Offer or Proposal
A contract is an agreement enforceable by law. To make a valid contract, there must be an agreement between the parties of the contract. An agreement arises only when an offer is made by one person and is accepted by the other person, to whom the offer is made.
Meaning and Definition
An offer is the proposal by one party to another to enter into a legally binding agreement with him.
According to Sec. 2(a) of the Indian Contract Act, "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 analysis of this legal definition shows that offer consists of the following two points:
a. Expression of one person's willingness to do or to abstain from doing something.
b. Such should be made with a view to obtain the assent of the other person to the proposed act or abstinence.
Example: A says to B, "will you purchase my car for 2 lacs?"
In this case A is making an offer to B as he signifies to B his willingness to sell his car to B for 2 lacs with a view to obtaining B's assent to purchase the car.
The person making the offer is known as 'offeror', 'proposer' or 'promisor' and the person to whom the offer is made is called 'offeree', 'proposee' or 'promisee'. When the offeree accepts the offer, he is called the 'acceptor'.
Essential Elements of Valid Offer
The following are the essential elements of a valid offer.
1.An offer may be express or implied
An offer which is expressed by words, spoken or written is called an express offer. Example, If A either tells or writes to B that he is ready to sell his car to B for 2 lacs. It is an express offer.
An offer which is expressed by conduct or act is known as 'Implied offer. (Sec.9). Example: A is standing in a queue for purchasing ticket for a railway journey. Here A is making an offer impliedly to travel in the train.
2.An offer may be specific or General
When an offer is made to a definite person or persons, it is called specific offer. It can be accepted only by the person or persons to whom the offer is made.
Example: A offers to sell his car to B for 50,000/-. This is a specific offer, because the offer is made specifically to B. This offer can be accepted only by B. When an offer is made to the world at large or the whole world, it is called General offer.
Where an offer is made to the world at large, any person or persons with notice of the offer can accept the offer. When the offer is accepted by a particular person, there is a contract between the offeror and that particular person. If a number of persons accept the offer, there are as many contracts as the number of persons accepting the offer.
Carlill Vs. Carbolic Smoke Ball Co.
A company introduced a new drug as a preventive for influenza fever. The company advertised in several newspapers that a reward of 100 pounds would be given to any person who contracted influenza after using the smoke balls of the company according to its printed direction. The advertisement also added that a sum of 1000 pounds had been deposited with Alliance Bank to show their sincerity in the matter.
One Mrs. Carlill used the smoke balls of the company according to its printed directions and yet contracted influenza. She claimed the reward. But the company refused to pay. Mrs. Carlill filed a suit against the company for recovery of reward.
It was held that she was entitled to the reward of 100 poundstag was a general offer and she accepted it.
3. The terms of the offer must be definite, clear and certain and not loose and vague
The terms of an offer must be definite, certain and clear. It should not be indefinite,loose or vague. If the terms of the offer are vague, loose or indefinite, its acceptance can not create any contractual relationship between parties to the contract.
A vague offer does not convey what exactly it means.
Example
a.A has three horses. A offers to sell to B one of them for 5,000] The offer is not
b.definite. It does not result in a contract. b. A agrees to sell to B, 100 tons of oil for 5 lacs. This offer is uncertain as there is nothing to show what kind of oil is intended to be sold. The contract is void for uncertainty.
According to Sec.29 of the Indian Contract Act, the agreement in which the term is not certain or capable of being made certain are void and the same cannot be enforced in a court of law. An
4.An offer must be made with an intention of creating legal obligation
a. The most important element of a valid contract is that it must create legal obligations among the parties to the contract. An offer will not become a promise unless it is made with a view to create legal obligation. An offer must impose some legal duty on the party making it.
Example: A offers to sell his car to B for 2 lacs. The agreement gives rise to an obligation on the part of A to deliver the car to B and on the part of B to pay 2 lacs.This agreement creates legal obligation between A and B. So this agreement is a contract.
b. An offer to perform social act or an invitation to social affairs are not valid offers in the eyes of law, because in such cases there is no intention between the parties to create legal obligations. So an agreement which gives rise to a social obligation of domestic agreement is not a contract.
Example: A father promises to pay his son 1000 every month as pocket allowance, Later he refuses to pay money to his son.
The son can not recover the amount as it is a domestic agreement and there is no intention on the part of the parties to create legal relations.
Balfour Vs. Balfour: Mr. Balfour was employed in 'Ceylon'. Mrs. Balfour owing to ill health had to stay in England. On the occasion of leaving her in England for medical treatment, Mr. Balfour promised to send her 30 pounds per month while he was abroad. Later Mr. Balfour failed to send the amount to Mrs. Balfour. She filed a suit against her husband for the recovery of the amount. The court held that it was a mere domestic agreement and that the promise made by the husband in this case was not intended to a legal obligation.
Hence, the suit filed by Mrs. Balfour was dismissed since there was no contract enforceable in a court of law.
So agreements of a social or domestic nature do not contemplate legal relationship as such they are not contracts.
5. Offer must be communicated to the offeree
An offer, to be complete, must be communicated to the person to whom it is made. An offer becomes effective only when it has been communicated to the offeree. It may be either express or implied. The offeree must have knowledge about the offer. Otherwise any act done by him will not create any contractual obligations.
Lalmanshukla Vs. Gauri Dutt: G sent his servant L, in search of his missing nephew. G, later announced that anybody who traced his nephew would be entitled to a certain reward. L, traced the boy in ignorance of announcement of the reward. Subsequently when he came to know of the reward, he claimed it. The court held that there can be no acceptance unless there is a knowledge of the offer and hence L was not entitled to the reward.
6. Offer must be with a view to obtaining the assent of the other party
An offer must be made with a view to obtain the assent of the party to whom the offer is made and not merely with a view to disclosing the intention of making an offer.
7. An offer may be conditional
An offer can be made subject to a condition. In that case it can be accepted only subject to that condition. If the offeror prescribes any condition it should be fulfilled by the offeree.
Example: A offers to sell his car to B subject to the condition that B must pay the price of the car before a particular date. If B agrees the condition, there is an agreement enforceable by law.
8.Offer should not contain a term, the noncompliance of which would amount to acceptance
A person cannot say if the acceptance is not communicated within a certain time, the offer would be considered as accepted.
Example: A writes to B, "I will sell you my car for 2 lacs and if you do not reply, I shall assume you have accepted the offer". There is no contract if B does not reply. B is under no obligation to reply.
9. Special terms attached to an offer should also be communicated to the offeree
Where any special terms are to be included in a contract, it is the responsibility of the offeror to bring those special terms to the knowledge of the offeree at the time when the offer is made. If it is not done and if the contract is subsequently entered into, the offeree will not be bound by them.
Example: A hotel put notice in the bed room, exempting the owner of the hotel from liability for the loss of goods of clients. In a suit, it was held by the court of law that the notice was not effective as it came to the knowledge of the client only when the contract to take a room had already been entered into.
Certain conditions are attached to transactions like purchase of a ticket for journey or deposit of luggage in cloak room. Wherever on the face of the ticket the words "for conditions see back" are printed, the person concerned is as a matter of law held to be bound by the conditions subject to which the ticket is issued whether he takes care to read them or not.
Thompson Vs. M and S Rail Company: T, a lady who could not read, took a t from a railway company. On the face of the ticket it was written "For conditions see ticke back". One of the conditions was that the railway company would not compensate passengers for personal injury. T was injured by a railway accident. In a suit filed by T, it was held that she was bound by the conditions of the railway company and could not recover damages.
If conditions are printed on the back of a ticket, but there are no words at all on the face of it to draw the attention of the person concerned to those conditions, he is not bound by them.
10. Invitation to an offer is not an offer
Quotations, catalogue of goods, advertisement for tenders and prospectus of a company are not actual offer. They are mere invitation to offer. In the case of invitation to offer, there is no intention on the part of the person sending out the invitation to obtain the assent of the other person to such invitation.
Example
(a) When a merchant sends his quotation, it is not an offer but is only an invitation on his part of his readiness to transact business on those terms.
(b) A mere statement of the lowest price at which the seller would sell, will not amount to an offer.
11. Tender as a definite offer
A tender, in response to an invitation to offer, is an offer. When tenders are invited for the supply of specified goods or services, each tender submitted is an offer. The party inviting tenders may accept any tender he chooses and thus bring about a binding contract.
12. The offer may be positive or negative
An offer may be to do something or not to do something. An offer to do something. is a positive offer, and an offer not to do something is a negative offer.
13. An invitation to receive offer is not an offer
When a person advertises that he has stock of goods to sell or houses to let out, there is no offer. Such advertisements are 'offer to receive offer' and not an offer to sell in itself.
Similarly, a shopkeeper's catalogue of price is not an offer, but it is only an invitation to receive offer from his customers. Display of goods in a shop, with price chits Anju attached, is not an offer. The buyer can not compel the seller to sell the goods at those prices.
14. A mere statement of intention is not an offer
Sometimes, a person declares that he has the intention to do something, this does not amount to an offer. Such statements merely indicate the intention that an offer will be made in future or an offer will be invited in future.
Example: A, an auctioneer, announced that specified goods will be sold by auction on a particular day. This statement is not an offer to hold the auction. It is merely a statement of an intention to hold auction. A will not be liable if he does not hold the auction on specified day.