Learning Outcomes
INTRODUCTION
As per Contract Law, an offer is a kind of proposal made by one party to another to express a willingness to enter into the contract on certain conditions. This offer must be definite, clear, and communicated to the other person. An offer must be made with the intention to create a legal obligation.
An offer refers to a proposal made by one party to another party. Here, An offer is a promise that one party makes in exchange for another party’s performance. In the offer, there is an intention to create a legal obligation. An offer can be expressed in many forms, from a simple and short statement to a detailed and long written statement.
So the offer must be clearly communicated and reasonable in order to convince the other party.
MEANING
In a contract, an offer is necessary and the first step of the contract. In this, if someone wants to create a valid contract, one person must make an offer, and another party must accept the offer with consideration.
As per the law, one who makes the offer is known as the “offerer” and the person who receives the offer is called the “offeree”.
As above mention an offer can be just a single-sentence or oral statement and an offer can be a detailed written statement.
Here, An offer refers to a bond that is dependent on doing a certain act or not doing a certain act. An offer is an invitation to the other party for entering into an agreement bound by the law by expressing their assent and it also shows the willingness of the party to enter into the contract.
After seeing the basic concept of the offer, let’s see what is an offer according to the Indian Contract Act, 1872.
According to section 2 (a) of the Indian Contract Act, 1872:
When one person signifies → to another his willingness to do → or to abstain from doing anything,
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with a view to obtaining → the assent of that → other to such act or abstinence,
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“he is said to make a proposal”
In layman’s language, an offer is a kind of proposal made by one person who shows his willingness to do or abstain from anything with the intention of obtaining assent from another party it considers as a proposal made by the person.
EXAMPLES
- A is making an offer to buy a car from B for 10000 Rs. Here B accepts it.
- Ramesh makes a proposal to purchase the house from Rakesh. Here Ramesh makes an offer with the intention to creat a legal obligation. It is a valid offer.
ESSENTIAL ELEMENTS OF A VALID OFFER
In the contract, the most important aspect is that whether a party has actually made the proper offer is a common challenge. for a valid offer necessary to have this essential element in the proposal.
i) Intention to create legal relations: the first and most important thing is that offer must be made with the intention of creating a legal obligation or relation. offer itself has a binding effect. if an offer does not make with the intention of creating legal relations then it not consider a valid offer.
Example: if A made an offer to B without the intention to create a legal obligation it does not consider a valid offer.
The offer must be made with the intention of creating a legally binding agreement.
ii) Definiteness: Another important element is definiteness in offer. It means that the terms and conditions which is mentioned in the offer must be definite, clear, and specific. The most important thing is that there should not be any vagueness and ambiguity in the terms and conditions of the offers.
Example: Ramesh made a proposal to buy a car from Rakesh. Here Rakesh has three cars. Here Ramesh did not mention a specific car that he want to purchase. so this offer is not valid because it creates ambiguity.
iii) Communication: A most important part of the offer is the communication of the offer. the offer must be communicated by one party to another. communication of offer must be done in various ways like writing, orally, and also by conduct.
Example: Rahul wants to purchase a house from Mahesh. Rahul communicated the offer by conducting a particular act which shows that Rahul wants to purchase that particular house. Mahesh accepts the offer.
iv) Lapse of time: Most important thing is that offer must be accepted within the time which is given by the party. If an offer it not accepted within a time specified by the offerer then an offer can lapse.
Example: Shah made an offer to Manish and gave the time to accept within two days. Manish accepted the offer after two days. so here, the offer should be lapse because acceptance of the offer is not within the time limit.
v) Acceptance: Another element is that the offer which is made by the offerer must be capable enough to accept by the parties. Acceptance of the offer is one of the necessary things in a contract. if the offer can not be accepted by the party then both parties can not enter into the agreement.
If the above elements are present in an offer, it can be considered as a valid offer in India.
CASE LAWS
Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256
In this landmark case,
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Defendant made an advertisement→ offering a reward that anyone suffering from any disease→ after using their product.
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Plaintiff purchased the product→ and suffered from disease after consuming the product,→ but Defendant refused to pay the reward.
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In this Court held that the advertisement of the product consider a General offer and→ Plaintiff’s use of the product amounted to acceptance of that offer.
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So Defendant is liable to pay compensation to the plaintiff.
Harvey v Facey [1893] UKPC 1
In this case,
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Facey who is the defendant sent a telegram to Harvey who is the plaintiff,→stating “Will you sell us Bumper Hall Pen?
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” The plaintiff responded with a price,→ and the defendant replied→ “We agree to buy Bumper Hall Pen for £900 asked by you.”
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The court held that there was therefore no valid contract between the parties because the defendant’s initial telegram was not an offer but a request for information, and the plaintiff’s response was merely a statement of price, not an offer to sell.
Gibson v Manchester City Council [1979] 1 WLR 294
In this case,
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the plaintiff submitted a tender→for a construction project → to the Manchester City Council.
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The MCC→ rejected the tender → but later approached → the plaintiff to negotiate a new contract.
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The plaintiff argued that → the council’s initial invitation to tender constituted an offer, → which he had accepted by submitting his tender.
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The court held that → an invitation to tender is not an offer, → but is kind of invitation to treat.
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there is no binding contracts between the parties.
CASE LAWS BY INDIAN COURT
Bhagwandas Goverdhandas Kedia v. M/s. M.S. Shoe (India) Ltd. (2005) 10 SCC 345
In this case,
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the plaintiff sent a letter to the defendant offering to sell certain goods.
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The defendant did not respond to the letter, but later placed an order for the goods at a lower price.
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The plaintiff argued that his letter constituted an offer that had been accepted by the defendant’s order.
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The court held that the plaintiff’s letter was merely an invitation to treat, and that the defendant’s order constituted a counter-offer.
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There was therefore no contract between the parties.
Lalman Shukla v. Gauri Dutt (1913) 40 IA 142
In this case,
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the plaintiff’s nephew had gone missing, and the plaintiff offered a reward for anyone who could find him.
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The defendant, who was unaware of the offer, found the nephew and brought him back.
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The plaintiff refused to pay the reward, and the defendant sued for breach of contract.
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The court held that the plaintiff’s offer was not a unilateral offer, but a mere expression of intention, and that the defendant’s act of finding the nephew did not constitute acceptance of the offer.
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There was therefore no contract between the parties.
Satyabrata Ghose v. Mugneeram Bangur & Co. (1954) SCR 310
In this case,
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the plaintiff entered into a contract with the defendant for the supply of jute.
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The contract contained a clause that allowed the defendant to cancel the order at any time before delivery.
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The defendant later cancelled the order, and the plaintiff sued for breach of contract.
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The court held that the clause allowing cancellation was a term of the offer, and that the plaintiff had accepted the offer with full knowledge of the terms.
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There was therefore a valid contract between the parties.
CONCLUSION
These cases highlight the importance of clear and unambiguous communication in the formation of a contract in Indian Contract Law. It is important to understand whether a statement is an offer or a mere invitation to treat, and to consider the terms of the offer before accepting it.
These cases illustrate the importance of clear and unambiguous communication in the formation of a contract. A statement may be an offer, an invitation to treat, or simply a request for information, depending on the context and the intentions of the parties involved.