lecture 3

OFFER

AND ACCEPTANCE

Learning

• What is an offer and Acceptance?• Legal rules as to offer and

acceptance• Communication of offer and

acceptance• Revocation of offer and acceptance

Composition of an agreementAn agreement is:• generally characterised by an ‘OFFER’ by one party and an ‘ACCEPTANCE’ by another

Definition of Offer

A person is said to have made a proposal when he signifies to another his willingness to do something with a view to obtain assent of that other. It indicates that upon acceptance by the offeree, the offeror will be bound thereby.

HOW AN OFFER IS MADE• Express Offer• Implied Offer

Elements of a Contract: 1) Offer What is an offer?

– Does not have to be in writing– Promissory: Promise to do something or to refrain

from doing a certain act– Intention: To be legally binding– Communication: To Promisee– Certainty: Terms must be clear & certain – Finality: Must be a degree of finality with the terms

Elements of a Contract: 1) Offer cont…

An offer must be made to another person• Offeror: party that makes the offer• Offeree: party that receives the offer

Offer made to the whole world

Carlill v Carbolic Smoke Ball Company

• The case concerned a flu remedy called the "carbolic smoke ball". The manufacturer advertised that buyers who found it did not work would be rewarded £100, a considerable amount of money at the time. The company was found to have been bound by its advertisement, which it construed as creating a contract. The Court of Appeal held the essential elements of a contract were all present, including an offer, acceptance, consideration and an intention to create legal relations.

Elements of a Contract: 1) Offer cont…

Offer must be communicated• Offeror to Offeree • Mode of Communication• Verbal/ Writing/Post

Elements of a Contract: 1) Offer cont…

Termination of an offerAn offer can be terminated through the following

ways:(1) Revocation (2) Lapse (3) Rejection By Offeree (4) Implied rejection : counter offer

Eg - A offers to sell his car to B for $1000. B says to A, “I will give you $750". B statement amounts to a counter offer which terminates the original offer by

A

Do you have a valid offer?

Offer

Do you have validoffer?

Yes

No

PreliminaryInquiries

Supply ofInformation

Invitation To Treat

Offer to Whom

1. To a specific person - Specific Offer

2. To the world at large – General offer

[Case: Carlill v/s Carbolic Smoke Ball Co.]

Rules relating to offer1. Offer must be such as in law is capable of being

accepted and giving rise to legal invitation.

2. Terms of offer must be definite and certainExamples: (i) A owns three cars and offers to sell

one of his car(ii) A offers to take a house on lease for 3 years if

the house was put to thorough repair and rooms are decorated according to present style

[ Case: Taylor v/s Portington]

• Case law: A offered to take a house on lease for three years at $ 285 per annum if the house was “put into through repair and drawing room handsomely decorated according to the present style.” Held, the offer was too vague to result in a contract relationship. (Taylor v/s Portington)

3. An offer may be distinguished from

(a) A declaration of an intention and an announcement

[Case: Harris v/s Nickerson – Auction Sale]

(b) An invitation to make an offer

• CL: An auctioneer advertised in a newspaper that a sale of office furniture would be held. A broker comes from a distinct place to attend that auction, but all the furniture was withdrawn from the auction. The broker thereupon sued the auctioneer for his loss of time and expenses. Held, a declaration of intention to do a thing did not create a binding contract with those who acted upon it, so that the broker could not recover. (Harris vs. Nickerson)

4. It must be communicated to the offeree.

Case law: S sent his servant, L to trace his missing nephew. He than announced that anybody who traced his nephew would be entitled to a certain reward. L traced the boy in ignorance of this announcement. Subsequently when he come to know of the reward, he claimed it. Held, he was not entitled to reward. (Lalman v/s Gauri Dutt)

5. It must be made with a view to obtain the assent.

6. It should not contain a term the non – compliance of which may be assumed to amount to acceptance

7. A statement of price is not an offer

[Case: Harvey v/s Facey]

Case law: three telegrams were exchanged between Harvey and facey.

• “Will you sell your bumper hall pen? Telegraph lowest cash price – answer paid”

• “Lowest price for bumper hall pen $900” (Facey to Harvey)

• “We agree to buy bumper hall pen for the sum of $900 asked by you” (Harvey to Facey)

Held, there was no concluded contract between Harvey and facey. (Harvey v/s Facey)

Acceptance

A manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer

Who can accept?Those to whom offer was made (either a specific

person or general public)

RuleAcceptance must match offer exactly

Must be communicated to offeror

• An acceptance is a final and unqualified assent to all the terms of the offer.

Rules of acceptance :

(1) Offer still in force

(2) Acceptance to be made by the offeree & to offeror

(3) Unqualified and absolute

(4) Acceptance can be in writing, oral or by conduct

(5) Silence does not constitute an acceptance

(5) Communication

• Communication of acceptance

• Completed acceptance

• Reasonable time

When is all this Effective?• Acceptance occurs

when SENT

– Through mail—when posted

– Spoken—when said

– Fax/E-mail—when sent

Legal rules as to acceptance

• Acceptance must be legal & unqualified Acceptance must be absolute and unqualified. If a

purported acceptance introduces any qualifications or new terms, it is a counter offer, which destroys the previous offer.

• It must be communicated to the offeror

Acceptance is only effective when it is communicated to the offeror.

Exception – Acceptance of a unilateral offer(made to public at large) need not be communicated. It happens on the performance of the coditions

– CASE: Carlill v Carbolic Smoke Ball Co (1893)

• It can not precede an offer• It must be according to the mode prescribed• It must be given within a reasonable time[Case: Ramsgate victoria Hotel Co V/s

Montefiore]• Showing intention to fulfil the terms of

promise It cannot be implied by silence (mere mental acceptance is no acceptance)

• Must be given before the offer lapses

Completion of Communication

Offer or Acceptance

OFFER : when it comes to the knowledge of the Offeree

ACCEPTANCE : (i) As against the offeror : when

putted into course of transmission (out of

acceptors’ power)

(ii) As against the acceptor : when it comes to the

knowledge of the offeror

Revocation of Offer or Acceptance

(i) As against the person who makes it -- when putted into course of transmission.

(ii) As against the person to whom it is made -- when it comes to his knowledge

EXAMPLE

A proposes by a letter to sell a house to B at certain price. The letter is posted on 15 th May.It reaches B on 19th May. A revokes his offer by telegram on 18th May. The telegram reaches B on 20th May. The revocation as against A is complete on ………………

and as against B is complete on …………………

Time for revocation of offer and acceptance

• Revocation of Offer:

Before the communication of acceptance is complete as against the proposer

• Revocation of Acceptance

Before the communication of acceptance is complete as against the acceptor.

withdrawal

Ineffective offer

Effective offerOffer on the way to the offeree

Offer on the way to the offeree

Offer on the way to the offeree

withdrawal

Ineffective offer

withdrawal

Offer dispatched Offer arrived

Withdrawal arrived after offer effected

Delayed withdrawal arrived after itshould have arrived

Withdrawal arrived before offer effected

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– Revocation by Communication– Automatic Revocation– Revocation by Passing of Time– Revocation by Death or Insanity– Revocation by Destruction– Revocation by Subsequent Illegality

Revocation of an Offer

Revocation by Communication

• An offer may be revoked by the offeror by communicating that intent to the offeree before the offer has been accepted.

Revocation is ineffective if acceptance has occurred.

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– Automatic Revocation• If term of offer includes a definite time limit for

acceptance, offer is automatically revoked at end of time period stated.

– Revocation by Passing of Time• When no time limit is set, an offer will revoke

automatically after the passing of a reasonable length of time.

• The time element is determined by a review of surrounding facts and circumstances.

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• Revocation by Death or Insanity– Death or insanity of an offeror automatically revokes

an offer that has not yet been accepted.– Revocation is immediate and communication to

offeree is not required.

• Revocation by Destruction– Destruction of subject matter related to an offer

automatically revokes that offer. 

• Revocation by Subsequent Illegality– Legislation that makes performance of an agreement

illegal automatically revokes an existing offer.

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THANK YOU

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