Offer and Acceptance
By: Fazal-e-Malik
Offer and Acceptance
The First essential of a valid contract is an agreement
i.e. offer and acceptance. An agreement arises when
one party makes an offer and the other party accepts it.
By: Fazal-e-Malik
Offer
Definition
Section 2(a) defines a proposal as, “When one person
signifies (show) to another his willingness to do or to
abstain(give up) from doing any thing, with a view to
obtaining the assent of that other to such act or
abstinence, he is said to make a proposal.”
It means that when a person show his willingness to do
or not to do something to obtain (find) the consent to
other person, it is considered a proposal.
By: Fazal-e-Malik
Cont…
The person making the offer is called the offeror or
promisor. The person to whom the offer is make is
called the offeree. The person accepting the offer is
called the promisee or acceptor. The word “offer” in
English Law is similar to the word “proposal”.
Examples:
a) A offers to sell his watch to B to for 100 AFN. A
makes an offer to B.
b) A offers to sell his car to B for 300,000 AFN. A makes
an offer to B.
By: Fazal-e-Malik
Essentials of a Valid Offer
The following are legal rules or essentials of a valid offer.
1. Express or implied
An offer may be made by words or conduct. An offer
which is made by words spoken or written is called
an express offer. The implied offer appears from the
actions, conduct of parties, course of dealing or
circumstances of the case.
Examples:
a) M says to N that he sell his motorcycle to him for
40,000 AFN. It is an express offer.
By: Fazal-e-Malik
Conti…
b) A cart carrier carries the luggage of B without asking to do
so. B allows him to do so. It is an implied offer.
c) B is running a bus services to carry passengers at scheduled
fares. This is an implied offer by the company.
2. Legal Relations
The offer must be made to create relations otherwise there
is no agreement. If an offer does not give rise to legal
obligation between the parties, it is not a valid offer. In
business transactions it is presumed (suppose) that the
parties intend to create legal relation.
By: Fazal-e-Malik
Conti…
Examples:
a) A invites B to dinner and B accepts the invitation. It
does not create legal relations, so there is no
agreement.
b) A offers to sell his house to B for 1 million AFN and B
agrees. There is an agreement because the parties
intend to create legal relations.
By: Fazal-e-Malik
Conti…
3. Definite & Clear
An offer must be definite and clear. If the terms of an
offer are not definite and clear, it cannot be called a
valid offer.
Examples:
a) A has two cars. He offers B to sell one car for 200,000
AFN. It is not a valid offer because it is not clear
which car A wants to sell.
By: Fazal-e-Malik
Conti…
4. Specific or General
When an offer is made to a specific person or group
of persons, it is called specific offer. Such an offer can
be accepted only by the person or persons to whom is
made. A general offer is made to public in general
and it may be accepted by any person who fulfills the
conditions mentioned in it.
Examples:
a) M makes an offer to N to sell his bicycle for 10,000
AFN, it is a specific offer. In this case only N can
accept it.
By: Fazal-e-Malik
Cont…
b) A announces in a newspaper a reward of 10,000 AFN
for any one who will return his lost documents of his
car. It is a general offer.
By: Fazal-e-Malik
Conti…
5. Communication with Offeree
An offer is effective only when it is communicated to
the offeree. If an offer is not communicated to the
offeree, is cannot be accepted. An acceptance of offer
without having knowledge of such offer is not valid
acceptance and does not create any legal obligation.
Thus, an offer which is not communicated is not a
valid offer.
By: Fazal-e-Malik
Conti…
Example:
G’s nephew was missing from home. He sent his
servant Lalman, in search of the boy. When the
servant left, G announced a reward of $ 500 for anyone
who gives information about the boy. The servant
before knowing the announcement found the boy and
informed G. Later, he claimed the reward. He failed on
the grounds that he could not accept the offer unless
he had the knowledge of it. (Lalman vs. Gauri Datt
1893)
By: Fazal-e-Malik
Cont…
6. Negative Condition
An offer cannot contain a condition that the offer
would be considered as accepted, if acceptance is not
communicated up to a certain date. If the offeree
does not reply, there is no contract because an
obligation to reply cannot be imposed on the
grounds of justice.
By: Fazal-e-Malik
Conti…
Example:
A wrote to B to sell his house adding that if he did not reply
within five days, the offer would be considered as accepted.
There is no agreement.
7. Condition in offer
An offeror may include any condition in his offer without
negative condition. There is no contract unless all the conditions
of the offer are accepted. If the offeror prescribes a specific mode
of acceptance, the offeree must adopt the same mode of
acceptance.
By: Fazal-e-Malik
Conti…
If the offeree does not follow the prescribed mode, the
offeror must inform the offeree regarding its rejection
otherwise he is considered to have accepted the
acceptance.
Example:
A ask B to send the reply of his offer by letter but B
send reply by e-mail. A may reject such acceptance.
By: Fazal-e-Malik
Revocation of Offer
An offer may revoke in any of the following ways: (Sec.6)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Notice of revocation
Lapse of Time
Failure to fulfill condition
Death or Insanity of Offeror
Revocation of Offer by Offeree
Counter offer by Offeree
Death or Insanity of Offeree
Subsequent Illegality
Destruction of subject Matter
Prescribed Manner
By: Fazal-e-Malik
1. Notice Of Revocation
An offer can be revoked (canceled) by sending a notice
to revocation to the other party it means that the
offeror may revoke his offer at an time before
acceptance, even though the period of acceptance of
offer has not yet expired. This way the offeree cannot
create a contract by accepting the revoked offer.
Example:
A, at an auction gives the highest bid to buy B’s goods.
He withdraws the bid before the fall of hammer. The
offer is revoked.
By: Fazal-e-Malik
2. Lapse of Time
When the offer is kept open for a specified time
period, it terminates if it is not accepted within that
period. If the offer does not specify any time period, it
terminates after lapse of a reasonable time. The
reasonable time depends upon the circumstances of
each case. If the commodity is perishable, the
reasonable time will be relatively shorter.
Example:
M offered to buy shares of a company R, on 8th June. R
allotted shares to M on 23rd November. M refused to
accept them, that the offer had lapsed by delay in
accepting.
By: Fazal-e-Malik
3. Failure to Fulfill Condition
If an offer contains some conditions and the offeree
fails to fulfill these conditions, the offer terminates.
Example:
A offers to sell his scooter to B, for 50,000 AFN if B gets
admission in Medical college. B fails to get admission,
the offer is revoked.
By: Fazal-e-Malik
4. Death or Insanity of Offeror
An offer terminates on death or insanity of the offeror,
if the offeree comes to know about the death or
insanity of offeror before his acceptance. If the offeree
does not know about the death or insanity of offeror
and gives his acceptance, it is valid acceptance. It
results in a valid contract and legal representatives of
the deceased offeror will be bound by the contract.
By: Fazal-e-Malik
Conti…
Example:
X requested D, to give credit to Y and guaranteed
payment up to 100,000 AFN. X died and D in
ignorance of this fact continued to give credit to Y. D
sued X’s legal representatives on the guarantee. Held,
that the legal representatives were liable.
By: Fazal-e-Malik
5.Revocation of Offer by Offeree
If the offeree rejects the offer and communicates the
rejection to the offeror, the offer terminates even
though the period for acceptance of offer has not yet
expired.
Example:
A offers to sell his cycle to B and keeps the offer open
for ten days. B refuses after three days. It terminates
although the period has not yet expired.
By: Fazal-e-Malik
6. Counter Offer by Offeree
When an offer is accepted with some change in the
terms of the offer, such acceptance is called counter
offer. An offer terminates when a counter offer is made.
The party making a counter offer cannot accept the
original offer.
Examples:
a) A offers to sell his house to B for 100,000 AFN. B
counter offers 80,000 AFN. Later, even if B is ready to
pay 100,000 AFN, the original offer is terminated.
By: Fazal-e-Malik
7. Death or insanity of Offeree
An offer can be accepted only by the offeree. It cannot
be accepted by his legal representatives upon his
death. If the offeree dies or becomes insane before
acceptance, the offer terminates.
Example:
X offers to sell his camera to Y. Y dies before
acceptance. The offer terminates.
By: Fazal-e-Malik
8. Subsequent Illegality
An offer lapses if it becomes illegal before its
acceptance. An offer may also terminates if it becomes
illegal due to change in law before its acceptance by
the offeree.
Example:
A offers to sell 10 bags of rice to B for 2,000 AFN.
before its acceptance, a law bans the sale of rice. The
offer terminates.
By: Fazal-e-Malik
9. Destruction of matter
An offer lapses if the subject matter of the offer is
destroyed before its acceptance by the offeree.
Example:
A offers to sell his car to B. The car get accident before
the acceptance of offer by B. The offer terminates.
By: Fazal-e-Malik
10. Prescribed Manner
If the offeror prescribes the manner of acceptance, the
offer terminates if the offeree dose not accept it
according to the prescribed manner. If the offeror
wants to reject the offer, he must inform the offeree
within a reasonable time. If offeror dose not inform, he
will be bound by such acceptance.
Example:
A offers to sell his car to B. A requests B to give
acceptance by telephone. B sends acceptance by letter.
The offer terminates.
By: Fazal-e-Malik
Acceptance
Definition
Section 2(b) defines promise as, “ When the person to
whom the proposal (offer) is made signifies (show) his
assent (agree) upon it, the proposal is said to be
accepted. A proposal, when accepted, becomes a
promise.”
Example:
A offers to sell his house to B for 500,000 AFN. B
accepts the offer. This is an acceptance.
By: Fazal-e-Malik
Essentials of Valid Acceptance
The following are legal rules or essentials of a valid
acceptance.
1. Acceptance by Offeree
An offer can be accepted only by the person to whom
is made. Is cannot be accepted by another person
without the consent of offeror. When an offer is
made to a particular group, it can be accepted by any
member of that group. If the offer is made to general
public, it can be accepted by any person who has
knowledge of that offer.
By: Fazal-e-Malik
Conti…
Examples:
a) X offered to sell his house to Y. Z who was aware of
such offer said that he is ready to buy X’s house. Z
cannot accept the offer because the offer is offered to
Y not to Z .
By: Fazal-e-Malik
Conti…
2. Absolute & Unconditional
For a valid agreement, the acceptance must be
absolute (complete or fixed) and unconditional. If
the offeree imposes any condition in his acceptance,
it is not a valid acceptance but a counter offer. There
is no until the counter offer is accepted by the
original offeror.
By: Fazal-e-Malik
Conti…
Examples:
a) A offers to sell his watch to B for 500 AFN. B replies
that he can buy it for 300 AFN. There is no
acceptance on the part of B.
b) M offered to sell land to N for 200000 AFN . N
replies for 150,000 AFN with a promise to pay the
balance by monthly installments of 10,000 AFN each.
Held, there was no contract as the acceptance was
conditional.
By: Fazal-e-Malik
Conti…
3. Prescribed Manner
If the offeror prescribes a particular manner of
acceptance, it must be given according to that
particular manner, the offeror may reject it. If no
particular manner is prescribed in the offer then
acceptance should be made in a reasonable manner.
By: Fazal-e-Malik
Conti…
Examples:
a) A offers to B and ask to accept the offer by post. B
sends his acceptance by telephone. It is not a valid
acceptance.
b) A offered to buy goods from B and request to send
acceptance by messenger who had brought the
order. B sent his acceptance by post thinking that
this would reach to A earlier than messenger.
Held, A was not bound by the acceptance.
By: Fazal-e-Malik
Conti…
4. Communication with offeror
The offeree must communicate the acceptance to the
offeror in a clear manner. Showing the intention to
accept an offer is not a valid acceptance. If the offeree
does not accept the offer, no agreement is formed.
When offeree accepts an offer but fails to clearly
communicate, it is not considered an acceptance.
By: Fazal-e-Malik
Conti…
Examples:
a) A offers by letter to purchase B’s house. B expresses
his intention to sell it but does not reply.
B cells to C.
A has no legal remedy against B.
b) The manager of a railway company received a draft
agreement relating to supply of coal. The manager
approved and put the agreement in the drawer and
forgot all about it. Held, there was no contract
as the other party was not informed.
(Brodgen vs. Metropolitan Railway Co. 1877)
By: Fazal-e-Malik
Conti…
5.
Express or Implied
When an acceptance is given by words spoken or
written is called express acceptance. When is
given by conduct or action it is called implied
acceptance. If the offer is made to the pubic, the
contract arises when any person accepts it by
words or conduct.
By: Fazal-e-Malik
Conti…
Examples:
a) A offered by letter to sell his motorcycle to B for
10,000 AFN. B accepted his offer and sent a letter
of acceptance. It is an express acceptance.
b) A widow promised to give some property to her
niece if she stayed with her. The niece stayed in
her residence till her death. Held, the niece was
entitled to the property.
(V Rao vs. A. Rao)
By: Fazal-e-Malik
Conti…
6.
Acceptance after Offer
Acceptance must be given after receiving an offer.
It cannot precede the offer. If acceptance is made
without having knowledge of the offer; there is no
contract because no acceptance can be made
without an offer.
By: Fazal-e-Malik
Conti…
Example:
a) A offered a reward for anyone who finds his lost
documents. B in ignorance of the offer; finds and
returns the documents. B cannot claim the
reward.
By: Fazal-e-Malik
Conti…
7.
Reasonable time
If offeror specifies a time period for acceptance in
his offer, the offeree must given acceptance within
that specified time. If no time is specified, the
acceptance must be given within a reasonable
time. The reasonable time depends upon the
circumstances of each case.
By: Fazal-e-Malik
Conti…
Example:
M applied for shares of a company in June but
allotment was made in November. M refused to
accept the shares. It was held that M could refuse
to take shares because offer has lapsed (failed)
after the expiry of a reasonable time.
(Ramsgate Victoria Hotel Co. vs. Montefiore 1866)
By: Fazal-e-Malik