Business Law Complete Notes BBS TU /Offer & Acceptance
CHAPTER-4 OFFER AND ACCEPTANCE
1. Explain the rules regarding valid offers.
It must be an expression of the willingness to do or abstain from doing something.
The expression of willingness to do or to abstain from doing something must be to another person. There cannot be a proposal by a person to himself.
The expression of willingness to do or abstain from doing something must be with a view to obtaining the assent of the other person to such act or abstinence.
Hence, an offer or proposal is an expression of willingness by one person. It has been put before another person with a view to getting assent from him, and it is made to do or not to do something. However, an offer made without an intention to get the assent of another is meaningless.
Legal rules regarding a valid offer
An offer may be ‘expressed’ or ‘implied’
An offer may be made either by words or by conduct. An offer which is expressed by words, spoken or written is called an ‘expressed offer’ and the one which is inferred from the conduct of a person or the circumstances of the case is called an ‘implied offer.’
An offer must contemplate giving rise to legal consequences and be capable of creating legal relations
If the offer does not intend to give rise to legal consequences, it is not a valid offer in the eye of law. An offer to s friend to dine at the offeror’s place or an offer to one’s wife to show her movie is not a valid offer and as such cannot give rise to a binding agreement, even though it is accepted and there is a consideration because in social agreements or domestic arrangements the presumption is that the parties do not intend legal consequences to follow the breach of the agreement. But in the agreements relating to business cases, the presumption is just the other way. In business agreements, it is taken for granted that parties intend legal agreements to follow.
The terms of the offer must be certain and not loose or vague
If the terms of offer are not definite and certain, it does not amount to a lawful offer. Unless all the material terms of the contract are agreed upon, there is no binding obligation. Thus, an agreement to agree in the future is not a contract, because the terms of an agreement are uncertain as they are yet to be settled. For example, X purchases a horse from Y and promised to buy another, if the first one proves lucky. X refused to buy the second horse. Y could not enforce the agreement if being loose and vague.
An intention to offer is not an offer
An offer must be distinguished from an ‘invitation to receive offer’ or as it is sometimes expressed in judicial language an ‘invitation to treat’. In the case of an ‘invitation to receive the offer,’ the person sending out the invitation does not make an offer nut only invites the other party to make an offer. His objective is merely to circulate information that he is willing to deal with anybody who on such information is willing to open negotiation with him.
We may have the following examples of invitation for offer:
Intention to sell: The display of goods with their price tags in a departmental store is merely an invitation of an offer. It is just an attempt to introduce offers to sell. When the buyer carries the goods to the cash counter then the offer is made by the customer. The receipt of payment amounts to a contract.
Quotations of price: A quotation of a price is a form of advertisement or formal or informal information is only an expression of intention to sell the goods. It is also not an offer.
Advertisement: An advertisement inviting applications for a job or inviting tenders to build a house is not an offer. It is only an initiation to make offers. The employee (applicant) or tenderer is the offerer and the application or proposal is called an offer.
Catalog: a catalog of goods or a prospectus of a college is only a form of advertisement. It is an attempt to induce offers to the client, but not an offer.
Auction: An auction to sell particular goods is not an offer. The person who attends the display is not giving assent. These efforts are not adequate to create a contract. Thus for a valid offer, there must be interactions of the parties to create the contractual relationship, which is determined by the nature of the subject matter of the contract.
An offer may be conditional
An offer may be made subject to conditions and that must be clearly conveyed to the offeree. But condition against any law, morality, and public policy cannot create legal obligations and unreasonable treatment and ignorance of offeree to the conditions are not valid. For example, A offers to B to sell his bike for Rs. 50,000 within three months if B pays to A Rs. 10,000 in advance, B must accept the offer first by paying an advance.
An offer must be communicated to the offeree
An offer is effective only when is it communicated to the offeree. Until the offer is made known to the offeree, there can be no acceptance and no contract. Doing anything in ignorance of the offer can never be treated as its acceptance, for; there was never a consequence of wills. This applies to both specific and general offers.
Accordingly, Section 508(1) of the Civil Code, ‘once the offeree comes to the knowledge of an offer, the act of making the offer shall be deemed to be completed.’
An offer may be general and specific
An offer may be general or specific. Specific offer is one which is addressed to a definite individual or group of individuals and only such individuals or groups of individuals can accept it.
Two identical cross-offers do not make a contract
When two parries make an identical offer to each other, in ignorance of each other’s offer, the offer is ‘cross-offer’. Cross-offers do not constitute acceptance of one’s offer by the other and as such, there is no complete agreement.
2. Explain the rules regarding acceptance.
Legal rules regarding a valid acceptance
Acceptance must be given only by the person to whom the offer is made
An offer can be accepted only by the person or persons to whom it is made and with whom it imports an intention to contract; it cannot be accepted by another person without the consent of the offeror.
Acceptance must be absolute and unconditional
Acceptance, to be legally effective it must be an absolute and unconditional acceptance of all the terms of the offer. Even the slightest deviation from the terms of the offer makes the acceptance invalid. In effect, a deviated acceptance is regarded as a counteroffer in law.
Acceptance must be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted
If the offeror expressed no mode of acceptance, the acceptance must be communicated according to some usual and reasonable mode. The usual moods of communication are by words spoken or written or by post or telegram; it is called an express acceptance.
Acceptance must be communicated by the acceptor
For acceptance to be valid, it must not only make by the offeree but must also be communicated by the offeree to the offeror. Thus, the acceptance must be communicated in some reasonable form. Remaining silent or doing nothing for something cannot be regarded as valid acceptance. It means that acceptance must be something more than mental acceptance.
Acceptance must be given within a reasonable time and before the offer lapses and is revoked
To be legally effective acceptance must be given within a specified time limit if any, and if no time is stipulated, acceptance must be given within a reasonable time. Where A applied for certain shares in a company in June but the allotment was made in November and he refused to accept the allotted shares, it was held that the offeror (A) could refuse to take the shares as the offer stood withdrawal and could not be accepted because of the reasonable period during which the offer could be accepted has elapsed.
Acceptance must succeed in the offer
Acceptance must be given after receiving the offer. It should not precede the offer. In a company, the share was allotted to a person who had not applied for them. Subsequently, he applied for shares being unaware of the previous allotment. It was held that the allotment of the shares previous to the application was invalid.
Acceptance cannot be implied from silence and inaction
The acceptance of an offer cannot be implied from the silence and inaction of the offeree or his failure to answer. However, the offeree has by his previous conduct indicated that his silence means that he accepts then silence might also imply valid acceptance.
This is so as to ensure that no one can enforce a contract upon an unwilling party. For instance, person A writes to person B that “If I do not hear from you, I will assume that you have sold your horse to me for Rs.6000”.
Hence, A will not be able to bring a claim against B for non-delivery of the horse. However, there are exceptions to this, whereby silence may amount to acceptance of the contract. One example is when the offeree has explicitly stated that he wants his silence to be regarded as acceptance of the contract.
These are the major rules regarding acceptance that make an acceptance legally effective and form an agreement between the parties.
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