Lecture 3


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Lecture 3

  1. 1. OFFER <br />AND ACCEPTANCE<br />
  2. 2. Learning<br />What is an offer and Acceptance?<br />Legal rules as to offer and acceptance<br />Communication of offer and acceptance<br />Revocation of offer and acceptance<br />
  3. 3. Composition of an agreement<br />An agreement is:<br /><ul><li> generally characterised by an ‘OFFER’ by one party and an ‘ACCEPTANCE’ by another</li></li></ul><li>Definition of Offer<br />A person is said to have made a proposal when he signifies to another his willingness to do something with a view to obtain assent of that other. It indicates that upon acceptance by the offeree, the offeror will be bound thereby. <br />HOW AN OFFER IS MADE<br />Express Offer<br />Implied Offer<br />
  4. 4. Elements of a Contract: 1) Offer <br />What is an offer?<br />Does not have to be in writing<br />Promissory: Promise to do something or to refrain from doing a certain act<br />Intention: To be legally binding<br />Communication: To Promisee<br />Certainty: Terms must be clear & certain <br />Finality: Must be a degree of finality with the terms<br />
  5. 5. Elements of a Contract: 1) Offer cont…<br />An offer must be made to another person<br />Offeror: party that makes the offer<br />Offeree: party that receives the offer<br />Offer made to the whole world<br />Carlill v Carbolic Smoke Ball Company<br />
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  8. 8. The case concerned a flu remedy called the "carbolic smoke ball". The manufacturer advertised that buyers who found it did not work would be rewarded £100, a considerable amount of money at the time. The company was found to have been bound by its advertisement, which it construed as creating a contract. The Court of Appeal held the essential elements of a contract were all present, including an offer, acceptance, consideration and an intention to create legal relations.<br />
  9. 9. Elements of a Contract: 1) Offer cont…<br />Offer must be communicated<br />Offeror to Offeree<br />Mode of Communication<br />Verbal/ Writing/Post<br />
  10. 10. Elements of a Contract: 1) Offer cont…<br />Termination of an offer<br />An offer can be terminated through the following ways:<br />(1) Revocation<br />(2) Lapse<br />(3) Rejection By Offeree <br />(4) Implied rejection : counter offer<br />Eg - A offers to sell his car to B for $1000. B says to A, “I will give you $750". B statement amounts to a counter offer which terminates the original offer by A<br />
  11. 11. Do you have a valid offer?<br />
  12. 12. Offer to Whom<br />1. To a specific person - Specific Offer<br />2. To the world at large – General offer<br />[Case: Carlill v/s Carbolic Smoke Ball Co.]<br />
  13. 13. Rules relating to offer<br />Offer must be such as in law is capable of being accepted and giving rise to legal invitation.<br />Terms of offer must be definite and certain<br />Examples: (i) A owns three cars and offers to sell one of his car<br />(ii) A offers to take a house on lease for 3 years if the house was put to thorough repair and rooms are decorated according to present style<br /> [ Case: Taylor v/s Portington]<br />
  14. 14. Case law: A offered to take a house on lease for three years at $ 285 per annum if the house was “put into through repair and drawing room handsomely decorated according to the present style.” Held, the offer was too vague to result in a contract relationship. (Taylor v/s Portington)<br />
  15. 15. 3. An offer may be distinguished from <br />(a) A declaration of an intention and an announcement<br /> [Case: Harris v/s Nickerson – Auction Sale]<br />(b) An invitation to make an offer <br />
  16. 16. CL: An auctioneer advertised in a newspaper that a sale of office furniture would be held. A broker comes from a distinct place to attend that auction, but all the furniture was withdrawn from the auction. The broker thereupon sued the auctioneer for his loss of time and expenses. Held, a declaration of intention to do a thing did not create a binding contract with those who acted upon it, so that the broker could not recover. (Harris vs. Nickerson)<br />
  17. 17. 4. It must be communicated to the offeree.<br />Case law: S sent his servant, L to trace his missing nephew. He than announced that anybody who traced his nephew would be entitled to a certain reward. L traced the boy in ignorance of this announcement. Subsequently when he come to know of the reward, he claimed it. Held, he was not entitled to reward. (Lalman v/s GauriDutt)<br />
  18. 18. 5. It must be made with a view to obtain the assent.<br />6. It should not contain a term the non – compliance of which may be assumed to amount to acceptance<br />7. A statement of price is not an offer<br /> [Case: Harvey v/s Facey]<br />
  19. 19. Case law: three telegrams were exchanged between Harvey and facey.<br />“Will you sell your bumper hall pen? Telegraph lowest cash price – answer paid”<br />“Lowest price for bumper hall pen $900” (Facey to Harvey)<br />“We agree to buy bumper hall pen for the sum of $900 asked by you” (Harvey to Facey)<br />Held, there was no concluded contract between Harvey and facey. (Harvey v/s Facey)<br />
  20. 20. Acceptance<br />A manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer<br />Who can accept? <br />Those to whom offer was made (either a specific person or general public)<br />Rule<br />Acceptance must match offer exactly<br />Must be communicated to offeror<br />
  21. 21. An acceptance is a final and unqualified assent to all the terms of the offer.<br />Rules of acceptance :<br />(1) Offer still in force<br />(2) Acceptanceto be made by the offeree & to offeror<br />(3) Unqualified and absolute <br />(4) Acceptance can be in writing, oral or by conduct<br />(5) Silence does not constitute an acceptance<br />(5) Communication<br />
  22. 22. Communication of acceptance<br />Completed acceptance <br />Reasonable time<br />
  23. 23. When is all this Effective?<br />Acceptance occurs when SENT<br />Through mail—when posted<br />Spoken—when said<br />Fax/E-mail—when sent<br />
  24. 24. Legal rules as to acceptance<br /><ul><li>Acceptance must be legal & unqualified</li></ul> Acceptance must be absolute and unqualified. If a purported acceptance introduces any qualifications or new terms, it is a counter offer, which destroys the previous offer.<br /><ul><li>It must be communicated to the offeror</li></ul> Acceptance is only effective when it is communicated to the offeror.<br />Exception – Acceptance of a unilateral offer(made to public at large) need not be communicated. It happens on the performance of the coditions<br /><ul><li>CASE: Carlill v Carbolic Smoke Ball Co (1893)</li></li></ul><li><ul><li>It can not precede an offer
  25. 25. It must be according to the mode prescribed
  26. 26. It must be given within a reasonable time</li></ul>[Case: Ramsgatevictoria Hotel Co V/s Montefiore]<br /><ul><li>Showing intention to fulfil the terms of promise It cannot be implied by silence (mere mental acceptance is no acceptance)
  27. 27. Must be given before the offer lapses</li></li></ul><li>Completion of Communication<br />Offer or Acceptance<br />OFFER : when it comes to the knowledge of the Offeree<br />ACCEPTANCE : (i) As against the offeror : when putted into course of transmission (out of acceptors’ power)<br />(ii) As against the acceptor : when it comes to the knowledge of the offeror<br />Revocation of Offer or Acceptance<br /> (i) As against the person who makes it -- when putted into course of transmission.<br /> (ii) As against the person to whom it is made -- when it comes to his knowledge<br />
  28. 28. EXAMPLE<br /> A proposes by a letter to sell a house to B at certain price. The letter is posted on 15 th May.It reaches B on 19th May. A revokes his offer by telegram on 18th May. The telegram reaches B on 20th May. The revocation as against A is complete on ………………<br /> and as against B is complete on …………………<br />
  29. 29. Time for revocation of offer and acceptance<br />Revocation of Offer:<br />Before the communication of acceptance is complete as against the proposer<br />Revocation of Acceptance<br /> Before the communication of acceptance is complete as against the acceptor.<br />
  30. 30. Withdrawal <br />arrived<br /> after offer<br /> effected <br />Effective offer<br />Offer on the way to the offeree<br />withdrawal<br />Withdrawal <br />arrived before <br />offer effected <br />Ineffective offer<br />Offer on the way to the offeree<br />withdrawal<br />Delayed <br />withdrawal <br />arrived after it<br />should have <br />arrived<br />Ineffective offer<br />Offer on the way to the offeree<br />withdrawal<br />Offer dispatched<br />Offer arrived<br />
  31. 31. 7-31<br />Revocation by Communication<br />Automatic Revocation<br />Revocation by Passing of Time<br />Revocation by Death or Insanity<br />Revocation by Destruction<br />Revocation by Subsequent Illegality<br />Revocation of an Offer<br />
  32. 32. Revocation by Communication<br />An offer may be revoked by the offeror by communicating that intent to the offeree before the offer has been accepted.<br /> Revocation is ineffective if acceptance has occurred.<br />7-32<br />
  33. 33. Automatic Revocation<br />If term of offer includes a definite time limit for acceptance, offer is automatically revoked at end of time period stated.<br />Revocation by Passing of Time<br />When no time limit is set, an offer will revoke automatically after the passing of a reasonable length of time.<br />The time element is determined by a review of surrounding facts and circumstances.<br />7-33<br />
  34. 34. <ul><li>Revocation by Death or Insanity
  35. 35. Death or insanity of an offeror automatically revokes an offer that has not yet been accepted.
  36. 36. Revocation is immediate and communication to offeree is not required.
  37. 37. Revocation by Destruction
  38. 38. Destruction of subject matter related to an offer automatically revokes that offer. 
  39. 39. Revocation by Subsequent Illegality
  40. 40. Legislation that makes performance of an agreement illegal automatically revokes an existing offer.</li></ul>7-34<br />
  41. 41. THANK YOU<br />11<br />