OFFER AND ACCEPTANCE

OFFER AND ACCEPTANCE

Definition – Download

Example of proposal – Mokal

Types of Offer – Below

Essentials of valid proposal – Download + Mokal

Test of an offer – below

Invitation to offer – Mokal

Intention of offer - Downlaod

Offer or Proposal

Definition :
Define Offer – Section 2(a) of the Indian Contract Act, 1872 defines the term "Proposal" as
when one person signifies to another his willingness to do or to abstain from doing
something with a view to obtaining the assent of the other to such an act or abstinence, he is
said to make a proposal. The person making the 'proposal' or 'offer' is called the
'promisor' or 'offeror', the person to whom the offer is made is called the 'offeree'.

An offer may require a unilateral act or an act by two or more parties. Thus if X gifts Y his
horse, it is an offer of unilateral act as Y has to do nothing or pay nothing to X in return of the
gift of horse from X. But in case of offers of bilateral acts or requiring actions by two or more
persons, then the offeree is supposed to act or respond in a specified manner. Now suppose
X offers to sell his horse for Rs. 1000 to Y then here Y also is expected to pay Rs. 1000 to X.
It is only the second type of offers about which we are concerned in the Indian Contract Act.
Thus an offer can be analysed into two parts comprising of:-

(a) a promise by the offeror, and

(b) a request to the offeree for something in return of the offer.

When the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted. A proposal, when accepted, becomes a promise.

Determination of an Offer (Test of an offer)

Every proposal made by an offeror is not legally regarded as an offer. Three tests are
applied to determine whether or not an offer has actually been made:

1. Does the offer show a clear intention on the part of the offeror to be bound by it.

2. Whether the proposal is definite?

3. Whether the offer is communicated to the offeror?

Offer must be distinguished from

(i) Mere invitation to an offer. Offer should be distinguished from a mere invitation to an
offer. Catalogue of goods, an advertisement inviting tenders or application for a job, a
prospectus of a company; an auctioneer’s request for bids or display of goods in showcase
with prices marked upon them etc., are mere invitations to offers and not actual offers. A
statement of the lowest price at which a landowner is prepared to sell has been held not to
be an offer thus, when an owner of property says he will not accept less than Rs. 5,000 he
does not make an offer, but merely invites offer. Similarly, a term in a partnership deed that
any of the parties wishing to sell his share will sell to the others at the market value is not an
offer but an undertaking to make an offer. Thus, in such cases the person who responds to
an invitation to an offer, makes the actual offer. The party issuing an invitation for the offers
has a right to accept or not to accept the offers received. As such in a case where brokers in
Bombay wrote to merchants in Delhi stating their terms of business and the merchants
afterwards placed orders with the brokers; no contract was made until the orders given by
the brokers were accepted by the merchants. A bank’s letter with quotation as to particulars
of interest on deposits, in answer to an enquiry, is not an offer but only a quotation of
business terms.

Example: A shopkeeper displays goods for sale in a shop with price tags attached to each
article. This is only an invitation to an offer. The shopkeeper cannot be compelled to sell the
goods at the price mentioned.

(ii) Mere statement of Intention: A declaration by a person that he has the intentions to
do something does not amount to an offer. The person making the declaration will not be
liable to the person who has suffered some loss because of reliance on the declared
intention.

Seller cannot be held liable for any loss caused to a prospective buyer by not adhering to the
advertisement for sale of goods by auction at a particular time and place because the
advertisement was a mere statement of intention (Hari V. Naickersor (1873). Similarly, the
announcement made on loudspeakers do not result into any binding offers.

Examples : T said in conversation to W that he would give Rs. 1000 to anyone, who married
his daughter with his consent. W married T’s daughter with his consent. Thereafter, T
refused to pay Rs. 1000/- We filed a case against T for the alleged promise. It was held that
words used by T were mere statement of intention and do not constitute an offer, therefore,
W could not succeed in his claim (Weeks V. Tybald 1605).

(b) A father wrote to his would be son-in-law that his daughter would have a share in all the
assets that he would leave. It was merely a statement of intention and, therefore, neither the
daughter nor the son-in-law can hold the promisor liable for anything if he does not leave any
assets. (Farina V. Fickus) (1900).

Essentials of a Valid Offer

1. The offer must disclose an intention to create legal relations: If the offer does not
contemplate to give rise to legal relationship, it is no offer in the eyes of law, e.g. invitation to
a dinner which has no intention to create relationship. An offer must impose some legal duty
on the party making it.
2. The terms of offer must be clear and certain and not indefinite, lose or ambiguous: The
terms of the offer must be definite, unambiguous, clear and certain and not lose and vague.
The offer must not be based on a condition which is uncertain or incapable of performance.
Though the proposer is free to lay down any terms and conditions in his offer, but they
should be certain and legal, otherwise its acceptance will amount to a vague agreement
which the courts will not enforce. But, where an agreement contains its own machinery for
clarifying vague term, the agreement will not be vague in Law. (Foley V. Classque Coaches
Ltd.) (1934). In some circumstances, the courts might imply a term based upon the
presumed, intention to the parties.

Examples:-(a) A says to B “I will sell you my car:. A owns four different cars. The offers is not
valid because it is not definite.

(b) A made a contact with B and promised that if he was satisfied with him as a customer he
would favourably consider his application for the renewal of the contract. The promise is too
vague to create any legal relationship.

Offer must be communicated: The offer, to be valid must be communicated to the offeree.
An offer becomes effective only when it has been communicated to the offeree so as to give
him an opportunity to accept or reject. An acceptance of the offer, in ignorance of the offer, is
no acceptance and, therefore, no valid contract can arise.

6. Statement of Price: If a party makes a statement of price, it cannot be taken as an offer

to sell at that price. The decision made in case of Harvey and Facey, is important to note in
this connection.

Example : A asks B, “Will you sell us Bumper Hall Pen? Telegraph lowest cash price-answer
paid”. B replies telegraphically “lowest price for Bumper Hall Pen £ 900”.

A responds by telegram “We agree to buy Bumper Ball Pen for the sum of £ 900 asked by
you”. It was held that no contract was concluded between A&B.

Leading case: Lalman Shukla V. Gauri Dut (1913):

In this case, G’s nephew has absconded. He sent his munim L in search of the missing boy.
In his absence, G issued hand bills oferring a reward of Rs, 501/- to anyone who might find
out the boy L found out the boy before seeing the hand bills. Later on, he came to know of
the reward and sued G for the reward. Here he could not claim the reward as he did not
know about the offer.

6. Offer nust be made with a view to obtain the consent: The offer must be made with a
view to obtain the consent of the other party and not merely with a view to disclosing the
intention of making an offer. A proposer cannot also dictate terms under which the offer can
be refused. At best, he can lay down the mode of acceptance.

7. Offer should not contain a term the non-compliance of which would amount to
acceptance: The offer should not contain a term the non-compliance of which would amount
to acceptance for example a person cannot make such an offer that if the acceptance of the
offer is not received upto Monday, the offer would be presumed to have been accepted.

8. Special conditions attached to an offer must also be communicated: Though an offeror

is free to lay down any terms and conditions in his offer, but it is the responsibility of the
offeror to bring all the terms of the offer to the notice of the other party, the acceptor is bound
only for those conditions which (i) have expressly communicated to him or (ii) have so clearly
been written that he ought to have known them or (iii) have reaonsable notice of the
existence of those terms. He will also be bound by the conditions if he knew of their
existence, though they are in a language unknown to him. It is his duty to get them
explained.

Examples : (a) A passenger had purchased a ticket for a journey. On the back of the ticket,
there were certain terms and conditions. One of the terms was that the carrying company
was not liable for losses of any kind. But there was nothing on the face of the ticket to draw
the attention of the passenger to the terms and conditions on the back of ticket. Held, the
passenger was not bound by the terms and conditions on the back side of the ticket.
(Henderson V. Stevenson) (1875).

(b) T, an illiterate, purchased a railway ticket on the front of which was printed “for
conditionsseek back”. One of the conditions was that the railway company would not be
liable for personal injuries to the passenger. An accident caused some injuries to T. Suit for
damages brought by T was dismised as he was bound by the conditions printed on the
reverse of the ticket. (Thompson V. L. M. & S. Rly.) (1930).

Now it is the established law that wherever on the face of a ticket words to the effect “for
conditions see back” are printed, the passenger concerned is bound by the conditions, it is
immaterial whether he actually reads them or not. If conditioins are printed on the back of the
ticket, but there is nothing on the face of it to draw attention of the person to these
conditions, he is not bound by the conditions.

Thus, it is to be noted that a person, who accepted without objection a document containing
terms of the offer, which he knows or ought to have known, will be bound by those terms
even if he had not read them. However, this rule will not be applicable if the conditions are so
irrelevant for unreasonable that an assent to them cannot reasonably be presumed.
Similarly, where a condition to an offer is against public policy, it will not be enforced merely
because it has been accepted by the acceptor.

Example: A garment of B was lost due to the negligence of laundry owner. On the back of
the laundry receipt, it was mentioned that in the event of loss only 15% of the market price or
value of the article would be recovered by the customer. In a suit by R, it was held that the
term being prima facie opposed to public policy it could not be enforced even though there
was tacit acceptance by the customer of the terms (Lily White V. Munnuswami) 1966.

The acceptor would be bound by the terms and conditions only when all the following
conditions are satisfied:

1. The acceptor knows about the writing or printing on the ticket.

2. He also knew the writing or printing on the ticket contained conditions regarding terms of
the contract.

3. The conditions must not be against public policy or the fundamental principles of
contracts.
4. The offeror had done all that was reasonably sufficient to give the acceptor notice of the
conditions. For example, if printing of the ticket is not clearly visible due to the smallness of
the type it could not be taken that the carrying company had made sufficient arrangement for
the communication of the conditions. (Richardson V. Rowntree) (1894).

5. The notice of the conditions should be given before or at the time of the contract but not
afterwards. A subsequent notice about the conditions will not bind the other party.

Example: A hotel put up a notcie in a bed room. “The proprietors will not hold themselves
responsible for articles lost or stolen unless handed to the manager for safe custody”. Held,
the notice was not effective as it came to the knowledge of the customer only after the
contract had been made and the customer had already paid the rent.

6. Conditions must not be contained in a voucher or receipt for payment of money because
they will not bind the person receiving the voucher or receipt (chapleton V. Barry U.D.C.)
1940.

TYPES OF OFFER

Specific Offer: When an offer is made to definite person or persons it is called specific offer.
A specific offer can be accepted only by the person to whom the offer has been made and in
the manner, if any specified in the terms of the offer.

General Offer: When an offer is made to the world at large it is called general offer. But a
general offer can be accepted by any persons having notice of the offer by doing what is
required under the offer. The most obvious example of such an offer is where a reward is
publicity offered to any about that object, who will recover a lost object or wll give some
information, there the party claiming the reward has not to prove anything more than that he
has performed the conditions on which the reward was offered. The time table of railways is
a general proposal to run trains according to the table, which is accepted by an intending
passenger tendering the price of the ticket.

Case: Carlill V. Carbolic Smoke Ball Co. (1983). In this case, the Company advertised that a
reward of £ 100 would be given to any person who contracted influenza after having used
the smoke-balls of the Company as directed. Mrs. Carlill used the smoke-balls according to
the directions of the company. but contracted influenza. It was held, that the offer was a
general one, and Mrs. Carlill had accepted it by acting in accordance with the advertisement,
and therefore, the company could not get away from its responsibility by saying that they had
not meant it seriously. She was entitled to the reward.

In India, the principle was applied in the case of Har Bhajan. Lal V, Han Charan Lal. In this
case offer of reward was made to any one tracing a lost boy and bringing him home.
Harbhajan Lal who knew of the reward. found out the boy and took him to the Police Station.
It was held that he was entitled to the reward.

3. Express Offer : An offer made by words, spoken or written is termed as an ‘express

offer’.

Example: If A says to B that he is willing to sell him his car for a sum of Rs. 10,000 it is an
express offer.
4. ‘Implied Offer’ means an offer made by conduct, an offer may also be implied from the
conduct of the parties or the circumstances of the case. This is known as an implied offer.
When one person allows the other to perform certain acts under such circumstances that
nobody would accept them without consideration it will amount to an offer by conduct and
the permission of the party, who is benefitted by such performances, will amount to his
acceptance.

Example : A bus company runs a bus on a particular route. This is an implied offer by the
bus company to take any person on the route who is prepared to pay the prescribed fare.
The acceptance of the offer is complete as soon as a passenger gets into the bus.

5. Tender

A person may invite tenders for the supply of specific goods or services. Thus, a tender, in
response to an invitation, is an offer. A tender may be either:

(i) A definite or single offer, or

(ii) A standing or an open offer.

Tender as a definite offer : If a tender has been submitted for goods or services in specified
quantities it is termed as a definite offer, A binding contract comes into existence as soon as
the tender is accepted.

Example: A invites tenders for the supply of 100 tons of local X, Y and Z submit the tenders.
A accepts Y’s tender. There is binding contract between A and Y.

Tender as a standing offer. Standing offer or tender may be of the nature of a continuing
offer. Thus, a tender to supply goods as and when required over a certain period amounts to
a standing offer. Here, the tenderer must supply whenever an order is placed. But he cannot
insist on any order being made at all.

Example: (a) A tendered to supply goods upto a certain amount to B over a certain period.
B’s order did not come upto the amount expected and A sued for breach of contract. Held,
each order made was a separate contract and A was bound to execute the orders made. B
was under no obligation to make any order at all. (Percival Ltd. V.L.C.C.) (1918).

(b) A railway company invited tenders for the supply of certain iron articles over a period of
12 months. W’s tender was accepted. After supplying for sometime, W refused to execute on
order placed during the currency of the tender. Held, W could not refuse within the terms of
the tender. (Great Northern Railway V. Witam).

Cross Offers :

Where two parties make identical offer to each other, in ignorance of each other’s offer, this
offer is termed as cross offer. In this case, there is no contract because out of the two parties
no one can be called for acceptance

(Tinn V. Hoffman) 1873.

Example: A, by a letter offers to sell his car to B for Rs. 10,000 B, by a letter which crosses
A’s letter in the post, offers to buy it for Rs. 10,000. The offers are cross- offers and no
binding contract will arise. Both A and b are ignorant of each other’s offer. There can be no
automatic acceptance of each other’s offer, rather a new acceptance from either of the two
parties would be required.

5. Counter Offer:
Counter offer by the offeree terminates the original offer. When in place of accepting the
terms of an offer as they are, the offeree accepts the same subject to certain condition or
qualification, then a counter offer is said to be made.
.Example from Mokal

Acceptance & Mental Acceptance not sufficient in eyes of law:

tranger to Contract
Stranger to Contract cannot sue upon the Contract - Stranger to Contract means a person
who is not a party to the Contract. He is neither offerer nor offeree. That means Stranger is
an outsider or a third party. As he is not party to the Contract he cannot file a suit in
connection with the Contract.

 Related case is Dunlop Pneumatic Type Company [A] (Vs) Selfridge and Company
[B]. In this case A sends goods to their agent Due and Company [C]. C sell those goods and
has to remit amount to A. On account of excessive work load, C appoints B as its sub-agent,
without having any relationship with A. As per the agency contract formed between C and B,
if B sells goods below the specified price, B has to pay five pounds per unit to C. Thereafter,
B sells two units below the specified price and also fails to pay ten pounds to C. A files a suit
against B to arrange that amount to C. Here Court decides that A is a stranger and therefore
its suit is not supportable.

Exceptions to the Statement 'Stranger to Contract cannot sue upon the Contract'

Trust deeds: In case of trust arrangements, the beneficiary, though he is a stranger to the
contract, can file suit in case where trustee comes across breach of trust.

 Example: A has a Son namely B who is a minor. For the sale of B, A has executed a
trust deed, appointing C as trustee. Here A is trust maker, C is trustee and B is beneficiary.
Here actually the Contract between A and C. But B can proceed legally if C breaches the
trust.

Stranger is authorized: When stranger is authorized by party to the contract, then

stranger`s suit becomes supportable.
When charge on property is made: In case where charge is created on property, stranger
can file a suit.

 A case on this point is Khaja Mohammed (Vs) Hussend Begum. In this case B is A`s
Son and C is B`s wife. A contract gets formed between A and B according to which A has to
provide for C`s betel box expenses, out of the proceeds which A gets from his property A
fails to pay and C sues. Court decides that C`s suit is supportable though it is stranger`s suit
because there is charge on property.

Agency Contract: In case of agency contract, the principle, though he is a stranger can file
a suit. Here condition is the contract made by the agent should be in his capacity as agent.

Family Arrangements: In case of family arrangements the dependent person can file a suit,
though they are strangers.

 A case on this point is Shuppa Ammal (Vs) Subramanyan. In this case Shuppa
Ammal has two sons. A contract gets formed between those brothers according to which
each of them has to contribute certain amount for their mother`s livelihood. The contract gets
breached and Shuppa Ammal files a suit. Her suit is given validity under this exception.

Assignment 4 – Mokal pg 84 to 88

Assignment 5 – Mokal Pg 110-111

f any person entitled to any legal character, or to any rights as to any property is denied by
another and if any suit is filed by the person so denied it is called a declaratory suit. A
Declaratory decree is a binding declaration of right in equity without consequential relief. In
simple terms, a declaratory decree is cone which settles the right and removes the confusion
of the status of the party.
Provision regarding declaratory decree has been provided in sections 34 and 35 of the
Specific Relief Act, 1963. Section 34 of Specific Relief Act reads as:

“Any person entitled to any legal character, or to any right as to any property, may institute a
suit against any person denying, or interested to deny, his title to such character or right, and
the court may in its discretion make therein a declaration that he is so entitled, and the
plaintiff need not in such suit ask for any further relief:

Provided that no court shall make any such declaration where the plaintiff, being able to
seek further relief than a mere declaration of title, omits to do so.
Explanation: A trustee of property is a "person interested to deny "a title adverse to the title
of someone who is not in existence, and for whom, if in existence, he would be a trustee.”
Essentials of a declaratory suit
The person filing the suit must be entitled to legal right or any right as to any property
The person against whom the suit is to be filed must actually be denying the right or is
interested in denying the right of the plaintiff
Passing a declaratory decree is on the discretion of the court.

Effect of declaration
The provision for the effect of declaration has been provided under section 35 of Specific
Relief Act. Section 35 reads as:

“A declaration made under this Chapter is binding only on the parties to the suit, persons
claiming through them respectively, and, where any of the parties are trustees, on the
persons for whom, if in existence at the date of declaration, such parties would be trustees.”

That means a declaratory decree is binding only on the parties to the suit and upon the
representatives of the parties to the suit. So, declaratory decree is “in personam” and not “in
rem”.

So a declaratory decree is one which resolves the legal uncertainty of the rights and status
of the parties. However, passing of a declaratory decree is a matter of discretion of court and
it cannot be claimed a right.
Section 34 of the Specific Relief Act also provides that any person entitle to any legal
character may institute a suit for declaration and the court may in its discretion make a
declaration that he is so entitled and the plaintiff in such a suit need not ask any further
relief.
The power of the civil court to issue declaratory decrees in exercise of power under Section
34 Specific Relief Act is not exhaustive and the civil court has power to grant further
declaratory decrees independently of the requireouments provided under Section 34 of the
Specific Relief Act. The Apex Court while considering the provisions of Section 14 along with
the Section 34 of the Specific Relief Act in the case of Ashok Kumar Srivastava Vs. National
Insurance Company Limited and others, 1998 (4) AWC 886 (SC) after due consideration of
all the above authorities on the point held that Section 34 of the Specific Relief Act is wide
enough to open the corridors of the civil court to admit suits filed for verity of the decrees of
declaratory nature and the language of Section 34 of the Specific Relief Act does not
exhaust the power of the court to grant declaratory reliefs not contemplated therein.
Discretion of court as to declaration of status or right: According to section 42 of the
S.R Act any person entitled to any legal character, or to any rights as to any property may
institute a suit against any person denying, or interested to deny, his title to such character or
right, and the court may in its discretion make therein a declaration that he is so entitled, the
plaintiff need not in such suit ask for any further relief.

Bar to such declaration- Provided that no court shall make any such declaration where the
plaintiff, being able to seek further relief than a mere declaration of title, omits to do so.
Illustration: A is in possession of certain property. B alleging that he is the owner of
the property requires A to deliver it to him. A may obtain a declaration of his right to whole the
property.

Applicability of Article 120- declaration as to right to property under section 42 of the

Specific Relief Act.
Article 120 of the Limitation Act which prescribes six years limitation.
Case: Mono Mohini Devi vs. Sirajud Ahmed Bhuiya, 21 DLR

Case Law-Not only a person entitled to any legal character but also any person entitled to
any right as to any property can institute a suit for declration.
 Case: Jinnat Mukhtean Vs. Abdul Majid, 27 DLR.

Essentials of the relief/ Requisite for a declaratory action: In order to obtain relief under
section 42, plaintiff must establish that –

1. The plaintiff is at the time of the suit entitle to any legal character or to any right as to any
property.
Case: Ahmed Vs. Haji Khan, AIR.

2. The defendant has denied or is interested in denying to the character or title of the plaintiff.
There must be some present danger or determent to his interest. So that a declaration is
necessary to safeguard his right and clear the mist.

3. The denial must be communicated to the plaintiff in order to give him cause of action.
Case: Mahabir Vs. Sarju, 43 IC.

4. The declaration asked for is a declaration that the plaintiff is entitled a

Legal character or to a right to property.

5. The plaintiff is not a possession to claim further relief than a bare

declaration of his title. A person who is able to seek for further relief,
Should not be allowed mere declaratory relief, if he omits to do so.
Case: Chinnammal Vs. Varadarajulu, 15 Mad.

When relief under section 42 would be refused: Though no hard or fast rules can be laid
down as to the circumstances in which the court should exercise or refuse to exercise its
discretionary jurisdiction under section 42, the following may be mentioned as the
circumstances in which the court may refuse the relief;

a) The courts will not grand relief unless there is substantial injury.
Case: Chhakowri vs. Secy. of State, 5 pat.

b) No declaration will be made where the plaintiff claim as never been denied by the
defendant.
Case: Pitchai Vs. Devaji, AIR.
Even a denial is not sufficient to justify a declaratory decree, where a mere denial is not
likely to injure the plaintiff materially.
Case: Ahmad Vs. Haji, AIR.
c) A declaration can not be given to a plaintiff whose conduct is fraudulent.
Case: Narainbhai Vs. Narbada, AIR.

d) No declaration would be granted where it could be rendered nugatory by the

defendant Narain Vs. Sashi, 37 All, as where it would be contrary to the provisions of a
statute.
Case: Ali Khan Vs. Bhagwan, 1943.

e) No declaration should be made which will be in fructuous or useless.

Case: Biswanath Vs. Mytaba, AIR.

f) A declaration may be refused where some other remedy would be more effective, e.g. a
proceedings for recovery of possession.
Case: Thakurji Vs. Kamta, AIR.
g) Non-joinder of necessary parties is a good ground for refusing to grant a declaration
decree in the exercise of discretionary power, because the court will not make a decree
which is ineffective.
Case: Maharaja of Benares Vs. Ramji, 27 All.

h) Great delay in bringing a suit may of itself be sufficient to refuse the declaratory relief of a
declaration.
Case: Shiambehari Vs. Madan, AIR.

Effect of declaration:
According to section 43-

A declaration made under this chapter is binding only on the parties to suit, persons claiming
through them respectively, where any of the parties are trustees, on the persons for whom, if
in existence at the date of the declaration, such parties would be trustees.