OFFER

1. Crucial Elements: Offer and Acceptance in the Formation of Contracts........................................2

2. Classification of Offers....................................................................................................................3
3. Rules for a Valid Offer....................................................................................................................4
4. Lapse and Revocation of Offer........................................................................................................8
5. Class Discussion:.............................................................................................................................9

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1. Crucial Elements: Offer and Acceptance in the Formation of Contracts

1.1 Introduction

(a) A valid contract requires two fundamental elements- a lawful offer and a lawful
acceptance.

(b) When one party makes a lawful offer, and the other party lawfully accepts it, a
contract is set up, provided that other essential contract elements are also in place.

If A offers to sell a wristwatch to B for Rs.2,000 and B accepts this offer, a contract is
formed.

1.2 Concept of Proposal

(a) The terms "proposal" and "offer" are identical and can be used interchangeably.
Section 2(a) of the Contract Act defines a "proposal" as follows:

(b) 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.

(c) This definition highlights three key components of a proposal:

(i) express willingness to perform or refrain from a specific action.

(ii) willingness must be targeted at another person; proposals cannot be made to

oneself.

(iii) willingness must aim to secure the other person's agreement to the proposed
action or inaction.

(d) Every statement or question does not constitutes a proposal.

Illustration:

(i) A casual inquiry like "Do you intend to sell your car?" is not a proposal.

(ii) A statement of intention such as "I may sell my car if I can get Rs.14,000 for
it" is not a proposal.

(iii) When A says to B, "Will you buy my car for Rs.5,00,000?" or "I am willing
to sell my car to you for Rs.5,00,000" a proposal is made because it expresses
willingness and intends to secure B's agreement.

1.3 Roles in offer and acceptance

(a) The person making the proposal or offer is called the "promisor" or "offeror."

(b) The person to whom the offer is directed is the "offeree."

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 (c) The person who accepts the offer is the "promisee" or "acceptor."

(d) Illustrations:

(i) If "A" tells "B" of his desire to marry "B" by the end of 2023 without asking,
"Will you marry me?" and seeking B's agreement, there is no offer.

(ii) If "A" offers to sell his car to "B," he conveys willingness and the intention to
obtain B's agreement, thus constituting a proposal.

2. Classification of Offers

Offers can be categorized into various types, including general offers, special offers, cross
offers, counter offers, and standing or continuing offers.

(a) General Offer:

(i) A general offer is an offer extended to the public at large, often without a
defined time limit.

(ii) As per Section 8 of the Act, anyone fulfilling the conditions of the general
offer can be considered to have accepted it, as determined in the case of
Carlill v. Carbolic Smoke Ball as summarised below:

(A) A pharmaceutical company advertised a reward of 100 Pounds to

anyone who contracted influenza after using their smoke balls.

(B) Mrs. Carlill purchased and used the smoke balls as directed, later
contracting influenza.

(C) The court determined that the company's advertisement was a general
offer to the public.

(D) As Mrs. Carlill acted on this offer by using the product as directed, a
contract was established between her and the company, allowing her
to claim the reward.

(E) General offers can also include rewards advertised in public for
services rendered or lost items restored.

(iii) Until the general offer is revoked or withdrawn, it remains open for
acceptance by anyone at any time, making it a continuing offer.

(b) Special/Specific Offer:

(i) A specific offer is made to a particular and named individual.

(ii) Only the specified person can accept this unique offer, as it is tailored
exclusively to the case.

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 (c) Cross Offer:

(i) When the person to whom the proposal is made signifies his assent thereto,
the proposal is said to be accepted. A proposal, when accepted becomes a
promise.

(ii) Acceptance can only apply to a 'proposal,' and without a proposal, acceptance
is irrelevant.

(iii) Illustration

If A presents a proposal to B to sell certain goods at a specified price, and B,

without awareness of A's proposal, makes a proposal to buy the same goods
at the price mentioned in A's proposal, it is not an acceptance but a cross
proposal. When two parties make offers to each other, it does not result in a
binding contract.

(d) Counter Offer:

(i) If, instead of immediately accepting an offer from an offeror, the offeree
introduces conditions that alter or amend the original offer, it is regarded as a
counter offer.

(ii) Counter offers reject the original offer.

(e) Standing, Continuing, or Open Offer:

(i) A standing, continuing, or open offer is an offer that is made available to the
public, and it remains open for public acceptance over a specific duration.

Classic instances of standing offers include tenders invited for the supply of
materials and goods.

3. Rules for a Valid Offer

3.1 For an offer to be valid, it must adhere to specific legal rules, including:

Express or Implied Offer:

(a) Offers can be either express or implied.

(b) An express offer is conveyed through spoken or written words, where the offeror
explicitly says the offer.

(c) An implied offer, on the other hand, is inferred from a person's actions or the
circumstances of the situation.

(d) Illustrations:

(i) If M tells N that he is willing to sell his motorcycle for Rs. 20,000, it is an
express offer.

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 (ii) When X writes to Y offering to sell his house for Rs. 80,000, it is an express
offer.

(iii) Chennai Tax Associations’ operation of taxis at listed fares implies an offer.

(iv) When a shoe shiner starts polishing someone's shoes, without a direct request,
but under circumstances where payment is expected, this forms an implied
offer.

3.2 Legal Consequences:

(a) An offer must intend to create legal consequences and establish legal relationships.

(b) Social or domestic agreements, such as inviting a friend for dinner or offering to
watch a movie with one's spouse, are not valid offers.

Even if accepted and consideration is present, they cannot result in a legally binding
agreement because such agreements are presumed not to have legal consequences in
the event of a breach.

(c) In contrast, business agreements are presumed to have legal consequences.

3.3 Definite and Certain Terms:

(a) The terms of the offer must be clear and specific. Offer cannot be vague.

(b) Offers with indefinite or uncertain terms do not qualify as lawful offers.

(c) Illustrations:

(i) If X buys a horse from Y and promises to buy another if the first horse proves
lucky, but then refuses to buy the second horse, Y cannot enforce the
agreement because it is vague.

(ii) If A offers to provide an overseas trip to B in exchange for a specific task

well performed, A's offer does not qualify as a lawful offer due to its
vagueness and uncertainty.

3.4 Distinction: Invitation to Offer vs. Actual Offer

An "invitation to offer" is not the same as an offer and should be distinguished accordingly.

(a) In legal terms, an "invitation to receive an offer" is when a party does not make an
offer but instead invites others to make offers.

(b) The purpose of such an invitation is to inform others that the party is open to
negotiations with anyone willing to initiate negotiations.

(c) These invitations are not legally considered offers and do not become agreements
upon acceptance. For instance, quotations, price catalogues, and displaying goods

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 with price tags serve as invitations for offers. In these cases, when a customer asks for
goods or makes an offer, the shopkeeper has the discretion to accept or reject it.

(d) In the Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd., goods
displayed for sale with price tags were deemed an invitation to offer. When a
customer selected goods and the shop owner refused to sell, it was held that no
contract was formed.

(e) In Harvey vs. Facey, the defendants responded to questions about selling a property
by quoting the price but did not provide a clear willingness to sell. The Privy Council
ruled that no offer was made, and mere statement of the lowest price did not imply a
contract to sell.

(f) Illustrations of invitations to offer include:

(i) A company inviting the public to subscribe to its shares.

(ii) Displaying goods for sale in shop windows.

(iii) Advertising auction sales.

(iv) Providing price quotations in response to price inquiries.

3.5 Goods Sold at Auction:

When goods are sold through an auction, the auctioneer does not enter a contract with anyone
who attends the sale. The auction serves as an advertisement to sell the items, but the actual
sale does not occur at the auction itself. Individuals attending the auction may have the
intention to purchase, but no contractual agreements are formed during the auction.

3.6 Specific and General Offers:

(a) An offer can be categorized as either "specific" or "general."

(b) A "specific offer" is made to a definite person or group of persons, and it can only be
accepted by the person or persons to whom it is made. For instance, if M offers to sell
his bicycle to N for Rs 1000. This is a specific offer, and only N can accept it.

(c) In contrast, a "general offer" is made to the public at large and may be accepted by
anyone who fulfills the specified conditions.

3.7 Communication of Offers:

(a) An offer must be effectively communicated to the offeree. Until the offer is conveyed
to the offeree, there can be no acceptance and, consequently, no contract.

(b) Ignorance of an offer does not constitute acceptance because mutual consent of
parties was never achieved.

(c) This communication requirement applies to both specific and general offers.

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 (d) Illustrations:

(i) A case where an individual, A, captures a criminal without being aware of a

reward offered for the criminal's arrest. A cannot claim the reward because he
did not accept the offer as he was unaware of it.

(ii) G's nephew was missing. L, who worked as G's manager, went searching for
the missing boy. In the meantime, G issued advertisement offering a reward
of Rs. 501 to anyone who could find the boy. L eventually found and
returned the boy. Since L had no knowledge of the reward offer, he could not
claim it since there was no acceptance, no contract was formed, and L was
not entitled to receive the reward.

3.8 No Term of Acceptance in Offer:

(a) An offer should not have a term that, if not communicated with, would be considered
as acceptance. The offeror cannot stipulate that non-communication of acceptance by
a certain date implies acceptance. It is unjust to impose an obligation on the offeree to
reply.

(b) If the offeree does not reply, no contract is formed because there is no obligation for
the offeree to respond.

3.9 Cross-Offers Do not Form a Contract:

(a) When two parties unknowingly make identical offers to each other, these offers are
referred to as "cross-offers."

(b) Cross-offers do not lead to the acceptance of one party's offer by the other, resulting
in an incomplete agreement.

(c) Illustration:

On October 15, 2008, A wrote to B offering to sell 100 tons of iron at Rs 25,000 per
ton. On the same day, B wrote to A offering to buy 100 tons of iron at Rs 25,000 per
ton. These letters crossed in the post.

No contract is formed between A and B because the offers were simultaneous, made
in ignorance of each other, and there was no acceptance of each other's offer.

3.10 Distinction Between Offer and Invitation to Offer:

(a) Meaning:

(i) When someone shows his readiness to enter a contract, it's called an offer.

(ii) When someone invites others to make offers to him, it's referred to as an
invitation to offer.

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 (b) Purpose:

(i) Offers are made with the intention of forming a contract.

(ii) The purpose of an invitation to offer is to receive offers from others or to

negotiate contract terms.

(c) Legal Effect:

(i) An offer, when accepted, results in a contract.

(ii) When acted upon, an invitation to offer results in an offer, not a contract.

4. Lapse and Revocation of Offer

An offer becomes invalid (lapses) under the following circumstances:

4.1 Lapse After Stipulated or Reasonable Time:

(a) If the acceptance is not communicated within the specified time or a reasonable time
(if no time is mentioned), the offer lapses.

(b) What is considered a reasonable time depends on the specific case's circumstances.

(c) For instance, an offer made via telegram implies urgency, and even a delay of a day
or two in accepting can cause the offer to lapse.

(d) Illustration:

If an application for shares is made on June 8 and the applicant is informed of the
allotment on November 23, and the applicant refuses, the offer has lapsed due to the
company's delayed acceptance notification.

4.2 Lapse Due to Non-Compliance with Mode of Acceptance:

(a) If the offeree does not accept the offer in the manner prescribed, or in the absence of
a prescribed mode, in a common and reasonable manner, the offer may lapse.

(b) However, according to Section 7 of the Act, if the offeree doesn't follow the
prescribed mode, the offer doesn't automatically lapse, and the offeror may insist on
the prescribed method.

4.3 Lapse Due to Rejection:

(a) An offer lapses if the offeree rejects it.

(b) Rejection can be either express (spoken or written) or implied, such as when the
offeree makes a counteroffer or offers conditional acceptance.

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 (c) Illustrations:

(i) A offers to sell his house to B for Rs. 90,000. B offers Rs. 80,000, and A
refuses to sell. Later, B offers to buy for Rs. 90,000. A declines to adhere to
his original offer. In court, it's determined that there was no contract because
B's initial offer was rejected by offering Rs. 80,000, thus ending the original
offer.

(ii) A offers to sell his car to B for Rs. 85,000. B says he accepts if he's made
General Manager of A's factory. B's conditional acceptance amounts to a
rejection of A's offer.

(iii) Rejection is effective when the offeror becomes aware of it. For instance, if C
makes an offer to D by letter and D writes a rejection letter before the
rejection reaches C, D changes his mind and telephones an acceptance, there
will be a contract between C and D, and the rejection will not be effective.

4.4 Lapse Due to Death or Insanity:

(a) An offer becomes void if the offeror or offeree dies or becomes insane before
acceptance.

(b) If the offeror dies or becomes insane before acceptance, the offer lapses, but the
knowledge of this fact must reach the acceptor before acceptance for it to be
effective.

(c) If the acceptor is unaware of the offeror's death or insanity and accepts the offer, it is
a valid acceptance.

(d) If the offeree dies or becomes insane before accepting, the offer terminates, and the
Offeree’s heirs cannot accept on behalf of the Offeree.

4.5 Revocation of Offer:

(a) An offer can be revoked when the offeror withdraws it.

(b) Revocation can occur at any time before acceptance by communicating it to the other
party. For instance, at an auction, if someone places the highest bid but withdraws it
before the hammer falls, there's no binding contract as the offer was revoked before
acceptance.

(c) It's essential that the revocation is explicitly communicated to the offeree to prevent
acceptance.

4.6 Revocation by Non-Fulfillment of Condition:

(a) An offer is revoked if the offeree fails to meet a condition precedent to acceptance.

If A offers to sell a scooter to B for Rs. 4,000, provided B joins the Lions Club within
a week, and B does not join, the offer is revoked.

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4.7 Lapse Due to Subsequent Illegality or Destruction:

(a) An offer lapses if it becomes illegal after being made but before acceptance.

(b) Similarly, if the subject matter of the offer is destroyed or substantially impaired
before acceptance, the offer terminates.

5. Class Discussion:

5.1 A introduced self-service system in his shop. B entered the shop, selected items into her
basket, and approached the cashier for payment. However, the cashier refused to accept the
price. Can A be compelled to sell the selected articles to B?

5.2 Neemco Private Limited (Neemco) advertised a reward of Rs. 5,000 for those who developed
skin disease after using their soap as directed. Ms. Rita Anand purchased and used the soap
according to the instructions, developing a skin disease, and claimed the reward. Neemco
refused the reward, arguing that the offer was not made to Ms. Anand, and even if it was, she
had not communicated her acceptance. Can Ms. Anand can claim the reward?

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