2. OFFER OR PROPOSAL :
Section 2(a) of Indian Contract Act 1872
defines the term ‘offer or proposal’. It provides
that “when one person (offeror) signifies to
another person (offeree ) 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 or
offer.”
3. How an offer is made
1. Express offer
2. Implied offer
To whom offer is made
1. Specific offer
2. General offer
4. ESSENTIALS OF A VALID OFFER
1. Intention to obtain acceptance
2. Intention to create legal relationship
3. Certainty
4. Communication
5. Should not contain a term the non
compliance of which would amount to
acceptance
6. A mere statement of price is not an offer to
sell
5. 7. An offer is different from invitation to an offer
8. An offer may be expressed or implied
9. An offer may be conditional or unconditional
6. • Meaning of cross offer
Two offers which are similar in all respects made by two
parties to each other, in ignorance of each other’s offer are
known as ‘cross offer.’ Cross offers do not amount to
acceptance of one’s offer by the other. Hence, no contract is
entered into on cross offers.
Example: X of Agra sends a letter by post to Y of Delhi
offering to sell his car for Rs.1 lakh. The letter is posted on 1st
January and the same day, Y of Delhi sends a letter by post to
X of Agra offering to buy X’s car for Rs. 1 lakh. These two
letter cross each other. Y’s letter is merely an offer and not the
acceptance of X’s letter. Here, both the parties are making
offer and no party has accepted the offer. Therefore, no
contract has been entered into, if they want to entered into
contract, at least one of them must send his acceptance to the
offer made by other.
7. • Meaning of standing offer:
An offer of continuous nature is known as ‘standing offer.’
A standing offer is in nature of a tender. It is the same thing as
an invitation to an offer. A contract is said to have been
entered into only when an order is placed on the basis of the
tender.
Example:
X Ltd requires a large quantity of certain goods during the 12
months period and gives an advertisement inviting tender in
the leading newspaper. Z submitted the tender to supply those
goods at a specific rate. Z’s tender is accepted or approved.
Now, Z’s tender becomes a standing offer. Each order given
by X Ltd will be an acceptance of the offer.
8. LAPSE OF OFFER OR REVOCATION OF
OFFER
• An offer is revoked in the following ways:
1. If the revocation is communicated by the offeror to the
offeree before its acceptance;
2. If it is not accepted within the specified time, if any, or after
a reasonable time if no time is specified;
3. If the offeree fails to fulfill a condition precedent to
acceptance ; or
4. If the offeror dies or becomes insane and the fact of his death
or insanity comes to the knowledge of the offeree before
acceptance.
9. •
Difference between Offer and Invitation of
Offer:
1.
In invitation to an offer one party invites the other party to
make an offer whereas in offer one party makes a definite
proposal to another party with a view to obtain the consent
of the other party.
Invitation to an offer is an initial intention whereas offer is
final willingness.
Invitation to an offer leads towards offer whereas offer leads
towards acceptance of offer.
2.
3.
10. • ACCEPTANCE:
Section 2(b) of Indian Contract Act,1872 defines the
term ‘acceptance’. It provides that “when the person,
to whom the proposal or offer is made, signifies his
assent thereto, the proposal or offer is said to
accepted.”
11. • Essentials of a Valid Acceptance:
A valid acceptance must comply with the following rules:
1.Must be absolute and unqualified.
2.Must be communicated to the offeror.
3.Must be according to the mode prescribed.
4.Must be given within a specified time.
5.Acceptance cannot precede an offer.
6.It must show an intention on the part of the acceptor to fulfil the terms of
promise.
7.It must be made only by the party or parties to whom the offer is made.
8.It must be made before the offer lapses or before the offer is withdrawn.
9.Silence cannot be the mode of acceptance.
10.Acceptance may be expressed or implied.
12. • Communication of Offer, Acceptance and Revocation:
According to Section 4, “The communication of an offer is complete when
it comes to the knowledge of the person to whom it is made.”
The communication of ACCEPTANCE is complete:
•
As against the proposer, when it is put into a course of transmission to
him, so as to be out of the power of the acceptor;
• As against the acceptor, when it comes to the knowledge of the proposer.
Communication of REVOCATION:
According to Section 5, “ the proposal may be revoked at any time before
the communication of its acceptance is complete as against the proposer,
but not afterwards.” An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the acceptor but
not afterwards.
13. • Consideration:
The term ‘consideration’ is defined under Section 2(d) of the
Indian Contract Act,1872. It provides that “ when at desire of
the promisor, the promisee (offeree) or any other person,
1.Has done or abstained from doing something or;
2.Does or abstains from doing something or;
3.Promises to do or to abstain from doing something,
such act, abstinence or promise is called consideration for the
agreement.”
14. Types of Consideration:
The Consideration may be of three kinds. It may be
past consideration, executed or present consideration
and executory or future consideration. On the basis of
this, contracts are also called past, executed and
executory contracts.
15. • Rules governing Consideration:
1.Consideration may be an act, abstinence or promise.
2.There must be mutuality i.e. each party must do or
agree to do something.
3.Consideration must be real and definite and not
vague.
4.Although consideration must have some value, it
need not be adequate i.e., a full return for the
promise.
16. • When Consideration not necessary:
The general rule is that an agreement made without
consideration is void.
EXCEPTIONS (Section 25):
1.Agreement out of natural love and affection between closely
related parties.
2.Agreement made voluntarily.
3.Agreement to pay time barred debt.
4.Agreement of agency.
5.Gifts.
17. •
The consideration and object of the
agreement is legal
Section 23 of the Act, provides that the consideration or
object of an agreement is lawful unless it is:
1.
2.
3.
4.
5.
forbidden by law or;
it is of such nature, if permitted, it would defeat the
provision of any law or;
is fraudulent or;
involves or implies injury to the person or property of
another or;
the court regards it as immoral or opposed to public policy.
