Q.
THE PROPOSAL OR OFFER
COMMUNICATION OF THE PROPOSAL OR OFFER
REVOCATION OF PROPOSAL
Introduction
A first step in the making of a contract there must be a "lawful offer by one
party and a 'lawful acceptance of the offer by the other party. Thus where A,
offers to sell a wrist watch to B for Rs. 200 and B accepts the offer, a contract
comes into being provided other essentials of a valid contract like that of
competency of parties to contract, ete, are present.
Relevant sections
Sections 2( a ), 2( c ),3,4,5,6,8,9
1. THE PROPOSAL OR OFFER
I. Definition
The words 'proposal' and 'offer' are synonymous and are used
interchangeably
Section 2(a) of the Contract Act defines a 'proposal" as,
"When one person signifies to another his willingness to do or to 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.
II. Essentials of a ‘proposal’:
Following three essentials of a 'proposal":
i. It must be an expression of the willingness to do or to abstain from
doing something
ii. The expression of willingness to do or to abstain from doing some-
thing must be to another person. There can be no 'proposal' by a
person to himself
iii. The expression of willingness to do or to abstain from doing
something must be made with a view to obtaining the assent of the
other person to such act or abstinence.
Thus a casual enquiry "Do you intend to sell your motorcycle?" is not a
'proposal. Similarly, a mere statement of intention "I may sell my
motorcycle if I can get Rs 14,000 for it" is not a proposal.
III. Promisor or Offeror,
According to section 2(c) of the Contract Act, 1872, The person making the
proposal' or 'offer' is called the 'promisor' or offeror,
IV. Legal Rules Regarding Valid Offer.
A valid offer must be in conformity with the following rules
i. An offer may be 'express or implied.(S.9)
An offer may be made by words or by conduct. An offer which is
expressed by words, spoken or written, is called an express offer and
the one which is inferred from the conduct of a person or the
circumstances of the case is called an implied offer
ILLUSTRATIONS
Express offer
a. A says to N that he is willing to sell his motorcycle for Rs 20,000
This is an express offer
b. A writes to B that he offers to sell his house to him for Rs 80.000.
There is an express offer
Implied offer
c. The Daewoo Bus Service runs buses on different routes to carry
passengers at the scheduled fares. This is an implied offer by the
Daewoo Bus Service
d. A shoe polisher / cobbler starts shining some one's shoes,
without being asked to do so in such circumstances that any
reasonable man could guess that he expects to be paid for this,
he makes an implied offer.
ii. An offer must contemplate to give rise to legal consequences and
be capable of creating legal relations.
Social agreements or domestic arrangements
If the offer does not intend to give rise to legal consequences, it is not a
valid offer in the eye of law. Social agreements or domestic
arrangements the presumption is that the parties do not intend legal
consequences to follow the breach of agreement. For example
a. An offer to a friend to dine at the offeror's place, or
b. an offer to one's wife to show her a movie
Business agreements
But in the case of agreements regulating business transactions the
presumption is just the other way. In business agreements it is taken as
that parties intend legal consequences to follow.
iii. The terms of the offer must be certain and not loose or vague.
If terms of the offer are not definite and certain, it does not amount to a
lawful offer. An agreement to agree in future is not a contract, because
the terms of agreement are uncertain as they are yet to be settled.
ILLUSTRATIONS.
a. X purchased 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, it being loose and vague.
b. A offers to B a lavish entertainment, if B does a particular work for him.
A's offer does not amount to lawful offer being vague and uncertain.
iv. An invitation to offer is not an offer.
An offer must be distinguished from an invitation to receive
In the case of an invitation to receive offer the person sending out the
invitation does not make an offer but only invites the other party to
make an offer. Such invitations for offers are therefore not offers in the
eye of law and do not become agreements by their acceptance.
Examples
i. An advertisement for sale of goods by auction does not amount to an
offer .
ii. Quotations, catalogues of prices or display of goods with prices marked
thereon do not constitute an offer. They are instead an
v. An offer may be 'specific' or 'general".
Specific Offer
An offer is said to be specific when it is made to a definite person or
persons. Such an offer can he accepted only by the person or persons
to whom it is made.
where M makes an offer to N to sell his bicycle for Rs 200, there is a
specific offer and N alone can accept it.
A general offer',
A general offer is one which is made to the world at large or public in
general and may be accepted by any person who fulfils the requisite
conditions.
vi. An offer should not contain a term the non-compliance of which
would amount to acceptance. Thus an offeror cannot say that if
acceptance need communicated up to a certain date, the offer would be
presumed to have been accepted.
If the offeree does not reply there is too because no obligation to reply
can be imposed on him.
vii. A Perposal can be made subject to any terms and conditions (S.8)
offeror may attach any terms and conditions to the offer he makes even
prescribe the mode of acceptance. The offeree will have to act on the
terms of the offer There is no contract, unless all the terms of the are
complied with and accepted in the mode prescribed.
Example.
if the offeror asks for sending the acceptance by telegram and the
offeree sends the acceptance 'by post', the offeror may decline to treat
the acceptance as valid acceptance
viii. Two identical cross-offers do not make a contract.
When parties make identical offers to each other, in ignorance of each
other offer, the offers are 'cross-offers. 'Cross-offers do not constitute
acceptance of one's offer by the other and as such there is no
completed agreement.
ILLUSTRATION. On 15 October. 1989 A wrote to B offering to sell him
10 tons of tron at Rs 8,800 per iron. On the same day, B wrote to A
offering to buy tons of iron at Rs 8,800 per ton. The letters crossed in
the post. There concluded contract between 4 and 8. because the offers
were simultaneous, a being made in ignorance of the other, and there is
no acceptance of each other offer
2. COMMUNICATION OF THE PROPOSAL OR OFFER
ix. An offer completed when communicated to the offeree. (S. 4)
An offer is effective only when it is communicated to the offerée. 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. This applies to both specific and general
offers
ILLUSTRATIONS.
(a) A without knowing that a reward has been offered the arrest of a
particular criminal, catches the criminal and gives the information the
superintendent of police A. cannot recover the reward as he cannot Be
said to have accepted the offer when he was not at all aware of a
x. Communication of special terms.
The special terms and conditions become binding as part of the
contract only if they are brought to the notice of the acceptor before or
at the time of contract. A subsequent communication will not bind the
contracting party unless he has assented thereto.
Regarding the communication of the special terms of the contract as
contained in a ticket, receipt, or standard form documents, the more
important rules adopted by the courts are as follows
a. If the acceptor or the promisee had no knowledge of special terms,
before or at the time of the contract, they are not binding upon the
acceptor.
b. If the acceptor or the promisee had the knowledge or may be presumed
to have the knowledge, because a reasonably sufficient notice has
been given to him by suitable words on the document, of special terms
before or at the time of the contract, the terms are binding upon the
acceptor whether he has read them or not is immaterial.
3. REVOCATION/LAPES OF PROPOSAL
An offer lapses and becomes invalid (i.e, comes to an end) in the following
circumstances
i. An offer lapses after stipulated or reasonable time. Sec. 6
(An offer lapses if acceptance is not communicated within the time
prescribed in the offer, or if no time is prescribed, within a
reasonable time.
ii. An offer lapses by not being accepted in the mode
prescribed, or if no mode is prescribed, in some usual and
reasonable manner. (Section 7)
If the offeree does not accept the offer according to the mode
prescribed, the offer does not lapse automatically it is for the
offeror to insist that his proposal shall be accepted only in the
prescribed manner, and if he fails to do so he is deemed to have
accepted the acceptance.
iii. An offer lapses by rejection.
An offer lapses if it has been rejected by the offeree. The
rejection may be express i.e by words spoken or written or
implied. Implied rejection is one (a) where either the offeree
makes a counter offer or (b) where the offeree gives a conditional
acceptance.
ILLUSTRATION
A offered to sell his house to B for Rs 90,000. B offered Rs
80,000 for which price A refused to sell. Subsequently B offered to
purchase the house for Rs 90.000 A declined to adhere to his
original offer. B filed a suit to obtain the specific performance of
the alleged contract. Dismissing the suit, the court held that A was
justified because no contract had come into existence. B by
offering Rs. 80.000 had negated the original offer Subsequent
willingness to pαy Rs. 90000 could be no acceptance of A's offer
as there was no offer to accept.
iv. An offer lapses by the death or insanity of the offeror or the
offeree before acceptance.
If the offeror dies or becomes insane before acceptance, the offer
lapses provided that the fact of his death or insanity omes to the
knowledge of the acceptor before acceptance [Sec. 6 (4)] From
the language of the Section, it may be inferred that an acceptance
in igno rince of the death or insanity of the offeror, is a valid
acceptance, and gives vise to a contract. Thus the fact of death or
insanity of the offeror would not pot en end to the offer until it
comes to the notice of the acceptor before scceptance. An
offeree's death or insanity before accepting the offer puts an ind in
the offer and hit heirs cannot accept for him (Reynolds vs
Atherton)
v. An offer lapses by revocation. [Sec.6 (1)].
An offer is revoked when it is retracted back by the offeror. An
offer may be revoked, at any time before acceptance, by the
communication of notice of revocation by the offeror to the other
party [Sec.6 (1)]. For example, at an auction sale A makes the
highest bid. But he withdraws the bid before the fall of the
hammer. There cannot be a concluded contract because the offer
has been revoked before acceptance
vi. An offer, agreed to be kept open for a definite period, may be
revoked even before the expiry of that period, unless there is
some consideration for so keeping it open. The effect of fixing a
time for acceptance is merely to fix a time beyond which the offer
cannot be accepted. Where no time limit is set, the offer cannot
be accepted after a reasonable time
ILLUSTRATION. A offers to sell his house to B for Rs 140.000. B
says to A that if he agrees to keep the offer open for 10 days he
(B) will pay him Rs 1.000 Pagrees. A cannot revoke the offer
before the expiry of 10 days, as B has obtained an option to
purchase the house within 10 days. If A revokes the offer before
the expiry of 10 days, he can be sued for breach of option
contract
vii. A revocation of an offer must he communicated or made
known to the offeree,
otherwise the revocation does not prevent acceptance.
Revocation of a general offer must be made through the same
channel by which the original offer was made. Again, revocation
must always be express and must be communicated by the
offeror himself or his duly authorised agent to the other party
viii. An offer lapses by subsequent illegality or destruction of
subject matter. An offer lapses if it becomes illegal after it is
made, and before it is accepted. Thus, where an offer is made to
sell 10 bags of wheat for Rs 6,500, and before it is accepted, a
law prohibiting the sale of wheat by private individuals is enacted,
the offer comes to an end. In the same manner, an offer may
lapse if the thing, which is the subject matter of the offer, is
destroyed or substantially impaired before acceptance.
