Proposal or OfferThe term proposal has been defined in Sec 2(a) as:“when one person signifies to another hiswillingness to do or abstain from doinganything, with a view to obtaining the assent ofthat other to such act or abstinence, he is said tomake a proposal.”The term proposal used in the Contract Act issynonymous with the term offer used in EnglishAct.
A contract is an agreement between two parties imposing rights andobligations which may be enforced by law. The courts need some kindof evidence of this agreement, so they look, through the eyes of areasonable person, for external evidence of it. To help identifyevidence of agreement, it is conventionally analysed into two aspects:offer and acceptance. Offer + Acceptance Contract
OfferAn Offer Can be Defined as follows:__________________________________________________________An expression of willingness to contract on certain terms, made with theintention that it shall become binding as soon as it is accepted by theperson to whom it is addressed.__________________________________________________________
Offers can be of two types: Specific – made to one person or group of people. Then only that particular person or group of people can accept. General – made to ‘the whole world’ (or people generally),particularly seen in the cases of rewards and other publicadvertisements.
The following inovles a general offer, made to the ‘whole world’.Carlill V Carbolic Smoke Ball Company (1893)Mrs Carlill acquired a smoke ball from her chemist. The smoke ballfailed to prevent her from getting influenza (despite its use as directedfrom November to January), Mrs Carlill claimed her £100. When thecompany refused to pay she sued them. It was held that Mrs Carlill couldsuccessfully recover the £100. An offer to the whole world was possible,becoming a contract with any person(s) who accepted the offer before itstermination. Mrs Carlill had accepted by her actions, and had turned theoffer to the world into a contract with her personally. The CarbolicSmoke Ball Company were therefore bound to give her the moneypromised in the advertisement.
The Carbolic Smoke Ball Company, in defending its claim put forwardvarious defences, and in rejecting them one by one the court laid downimportant legal principles:1) The company claimed that promise was mere advertising puff, notintended to create legal relations. However, the Court of Appealdismissed this argument because:a) The company had made a specific statement of fact, capable offorming part of a binding contract: “If you use our product and catch ’flu,we will give you £100.b) The advert had also stated that ‘£1000 is deposited with the AllianceBank, Regent Street, showing our sincerity in the matter’. The court feltthat people generally would interpret this as an offer to be acted on.
2) The company argued that a ‘contract with the whole world’ wasnot possible.Bowen LJ said that this was not a contract with the whole world but anoffer made to all the world, which was to ripen into a contract withanybody who performed the necessary conditions.3) The company claimed that as Carlill had not notified them of herintention to accept the offer there was no contract.The Court of Appeal held that the company had waived the need tocommunicate acceptance because the advert indicated that the action ofusing the smoke ball was what was required of the offeree, rather than anoral or written response. In this the court recognised the existence ofunilateral contracts.4) The company argued that there was no consideration to make thepromise binding.The Court of Appeal said that Mrs Carlill’s use three times daily wasconsideration, also the benefit received in promoting sales.
While most offers require verbal or written acceptance (forming what areknown as bilateral contracts), with the general offers the performance ofsome act may be valid acceptance (forming a unilateral contract)An offer may be: Express – either verbal or written, or Implied – from conduct or circumstances. Sometimes, nothing issaid at all but an offer is obvious from the actions. This is probably thesituation when making a journey on a bus. The case of Wilkie V LondonPassenger Transport Board (1947) involved a discussion as to how andwhere a contract was formed in a bus journey. Clearly there was acontract, but exactly where offer and acceptance took place wasdebatable. It was largely implied by the actions of the parties, rather thananything said specifically on each bus journey.
Communication of offer necessaryThe offer has to be communicated to the offeree in inorder that the offeree can accept it.According to Sec 4, “the communication of a proposalis complete when it comes to the knowledge of theperson to whom it is made.”Cross offer: Tinn vs Hoffmann (1873) 800 tons ofiron at 69 shillings per ton.
Termination of an offerThe various ways in which an offer may terminate:
AcceptanceThis will normally mean that the offer is no longer available to anyoneelse, as the stock may be exhausted, such as where a person has a bicyclefor sale.RefusalAn offeree may refuse an offer, in which case the offer ends, so it cannotbe accepted later by the offeree.Counter-offerSometimes a reply from an offeree comes in the form of a new proposal,or counter-offer. It may simply be that the offeree is not happy with oneor more of the terms and makes changes accordingly. Since this is not anagreement to all the terms of the offer, it is not acceptance, and is knownas a counter-offer. It is really a new offer, which is then open toacceptance or termination in some other way. The effect of a counter-offer is to destroy the original offer. This can be seen in the followingcase.
AcceptanceAccording to sec 2(b) when the person to whom the proposal is madesignifies his assent thereto the proposal is said to be acceptedAcceptance can be defined as:__________________________________________________________ Agreement to all terms of an offer by words or conduct.__________________________________________________________
Essential of valid Acceptance• Acceptance should be communicated• Acceptance should be absolute and unqulified.It lapses by rejection or counter-offer• Acceptance should be expressed in usual/ prescribed manner• Acceptance should be made while the offer is still subsisting