First-Year Law Notes & Flashcards

Express offer and implied offer (Section 9)

Section 9 of The ICA defines both of them as:  In so far as the proposal or acceptance of any promise is made in words, the promise is said to be expressed. In so far as such a proposal or acceptance is made otherwise than in words, the promise is said to be implied.

Therefore, any offer that is made with words, it may be regarded as express. Any promise that is made otherwise than in words is implied. A bid at an auction is an example of an Implied offer.

Similarly entering into an omnibus also amounts to implied acceptance, same as consuming edibles at a self-service restaurant. Therefore in simpler terms a contract that is entered into because of actions on the offerors part, may be referred to as an implied offer, any contract entered into otherwise is an express offer.

General offer

A General Offer is an offer that is made to the world at large. The genesis of a General Offer came about from the Landmark case of  Carlill v. Carbolic Smoke Ball Co . 1892] 2 Q.B. 484

 A company by the name Carbolic Smoke Ball offered through an Advertisement to pay 100 Pounds to anyone who would contract increasing epidemic Influenza, colds or any disease caused by cold after taking its Medicine according to the prescribed instructions. It was also added that 1000 Pounds have been deposited in Alliance bank showing our sincerity in the matter. One customer Mrs Carlill used the medicine and still contracted Influenza and hence sued the company for the reward. The Defendants gave the argument that the offer was not made with an intention to enter into a legally binding agreement, rather was only to Puff the sales of the company. Moreover, they also contended that an offer needs to be made to a specific person, and here the offer was not to any specific person and hence they are not obliged to the Plaintiff. 

Setting aside the arguments of the Defendant, the bench stated that in cases of such offers i.e- general offers, there is no need for communication of acceptance, anyone who performs the conditions of the contract is said to have communicated his/her acceptance, and moreover, the money deposited by the Defendant in Alliance Bank clearly shows that they intended to create a legally binding relationship. Hence the Plaintiff was awarded with the amount. An Indian authority in this regard is  Lalman Shukla v. Gauri Dutt,  wherein a servant was sent by his master to trace his missing nephew. In the meanwhile, he also announced a reward for anyone finding his nephew, this in itself is an example of an offer that is made to the world at large and hence a General Offer.

Valid acceptance based on fulfillment of condition

This concept has been given statutory authority under section 8 of the ICA:

Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal. 

This section was applied by YEARS CJ of Allahabad high court in the case of  Har Bhajan Lal v. Har Charan Lal,  wherein the father of a young boy who ran from home issued a pamphlet for a reward for anyone who would find him. The Plaintiff found him at the railway station and sent a Telegram to his father. The Court held that the handbill was an offer that was made to the world at large and anyone who fulfilled the conditions is deemed to have accepted it. In the State  of Bihar v. Bengal Chemical and Pharmaceutical Works LTD,  the Patna HC held that where the acceptance consists of an act, e.g- dispatching some goods, the rule that there shall be no communication of acceptance will come into play. 

General offer of continuing nature

When a general offer is of continuing nature, like it was in a carbolic smoke ball case, it can be accepted by a number of people till it is retracted. However, when a similar offer requires information regarding a missing thing, it is closed as soon as the first information comes in. 

Specific offer

A Specific offer is an offer that is made to a specific or ascertained person, this type of offer can only be accepted by the person to whom it is made. This concept was seen briefly in the case of  Boulton v. Jones,  wherein the Plaintiff had taken the business of one Brocklehurst, the defendant used to have business with Brocklehurst and not knowing about the change in ownership of business, sent him an order for certain goods. The Defendant came to know about the change only after receiving an invoice, at which point he had already consumed the goods. The Defendant refused to pay the price, as he had a set off against the original owner, for which the plaintiff sued him.

The Judges gave a unanimous judgement holding the defendant not liable. Pollock CB held that the rule of law is clear, if you intend to contract with A, B cannot substitute himself as A without your consent and to your disadvantage. It was also held that whenever a person makes a contract with a specific personality, a specific party, so to say, for writing a book, for painting a picture or for any personal service or if there is any set off due from any party, no one has the authority to come in and maintain that he is the party contracted with. 

Cross offer

When two parties make an identical offer to each other, in ignorance to each other’s offer, they are said to make cross offers.  Cross offers are not valid offers.  For example- if A makes an offer to sell his car for 7 lakhs to B and B in ignorance of that makes an offer to buy the same car for 7 Lakhs, they are said to make a cross offer, and there is no acceptance in this case, hence it cannot be a mutual acceptance. 

 Basic essentials of a cross offer

1. Same offer to one another- When the offeror makes an offer to the offeree and the offeree without prior knowledge makes the same offer to the offeror, then both the object and the party remain the same.
2. Offer must be made in ignorance of each other- The two parties must make their offer in ignorance of each other.

An important case in this aspect is the English case of  Tinn v. Hoffman , the defendant wrote to the complainant an offer to sell him 800 tons of iron at 69s per ton, at the same time the complainant also wrote to the defendant an offer to buy the iron at similar terms. The issue in this case was that, was there any contract between the parties, and would simultaneous offers be a valid acceptance. The court held that these were cross offers that were made simultaneously without knowledge of one another and would not bind the parties. 

Here it is imperative to deduce that for a valid contract to be formed there needs to be an offer and acceptance of the same, whereas in a cross offer there is no acceptance, but only simultaneous offers being and therefore a cross offer will not lead to the formation of a contract. 

Counter offer

When the offeree offers a qualified acceptance of the offer subject to modifications and variations in terms of the original offer, he is said to have made a counter offer. A counter offer is a rejection of the original offer. An example of this would be if A offers B a car for 10 Lakhs, B agrees to buy for 8 Lakhs, this amounts to a counter offer and it would mean a rejection of the original offer. Later on, if B agrees to buy for 10 Lakhs, A may refuse. 

The Bombay High court gave this decision based upon the landmark judgement of  Hyde v. Wrench,  in which an offer to sell a farm for 1000 Pounds was rejected by the Plaintiff, who offered 950 for it. Subsequently the Plaintiff gave an acceptance to the original offer. Holding that the Defendant was not bound by a contract, the court said that the Plaintiff accepted the original offer of buying the farm at the price of 1000 pounds, it would have been a completely valid contract , however he gave a counter proposal to it, thus rejecting the original offer. 

Partial acceptance

Counter offer also includes within its contours Partial acceptance, meaning that a party to the contract cannot agree to those conditions of the agreement that favour him and reject the rest, the acceptance should be of the complete agreement i.e.- all its parts. In  Ramanbhai M. Nilkanth v. Ghashiram Ladli Prasad , the plaintiff made an application for certain shares in a company with the underlying condition that he would be made the cashier in its new branch. The Company did not comply with this and hence the suit. The court held that the Petitioners application for shares was condition on him being made the cashier and that he would have never applied for the shares had there been no such condition. 

Acceptance of a counter proposal

In  Hargopal v. People’s Bank of Northern India LTD , an application for shares was made on a conditional undertaking by the bank that the applicant would be made the director of the new branch. The shares were allotted to him without fulfilling the condition. The applicant did not say anything and took his dividends, a subsequent suit by him failed as the court held that he through his conduct had waived the condition. When a counter proposal is accepted the contract arises in terms of the counter proposal and not in terms of the original contract.    

Standing offer 

An Offer which remains open for acceptance over a period of time is called a standing offer. Tenders that are invited for supply of goods is a kind of Standing Offer. In  Percival Ltd. V. London County Council Asylums and Mental deficiency Committee,  the Plaintiff advertised for tenders for supply of goods. The defendant took the tender in which he had to supply to the company various special articles for a period of 12 months. In-between this the Defendant didn’t supply for a particular consignment. The Court held that the Tender was a standing offer that was to be converted into a series of contracts by the subsequent acts of the company and that an order prevented the possibility of revocation, hence the company succeeded in an action for breach of contract. 

Difference between an offer and Invitation to offer 

Although Invitation to Offer is not a type of offer  per se,  it is imperative to distinguish both to even construe what an actual offer is. An invitation to offer is an offer to negotiate, an offer to receive offers, offers to chauffeur. An offer is a final expression of willingness to get into a contract upon those following terms. The concept of Invitation to offer was explained in the Privy Council case of  Harvey v. Facey,  the Plaintiffs in this asked two questions from the defendant i.e.- Would you sell me your Bumper Hall pen , telegram me the lowest price? , the Defendant only gave the answer to the latter question , post which he refused to sell. The Court held that the defendant was not to sell as he had only answered the second question and reserved the same for his first question. Thus, this clearly shows the distinction between an offer and invitation to offer.

In  Adikanda Biswal v. Bhubaneswar Development Authority,  when a development authority made an announcement for allotment of plots on first come first serve basis on payment of full consideration. An application against this with full consideration was only considered to be an offer, as the Development authority only gave an invitation to offer, and the offer can only be formalized into a contract when it is accepted by the development authority. 

Rules regarding display of goods in shops 

In  Pharmaceutical Society of Great Britain v. Boots Cash Chemists Southern Ltd.,  lord GODDARD CJ, said that it would be wrong to say that a shopkeeper intends to sell everything that is displayed in his shop. Meaning that the customer makes an offer, to which the shopkeeper has the discretion to accept or deny. The shopkeeper may say that he doesn’t have enough stock of that good and therefore may not sell. Similarly, a bankers catalogue of charges is also not an offer, the auction held by a person is also only an invitation to offer and he may not be liable for the transportation costs that people may have to pay to come to the place of auction, in case he cancels at the end moment.

Difference between general offer and specific offer

General Offer vs Specific Offer

General Offer	Specific Offer
General Offer is made to the whole world at large.	A specific Offer is made to some specific person.
A general offer can be considered by any person.	A specific offer can be accepted by only a specific person.

Lapses and revocation of an offer 

• An offer lapses after a defined or reasonable time.

• An offer lapse by not being accepted in the specified mode

• An offer lapses by rejection. 

• An offer lapses by the offeror or the offeror’s death or insanity until acceptance.

• An offer lapses by revocation before acceptance.

• An offer lapses by subsequent illegality or destruction of the subject matter.

When communication is complete

• Communication of offer (section 4)

The communication of the offer is complete when it comes to the knowledge of the person to whom it is made.

Time of revocation of an offer

• Revocation of the offer (Section 4)

A proposal can be revoked at any time before the communication of its acceptance is complete as against the proposer but not afterward.

Revocation of the offer by the offeror

The offeror can withdraw his offer before it is accepted “the bidder can withdraw (revoke) his offer at an auction sale before being accepted by any auctioneer using any of the customary methods.

Example

‘A’ agreed to sell the property to ‘B’ by a written document which stated “this offer to be left over until Friday 9 AM”. on Thursday ‘A’ made a contract to sell the property to ‘C’. ‘B’ heard of this from ‘X’ and on Friday 7 AM he delivered to ‘A’ acceptance of his offer. Held ‘B’ could not accept A’s offer after he knew it had been revoked by the sale of the property to C. 

Acceptance (Section 2(b))

The Indian Contract Act 1872 defines acceptance in  Section 2 (b)  as “When the person to whom the proposal is made signifies his assent thereto, the offer is said to be accepted. Thus the proposal when accepted becomes a promise.” An offer can be revoked before it is accepted.

As specified in the definition, if the offer is accepted unconditionally by the offeree to whom the request is made, it will amount to acceptance. When the offer is accepted it becomes a promise.

Example

‘A’ offer to buy B’s house for rupees 40 lacs and ‘B’ accepts such an offer. Now, it has become a promise.

When an offer is accepted and it becomes a promise it also becomes irrevocable. No legal obligation created by an offer.

Mode of acceptance

Under the Indian Contract Act, acceptance can be by following two ways:

• Implied acceptance: Acceptance which is not explicitly made by means of speech or writing but, by the conduct of the person to whom an offer is made. The striking of hammer thrice by the auctioneer in order to show his acceptance to the offer made by a bidder is an example of implied acceptance to the offer made by the bidder at an auction to the auctioneer;

• Express acceptance: Acceptance which is made by means of words, oral or written is known as an express acceptance. For example, A offers B his watch for sale through a mail and A replies in positive to the offer by email.

Acceptance: absolute and unqualified (Section 7)

Acceptance to be legally enforceable must be absolute and unqualified.  Section 7(1)  of the Indian Contract Act provides that in order to turn an offer into an agreement the acceptance to the offer must be absolute and unqualified. The logic behind the principle that the acceptance to the offer must be absolute and unqualified is that when acceptance is not absolute and is qualified it results into a counter offer which leads to the rejection of the original offer made by the offeror to the offeree. If the offeree makes any variations in the original terms of the contract proposed to him and then accepts the contract, such an acceptance would result in the invalidity of the contract.

For example, if A offers to sell his bike to B for Rupees 10,000. But B persuades A to sell him the bike for 7,000 rupees to which A denies and if B at any later point of time agrees to buy the bike for 10,000 rupees. Then A is under no obligations to sell him the bike as the counteroffer made by B puts an end to the original offer.

It is also important that the acceptance made by the offeree should be in toto, i.e. acceptance should be given to all the terms and conditions of the offer as acceptance of only a part of the offer is not a good acceptance under the law. For example, A makes an offer to B of sale of 30 kg of wheat at Rupees 700 but B agrees to buy only 10 kg of wheat. Here the acceptance made by B is not in toto with respect to the terms of the contract and therefore, the acceptance made by B is no acceptance in the eyes of law and therefore, A is under no obligation to sell him wheat since there is no contract between them.

Legal rules and conditions for acceptance

• Acceptance must be absolute and unqualified 

The offeree’s approval cannot be conditional. For example, ‘A’ wants to sell her car to ‘B’ for Rs 2 lakh, ‘B’ can’t come back and says that she accepts the offer but will buy the same for Rs. 1 lakh.

• Acceptance must be told to the offeror

If the acceptor just accepts the offer in his head and he does not mention the same to the offeror, it can not be called an Acceptance, whether in an express manner or an implied manner.

• Acceptance must be recommended in the following mode

Acceptance is sometimes required in a prescribed/specified communication mode.

• In a reasonable amount of time, the acceptance is given

It’s very rare that an offer is always to get acceptance at any time and at all times. Therefore, the offer defines a time limit. If it does not, it should not be acknowledged forever.

Mere silence is not acceptance

If the offeree fails to respond to an offer made to him, his silence can not be confused with acceptance. But, there is an exception to this rule. It is stated that, within 3 weeks of the date on which the offer is made, the non-acceptance shall be communicated to the offeror. Otherwise, the silence shall be communicated as acceptance.

When communication is complete

• Communication of acceptance (Section 4)

Communication of acceptance is complete when it is put in the course of transmission to him as to be out of the power of the acceptor to withdraw the same and when it comes to the knowledge of the proposer.

Time of revocation of acceptance

An acceptance may be revoked at any time, but not afterward, before the communication of the acceptance is complete as against the acceptor.

Acceptance with subsequent condition

In the law of contract, the term “condition” is used in a loose sense and it is used synonymously as “terms”, ‘’condition” or ”clause”. In its proper sense, the term condition means some operative term subsequent to acceptance and prior to acceptance, it is a fact on which the rights and duties of the parties to the contract depend on. The fact can be any act or omission by any of the contracting parties, an act of the third party or happening or not happening of any natural event. Conditions are of three types, which are as follows:

• Express condition: In an express condition, certain facts can operate as condition as it has been expressly agreed upon by the parties to the contract;

• Implied condition: When certain facts which operate as a condition are not expressly mentioned by the parties but can be inferred by the conduct of the parties to contract is known as an implied condition;

• Constructive condition: When the court believes that the parties to a contract must have intended to operate certain conditions because the court believes that the Justice requires the presence of the condition. These conditions are known as constructive conditions.  

A contract comes into force by the acts or conduct of one party to the other party. The acts or conduct of the party can be turned into a promise only by meeting of mind or an agreement between both the parties. An acceptance that carries a subsequent condition may not have the effect of counter-proposal. Thus, where a person ‘A’ accepted the terms of the contract for the sale of a good by accompanying the acceptance with the warning that if money was not delivered to him by a particular date, then the contract will remain repudiated. The acceptance of the offer would not be deemed to be a counter-proposal.

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