OFFER

Legal Aspects of Business

Group no:2
ISA - 2
 ROLL NO NAMES
1703 Afsana Azizi
1705 Akshay Naik
1726 Junaid Sayed
1728 Maisun Sheikh
1733 Masood Mohammed
1746 Devyani Parab
1766 Tanuja Krishna Naik
 Offer
i. Introduction
Definition of Offer

When a person signifies to another his willingness to do or to abstain from doing anything, with
a view to obtaining the ascent of that other to such act or abstinence he is said to make a
proposal. - Section 2 (a) of Indian Contract act.

Offer is otherwise known as proposal.To form a contract, there must be an offer by one party, an
acceptance by another party, and an exchange of consideration (something of value). The person
who proposes the terms of an agreement makes an offer, and is called an offeror in contract
law. The person to whom the offer is made is known as the offeree.

ii. Essentials or Legal Rules as To Proposal

1. There must be at least two parties:

No man can in his own right, be under an obligation to himself. There must be at least two
parties; to present an offer before another.

2. The proposal may be to do or abstain from doing something:

The offeror must make the offer with an intention to obtain the assent of the offeree to do or
abstain from doing something.

3. The offer must be capable of being accepted and giving rise to legal relationship:

An offer must be such as would result in a valid contract when it is accepted by the offeree. An
offer of social nature does not constitute legal relationship

4. The terms of offer must be certain and not vague:

The terms of the offer should not be indefinite, loose or vague, or if an essential provision is
lacking it cannot be accepted. This is because that its acceptance cannot create any legal
relationship.

For example: A owns three cars of different colours and he says to B that he is prepared to sell
one car to B. The offer is not definite because A has not specified

Which car (colour/make) he is intending to sell to B.

5. Offer must be communicated to the offeree:

Until an offer is made known to the offeree, he(offeree) does not know what he has to accept. It
must be communicated to the person to whom it is made. An ignorance of the offer is no
acceptance and it will not create any legal right on the acceptor.

Eg: A makes an offer to B to sell his car to B for Rs 2 lacs. B accepts the offer. Here A is
communicating or making an offer to B to buy his car. It is a valid offer.
A does not communicate to B but thinks that he(A) will sell his car to B. Here the buyer(B) does
not have any knowledge about the offer and hence it is not a valid offer.

6. The offer must not bind the offeree to send intimation of acceptance:

The offeror can set a time limit for getting acceptance of the offeree, but he cannot say that if no
acceptance is received from the offeree within a prescribed time, the offer shall be deemed as
accepted.

E.g.: A makes an offer to B to sell his car to B for Rs 2 lacs. B says he needs some time to think on
it. A says I will give you 2 days to reply and if you do not reply I shall consider the offer accepted.
It is not a valid offer.

7. Offer must be distinguished from Invitation to offer:

Advertisements are not held as offers. They are generally assumed to constitute an invitation to
make an offer.

Invitation to offer is where you only invite an offer from the buyer but do not make an offer to
sell the product. You may accept or reject the offer.

When someone advertises for his product, he is not actually making an offer but he is inviting an
offer from the buyer. The buyer gets enticed by looking at the advertisement to purchase that
product. The buyer goes to the shop and then makes an offer then the seller has right to accept
or reject the buyers offer.

E.g.: Advertisements such as up to 50% off or stock clearance sale are only invitation to offer and
not an offer.

8. Offer must not be a mere statement or intention or a wish:

A statement made by a person about his wish or intention should not be construed as an offer.

E.g.: A says to B that I wish to give all my property to the person who will marry my daughter.
B then asks his son to marry As daughter. Bs son marries As daughter. After marriage when As
son-in-law tells A to handover his(As) property to him(son-in-law), A rejects because A had not
made any offer. He had only expressed his wish or intention. Offer is clearly different from a wish
or an intention. It is not a valid offer.

iii. Kinds of Offer

1. General Offer: Offer is one which is not made to a definite person, but to the world at
large or public in general. A general offer can be accepted by any person by fulfilling the
terms of the offer. In case of general offer, the contract is made with person who having
the knowledge of the offer comes forward and acts according to the conditions of the
offer.
Example: X advertised In the newspaper that he would pay Rs 5,000 to anyone who traces his
missing boy. Y who knew about the reward traced that boy and sent a telegram to X that he had
found his son, It was held that X was entitled to receive the amount of reward.

2. Cross Offer: Two offers which are similar in all respects made by two parties to each other,
in ignorance of each others offer are known as `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 Xs car for Rs 1 lakh. These two letters cross each other. Ys letter is merely an
offer and not the acceptance of Xs 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 enter into a
contract, at least one of them must send his acceptance to the offer made by the other.

3. Counteroffer

A counteroffer is a proposal that is made as a result of an undesirable offer. A counteroffer revises

the initial offer and makes it more desirable for the person making the new offer. This type of
offer permits a person to decline a previous offer and allows offer negotiations to continue.

For example, a seller wants to sell a vehicle for $20,000. A buyer arrives and offers $15,000 for
the vehicle. The offeror provides a counteroffer asking for $16,000 with the objective of obtaining
a higher price. If the offeree declines, the offeror cannot force the buyer to purchase the vehicle
at $15,000, even though the buyer suggested that price.

4. Continuing offer: An offer which is to be kept open for a certain time, or a proposal made
to be accepted within a specified time.
5. Invitation to offer: Invitation to offer is inviting someone to make a proposal. In an offer,
there is an intention to enter into a contract, of the party, making it and thus it is certain.
On the other hand, an invitation to offer is an act which leads to the offer, which is made
with an aim of inducing or negotiating the terms.

So, in an invitation to offer, the offeror, does not make an offer, rather invites other parties to
make an offer. E.g. Auction

iv. Communication of Proposal

According to Sec.4 of the contract act, the communication of Proposal is completed when it
comes to the knowledge of the person to whom it is made.

For Example: A proposes, by letter, to sell his house to B at a price of Rs 50 lacs. The letter is
posted by A on June 1st and it reaches B on June 3rd. The communication of the offer completes
when B receives the Letter and read it.
 v. Revocation of Offer
A proposal may be revoked at any time before the communication of its acceptance completes,
as against the offeror, but not afterwards. This means that the proposal may be revoked by the
proposer at anytime by an mode of communication before the acceptor has accepted.

Methods of revocation

1. By notice of revocation

Offer may be revoked by the offeror by communication of a notice of revocation, at any time
before its acceptance is completed as against him.

2. By lapse of specified time

An offer maybe lapsed after the expiry of the specified time, if a time is fixed by the offeror for
the offeree to accept the proposal

3. By the lapse of a reasonable time

If no time is prescribed for acceptance, the offer lapses by the expiry of reasonable time

4. Buy death or insanity of the offeror

If the offeror dies before the acceptance received, there is no offer to accept, and if the
acceptance is made it becomes infructuous. If the acceptance is made in ignorance of death or
insanity of the offeror there would be a valid contract.

5. By the death or insanity of the offeree

An offer lapses by the death or insanity of the offeree before acceptance given. The offeree's
death without accepting the offer puts an end to the offer, his legal representative cannot accept
for him.

6. In case of non-fulfillment of conditions of offer

In case of non-fulfillment by the offeree of a condition precedent to the acceptance the offer
lapses.

Example: A seller agrees to sell certain goods to B the buyer, provided he pays the price in
advance. If B fails to pay the price by the date, the offer stands revoked.

7. In case of Counter offer

An offer lapses by counter offer by the offeree if it amounts to the rejection of the offer. Where
an offer is accepted with certain charges in terms of the offer or with some other conditions not
forming part of the offer, search qualified acceptance is called counter offer.

Example: if A makes offer to B to sell his house for Rs 1.50 lacs and B instead of accepting the
offer makes an offer to buy it for Rupees 1.25 lakh, the original offer by A is lapsed. Such an offer
is known as counter offer
 8. Implied revocation of offer

An offer can be revoked by the conduct of the offeror before the acceptance is completed.

Example: A agrees to sell his bicycle to B at a price of rupees 3000. Before B accepts the offer A
has sold out the cycle to C there is an implied revocation of offer.