Announcement for sale of property.
6. Communication of offer: An offer to be effective and complete must be communicated to the person to whom it is made because a mere desire of a person to make an offer which remains hidden in his mind is no offer.
Until an offer comes to the knowledge of the offeree, he does net know what to accept. A written letter which is put in an envelop, stamped and addressed to the offeree but not dropped in the letter box is not an offer.
The offer must be communicated by the offeror (or his authorised agent). If a person learns of the intention of the offer or from a different source, there is no offer. Any act done in ignorance of an offer is not binding.
7. Statement of price: A mere statement of price is not an offer to cell.
A tender is an offer to supply goods on terms submitted, when an order is placed in accordance with these terms by the other party. So a tender is merely a standing offer which does not become a contract on the tender being accepted but becomes a binding agreement only when an order in terms of the tender is placed by the other party with the tendere. Consequently, till an order is placed both parties are free fron all legal obligations with regard to the tender. The party accepting the tender is not baund to place any order with the tenderer in terms of the tender, nor is the tenderer bound to abide by the terms of the tender, which he can always withdraw before the other party has accepted the terms by placing an order with the tendere, according to terms.