Offer and Acceptance

Offer

Offer generally known as proposal is an expression of willingness by one person put forward to another person with a view to get assent. A person is said to have made the proposal when he signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of that offer to such act or abstinence. It must be made by one person to another person. It must be an expression of readiness or willingness to do or abstain from doing something. It must be made with a view to obtain the consent of that person to proposed act or abstinence.

Section 2(b) of NCA 2056 defines offer as a proposal put by a person to another with a hope to get assent from him for doing or not doing any work.

Section 2(a) of ICA 1872 mentions, “when one person signifies to another, his willingness to do or abstain from doing something with a view to obtaining assent of that other to such act or abstinences, he is said to make a proposal.”

The person who makes the proposal is called the promisor or offerer and the person to whom it is made is called promisee or offeree.

Types of Offer

1. Express or Implied Offer: An express offer is made by using words in written or verbal form that makes a formal contract. Implied offer is made by the conduct of the parties or circumstances.
Eg. A offers to sell his bike to B over phone(Express)
A transport company runs a bus in particular route(Implied)
2. Specific and General offer: An offer made to a particular group or person is specific offer and the offer made to general public or society at large is general offer.
3. Cross and Counter Offer: Where both the parties make their offer innocently to each other at the same time through any medium, this is cross offer.
Counter offer is a rejection of original offer by making a new offer which may not amount to a contract. where an offeree intends to accept the offer after alteration in any terms of offer, there is counter offer.
4. Standing Offer: Where large quantity of goods are required from time to time during a particular period continuously there is an standing offer. it is open for a certain period of time. For e.g., A, the supplier of rice, offers to Arms Police to supply rice and vegetables, for a certain period of 1 year, at certain rate. This is standing offer.

Rules regarding offer

i) Express or implied offer
An offer can be made by words or conduct. E.g., A says B “will you buy my watch for 1000?” (express); A transport company runs buses in different routes to carry passenger(implied)

ii) intention to create legal relationship
To create an offer, the offeror must intend to create legal obligation. Ordinary invitations to social affairs are not offer in the eyes of law, because the idea of bargain is absent in such cases and there is no intention to create legal relationship. E.g., an agreement between two persons to go together to picture, or for a walk does not create legal obligations on their part to abide by it, as it relates to social matters. (note: Balfour v. Balfour)

iii) certain and unambiguous terms
Terms of offer must be certain and unambiguous and not vague. If the terms of the offer are vague, no contract can be entered. E.g., X offers to sell to Y his car for Rs. 1, 00,000 or Rs. 1, 50,000. Here X’s offer is not certain because it is not clear which of the two prices was to be given by Y.

iv) different from a Mere Declaration of Intention
The offer must be distinguished from a mere declaration of intention. Intention or willingness expressed to know the opinion of someone is mere declaration of intention. No obligation arises even though it is accepted. Such statement or declaration merely indicates that an offer will be made or invited in future. E.g., a father wrote to his would be son in law that his daughter would have a share of what he left after the death of his wife. It was held that the letter was a mere intention and not an offer.

v) different from an Invitation to offer
An offer must be distinguished from an invitation to offer. In case of an invitation to offer, the person making an invitation invites others to make an offer to him. E.g., goods are displayed in the shop with price tags attached on each article. The display of goods is an invitation to offer.

vi) Communication
Offer must be communicated to the person to whom it is made. An offer is complete only when it is communicated to the offeree. One can accept the offer only when he knows about it. Thus an offer accepted without its knowledge does not confer any legal rights on the acceptor. Section 7(1) of NCA 2056 clearly mentions that an offer must be communicated to the offeree. Notice must be given to him for whom the offer is made. Offeree must have knowledge of the offer made to him.
E.g., A writes a letter to B offering to sell his house for RS 5000000/- but never posts the letter. This is not an offer as B never knew about the offer.
 E.g., G sent his servant L to trace his lost nephew. When servant left, G announced reward of Rs 500. L found the boy and brought him home. Later he knew about reward filed the case. His suit was dismissed on the ground that he could not accept the offer unless he had knowledge of it. It was held that L was not entitled to reward because he did not know about the reward when he found the missing boy. (Lalman Shukla v. Gauri dutt (1913)

Revocation and lapse of offer

Revocation means cancellation or withdrawal or taking back offer made by the offerer before the offer is accepted. The term lapse of offer refers to the condition under which the offer automatically gets terminated. It does not depend upon the will of the offeror. Revocation or lapse of offer can take place as under:

1. By notice of revocation
Revocation means withdrawal. According to section 8(1) of NCA 2056, the offerer may at any time withdraw offer by serving a notice of revocation to the offeree before the notice of acceptance is received. In such case, the offer gets terminated and no contract is formed.

2. By expiry of time
According to section 9 (a), (b) of NCA, an offer must be accepted with in stipulated time in the offer, if any. The offer if not accepted within such time gets automatically terminated.
e.g.; A offers to sell his bus to B and agrees to give 5 days time to B for acceptance. If B doesnot accept within 5 days, the offer gets terminated.

3. By death/insanity of the offeror
Section 9 (c) of NCA, mentions that if an event of death or insanity takes place before the offer is accepted, the offers gets terminated.

4. By rejection of the offer by offeree
Rejection is the refusal to accept what is offered. The offeree can accept or reject the offer. Thus, an offer lapses as soon as it is rejected by the offeree. As per section 2 (c) and 9 of NCA, rejection takes place under any of the following condition:

a) Counter offer
If a person to whom an offer is made accepts the offer changing the terms of offer is counter offer. Counter offer is the rejection of the original offer made by the offeror.

b) Conditional acceptance
If a person to whom an offer is puts condition, there is no contract. For e.g.; A makes an offer to B to sell his bike for Rs 50,000/-. B says he will purchase the bike if he appoints B as accountant of A’s company.

c) Non fulfillment of condition
If there is a condition in the offer, and such condition must be fulfilled. If offeree accepts it without fulfilling the condition the offer is naturally revoked. E.g, failure to pay advance if asked etc.

d) Failure of accepting modes
If the prescribed mode is not followed by the offeree the offer gets terminated.

5. Effects of two notices
As per section 8(4) of NCA, after sending notice of offer to the offeree if the offeror send a letter of withdrawing the offer, and the offeree gets both the letter at the same time, contract is not deemed to have formed. The offer lapses that mean the withdrawal notice gets validity over the offer.

6. By subsequent illegality
After the offer is made but before accepted by the offeree if the offered matter becomes subsequently illegal, the offer lapses. E.g. A offers to supply 100 tons of oil to B on a certain date, before accepted if government puts ban on selling oil by individual, the offers ends.

7. By destruction of subject matter
Where the subject matter of the offer is destroyed (by fire, loot etc) before it is accepted by the offeree, the offer lapses.

Acceptance

Acceptance means giving consent to the offer. It is an expression by the offeree of his willingness to be bound by the terms of the offer. Section 2 (c) of NCA defines acceptance as a consent given by a person in the same sense in which the offeror has taken the substance of the proposal presented by him to the former.  Acceptance is the act of assenting by the offeree to an offer.
Offer + Acceptance = Contract

Rules relating to Acceptance

a) Absolute and unconditional : Offer may consists several condition but acceptance should be absolute and unconditional, even a single word could not be changed from the offer. For e.g, A offers B to sell his car for Rs 3,00,000. B agrees to buy if for Rs 2,50,000. B’s Act is a counter offer not an acceptance to A’s offer. Now if B accepts the original offer to buy the car for Rs 3,00,000. A will not be bound to sell the car because B’s counter offer puts the original offer into end.

b) Communication: Once an offer is accepted by offeror it must be communicated to the offeree. E.g., A offered to supply coal to a railway company. The manger of the company accepted the offer and kept it in the drawer intending to send it but he forgot to do so. There is no contract as acceptance of the contract was not communicated to the offeror
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c) it must be according to the mode prescribed: offeree must accept the offer in the mode or manner as prescribed by the offeror, if not according to usual and reasonable method.

d) it must be given within a reasonable time: acceptance must be given within a right time within which acceptance must be given. If time is not prescribed it should be accepted within reasonable time.

e) acceptance must be given before the offer lapses or before the offer is withdrawn: E.g., A by a letter offered to B to sell his house for Rs 5,00,000. Subsequently A withdraws his offer by telegram which is duly received by B before the receipt of the letter of offer. Here B’s acceptance cannot be valid after the receipt of withdrawal notice.

Revocation and lapse of offer

1. By notice of revocation: Revocation means withdrawal and revocation of acceptance means an act of withdrawing acceptance. Section 8(2) of NCA 2056 mentions that the offeree can revoke his acceptance by giving notice but if offeror has already received the letter of acceptance it cannot be revoked. For e.g., A offers by a letter dated 5th July sent by post to sell his house to B for Rs 5,00,000. B accepts the offer on 11th July by letter sent through post. A receives the letter on 16th July. Here B can revoke his acceptance before 16th July.

2. Effects of two notices: As per section 8(4) of NCA, after sending notice of acceptance to the offeror if the offeree sends a letter of withdrawing the acceptance, and the offeror gets both the letter at the same time, contract is not deemed to have formed. The acceptance lapses that mean the withdrawal notice gets validity over the acceptance.

3. By death or insanity: acceptance is deemed to be lapsed if the offeree dies or becomes insane before the offeror receives the notice of acceptance. However, the acceptance is not lapsed, if the offeree dies or becomes insane only after receiving a notice of acceptance by offeror. It amounts to a valid contract whereby the hiers and legal representatives of deceased or insane offeree must be liable.