Offer and acceptance

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Offer and acceptance

  1. 1. Chapter 2J J Maini, MIMIT MALOUT 1
  2. 2.  What is `Offer/Proposal` A Proposal is defined as "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." [Section 2(a)]. A PROPOSAL IS AN EXPRESSION OF WILL OR INTENTION J J Maini, MIMIT MALOUT 2
  3. 3. How offer is madeExpressImplied To Whom offer is made An offer may be made toa) A particular personb) A particular group or body of personsc) The public at large i.e. whole world J J Maini, MIMIT MALOUT 3
  4. 4. Express and implied offer When an offer is expressed by words spoken or written it is termed as an express offer. Implied offer means an offer made by conduct. when one person allows the other to perform certain acts under such circumstances that nobody would accept them without consideration it will amount to an offer by conduct and the permission of the party ,who is benefited by such performance, will amount to his acceptance .such an acceptance will be asked to pay for it. J J Maini, MIMIT MALOUT 4
  5. 5. Example of implied offer A bus company runs buses between India gate to kahsmiri gate. There is implied offer from the bus company to take any person on the route who is prepared to pay the prescribed fare. the offer will be said to be accepted by a passenger as soon as he takes seat in the bus. A bid at an auction is an implied offer Accepto to buy. Similarly consuming eatables Of offe at a self service restaurant, both create implied promise to pay for the auction benefits enjoyed. Bidder Is an offeror J J Maini, MIMIT MALOUT 5
  6. 6. Positive and negative offer A person may express his willingness to do something or to abstain from doing something e.g it may be an offer to construct a wall to provide privacy or not to construct a wall so that free passage of light and air may not be obstructed. J J Maini, MIMIT MALOUT 6
  7. 7.  Specific Offer – An offer made to a definite person or body of persons General Offer - When an offer is addressed to the whole world , it is called general offer. J J Maini, MIMIT MALOUT 7
  8. 8. Carlill vs. Carbolic Smoke Ball Co. s case, the patent- medicine company advertised that it would give a reward of £100 to anyone who contracted influenza after using the smoke balls of the company for a certain period according to the printed directions. Mrs. Carlill purchased the advertised smoke ball and contracted influenza in spite of using the smoke ball according to the printed instructions. She claimed the reward of £100. The claim was resisted by the company on the ground that offer was not made to her and that in any case she had not com-municated her acceptance of the offer. She filed a suit for the recovery of the reward.Held: She could recover the reward as she had accepted the offer by complying with the terms of the offer.) J J Maini, MIMIT MALOUT 8
  9. 9. An offer must have certain essentials in order to constitute it a valid offer. These are:I. The offer must be made with a view to obtain acceptance/ assent of the other party. Case : Harris vs. Nickerson ( advt. In newspaper for sale but later cancelled)2. The offer must be made with the intention of creating legal relations. [Balfour v. Balfour (1919) J J Maini, MIMIT MALOUT 9
  10. 10. 3. The terms of offer must be definite, unambiguous and certain or capable of being made certain. The terms of the offer must not be loose, vague or ambiguous. Taylor vs. Portington ( Handsomely decorated) J J Maini, MIMIT MALOUT 10
  11. 11. 4. An offer must be distinguished from (a) a mere declaration of intention or (b) an invitation to offer or to treat.An auctioneer, at the time of auction, invites offers from the would-be-bidders. He is not making a proposal.A display of goods with a price on them in a shop window is construed an invitation to offer and not an offer to sell. J J Maini, MIMIT MALOUT 11
  12. 12. 5. Offer must be Communicated to the offeree Case Lalman Shukla vs. Gauri Dutt ( servant and missing nephew)6. It may be conditional7. Lapse of an offer8. An invitation to offer is not an offer9. Offer should not contain a term the non- compliance of which would amount to acceptance J J Maini, MIMIT MALOUT 12
  13. 13.  An offer is made with a view to obtain assent thereto. As soon as the offer is accepted it becomes a con-tract. But before it is accepted, it may lapse, or may be revoked. Also, the offeree may reject the offer. In these cases, the offer will come to an end. The offer lapses after stipulated or reasonable time An offer lapses by the death or insanity of the offeror or the offeree before acceptance. An offer terminates when rejected by the offeree. An offer terminates when revoked by the offeror before acceptance. An offer terminates by not being accepted in the mode prescribed, or if no mode is prescribed, in some usual and reasonable manner. A conditional offer terminates when the condition is not accepted by the offeree. Counter Offer J J Maini, MIMIT MALOUT 13
  14. 14. 1. An offer lapses after stipulated or reasonable time.2. An offer lapses by the death or insanity of the offeror or the offeree before acceptance.3. An offer lapses on rejection.4. An offer terminates when revoked.5. It terminates by counter-offer.6. It terminates by not being accepted in the mode prescribed or in usual and reasonable manner.7. A conditional offer terminates when condition is not accepted. J J Maini, MIMIT MALOUT 14
  15. 15.  Counter Offer - rejection of the original offer and making a new offer. This new offer is counter offer. Case hyde vs. Wrench ( sell farm for 1000 pounds, counter offer for 950 pounds) J J Maini, MIMIT MALOUT 15
  16. 16. Offer vis-a-vis Invitation to offer An offer must be distinguished from invitation to offer. A prospectus issued by a company for subscription of its shares by the members of the public, is an invitation to offer. The Letter of Offer issued by a company to its existing shareholders is an offer.5. The offer must be communicated to the offeree. An offer must be communicated to the offeree before it can be accepted. This is true of specific as sell as general offer.6. The offer must not contain a term the non-compliance of which may be assumed to amount to acceptance.Cross Offers Where two parties make identical offers to each other, in ignorance of each others offer, the offers are known as cross-offers and neither of the two can be called an acceptance of the other and, therefore, there is no contract. J J Maini, MIMIT MALOUT 16
  17. 17.  Section 2(b) states thatA proposal when the personto whom the proposal ismade signifies his assent thereto the proposal is said to be accepted.An accepted proposal is called a promise or an agreement. J J Maini, MIMIT MALOUT 17
  18. 18. Acceptance may be express orimplied Express- words spoken or written Implied- accepted by conduct J J Maini, MIMIT MALOUT 18
  19. 19. A lady invited her niece to stay with her in thesame house and promised to settle on herimmovable property. The niece stayed withher residence till the time of her death. Niecewas held to be entitled to property becauseshe has accepted the offer of the aunt byconduct i.e., by going to her house andstaying with her as desired. (V. Rao v/s A.Rao) J J Maini, MIMIT MALOUT 19
  20. 20.  An offer may be accepted by the person to whom it is made. Case Boulton vs. Jones General offer- only the persons with the knowledge /notice of the offer can come forward and accept the offer. Case Carlill vs. Carbolic Smoke Ball Co. J J Maini, MIMIT MALOUT 20
  21. 21.  Boulton v. Jones 1857 A foreman bought the business from the owner. Then a certain amount of piping was ordered. The order was accepted and sent by the new owner. The offeror refused to pay because the old owner owed him money and there was a set-off agreement that the dept would be paid in the form of leather piping. It was an offer to a specific person which could be accepted only by him. Jones only made the offer because he thought to receive piping for free. J J Maini, MIMIT MALOUT 21
  22. 22. I want reward Carbolic smoke ball Company advertisementCarlill vs Carbolic smoke ball company,(1983)IQB256 Shweta Verma, Research Scholar 22 J J Maini, MIMIT MALOUT 22
  23. 23. 1. Acceptance must be absolute and unqualified/ unconditionalCase : A made an offer to B to purchase a house with possession from 25th July, the offer was followed by an acceptance suggesting possession from 1st August. Held there was no concluded contract (Routledge v/s Grant)2. Acceptance must be communicated to the offeror. Case Brodgen vs. Metroploitan Railway co.Case : a draft agreement relating to supply of coal was sent to the manager of a railway company for his acceptance. The manager wrote the word “Approve” and put the draft in the drawer of his table intending it to send it to the company’s solicitor for a formal contract to be drawn up. By some oversight the document remained in the drawer. Held, there is no contract. (Brogden v/s Metropolitan Rail Co.,) J J Maini, MIMIT MALOUT 23
  24. 24. 3. Acceptance may be made within reasonable timeCase Ramsgate Victoria Hotel Co. Vs. Montefiore ( a for person applied for shares in June can’t be bound by an allotment made in late November.Case: on 08th June, Mr. M offered to take shares in R Company. He received a letter of acceptance on November 23. He refuses to take the shares. Held, Mr. M, was entitled to refuse as his offer has lapsed as the reasonable period during which it could be accepted had elapsed (Ramsgate Victoria Hotel Co., vs. Montefiore) J J Maini, MIMIT MALOUT 24
  25. 25. 4. Acceptance must be according to the mode prescribed. Ex- A sends an offer to B through post in the usual course. B should make the acceptance in the "usual and reasonable manner" as no mode of acceptance is prescribed. He may ac-cept the offer by sending a letter, through post, in the ordinary course, within a reasonable time. J J Maini, MIMIT MALOUT 25
  26. 26. 5. The acceptor must be aware of the proposal at the time of offer Case Boulton vs. Jones Case: Boulton brought a hose-pipe business from Brocklehurst. Jones to whom Brocklehurst owed a debt, place an order with Brocklehurst for the supply of certain goods. Boulton supplied the goods even though the order was not addressed to him. Jones refused to pay Boulton for the goods because he, by entering into contract with Brocklehurst, intended to set off his debt against Brocklehurst. Held, the offer was made to Brocklehurst and it was not in the power of Boulton to step in and accept and therefore there was no consent (Boulton vs. Jones) J J Maini, MIMIT MALOUT 26
  27. 27. 6. Acceptance must be given before the offer lapses or before the offer is revoked7. Acceptance can’t be implied from silence J J Maini, MIMIT MALOUT 27
  28. 28. Acceptance of a proposal may sometimes be inferred from silence or inaction. As a rule silence does not imply acceptance, but in the following cases silence may be indicative of assent to the proposal1. Where the offeree having reasonable opportunity to reject the offered goods or services takes the benefit of them, it will Amount to acceptance.Case Kashi Prasad vs. Sajjadi Begum- Enhancement of rent not protested and tenants continued living after notice was served by the landlord J J Maini, MIMIT MALOUT 28
  29. 29. 2. Where because of previous dealings the offeree has given the proposer reason to understand that the silence was intended by the offeree as a manifestation of assent and the offeror does so understand. J J Maini, MIMIT MALOUT 29
  30. 30. Subject to contract or subject to approval bycertain persons such as solicitors etc.No contract will arise till a formal contract issettled or consent of such person obtained. J J Maini, MIMIT MALOUT 30
  31. 31.  When the contracting parties are face to face and negotiate in person, a contract comes in existence the movement the offeree gives his absolute and unqualified acceptance to the proposal made by the offeror. When the parties are at the distance and the offer and the acceptance and their revocation are made through post, i.e., by letter or telegram. When parties are at a distance and the offer and acceptance are exchanged through post, rules contained in sec.4 & 5 apply J J Maini, MIMIT MALOUT 31
  32. 32. The communication of offer is complete when is comes to the knowledge of the person to whom is made/ offeree.E.g., A Proposes, by a letter, to sell a house to B at a certain price. The letter is posted 10th July. It reaches B on 12th July. The communication of the offer is complete when B receives the letter, i.e., on 12th July. J J Maini, MIMIT MALOUT 32
  33. 33. As against the proposer-when it is put into course of transmission to him so as to be out of the power of the acceptorAs against the acceptor- when it comes to the knowledge of the proposerE.g., in the above case, when B accepts A’s Proposal, by a letter sent by post on 13th instant. The letter reaches on 15th instant. The communication of acceptance is complete, as against A, when the letter is posted, i.e., on 13th, as against B, when the letter is received by A, i.e., on 15th. (Case of NT Rama Rao) J J Maini, MIMIT MALOUT 33
  34. 34. As against the proposer• Communication is complete as soon as a duly addressed letter of acceptance is put into the course of transmission.• Whether the same reaches the proposer or not.As against the acceptor• Communication is complete only when the proposer has received the letter and learnt the contents thereof. J J Maini, MIMIT MALOUT 34
  35. 35. Communication of Revocation• Communication of revocation (of offer or acceptance) is complete: – As against the person who makes it when it is put into the course of transmission. – As against the person to whom it is made, when it comes to his knowledge. J J Maini, MIMIT MALOUT 35
  36. 36.  The communication of a revocation is complete - as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge. E.g., A Proposes, by a letter, to sell a house to B at a certain price. The letter is posted 15th May. It reaches B on 20th May. A revokes his offer by a telegram on 19th May. The telegram reaches B on 21st May. The revocation is complete as against A when the telegram is dispatched, i.e., on 19th May. It is complete as against B when he receives it, i.e., on 21st May. J J Maini, MIMIT MALOUT 36
  37. 37. Time of revocation of offer and acceptance(sec5)• Revocation of offer(sec5 para1)- A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer but not afterwards.• (Revocation of acceptance sec5 para2)- An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. J J Maini, MIMIT MALOUT 37
  38. 38. Example A proposes by a letter sent by post to sell his to B. the letter is posted on the 1st of the month. B accept the proposal by a letter sent by post on the 4th. The letter reaches A on 6th• A may revoke his offer at any time before B post his letter of accpetance i.e 4th but not afterwards. B may revoke his acceptance at any time before the letter of acceptance reaches A i.e 6th but not afterwards. J J Maini, MIMIT MALOUT 38
  39. 39. A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. Ex- A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of ac-ceptance, but not afterwards. B may revoke his acceptance at any time before or at the moment when the letter communi-cating it reaches A, but not afterwards. J J Maini, MIMIT MALOUT 39
  40. 40.  A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but no afterwards. Ex: Mr. A proposes by a letter sent by post to sell his house to Mr. B. the letter is posted on the 01st of the month. Mr. B accepts the proposal by a letter sent by post on the 04th. The letter reaches Mr. A on the 06th. Mr. A may revoke his offer at any time before Mr. B posts his letter of acceptance, i.e., 04th but not afterwards Mr. B may revoke his acceptance at any time before the letter of acceptance reaches Mr. A, i.e., 06th, but not afterwards J J Maini, MIMIT MALOUT 40
  41. 41. Revocation of offer arises if there has been no acceptance of the offer by the time of revocation. Sec.6 Modes of revocation of offer J J Maini, MIMIT MALOUT 41
  42. 42. Revocation of the offer by theofferor The offeror can revoke his offer before it is accepted “the bidder at an auction sale may withdraw (revoke) his bid (offer) before it is accepted by the auctioneer by using any of the customary method e.g. fall of hammer. J J Maini, MIMIT MALOUT 42
  43. 43. Decided case on revocation of offer by the offeror CASE 1 In cooke .v. Oxley(1790)3 T R 653 ,A offered to sell 266 hogshed at a certain price and promised to keep it open for acceptance by B till 4 PM of that day .Before that time A sold them to C ,B accepted before 4PM but after the revocation by A .it was held that the offer was already revoked. A B 43 J J Maini, MIMIT MALOUT 43
  44. 44. CASE 2 IN Dickinson V. Dodds (1876) 2ch.D.463,A agreed to sell property to B by a written document which stated “this offer to be left over until Friday 9AM”.on the Thursday A made a contract to sell the property to C .B heard of this from X and on Friday at 7AM he delivered to A an acceptance of his offer .Held B could not accept A’s offer after he knew it had been revoked by the sale of the property to C. J J Maini, MIMIT MALOUT 44
  45. 45.  Acceptance is complete as against the offeror as soon as the letter of acceptance is posted. The contract is complete even if the letter of acceptance goes astray or is lost through an accident in the post. But in order to bind the offeror, it is important that the letter of acceptance is correctly addressed, adequately stamped and posted, otherwise the acceptance is not complete as per section 04 of the Act. J J Maini, MIMIT MALOUT 45
  46. 46. 1. By notice of revocation2. By lapse of time3. By non-fulfillment of condition precedent4. By death or insanity5. By counter offer6. By the non-acceptance of offer acc. to the prescribed or usual mode7. By the subsequent illegality J J Maini, MIMIT MALOUT 46
  47. 47.  Acceptance of a proposal may be revoked at any time before the communication of acceptance is complete as against the acceptor but not afterwards. The acceptance is binding on the acceptor when the letter of acceptance actually reaches the proposer J J Maini, MIMIT MALOUT 47

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