Define the Term Offer. Discuss the Essential Elements and Legal Rules of a Valid Offer.
The word ‘proposal’ and ‘offer’ are synonymous and are used inter changeably. Section 2 (a) of the Indian Contract Act, 1872 defines proposal or offer as follows:
When one person signifies to another his willingness to do or abstain from doing anything, with a view to obtain the assent of that other to such act he is said to make a proposal.
An offer is the starting point in making of an agreement. An offer consists of two elements: (a) there is an expression of willingness by the offeror to do or abstain from doing something; (b) such expression of willingness is Made to obtain the assent of the other person to such act or abstinence.
The person making the offer is known as offer and the person to whom the offer is made is known as the offeree . Illustration X says to Y that he wants to sell his car to Y for Rs. 1,00,000. Here, X is Offeror and Y is offeree.
Essential Requirements of a Valid Offer:
- There should be an expression of willingness to do or to abstain from doing something.
- It must be made to another person. There can be no ‘proposal’ by a person himself.
- It must be made with a view to obtain the assent of that other to such act or abstinence.
- The expression of willingness must be made with a view to create legal relations.
How to make an offer?: An offer can be made by any act which has the effect of communicating it to another person.
An offer may be either express or implied.
Express offer : An express offer is one which is made by words spoken or written. The oral offer can be made either in person or through a telephone. Example: A says to B will you purchase my scooter for Rs. 20,000? Example : A writes a letter to B I want to sell my car to you for Rs. 1,00,000? These are cases of express offer.
Implied offer : An implied offer is one which is not made in words. It may be implied from the conduct of the parties or circumstances of the case. Example: DTC runs bus on a particular route. There is an implied proposal from DTC to carry passengers on the route who are prepared to Pay the specified fare.
To whom can an offer be made? :
An offer may be specific or general.
Specific offer : A specific offer is one whith is made to a definite person or a particular person. In this case the offeror wants only a specific person to do what he has in mind. Such an offer can be accepted only by that person and no one else. Example : X makes an offer to Y to sell his car for Rs. 1,00,000. This is a specific offer which can be accepted only by Y.
General offer : A general offer is one which is made to the public in general and may be accepted by any person who fulfills the requisite conditions. Such an offer can not form the foundation of the contract until it has been accepted by an ascertained person.
An authority on this point is Carlin vs. Carbolic Smoke Ball Co: In this case, ‘Carbolic Smoke Ball Company’, advertised in the newspaper that the company would pay £100 reward to anyone who contacted influenza after having used the medicine according to the printed directions. A lady, Mrs. Carllil, bought the Smoke Ball and used it as directed but she was attacked by influenza. She sued for the reward. One of the points raised by the company was that it was only an offer made to the public. It was also said that you cannot contract with anybody and everybody.
But the court was of the opinion that although it was an offer made to the world at large, but it was to ripen into a contract with anybody who came forward and performed the conditions. Therefore, in this case Mrs. Carllil was held entitled for the reward.
Legal Rules Regarding Valid Offer:
A valid offer must be in conformity with the following rules:
The offer must be capable of creating legal relationship: If the offer does not intend to give rise to legal consequences, it is not a valid offer in the eyes of law. Sometimes offers are made which are social in nature such social engagements do not make a valid contract because in these cases the intention is not to form a legal relationship. It is very important for a valid offer to intend to give rise to a legal relationship, otherwise the offer is not considered valid.
The terms of the offer must be clear, definite and certain and not loose or vague : An offer must be definite and certain. An indefinite or vague offer can not be accepted because the courts in such cases can not tell what the parties are to do. The intention of the parties must be very clear, as to what they intend to do. Example: X offers to sell to Y 100 liters of oil. It is a vague offer as there is nothing to show what type of oil is intended.
An offer must be distinguished from a mere declaration of intention : Sometimes there may be preliminary discussion or an invitation by one party to the other to negotiate terms or simply declaration of intention. Such declaration merely indicates that an offer will be made in future. In Farina vs. Fickus case, a father wrote to his would be son-in-law that his daughter would have a share of what he would leave, after the death of his wife. It was held that the letter contained a statement of intention only.
An invitation to offer is not an offer : An offer must be distinguished from an ‘invitation to receive offer’. The offer or should, express his willingness to do or abstain from doing something with such finality that the only thing wanted is the assent of the other party. But where a party proposes certain terms on which he is willing to negotiate, he is not making an offer but only inviting others to make offer on those terms.
An offer must be communicated to the offer : An offer must be communicated to the person to whom the same is addressed. Communication of offer is important to conclude an agreement because acceptance can be given only after one knows about the offer. This applies to both ‘specific’ as well as ‘general’ offer. Section 4 states that communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
Example. In Lalman Shukla vs. Gauri Dutt case., G sent S the munim of his firm in search of his missing nephew. After this G announced a reward of Rs. 501 to anyone who might find out the boy. S traced the boy and informed G. When S came to know about reward, he filed a suit against G to recover the reward. It was held that he was not entitled for the reward. The court held that since there can be no acceptance unless there is knowledge of the offer, the contract had not concluded and so S was not entitled to the reward.
An offer should not contain such a term the non-compliance of which would amount to acceptance : The offeror can not say that if the offer does not communicate acceptance by a certain time the offer would have been deemed to be accepted. The burden of communication of rejection of offer can not be imposed on the offeree. If the offeree sends no reply, there is no contract.
Two identical cross -offers do not make a contract : Where two parties make identical offers to each other, in ignorance of each other’s offer, the offers are known as cross offers. ‘Cross offers’ do not constitute acceptance of one’s offer by the other and as such there is no completed agreement. Example. H wrote to T offering to sell him 800 tons of iron at 69s per ton. On the same day T wrote to H offering to buy 800 tons at 69s. Their letters crossed in the post. T contended that there was a a good contract. Held: That there was no contract [Tim v. Hoffman & Co].