OFFER AND ACCEPTANCE
Week 2
Business Law
OFFER / PROPOSAL:
When one person signifies to
another his willingness to do or to
abstain from doing anything, with a
view to obtaining the assent of that
other to such act or abstinence, he
is said to make a proposal.
Example: Mr. A says to Mr. B, “Will you purchase
my car for Rs.1,00,000?” In this case, Mr. A is
making an offer to Mr. B. Here A is the offeror and B
is the offeree.
Essentials of a valid offer
1. At least two persons
2. Certain and definite
3. Contractual intention
4. Communication
5. Objective of obtaining consent
6. It can be conditional
7. Negative confirmation not allowed
8. It is different from invitation of offer
9. Communication of special conditions
Lapse of an offer
1. Revocation by offeror before acceptance
2. Lapse of fixed time or reasonable time
3. Death or insanity of offeror (when offeree
becomes aware)
4. Non-fulfillment of condition precedent
5. Non-acceptance / Rejection by offeree
6. Counter offer
7. Non-acceptance according to
requirement
8. Subsequent illegality or destruction
ACCEPTANCE
When the person to whom the
proposal is made signifies his assent
to it, the proposal is said to be
accepted. Thus, an acceptance
means assenting to an offer made.
An offer when accepted becomes a
promise.
Example: A offers to buy B’s car for rupees two
lacs and B accepts such an offer. Now, this has
become a promise.
Essentials of Acceptance
1. Absolute and unconditional
2. Communication
3. Reasonable time
4. Reasonable mode
5. Awareness of proposal
6. It must be before lapse of an offer
7. Negative confirmation not allowed
Postal rule:
The communication of acceptance by post is
complete as against the proposer when it is put in a
course of transmission. In case of acceptance made
by post, the proposer becomes bound as soon as the
letter of acceptance is posted even if such letter is
lost or delay. The communication is complete as
against the acceptor when it comes to the knowledge
of the proposer. In case of acceptance by post, the
acceptor becomes bound when the letter of
acceptance is actually received, before that acceptor
may revoke his acceptance.
Example: Adeel offers, by letter, to sell a van to Kashif for Rs. 100,000. The
letter reaches Kashif on 8th March. Kashif accepts by a letter sent by post on
9th March. The letter reaches Adeel on 11th March. The communication of
the acceptance is complete:
As against Adeel, when the letter is posted i.e. on 9th March
As against Kashif, when the letter is received by Adeel i.e. on 11th March
REVOCATION
Annulment or cancellation of a
statement, document, or offer not yet
accepted, or cancellation of a contract
by the parties to it.
Example: a person can revoke a will or
revoke an offer to enter into a contract, and
a government agency can revoke a license.
Timing of revocation [Section 5]:
Timing of revocation of an offer
Timing of revocation of an
acceptance
Example: Adeel offers by letter to sell his house to Kashif.
Kashif accepts the offer by a letter posted on 4th May. The
letter reaches Adeel on 6th May.
Adeel may revoke his offer before Kashif posts his letter of
acceptance, i.e. 4th May but not afterwards.
Kashif may revoke his acceptance before the letter of
acceptance reaches Adeel, i.e. 6th May but not afterwards
Communication of revocation
[Section 4]
As against the person who makes it:
As against the person to whom it is
made:
Example: Talal offered by a letter on October 1st, to sell
goods to Bilal in Multan. Bilal received the offer on 11th
October and gave his acceptance. On 18th October Talal
wrote a letter revoking his offer. The letter was received by
Bilal on 20th October. Held, the revocation was of no effect
until it reached Bilal. A contract was made on 11th October
when Bilal accepted the offer.
Revocation How Made
[Section 6]
By the communication of the notice of revocation by the
proposer to the other party.
By the lapse of the time prescribed in such proposal for its
acceptance, or, if no time prescribed, by the lapse of
reasonable time, without communication of the
acceptance.
By the failure of the acceptor to fulfill the condition
precedent to acceptance.
By the death or insanity of the proposer, if the fact of his
death or insanity comes to the knowledge of acceptor
before acceptance.
Thank you.
