offer & acceptance (1)

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Business Law Business Law OFFER OFFER AND AND ACCEPTANCE ACCEPTANCE

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Page 1: Offer & Acceptance (1)

Business LawBusiness Law

OFFEROFFER AND AND

ACCEPTANCEACCEPTANCE

Page 2: Offer & Acceptance (1)

OFFEROFFER

At the inception of every agreement, there At the inception of every agreement, there must be a definite offer by one person to must be a definite offer by one person to another and its unqualified acceptance by another and its unqualified acceptance by the person to whom the offer is made.the person to whom the offer is made.

““An An OfferOffer is a proposal by one party to is a proposal by one party to another to enter into a legally binding another to enter into a legally binding agreement with him”.agreement with him”.

Page 3: Offer & Acceptance (1)

HOW AN OFFER IS MADE ?HOW AN OFFER IS MADE ?

Express Words, Spoken, WrittenExpress Words, Spoken, Written

When an Offer is made to a definite When an Offer is made to a definite person, it is called a person, it is called a Specific OfferSpecific Offer. (It . (It can be accepted only by the person to can be accepted only by the person to whom it is made)whom it is made)

When an offer is made to the world at When an offer is made to the world at large, it is called a large, it is called a General Offer.General Offer.

Page 4: Offer & Acceptance (1)

WHAT CONSTITUTES AN WHAT CONSTITUTES AN OFFER ?OFFER ?

The offer must show an obvious The offer must show an obvious intension on the part of the offerer to intension on the part of the offerer to be bound by it.be bound by it.

The offeror must make the offer with a The offeror must make the offer with a view to obtaining the asset of the view to obtaining the asset of the offeree to such act or abstinenceofferee to such act or abstinence

The offer must be definiteThe offer must be definite It must be communicate to the offereeIt must be communicate to the offeree

Page 5: Offer & Acceptance (1)

LEGAL RULES AS TO OFFERLEGAL RULES AS TO OFFER

Offer must be such as in law is capable of being Offer must be such as in law is capable of being accepted and giving rise to legal relationship.accepted and giving rise to legal relationship.

Terms of offer must be definite, unambiguous Terms of offer must be definite, unambiguous and certain and not loose and vague.and certain and not loose and vague.

An offer may be distinguished from: An offer may be distinguished from: a)a) A declaration of intention & an announcement.A declaration of intention & an announcement.b)b) An invitation to make an offer or do businessAn invitation to make an offer or do business Offer must be communicatedOffer must be communicated Offer shouldn’t contain a term the non-Offer shouldn’t contain a term the non-

compliance of which may be assumed to compliance of which may be assumed to amount to acceptance.amount to acceptance.

A statement of price is not an offer.A statement of price is not an offer.

Page 6: Offer & Acceptance (1)

Carlill v Carbolic Smoke Ball CoCarlill v Carbolic Smoke Ball Co (1893)(1893)

Mrs Carlill read the company's advertisement Mrs Carlill read the company's advertisement in which they promised to pay £100 to in which they promised to pay £100 to anyone who caught influenza after using anyone who caught influenza after using their Carbolic Smoke Ball as directed.  The their Carbolic Smoke Ball as directed.  The advertisement also stated that the company advertisement also stated that the company had deposited £1,000 at their bank to show had deposited £1,000 at their bank to show their sincerity.  Despite the purchase and use their sincerity.  Despite the purchase and use of the ball, Mrs Carlill contracted influenza of the ball, Mrs Carlill contracted influenza and sued for her £100.  One of the and sued for her £100.  One of the company's defences was that you could not company's defences was that you could not address an offer to the whole world.address an offer to the whole world.

Page 7: Offer & Acceptance (1)

TENDERSTENDERS

A Tender (in response to an A Tender (in response to an invitation to offer) is an offer & may invitation to offer) is an offer & may be either:be either:

A definite offer to supply specified A definite offer to supply specified goods or services.goods or services.

ExEx: Great Northern Rail vs. Witham: Great Northern Rail vs. Witham

Page 8: Offer & Acceptance (1)

Sale by tenderSale by tender. This is a sale where . This is a sale where a party invites sealed competitive a party invites sealed competitive bids which must normally be bids which must normally be submitted within a time limit. submitted within a time limit. Invitations to tender are normally Invitations to tender are normally regarded as invitations to treat regarded as invitations to treat rather than offers; rather than offers; Spencer v Spencer v Harding Harding (1870)(1870)

Page 9: Offer & Acceptance (1)

ExampleExample

But an invitation to tender may amount to a But an invitation to tender may amount to a unilateral offer; unilateral offer; Harvela Investments Ltd Harvela Investments Ltd vv  Royal Trust Co of CanadaRoyal Trust Co of Canada  (1985). In (1985). In this case the defendants invited tenders and this case the defendants invited tenders and said:said:

"We confirm that if the offer [i.e. tender] "We confirm that if the offer [i.e. tender] submitted by you is the highest offer submitted by you is the highest offer received by us we bind ourselves to accept received by us we bind ourselves to accept such offer."  The words used were held to such offer."  The words used were held to constitute an offer; the defendants had constitute an offer; the defendants had promised to sell to the highest bidder.promised to sell to the highest bidder.

Page 10: Offer & Acceptance (1)

Harris v NickersonHarris v Nickerson (1873) (1873)

An auctioneer advertised that An auctioneer advertised that certain goods were to be auctioned certain goods were to be auctioned at a specified time and place.  Harris at a specified time and place.  Harris went to the sale but the goods in went to the sale but the goods in which he was interested had been which he was interested had been withdrawn from the sale.  He sued withdrawn from the sale.  He sued the auctioneer for the loss of his time the auctioneer for the loss of his time and expenses in going to the sale.and expenses in going to the sale.

Page 11: Offer & Acceptance (1)

HELDHELD

Once the bidding commences there Once the bidding commences there is a unilateral offer to the highest is a unilateral offer to the highest bidder, accepted by him when he bidder, accepted by him when he bids, consisting of a promise not to bids, consisting of a promise not to put a reserve on the goods.  If the put a reserve on the goods.  If the auctioneer withdraws the goods from auctioneer withdraws the goods from sale, he will be in breach of contract sale, he will be in breach of contract with the highest bidder who will have with the highest bidder who will have a claim in damages.a claim in damages.

Page 12: Offer & Acceptance (1)

CROSS OFFERSCROSS OFFERS

When two parties make identical When two parties make identical offers to each other, in ignorance of offers to each other, in ignorance of each other offer, the offers are each other offer, the offers are cross offers.cross offers.

Page 13: Offer & Acceptance (1)

ACCEPTANCEACCEPTANCE

Acceptance is the act of assenting by the Acceptance is the act of assenting by the offeree to an offer.offeree to an offer.

““It is the manifestation by the offeree of his It is the manifestation by the offeree of his willingness to be bound by the terms of the willingness to be bound by the terms of the offer”.offer”.

Acceptance may be Acceptance may be ExpressExpress or or ImpliedImplied. . -It is -It is ExpressExpress when it is communicated by when it is communicated by words, spoken or written or by doing some words, spoken or written or by doing some required act.required act.-It is -It is Implied Implied when it is to be gathered from when it is to be gathered from the surrounding circumstances or the conduct the surrounding circumstances or the conduct of the parties.of the parties.

Page 14: Offer & Acceptance (1)

WHO CAN ACCEPT ?WHO CAN ACCEPT ?

Acceptance of particular offer. When Acceptance of particular offer. When an offer is made to a particular an offer is made to a particular person, it can be accepted by him person, it can be accepted by him alone. If it is accepted by any other alone. If it is accepted by any other person, thre is no valid acceptance.person, thre is no valid acceptance.

Acceptance of general offer. When Acceptance of general offer. When an offer is made to world at large, an offer is made to world at large, any persons to whom the offer is any persons to whom the offer is made can accept it.made can accept it.

Page 15: Offer & Acceptance (1)

LEGAL RULES AS TO LEGAL RULES AS TO ACCEPTANCEACCEPTANCE

It must be absolute and unqualified i.e., it It must be absolute and unqualified i.e., it must conform with the offer.must conform with the offer.

It must be communicated to the offeror.It must be communicated to the offeror. It must be according to the mode prescribed It must be according to the mode prescribed

or usual and reasonable mode.or usual and reasonable mode. It must be given within a reasonable time.It must be given within a reasonable time. It must show an intention on the part f the It must show an intention on the part f the

acceptor to fulfill terms of promiseacceptor to fulfill terms of promise It must be given by the party or parties to It must be given by the party or parties to

whom the offer is made.whom the offer is made. It must be given before the offer lapses or It must be given before the offer lapses or

before the offer is withdrawnbefore the offer is withdrawn It cannot be implied from silenceIt cannot be implied from silence

Page 16: Offer & Acceptance (1)

Agreement to agree in future- Agreement to agree in future- If If the parties have not agreed upon the the parties have not agreed upon the terms of their contract but have terms of their contract but have made an agreement to agree in made an agreement to agree in future, there is no contract.future, there is no contract.

Page 17: Offer & Acceptance (1)

COMMUNICATION OF OFFER, COMMUNICATION OF OFFER, ACCEPTANCE AND ACCEPTANCE AND

REVOCATIONREVOCATION An offer, its acceptance and their An offer, its acceptance and their

revocation (withdrawal) to be revocation (withdrawal) to be completed must be communicated. completed must be communicated. when the contracting parties are face when the contracting parties are face to face and negotiate in person a to face and negotiate in person a contract comes into existence the contract comes into existence the moment the offeree gives his absolute moment the offeree gives his absolute and unqualified acceptance to the and unqualified acceptance to the proposal made by the offerer. proposal made by the offerer.

Distance: Telegraph, letterDistance: Telegraph, letter

Page 18: Offer & Acceptance (1)

Mode of communication- Mode of communication- Offer Offer acceptance or revocation may be acceptance or revocation may be communicated by words, spoken or communicated by words, spoken or written.written.

Ex: Ex: Weighing machineWeighing machine When is communication complete- When is communication complete-

communication of offer.communication of offer.

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

Page 19: Offer & Acceptance (1)

Communication of revocation : Communication of revocation : Revocation means “taking back” it Revocation means “taking back” it may be revocation of offer or may be revocation of offer or acceptance . acceptance .

Time for revocation of offer and Time for revocation of offer and acceptance:acceptance:

Time for revocation of proposal- Time for revocation of proposal- a a proposal may be revoke at any time proposal may be revoke at any time before the communication of its before the communication of its acceptance is complete as against the acceptance is complete as against the prosper but not afterward.prosper but not afterward.

Page 20: Offer & Acceptance (1)

LOSS OF LETTER OF ACCEPTANCE LOSS OF LETTER OF ACCEPTANCE IN POSTAL TRANSMITIN POSTAL TRANSMIT

The contract is complete even if the letter of The contract is complete even if the letter of acceptance goes astray or lost through an acceptance goes astray or lost through an accident in the post.accident in the post.

It is important that the letter of acceptance is It is important that the letter of acceptance is correctly addressed, sufficiently stamped and correctly addressed, sufficiently stamped and posted.posted.

If not correctly addressed or sufficiently If not correctly addressed or sufficiently stamped the communication of acceptance is stamped the communication of acceptance is not complete within the meaning of sec. 4 not complete within the meaning of sec. 4 even if it is posted.even if it is posted.

Page 21: Offer & Acceptance (1)

CONTRACTS OVER TELEPHONE OR CONTRACTS OVER TELEPHONE OR ORAL COMUNICATIONORAL COMUNICATION

A contract by telephone has a same A contract by telephone has a same effect as an oral agreement entered effect as an oral agreement entered into between the parties when they into between the parties when they are face to face.are face to face.

But the offeree must make sure that But the offeree must make sure that his acceptance is a properly received his acceptance is a properly received that is heard and understood by the that is heard and understood by the offerer.offerer.

Page 22: Offer & Acceptance (1)

WHEN DOES AN OFFER COME WHEN DOES AN OFFER COME TO AN END ?TO AN END ?

Revocation or lapse of offerRevocation or lapse of offer.. By By communication of notice communication of notice of revocation of revocation

by the offeror at any time before its by the offeror at any time before its acceptance is complete as against him.acceptance is complete as against him.

By By lapse of time lapse of time if it is not accepted if it is not accepted within the prescribed time.within the prescribed time.

By By non-fulfillment by the offeree of a non-fulfillment by the offeree of a conditioncondition precedent to acceptance precedent to acceptance

By By death or insanity death or insanity of the offeror of the offeror provided the offeree comes to know of it provided the offeree comes to know of it before acceptance.before acceptance.

Page 23: Offer & Acceptance (1)

If an offer is If an offer is not accepted not accepted according according to the prescribed or usual modeto the prescribed or usual mode

If the If the law is changedlaw is changed..

Rejection of offerRejection of offer

Page 24: Offer & Acceptance (1)

THANK YOUTHANK YOU

Page 25: Offer & Acceptance (1)

OBJECTIVE QUESTIONS OBJECTIVE QUESTIONS

1. Which of the following result in an 1. Which of the following result in an offer?offer?

i.i. A declaration of intentionA declaration of intention

ii.ii. An invitation to offerAn invitation to offer

iii.iii. An advertisement offering reward to An advertisement offering reward to anyone who finds the lost dog of the anyone who finds the lost dog of the adviser.adviser.

iv.iv.An offer made in a joke.An offer made in a joke.

Page 26: Offer & Acceptance (1)

2. A specific offer can be accepted by:2. A specific offer can be accepted by:

i.i. Any personAny person

ii.ii. Any friend of offerer Any friend of offerer

iii.iii. The person to whom it is madeThe person to whom it is made

iv.iv.Any friend of the offereeAny friend of the offeree

Page 27: Offer & Acceptance (1)

3. Acceptance once made cannot be 3. Acceptance once made cannot be revoked at all. [T/F]revoked at all. [T/F]

4. Mental acceptance is not 4. Mental acceptance is not acceptance at all. [T/F]acceptance at all. [T/F]

Page 28: Offer & Acceptance (1)

5. An advertisement to sell a thing by 5. An advertisement to sell a thing by auction is:auction is:

i.i. An offerAn offer

ii.ii. An invitation to offerAn invitation to offer

iii.iii. No offer at allNo offer at all

iv.iv.An obligationAn obligation