Offer

The word ‘proposal’ is synonymous with the English word “offer”. An offer is a proposal by one person, whereby he expresses his willingness to enter into a contractual obligation in return for a promise, act or forbearance. Section 2(a) of the Indian Contract Act defines proposal or offer as “when one person signifies to another his willingness to do or 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”. The person making the proposal or offer is called the proposer or offeror and the person to whom the proposal is made is called the offeree. 

For example, “A” made an offer to” B” to buy the house. Here “A” is the offeror or promisor or proposer and “B” is the offeree or promise.

Rules Governing Offers 

A valid offer must comply with the following rules: 

(a) An offer must be clear, definite, complete and final. It must not be vague. For example, a promise to pay an increased price for a horse if it proves lucky to promisor, is too vague and is not binding. 

(b) An offer must be communicated to the offeree. An offer becomes effective only when it has been communicated to the offeree so as to give him an opportunity to accept or reject the same. 

(c) The communication of an offer may be made by express words-oral or written-or it may be implied by conduct. A offers his car to B for `10,000. It is an express offer. A bus plying on a definite route goes along the street. This is an implied offer on the part of the owners of the bus to carry passengers at the scheduled fares for the various stages. 

(d) The communication of the offer may be general or specific. Where an offer is made to a specific person it is called specific offer and it can be accepted only by that person.

In India also, in the case of HarbhajanLal v. HarcharanLal (AIR 1925 All. 539), the same rule was applied. In this case, a young boy ran away from his fathers home. The father issued a pamphlet offering a reward of `500 to anybody who would bring the boy home. The plaintiff saw the boy at a railway station and sent a telegram to the boys father. It was held that the handbill was an offer open to the world at large and was capable to acceptance by any person who fulfilled the conditions contained in the offer. The plaintiff substantially performed the conditions and was entitled to the reward offered. 

Example: A advertises in the newspapers that he will pay rupees one thousand to anyone who brings to him his lost son. B without knowing of this reward finds A’s lost son and restore him to A. In this case since B did not know of the reward, he cannot claim it from A even though he finds A’s lost son and brings him to A. 

An Offer must be Distinguished from:

(a) An invitation to treat or an invitation to make an offer: e.g., an auctioneers request for bids (which are offered by the bidders), the display of goods in a shop window with prices marked upon them, or the display of priced goods in a self- service store or a shopkeepers catalogue of prices are invitations to an offer. 

(b) A mere statement of intention: e.g., an announcement of a coming auction sale. Thus, a person who attended the advertised place of auction could not sue for breach of contract if the auction was cancelled (Harris v. Nickerson (1873) L.R. 8 QB 286). 

(c) A mere communication of information in the course of negotiation: e.g., a statement of the price at which one is prepared to consider negotiating the sale of piece of land (Harvey v. Facey (1893) A.C. 552).

Different Types Of Offers

1. GENERAL OFFER:-

When an offer made at large or in public or in general this offer is known as General Offer. It can be accepted by any individual or public at large whoever is interested in the offer offered. When a person accepts the offer given then offeror and offeree enter into contract. The reward will be given to that person who completed the task given or fulfilled the given condition.

CASE : CARLILL v. CARBOLIC SMOKE BALLS CO. (1893) This is the landmark judgment of the general offer. In this case it is held by the Court of Appeal that whosoever fulfills the terms and condition of the offer will be eligible for the reward of the offer.

2. SPECIFIC OFFER :-

The offer which is made to an individual or to a specific group of individuals is said to be a Specific offer. It can be accepted by that individual or that group of individuals.

Example : Sandhya offers to buy a car from Sona for Rs. 10 lakh. Thus, a specific offer is made to a specific person , and only Sona can accept the offer.

3. COUNTER OFFER :-

When an offeror makes an offer to offeror and offeree with some modification in it makes converse offer which makes initial offer void and the other comes in existence, which reverses the party from offeror and offeree to offeree and offeror respectively this type of offer is known as counter offer.

CASE : HYDE v.WRENCH (1840) Defendant(offeror) offered to sell his farm for £1000 but the Plaintiff(offeree) offered him £950 and subsequently rejected the offer. So, the offeree filed the case as the offeror was bound by the contract but it was held that as soon as the offeree put the condition the first offer became void which means that the offeror is not bound by the contract as the original offer was rejected by the offeree.

4. CROSS OFFER :-

When the offeror and offeree make the same offer to one another having the same terms out of knowledge of each other is known as cross offer. In this case there will be no contract due to acceptance of the offer offered.

5. IMPLIED OFFER :-

When an offer is given by body posture, gesture or by action or by the conduct of the offeror is known as implied offer. The offeree can accept the offer by understanding the action of the offeror.

6. EXPRESSED OFFER :-

When an offer is expressed in written or in verbal form then this offer is known as expressed offer. For example : “C” writes a letter to “D” to buy his earphone for Rs.500. This is an expressed offer.

7. STANDING OFFER :-

When a tender is submitted to supply certain goods or any quantity as and when required it will amount to standing offer. In such a case a contract does not come into existence merely when tender is accepted, but a contract takes place only after the order is placed. Each order in such a case is accepted and as soon as the offer is accepted the contract comes into existence.

Lapse of Offer 

Section 6 deals with various modes of lapse of an offer. It states that an offer lapses if— 

(a) it is not accepted within the specified time (if any) or after a reasonable time, if none is specified. 

(b) it is not accepted in the mode prescribed or if no mode is prescribed in some usual and reasonable manner, e.g., by sending a letter by mail when early reply was requested; 

(c) the offeree rejects it by distinct refusal to accept it;

 (d) either the offeror or the offeree dies before acceptance; 

(e) the acceptor fails to fulfill a condition precedent to an acceptance. 

(f) the offeree makes a counter offer, it amounts to rejection of the offer and an offer by the offeree may be accepted or rejected by the offeror.

Revocation of Offer by the Offeror:

A proposal can be revoked if the period mentioned in the proposal has elapsed, or if no period is mentioned in the offer,

 The proposal would expire once a fair amount of time has elapsed.

 When the proposer dies or becomes insane, and the acceptor learns about his death or insanity before accepting the proposal.  When a proposal’s acceptance is communicated in such a way that it is beyond the acceptor’s control, it is completely against the proposer. The proposing party must notify the other party of the cancellation before the other party accepts the offer.

 When the revocation is communicated to the other party, the original proposal is canceled, and the other party cannot legitimately accept the proposal since it no longer exists. When the revocation is transmitted to the proper person, it takes effect. 

In the Indian Contract Act, Section 5 deals with the revocation of proposals. In the case of Payne v. Cave (1789), it was held that – “bidamounted to an offer which he was entitled to withdraw at any time before the auctioneer signified acceptance by knocking down the hammer

a proposal and acceptance can be canceled at any time prior to the formation of a legal contract. To establish a binding contract, a proposal can be revoked at any time until final acceptance is given to the proposer. Furthermore, an acceptance can be canceled at any time before it is completely transmitted to the acceptor. As a result, offer and acceptance are critical components of a contract, and they should be made freely and with the intent to enter into a legally binding agreement in any case.

Definition of Acceptance

The Indian Contract Act 1872 defines acceptance in Section 2 (b) as “When the person to whom the proposal has been made signifies his assent thereto, the offer is said to be accepted. Thus the proposal when accepted becomes a promise.”

Therefore once an offer is accepted it cannot be revoked because it has become a promise which creates a legal obligation between the parties.

Example -Anita offers to buy Priya’s car for Rs.10 lakhs and Priya accepts such an offer. Now, this has become a promise.

Rules Governing Acceptance 

(a) Acceptance may be express i.e. by words spoken or written or implied from the conduct of the parties. 

(b) If a particular method of acceptance is prescribed, the offer must be accepted in the prescribed manner. 

(c) Acceptance must be unqualified and absolute and must correspond with all the terms of the offer. 

(d) A counter offer or conditional acceptance operates as a rejection of the offer and causes it to lapse, e.g., where a horse is offered for Rs. 1,000 and the offeree counter-offers Rs. 990, the offer lapses by rejection. 

(e) Acceptance must be communicated to the offeror, for acceptance is complete the moment it is communicated. Where the offeree merely intended to accept but does not communicate his intention to the offeror, there is no contract. Mere mental acceptance is not enough. 

(f) Mere silence on the part of the offeree does not amount to acceptance. Ordinarily, the offeror cannot frame his offer in such a way as to make the silence or inaction of the offeree as an acceptance. In other words, the offeror can prescribe the mode of acceptance but not the mode of rejection. 

(g) If the offer is one which is to be accepted by being acted upon, no communication of acceptance to the offeror is necessary, unless communication is stipulated for in the offer itself. Thus, if a reward is offered for finding a lost dog, the offer is accepted by finding the dog after reading about the offer, and it is unnecessary before beginning to search for the dog to give notice of acceptance to the offeror. 

(h) Acceptance must be given within a reasonable time and before the offer lapses or is revoked. An offer becomes irrevocable by acceptance. An acceptance never precedes an offer. 

There can be no acceptance of an offer which is not communicated. Similarly, performance of conditions of an offer without the knowledge of the specific offer, is no acceptance. Thus in Lalman Shukla v.GauriDutt(1913), where a servant brought the boy without knowing of the reward, he was held not entitled to reward because he did not know about the offer.

Standing Offers

Where a person offers to another to supply specific goods, up to a stated quantity or in any quantity which may be required, at a certain rate, during a fixed period, he makes a standing offer. Thus, a tender to supply goods as and when required, amounts to a standing offer.

A standing offer or a tender is of the nature of a continuing offer. An acceptance of such an offer merely amounts to intimation that the offer will be considered to remain open during the period specified and that it will be accepted from time to time by placing order for specified quantities. Each successive order given, while the offer remains in force, is an acceptance of the standing offer as to the quantity ordered, and creates a separate contract.

Tickets

Tickets purchased for entrance into places of amusement, or tickets issued by railways or bus companies, clock-room tickets, and many other contracts set out in printed documents contain numerous terms, of many of which the party receiving the ticket or document is ignorant. If a passenger on a railway train receives a ticket on the face of which is printed “this ticket is issued subject to the notices, regulations and conditions contained in the current time-tables of the railway”, the regulations and conditions referred to are deemed to be communicated to him and he is bound by them whether or not he has read them. He is bound even if he is illiterate and unable to read them. But it is important that the notice of the conditions is contemporaneous with the making of the contract and not after the contract has been made.

Contracts by Post 

Contracts by post are subject to the same rules as others, but because of their importance, these are stated below separately: 

(a) An offer by post may be accepted by post, unless the offeror indicates anything to the contrary.

(b) An offer is made only when it actually reaches the offeree and not before, i.e., when the letter containing the offer is delivered to the offeree. 

(c) An acceptance is made as far as the offeror is concerned, as soon as the letter containing the acceptance is posted, to offerors correct address; it binds the offeror, but not the acceptor. An acceptance binds the acceptor only when the letter containing the acceptance reaches the offeror. The result is that the acceptor can revoke his acceptance before it reaches the offeror. 

(d) An offer may be revoked before the letter containing the acceptance is posted. An acceptance can be revoked before it reaches the offeror. 

Contracts over the Telephone 

Contracts over the telephone are regarded the same in principle as those negotiated by the parties in the actual presence of each other. In both cases an oral offer is made and an oral acceptance is expected. It is important that the acceptance must be audible, heard and understood by the offeror. If during the conversation the telephone lines go “dead” and the offeror does not hear the offerees word of acceptance, there is no contract at the moment. If the whole conversation is repeated and the offeror hears and understands the words of acceptance, the contract is complete (Kanhaiyalal v. Dineshwarchandra (1959) AIR, M.P. 234).

Essentials of a valid acceptance

Section 7 of The Indian Contract Act,1872 lays down two essentials of a valid acceptance.

(1) Must be unconditional and absolute

Conditional Acceptance will not be a valid acceptance as it would amount to a counter offer which would nullify the original offer. Example. Anita offers to sell her bag to Priya for 3000/-. Priya says she accepts if Anita will sell it for 1500/-. This does not amount to the offer being accepted and it will count as a counteroffer.

(2) Must be expressed in some usual and reasonable manner

If the offeror does not describe any prescribed manner then it must be expressed in the normal and reasonable manner, i.e. as it would be in the normal course of business.

3)  Acceptance can only be given to whom the offer was made

In the case of a specific proposal or offer, it can only be accepted by the person it was made to. No third person without the knowledge of the offeree can accept the offer.

4] It must be in the prescribed mode

Acceptance of the offer must be in the prescribed manner that is demanded by the offeror. If no such manner is prescribed, it must be in a reasonable manner that would

 be employed in the normal course of business.

5] Implied Acceptance

Section 8 of the Indian Contract Act 1872, provides that acceptance by conduct or actions of the promisee is acceptable. So if a person performs certain actions that communicate that he has accepted the offer, such implied acceptance is permissible. 

6) . SILENCE CANNOT AMOUNT TO ACCEPTANCE

No contract is formed if the offeree remains silent and does nothing to show that he has accepted the offer.

Generally speaking the person to whom the proposal is made need not reply. His silence cannot be regarded as an acceptance of the proposal. Proposal made to another cannot ripen into an agreement merely because the offeree makes no reply even though the proposal states that silence will be taken to amount to acceptance. So, mental acceptance is no acceptance.

7) ACCEPTANCE MUST BE GIVEN BEFORE LAPSE OF AN OFFER

A valid contract can arise only when the acceptance is made before the offer has lapsed or being withdrawn. An acceptance which is made after the withdrawal of the offer is invalid and does not create any legal relationship.

Difference between an acceptance and a counter offer

A counter offer is an offeree’s new offer that varies the terms of the original offer and therefore, constitutes a rejection of the original offer.

In John Hancock Mutual Life Insurance Co. v. Dietlin(1964), an acceptance which is upon the condition or with a limitation is a counteroffer and requires acceptance by the original offeror before a contractual relationship can exist.

In Ardente v. Horan(1976), the defendants offered to sell their house to the Plaintiff who agreed to buy the house but he requested that certain furniture and fixtures should also come with the property. The Defendants refused to sell their furniture and fixtures along with the house and returned the unsigned agreement as well as the Plaintiff’s deposit. The Plaintiff sued for specific performance. It was held that a valid contract was not formed as the defendants never accepted the counteroffer. A contract is considered valid when the acceptance is definite and unequivocal, conditional acceptances shall be construed as counter-offers.

Conclusion

The communication of an offer is complete when it comes to the knowledge of the person to whom the offer is made and the communication of an acceptance is complete when the acceptance is put in a course of transmission to the offeror. Therefore, Offer and acceptance are the essential elements of a contract and in either case, it should be done out of one’s free will and with an intention to enter into a legally binding agreement.