Contract law of Bd discussions

1. INTRODUCTION TO BUSINESS LAW
COURSE CODE: BUS 360
SECTION: 07
Course Instructor: Afnan Ashfaque
E-mail: afnan.ashfaque@iub.edu.bd
LECTURE 2: OFFER AND ACCEPTANCE
PRIMARY SOURCE: CHAPTER 2, COMMERCIAL LAW AND INDUSTRIAL LAW, 27TH EDITION BY
ARUN KUMAR SEN AND JITENDRA KUMAR MITRA

2. Formation of Contract
Recap: All contracts are made by the process of a lawful offer
by one party and the lawful acceptance of the offer by the
other party.
Example: X says to Y “Will you buy my house for 80 Lac Taka?”.
This is an offer. If Y says “Yes”, the offer is accepted and a
contract is formed.
It is both a specific offer and an express offer, which will be
discussed in later slides.
Terms to remember
Offeror: The person making the offer is called the offeror.
Offeree: The person to whom the offer is made is called the
offeree.
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3. Specific and General Offers
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When the offer is made to a specific person it is
known as a specific offer , but when it is not
made to any particular person but to the public at
large it is known as general offer.
Example 1 (General offer): an offer to give reward to
anybody who finds a lost dog is a general offer.
This general agreement will be deemed to be
accepted by anyone who actually finds the lost
dog. The person, who accepts this offer, generally
by performing the condition of the offer, can bind
the person making the offer.

4. Specific and General Offers
cntd.
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Example 2 (General offer): Carlill v Carbolic Smoke
Ball Co
It is often the first legal case a student studies under
the law of contract. The case concerned a flu
remedy called the "carbolic smoke ball". The
manufacturer advertised that buyers who found it
did not work would be awarded £100. The company
was found to have been bound by its advertisement,
which was construed as an offer which the buyer, by
using the smoke ball, accepted, creating a contract.
The essential elements of a contract were all
present, including offer and acceptance,
consideration and an intention to create legal
relations.

5. Specific and General Offers
Example 2 cntd.
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The plaintiff (Mrs. Carlill ) relying on the
advertisement purchased a Smoke Ball, used it in
accordance with the directions of the defendants
(Carbolic Smoke Ball Co), but still caught
influenza. She sued the defendants to claim the
reward of 100 pounds advertised by them. It was
held that this being a general offer addressed to
all the world had ripened into a contract with the
plaintiff by her act of performance of the required
conditions and thus accepting the offer. She was
therefore, entitled to claim the reward.
Example 3 (Specific offer): See example in slide 2.

6. Rules regarding offer
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1. An offer may be express or may be implied
from the circumstances:
- an express offer is stated in words or in
writing (see example in slide 2)
- The offer which could be understood by
conduct of parties is called an implied offer.
For example, when a bus company runs its
bus on a particular route, there is an implied
offer by the bus company to carry passengers
to the specified destination at a certain fair.

7. Rules regarding offer cntd.
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2. An offer may be made to a definite person, to
some definite class of persons, or to the public at
large.
3. The offer must be capable of creating a legal
relationship. Example: An invitation to play cards
does not create a legal relationship.
4. The terms of an offer must be certain, definite,
unambiguous and not vague. Example: X says to
Y “ I will give you some money if you fix my car”. It
is not an offer which can be accepted because the
amount of money to be paid is not certain.

8. Rules regarding offer cntd.
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5. A mere statement of intention is not an offer:
Price lists and catalogues are merely statements
of intention. They are not regarded as offers but
as invitation to others to make offers.
For example, at a computer store a laptop has a
price tag attached to it which says the price of the
laptop is 85,000 Taka. The price tag is considered
to be the expression of an intention to sell the
laptop at 85,000 Taka. It is not an offer to the
world at large which can be accepted by anybody.
The intending purchaser who wished to buy the
laptop is the proposer/offeror. The shopkeeper
may or may not accept the proposal.

9. Rules regarding offer cntd.
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6. An offer must be communicated to the offeree:
A person cannot accept the offer unless he
knows about the existence of the offer.
Example: P offers a reward to anyone who
returns his lost dog. Q finds the dog and brings
it to P without knowing about the offer.
Therefore, Q is not entitled to the reward.
7. An offer may be conditional: In such cases the
conditions must be clearly communicated.

10. Rules regarding acceptance
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1. It must be an absolute and unqualified
acceptance of all the terms of the offer.
2. Conditional acceptance: An acceptance with a
variation is no acceptance. It is simply a
counter proposal/offer. Which must be
accepted by the original offeror.
Example: X offered to sell his house to Y for 45
lac taka. Y said “accepted for 40 lac taka”.
This is not an acceptance. It is a counter
offer. Which X may or may not accept.

11. Rules regarding acceptance
cntd.
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3. Contracts subject to condition: There are cases
where rights and obligations may be dependent
upon the happening of a particular event.
4. The acceptance must be expressed in some
usual or reasonable manner, e.g. by word of
mouth, telephone, telegram, or by post.
5. Mental acceptance or uncommunicated assent
does not result in a contract.
6. Mode of acceptance: If the offeror prescribes a
particular mode of acceptance then the offeree
must follow it.

12. Rules regarding acceptance
cntd.
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7. Time of acceptance: If the offeror prescribes a
time. The offeree must accept it within that time.
8. When acceptance is complete:
A proposes, by letter, to sell a house to B at a
certain price, the communication of the proposal is
complete when B receives the letter.
B accepts the proposal by a letter sent by post. As
against A, the communication of acceptance is
complete when B posts the letter. As against B,
the communication of acceptance is complete
when A receives the letter.

13. Rules regarding acceptance
cntd.
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9. Before offer: There cannot be acceptance
before the offer is given.
10. The acceptance must be made while the
offer is in force: before the offer is revoked.

14. Revocation
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An offer comes to an end and is no longer open
to
acceptance under the following circumstances.
1. By notice: If the offeror gives notice of
revocation to the other party the offer comes to
an end. An offer may be revoked anytime
before acceptance but not afterwards. Once
an offer is accepted there is a binding contract.
2. By lapse of time: when the offeror prescribes
a time within which the offer must be
accepted, the proposal lapses as soon as the
time expires.

15. Revocation cntd.
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3. After expiry of the reasonable time: when no time
has been prescribed, the proposal lapses after the
expiry of a reasonable time. “What is reasonable
time’ depends on the circumstances of the case.
Note: See example on page 30 of textbook.
4. By failure of condition as precedent: An offer
lapses by the failure of the acceptor to fulfill a
condition precedent to acceptance.
Example: A says to B “I will sell my house to you for
50 Lac taka if you are married”. The offer cannot
be accepted until or unless B is married.

16. Revocation cntd.
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5. By death or insanity of the offeror, if the fact of
his death or insanity comes to the knowledge of
the acceptor of the acceptance.
6. Counter offer: when a counter offer is given, the
original offer lapses.
7. By refusal: A proposal once refused is dead.
Example: A offers to sell his firm to B for 50,000
taka. B replies offering to pay 30,000 taka. A
refuses. Then B writes to A accepting the original
offer. There is no contract because original offer
has lapsed.

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Note: The students are strictly advised to follow
the assigned text book for details. Examples
borrowed from external sources have been
used for a better understanding of the material.
It is mandatory for the students to read and
understand all the given examples.