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CA Foundation
Business Law
Indian Contract Act, 1872
Case Studies on Offer
Q.1 State with reason whether the following constitute a valid offer to sell.
a) A notice stated that the goods included in the notice would be sold by tender.
b) An advertisement in a newspaper that a sale of office furniture by auction will be held at 2 P.
M.
On 9th August 2018 at Pragati Maidan, Stall No. 420, New Delhi.
c) The display of articles with a price in a shop having a “sell service” system.
d) The price list of the goods doesn’t constitute an offer for the sale of certain goods on the list.
e) An announcement to give scholarships to children scoring more than 95% in 12th board.
Ans.
a) As per the provisions of the Indian Contract Act,1872, an offer means when one person signifies
to another his willingness to do or to abstain from doing anything with a view to obtain the
assent of others. But when the person intends some further acts to be done before he becomes
bound by it, then it is an invitation to offer.
The fact of the case:
In the given case law, a notice was issued stating that the goods included in the notice would
be sold by tender. Here, the notice was an invitation to offer, but it was not an offer for the sale
of goods.
Conclusion:
So, the notice was merely an invitation to offer but not an offer for the sale of goods. The notice
does not mention that the goods would be sold to a specific person.
b) As per the provisions of the Indian Contract Act,1872, an offer means when one person signifies
to another his willingness to do or to abstain from doing anything with a view to obtain the
assent of others. But when the person intends some further acts to be done before he becomes
bound by it, then it is an invitation to offer.
The fact of the case:
In the given case, an advertisement was printed in the newspaper about the sale of office
furniture through an auction to be held on 9th August 2018 at 2 PM at Pragati Maidan, Stall No.
420. Here, the advertisement clearly states that the sale of office furniture would be held
through auction.
Conclusion:
The office furniture would not be sold to a specific person. It would be sold to the highest bidder
only. No person can buy it personally from the seller. Here, the seller gives an invitation to
accept the offer for the auction of office furniture, not to sell it.
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c) As per the provisions of the Indian Contract Act,1872, an offer means when one person signifies
to another his willingness to do or to abstain from doing anything with a view to obtain the
assent of others. But when the person intends some further acts to be done before he becomes
bound by it, then it is an invitation to offer.
The fact of the case:
In the above case, the articles are displayed with a price in the shop having a “sell service”
system. The shopkeeper wants the customer to approach him and give him an offer that he
wants to buy the articles displayed in his shop. It is the customer’s wish to buy it or not.
Conclusion:
Hence, we can conclude that the articles displayed in the shop are an invitation to offer. The
customer can enter the shop and exit the shop without buying any article. Customer is not
bound to buy those articles. The display of articles with a price tag is a mere invitation to offer.
The customer has to give an offer to the shopkeeper to buy those articles after giving some
payment for those articles.
d) As per the provisions of the Indian Contract Act,1872, an offer means when one person signifies
to another his willingness to do or to abstain from doing anything with a view to obtain the
assent of others. But when the person intends some further acts to be done before he becomes
bound by it, then it is an invitation to offer.
The fact of the case
In the given case, the price list of the goods doesn’t constitute an offer for the sale of certain
goods on the list. Here, the price list clearly states that the sale of certain goods on the list.
Conclusion:
The price list of the goods does not constitute an offer for the sale of certain goods on the list. It
is a person can buy it personally from the seller. Here, A statement of price is not an offer; the
seller gives an invitation to accept the offer of the list of the goods.
Ans. As per the provisions of the Indian Contract Act,1872, an offer means when one person
signifies to another his willingness to do or to abstain from doing anything with a view to obtain
the assent of others. But when the person intends some further acts to be done before he
becomes bound by it, then it is an invitation to offer.
The fact of the case
In the given case, an announcement to give scholarships to children scoring more than 95% in
the 12th board is not an offer.
Conclusion:
An announcement to give scholarships to children scoring more than 95% in 12th board is not an
offer. It is an invitation to offer. Here, Offer is different from a mere statement of intention, an
invitation to offer, a mere communication of information. A statement of intention and
announcement.
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Q.2 State with reason whether there is a valid contract in the following cases:
a) X invited Y for dinner, and Y accepted the invitation.
b) X makes a promise to his wife Y to give her pocket money of ₹ 10,000 per month.
c) X appointed Y as an agent by an agreement which shall not be subject to legal jurisdiction in
the law courts.
Ans.
a) As per the provisions of the Indian Contract Act,1872, the offer must be capable of creating legal
relations. A social invitation, even if it is accepted, does not create relations. An offer should be
such when it is accepted should result in a contract which is binding on both parties.
The fact of the case:
In the given case, X invited Y for dinner, and Y accepted the same. Here, the intention of X
cannot be understood as to create legal relations. This will tantamount to a social agreement
only.
Conclusion:
Here, there is no valid contract between X and Y as regard to the invitation given by X to Y for
dinner. Both parties have a social agreement, which does not create a legal relationship between
both parties.
b) As per the provisions of the Indian Contract Act,1872, the offer must be capable of creating legal
relations. An offer performed out of natural love and affection is not a valid offer.
The fact of the case:
In the given case, X makes a promise to his wife, Y, to give her pocket money of ₹ 10,000 per
month. Here, the intention of X is not to create any contract with his wife, Y, to give her ₹ 10,000
per month. He is giving the money to his wife out of love and affection. This will tantamount to a
social agreement only.
Conclusion:
Hence, we conclude that X is not intended to create a legal relationship with his wife regarding
giving her money. He is just doing it out of natural love and affection.
c) As per the provisions of the Indian Contract Act,1872, the offer must be capable of creating legal
relations. An offer, if it does not subject to a legal relationship, is not a valid offer.
The fact of the case:
In the given case, X appointed Y as an agent by an agreement which shall not be subject to legal
jurisdiction in the law courts. Here, it is clarified in the agreement that the agreement will not be
subjected to legal jurisdiction in the court of law, and both parties accepted it.
Conclusion:
Hence, we can conclude that neither X nor Y could sue each other based on the agreement they
had made with each other as the agreement clearly states that the agreement shall not be
subject to any legal jurisdiction in the court of law. An offer is valid only if it is capable of
creating a legal relationship between the parties involved in the offer.
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Q.3 X delivered a coat to Y, a dry cleaner, for dry cleaning and took the receipt. On the back of the
receipt, certain conditions were printed in the English language. One of the conditions printed
on the back was “The liability of the dry cleaner Company shall be limited to the 50% of the cost
of the goods.” X never looked at the back of the receipt. X’s coat was lost, and X claimed the
actual value of the coat. Discuss the legal position in each of the following alternative cases:
Case a) If there was nothing on the face of the receipt to draw attention to the conditions printed on
the backside and X was a graduate in English.
Case b) If on the face of the receipt, the words ‘See Back’ were printed in English, but X did not read
it.
Ans. As per the provisions of the Indian Contract Act, 1872, when special terms are included in the
offer, they must be duly brought to the notice of other parties at the time when the proposal is
made. If this is not done and the contract is entered into, the other party will not be bound by
specific terms.
The fact of the case:
X delivered a coat to Y, a dry cleaner, and took the receipt from Y. On the back of the receipt, it
was printed in English that the liability of the dry cleaner company, in case of any damages, shall
be limited to 50% of the cost of goods. X didn’t look back on the receipt. X’s coat was lost, and he
claimed the actual value of the coat.
There are two situations:
a) If there was nothing written on the face of the receipt to draw attention to the conditions
printed on the back and X was a graduate in English.
b) If on the face of receipt, the words ‘See Back’ were printed in English, but X did not read it.
Conclusion:
a) X was entitled to claim compensation for the loss of his coat because there was no indication
on the face of the receipt to draw his attention to the special terms printed on the back of the
receipt. If conditions are not properly brought to the notice, the same wouldn’t be binding on
the parties.
b) X was entitled to claim only 50% of the cost of the coat because there was sufficient
information given on the face of the receipt to draw his attention to the special terms printed
on the back of the receipt.
Q.4 X and Mrs X hired a room in a hotel for a week. When they entered the room, they found a notice
on the wall disclaiming the owner’s liability for damages, loss or theft of articles. Some of their
items were stolen. Discuss the legal position.
Ans. As per the provisions of the Indian Contract Act, 1872, when special terms are included in the
offer, they must be duly brought to the notice of other parties at the time when the proposal is
made. If this is not done and the contract is entered into, the other party will not be bound by
specific terms.
The fact of the case:
X and Mrs X hired a room in a hotel for a week. When they entered the room, they found a notice
on the wall disclaiming the owner’s liability for damages, loss or theft of articles. Some of their
items were stolen.
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Conclusion:
The owner of the hotel is liable for the stolen items of X and Mrs X as the condition of ‘owner’s
liability for damages, loss or theft of articles’ was brought into the notice of the couple after they
have entered into the contract. If special terms are brought into notice after entering into a
contract, then the other party is not bound by that special term.
Q. 5 A boy starts cleaning the car as it stops on the traffic signal without being asked to do so; in such
circumstances, any reasonable man could guess that he expects to be paid for this. Is boy offer to
the car owner for doing?
Ans. As per the provision of the Indian Contract Act, 1872, the offer may be made either by words
or by conduct. An offer may be express by the word or doing some act or conduct an act.
The fact of the case:
A boy starts cleaning the car as it stops at the traffic signal without being asked to do so; in
such circumstances, any reasonable man could guess that he expects to be paid for this.
Conclusion:
In the given case, it is an offer by doing; in such circumstances, any reasonable man could
guess that he expects to be paid for this, here boy makes an implied offer.
Q. 6 A proposes B purchase his android mobile for ₹ 5000, and if no reply by him in a week, it would
be assumed that B had accepted the proposal. Would this result enter into a contract?
Ans. As per the provision of the Indian Contract Act, 1872, if the offer contains a condition that if an
acceptance is not communicated by a certain time offer shall be deemed to be accepting, non-
communication of acceptance by a particular time cannot be taken as acceptance.
The fact of the case:
A proposes B purchase his android mobile for ₹ 5000, and if no reply by him in a week, it would
be assumed that B had accepted the proposal.
Conclusion:
Suppose one cannot say that if acceptance is not communicated by a certain time, the offer
would be considered as accepted; it is not a valid acceptance. This would not result entered into
a contract.
Q.7 May the offeror ask for payment by RTGS, NEFT etc.? if yes, explain
Ans. As per the provision of the Indian Contract Act, 1872, where special terms are included in the
offer, they must be duly brought into the notice of the other party at the time when the proposal
is made. If this is not, the other party will not be bound by a specific term.
The fact of the case:
The offeror may ask for the payment by RTGS, NEFT etc. It is a conditional offer.
Conclusion:
Yes, the offeror may ask for payment by RTGS, NEFT etc. The offeree will have to accept all the
terms of the offer; otherwise, the contract will be treated as invalid.
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Q. 8 A makes a proposal to B to sell his car for ₹ 2 lacs, and B, without knowing the proposal of A,
makes an offer to purchase the same car at ₹ 2 lacs from A, B was not aware of a proposal
made by A. When two persons make an offer to each other, can it be treated as mutual
acceptance? Are the parties binding contract?
Ans. As per the provision of the Indian Contract Act, 1872, When two parties exchange identical
offers in ignorance at the time of each other’s offer, the offers are called cross offers. There is
no binding contract in such a case because an offer made by a person cannot be construed as
acceptance of another’s offer
The fact of the case:
If A makes a proposal to B to sell his car for ₹ 2 lacs and B, without knowing the proposal of A,
makes an offer to purchase the same car at ₹ 2 lacs from A, it is not an acceptance, as B was not
aware of a proposal made by A
Conclusion:
It is only a cross proposal (cross offer). And when two persons make an offer to each other,
it cannot be treated as mutual acceptance. There is no binding contract in such a case.
Q. 9 A offers to sell his plot to B for ₹10 lakhs. B agrees to buy it for ₹ 8 lakhs. It amounts to a counter-
offer. A does not give any consent to B. If later on, B agrees to buy the plot for ₹ 10 lakhs, A
refused, then B can claim for damages?
Ans. As per the provision of the Indian Contract Act, 1872, When the person to whom the offer is
made make the qualified acceptance of the offer, he is said to have made a counter-offer. The counter-offer
so made in rejection of the original offer.
The fact of the case:
In the given case, A offers to sell his plot to B for ₹ 10 lakhs. ’B’ agrees to buy it for ₹ 8 lakhs. It
amounts to a counter-offer. A does not give any consent to B, but later on, B agrees to buy the
plot for ₹ 10 lakhs, A refused.
Conclusion:
In the given case, the original offer is rejected. B cannot sue for the damages because B’s
counter-offer terminate the offer of A.
Q. 10 A proposes to B by post to sell his house for ₹ 5 lakhs, and if the letter containing the offer is
posted on 10th March and if that letter reaches B on 12th March, but he reads it on 15th March.
In this case, when an offer is communicated?
Ans. As per the provision of the Indian Contract Act, 1872, the communication of offer is complete
when it comes to the knowledge of the person to whom it is made.
The fact of the case:
In the given case, A proposes to B by post to sell his house for ₹ 5 lakhs, and the offer is posted
on 10th March and letter reaches B on 12th March, but he reads it on 15th March.
Conclusion:
In this case, the letter reaches B on 12th March, but he reads it on 15th March. It is presumed that
B had the knowledge of the offer on 12th March.
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