"OFFER" (Proposal): As per Law of Contract (1872):

Key Points:

1. Meaning of OFFER (Proposal)
2. Definition of OFFER (Proposal)
3. Elements of an Offer
4. Types of Offer
5. Lapse & Revocation of an Offer
6. Invitation to offer
7. Important Points to Remember

 

Link : https://smckk14.blogspot.com/2022/05/void-agreements-under-indian-contract.html

1. Meaning of OFFER (Proposal):

The journey of a contract starts from offer.

Offer + Acceptance = Agreement

Agreement + Enforceability by Law = Contract

To form a contract there must be an offer by one person and that offer must be accepted by another person for exchange of goods and/or services.

The person who makes offer is called "Offeror or Promisor". And the person who accepts the offer is called "offeree or Promise or Acceptor".

2. Definition of OFFER (Proposal):

Section 2(a) - "When one person signifies to another person his willingness to do or abstain from doing anything with a view to obtaining the assent of that other person to such an act or abstinence, he is said to make a Proposal".

Section 2(b) - "When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted becomes a Promise".

Offer is more than a promise because it is made with the understanding that what is being agreed will be legally binding.

Ex. - Sale of goods, Performance of service, Promise not to engage in any activity.

The offeror must express his willingness to do or not to do an act. Only willingness is not sufficient. Offer can be negative or positive and both are valid offers.

3. Elements of an Offer:

(i) There must be Two Parties -

There must be at least two persons, a person to make the offer and the other person to accept the offer. Here, legal persons as well as artificial persons are also included.

(ii) Offer must be Communicated - (Lalman Shukla Vs. Gauri Dutt)-

An offer is valid if it is conveyed to the offeree. Communication must be express or implied.

Section 4 – "Communication of an offer is complete when it comes to the knowledge of the person to whom it is made".

Ex. - Rajesh offers his Activa to Vishal for ₹ 30000/- by writing a letter. Once Vishal receives the letter, the communication is complete.

(iii) Offer must create legal relationship -

Offer must be of such nature that if accepted will become a contract. Social, Domestic, Religious, Personal offers can't be said offers because if such invitation are accepted, they won't create legal relationship.

Ex- Aditya invites his friend Shreyash to dinner and Shreyash accepts the invitation. It is a social invitation and if Aditya fails to provide dinner, he won't be legally liable.

(iv) Offer must be clear and definite -

Terms & conditions of the offer must be certain and clear to create contract because if there is no clarity the Court won't be able to decide what the parties wanted to do.

Ex. - Akash offers Ravi to sell fruits worth ₹ 500/-. This is not a valid offer because what type of fruits or what quantity are not mentioned.

4. Types of Offer:

(i) Express Offer -

An offer made by the words written or spoken is "Express Offer".

Ex. - Ananya says to Alka "Will you purchase my watch for ₹1000/-?”

Ananya writes a letter to Alka "Will you purchase my watch for ₹ 1000/-?”

(ii) Implied Offer -

An offer made by actions, conduct or circumstances is "Implied Offer".

Ex.- Going to Barber's Shop, Going to travel by bus or train etc.

(iii) General Offer -

An offer made to the public is "General Offer". Any person from public can accept the offer and have the right to consideration.

Ex. - Shubham makes an advertisement in the paper that whosoever finds his missing mark sheets will be rewarded with ₹10000.

(iv) Specific Offer -

An offer made for acceptance of any specific person or group of persons to whom it is made and not by anyone else, is specific offer.

Ex. - Ashok offers to sell his house for ₹10 Lakhs to Bala.

A clothe stores offers to give 20% discount on school uniform to the students of Sunshine Public School.

(v) Cross Offer - 

When the persons make the same offer at same time to each other, is called "Cross Offer". In this case, Cross Offer will not amount to accepting the offer.

Ex. - Rakesh sends letter to sell his car to Ramesh for ₹ 2 Lakhs on 10th Sep.2020 and Ramesh sends letter to Rakesh to buy his car for ₹ 2 Lakhs on 10th Sep. 2020. This is Cross Offer.

(vi) Counter Offer - 

A Counter Offer is an answer given to the original offer. It means that the original offer has been refused and replaced by another offer.

Ex. - Anil offers to sell his shop to Mukesh for ₹ 20 Lakhs. Instead of accepting, Mukesh gives offer to Anil to purchase his shop for ₹18 Lakhs.

5. Lapse & Revocation of an Offer:

(i) An offer lapses after a specified or reasonable time

(ii) An offer lapses by not being accepted in specified mode.

(iii) An offer lapses by rejection.

(iv) An offer lapses by the offeror’s or offeree's death or insanity until acceptance.

(v) An offer lapses by the revocation before acceptance.

(vi) An offer lapses by subsequent illegality or destruction of subject matter.

6. Invitation to offer:

An invitation to offer is an indication of willingness to deal or trade and statements that purely provide information without intending to make an offer, are not offers.

"Offer" is defined in Section 2(a) but "Invitation to offer" is not defined in Indian Contract Act.

(i) Shop Displays, Catalogues & Advertisement -

These are invitation to offer. The offer is made when the customer takes the item to the counter and acceptance is the shopkeeper selling the item to the customer.

An advertisement, catalogue & shop display are treated as invitation to a customer to make an offer and not as an offer. The Courts say that a business might not have sufficient stock to fulfill the demand and that it would not be reasonable for a customer to expect for sale.

In addition Courts have held that an advertisement is an offer for a unilateral contract that can be revoked at the desire of the offeror before its performance.

(ii) Auction Sale –

In auction sale, the auctioneer's call for bids is an invitation to offer. Where a bid is made, it is an offer from the bidder to the buyer at the price offered. The auctioneer may then either accept or reject the offer on behalf of the Principal.

(iii) Online Auction - 

Online auctions like e-bay create binding contracts because the online sites create a framework for the auction in which the buyer and the seller were willing participants.

(iv) Tenders - 

Tenders are usually regarded as an invitation to the offer. A person submitting tender makes the offer and there is no contract until the person who called for tender accepts the tender.

7. Important Points to Remember:

(i) An offer made can be revoked at any time before the communication of its acceptance is complete but not afterwards.

(ii) The offeror can withdraw his offer before it is accepted.

Ex. - X offers to sell his house to Y for ₹ 20 Lakhs through a letter sent by post. X may revoke his offer at any time before or at the moment when Y posts his letter of acceptance but not afterwards. Y may revoke his acceptance at any time before or at the moment when Y posts his letter of acceptance but not afterwards.

(iii) Communication of the offer is not valid and not completed until it is consented by the other person and accepted by him.

(iv) Communication must be done in some usual and reasonable manner.

(v) When one person says that he desires to do something, this doesn’t mean that he will do something. So, it will not be an offer.

(vi) The major difference between OFFER and INVITATION TO OFFER is that the purpose of the OFFER is to create a contract while purpose of INVITATION TO OFFER is to receive an offer to create a contract.

Ex. - Piyush in a shop sees a packet of chocolate with price tag of ₹ 100 in the shop of Manish. Piyush tells Manish that he wants to buy that chocolate and offers him ₹ 100. Manish says that he doesn’t want to sell that chocolate. In this case there is no contract at all and the price tag is not an offer but an invitation to offer. It is on the desire/ discretion of the shopkeeper whether he wants to sell or not.

CASE LAW- HARVEY Vs. FACEY (1893)

(vii) Advertisements are generally Invitation to Offer. (CASE LAW- Partridge Vs. Crittenden-1968)

(viii) However in some cases an advertisement can amount to an offer. (CASE LAW- Carlill Vs. Carbolic Smoke Ball Co. -1892)

(ix) The Cash Depositing Machine represents the offer and inserting the Cash into the Machine is acceptance. (CASE LAW- Thornton Vs. Shoe Lane Parking-1971)

OFFER & ACCEPTANCE: