Offer and acceptance analysis is a traditional approach in contract law used to determine whether an agreement exists between two parties. An offer is an indication by one person to another of their willingness to contract on certain terms without further negotiations. A contract is then formed if there is express or implied agreement. A contract is said to come into existence when acceptance of an offer has been communicated to the offeror by the offeree.
The offer and acceptance formula, developed in the 19th century, identifies a moment of formation when the parties are of one mind. This classical approach to contract formation has been weakened by developments in the law of estoppel, misleading conduct, misrepresentation and unjust enrichment.
The nature of an offer
An offer is an expression of willingness to contract on certain terms, made with the the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed, the “offeree” [G.H. Tretel, The Law of Contract, 10th edn, p.8].The “expression” referred to in the definition may take different forms, such as a letter, newspaper, fax, email and even conduct, as long as it it communicates the basis on which the offeror is prepared to contract.
The “intention” referred to in the definition is objectively judged by the courts. The English case of Smith v. Hughes (1871) LR 6 QB 597 emphasises that the important thing is not a party’s real intentions but how a reasonable person would view the situation. This is due mainly to common sense as each party would not wish to breach his side of the contract if it would make him or her culpable to damages, it would especially be contrary to the principle of certainty and clarity in commercial contract and the topic of mistake and how it affect the contract.The classical principles are illustrated in the well-known case of Carlill v. Carbolic Smoke Ball Company.
The contract in Carlill v. Carbolic Smoke Ball Co was of a kind known as a unilateral contract, one in which the offeree accepts the offer by performing his or her side of the bargain. It can be contrasted with a bilateral contract, where there is an exchange of promises between two parties. In Australian Woollen Mills Pty Ltd v. The Commonwealth (1954), the High Court of Australia held that, for a unilateral contract to arise, the promise must be made “in return for” the doing of the act. The court distinguished between a unilateral contract from a conditional gift. The case is generally seen to demonstrate the connection between the requirements of offer and acceptance, consideration and intention to create legal relations.
An invitation to treat is not an offer, but an indication of a person’s willingness to negotiate a contract. In Harvey v Facey, an indication by the owner of property that he or she might be interested in selling at a certain price, for example, has been regarded as an invitation to treat. The courts have tended to take a consistent approach to the identification of invitiations to treat, as compared with offer and acceptance, in common transacions. The display of goods for sale, whether in a shop window or on the shelves of a self-service store, is ordinarily treated as an invitation to treat and not an offer. The holding of a public auction will also usually be regarded as an invitation to treat.
Revocation of offer
An offeror may revoke an offer before it has been accepted, but the revocation must be communicated to the offeree, although not necessarily by the offeror. If the offer was made to the entire world, such as in Carlill’s case, the revocation must take a form that is similar to the offer. However, an offer may not be revoked if it has been encapsulated in an option (see also option contract).
If the offer is a unilateral offer, unless there was an ancillary contract entered into that guaranteed that the main contract would not be withdrawn, the contract may be revoked at any time: see Mobil Oil Australia Ltd v. Wellcome International Pty Ltd (1998) 81 FCR 475.
Acceptance is a final and unqualified expression of assent to the terms of an offer [G.H. Treitel, The Law of Contract, 10th edn, p.16]. It is no defense to an action based on a contract for the defendant to claim that he never intended to be bound by the agreement if under all the circumstances it is shown at trial that his conduct was such that it communicated to the other party or parties that the defendant had in fact agreed. Signing of a contract is one way a party may show his assent. Alternatively, an offer consisting of a promise to pay someone if the latter performs certain acts which the latter would not otherwise do (such as paint a house) may be accepted by the requested conduct instead of a promise to do the act. The performance of the requested act indicates objectively the party’s assent to the terms of the offer.
The essential requirement is that there be evidence that the parties had each from an objective perspective engaged in conduct manifesting their assent. This manifestation of assent theory of contract formation may be contrasted with older theories, in which it was sometimes argued that a contract required the parties to have a true meeting of the minds between the parties. Under the “meeting of the minds” theory of contract, a party could resist a claim of breach by proving that although it may have appeared objectively that he intended to be bound by the agreement, he had never truly intended to be bound. This is unsatisfactory, as the other parties have no means of knowing their counterparts’ undisclosed intentions or understandings. They can only act upon what a party reveals objectively to be his intent. Hence, an actual meeting of the minds is not required.
This requirement of an objective perspective is important in cases where a party claims that an offer was not accepted, taking advantage of the performance of the other party. Here, we can apply the test of whether a reasonable bystander (a “fly on the wall”) would have perceived that the party has impliedly accepted the offer by conduct.
Communication of acceptance
There are several rules dealing with the communication of acceptance:
* The acceptance must be communicated: Depending on the construction of the contract, the acceptance may not have to come until the notification of the performance of the conditions in the offer as in Carlill’s case, but nonetheless the acceptance must be communicated. Prior to acceptance, an offer may be withdrawn.
* An offer can only be accepted by the offeree, that is, the person to whom the offer is made.
* An offer is not bound if another person accepts the offer on his behalf without his authorisation: see agent (law).
* It may be implied from the construction of the contract that the offeror has dispensed with the requirement of communication of acceptance.
* If the offer specifies a method of acceptance (such as by post or fax), you must accept it using a method that is no less effective than the method specified.
* Silence cannot be construed as acceptance: see Felthouse v. Bindley (1862) 142 ER 1037.
Correspondence with offer
The “mirror image rule” states that if you are to accept an offer, you must accept an offer exactly, without modifications; if you change the offer in any way, this is a counter-offer that kills the original offer. However, a mere request for information is not a counter-offer. It may be possible to draft an enquiry such that is adds to the terms of the contract while keeping the original offer alive.
Battle of the forms
Often when two companies deal with each other in the course of business, they will use standard form contracts. In Butler Machine Tool Co Ltd v. Ex-Cell-O Corporation (England) Ltd  WLR 401, the question was raised as to which of the standard form contracts prevailed in the transaction. Denning MR preferred the view that the documents were to be considered as a whole, and the important factor was finding the decisive document; on the other hand, Lawton and Bridge LJJ preferred traditional offer-acceptance analysis, and considered that the last counter-offer killed all preceding offers.
Postal acceptance rule
As a rule of convenience, if the offer is accepted by post, the contract comes into existence at the moment that the acceptance was posted. This rule only applies when, impliedly or explicitly, the parties have in contemplation post as a means of acceptance. It excludes contracts involving land, letters incorrectly addressed and instantaneous modes of communication.
See main article: Mailbox rule.
Knowledge of the offer
In Australian law, there is a requirement that an acceptance is made in reliance or persuance of an offer: see R v. Clarke.
Rejection, death or lapse of time
If the offeree rejects the offer, the offer has been killed and cannot be accepted at a further date. The offer also cannot be accepted after the time period specified in the offer, or if no time was specified, after a reasonable period of time. If the offeror dies, the offeree may accept only if the acceptance is done without the knowledge of the death; conversely, the estate of a deceased offeree may not accept an offer.
A contract will be formed (assuming the other requirements are met) when the parties give objective manifestation of an intent to form the contract. Of course, the assent must be given to terms of the agreement. Usually this involves the making by one party of an offer to be bound upon certain terms, and the other parties’ acceptance of the offer on the same terms. The acceptance of an offer may be either a statement of agreement, or, if the offer invites acceptance in this way, a performance of an act requested in the terms of the offer. For instance, if one tells a neighbor kid that if the kid mows the offeror’s lawn, the offeror will pay $20.00, and the kid does mow the lawn, the act of mowing constitutes the manifestation of the kid’s assent. For a contract based on offer and acceptance to be enforced, the terms must be capable of determination in a way that it is clear that the parties assent was given to the same terms. The terms, like the manifestation of assent itself, are determined objectively. They may be written, or sometimes oral, although some kinds of contracts require a writing as evidence of the agreement to be enforced. For information on the written requirements of contracts, see the main contract article.
Criticisms of offer-acceptance analysis lie in that this tool was created by legal academics and can be rather arbitrary at time, and bears little resemblance to how lay-people perceive the formation of a contract.
OFFER AND ACCEPTANCE
Offer or Proposal
Essential Elements of a Valid Contract discussed in detail
Section 2(a) defines an offer as, “a proposal made by one person to another to do an act or abstain from doing it.” The person who makes the offer is known as the promisor or offer or and the person to whom an offer is made is known as the promisee or the offeree.
An offer may require a unilateral act or an acts by two or more parties. Thus if X gifts Y his horse, it is an offer of unilateral acts as Y has to do nothing or pay nothing to X in return of the gifts of 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 concerend 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 intenton 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 distinguised 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 relaince on the delcared 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. Therefater, 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 intentioin 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 clar:. 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.
3. Offer may be general or specific: An offer may be made to definite person or persons or to the world at large. When it is made to some specific person or persons it is called a specific offer. When it is made to the world at large it is called a General 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.
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.
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.
4. Offer may be express or implied: 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.
‘Imlied 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. 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 sbusequent 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.
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 :
Identical offers made by two parties in ignorance of each other’s offer, are termed as cross offers. They will not constitute acceptance of one’s offer by the other. (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.
A contract comes into being from the acceptance of an offer. When the person to whom the offer is made signifies his assent thereto, the proposal is said to be accepted (Sec. 2(b). Thus, acceptance of the offer must be absolute and unqualified. It cannot be conditional.
Who can give acceptance
When an offer is made to particular person or to a group of persons, it can be accepted only by that person or member of the group. If it is accepted by any other persons, there is no valid acceptance.
Example: B sold his business to P without disclosing the fact to his customers. J, who had a running account with B, placed an order with B for supply of certain goods. The new owner without disclosing the fact of himself having purchased the business, executed the order. J refused to pay P for the goods because he, by entering into contract with B intended to set off his debt against B. Held, the new owner of could not recover the price. “The rule of law is that if you promise to make a contract with A, then B cannot substitute himself for A without your consent and to your disadvantage, securing to himself all the benefits of the contract”.
When an offer is made generally to the public at large, any person or persons who have the notice of the offer, may come forward and accept the offer. By doing what is required to be done under the offer, offer is said to be as accepted and there will be valid contract, (Carlill V. Carbolic Smoke Ball Co. 1893).
Essentials of a valid acceptance
1. Acceptance must be absolute and unqualified: Section 7 of the Contract Act requires that the acceptance must be absolute and unqualified. It must correspond with all the terms of the offer. Conditional acceptance is no acceptance. If there is a variation in the terms of the acceptance, it is not an acceptance, but a counter-offer, which the proposer may or may not accept. A counter-offer destroys the original offer. Thereafter the offeree cannot rever to the original offer and purport to accept it. (Erollope & Colls Ltd. V. Atomic Power Construction Ltd. (1963)
Example: A offers to sell his house for a sum of Rs. 20,000 B sends his acceptance to purchase it for a sum of Rs. 19,000. There is no acceptance. It will be taken as a new offer from B, which may not be accepted by A.
2. Acceptance must be in the mode prescribed: A proposal must be accepted accroding to its terms. If the proposal lays down a mode of acceptace, the acceptance must be according to the mode prescribed. Therefore, if the proposer choses to require that the goods shall be delivered at a particular place, he is not bound to accept delivery at any other place. It is not for the acceptor to say that some other mode of acceptance which is not according to the terms of the proposal will do as well. If the acceptance is not given in the made prescribed, the proposer may reject the acceptance and intimate the offeree within a reasonable time. But if he does not inform the offeree, he is deemed to have accepted the acceptance.
If the proposer has not prescribed any mode of acceptance, it must be given and communicated in some usual and reasonable manner.
Example: An offer is made to take shares indicating that the acceptance is to come by a telegram. If the acceptance is sent by ordinary post then it is not an acceptance according to the mode prescribed and the offer will be deemed to be not accepted. The offeror need not inform the offeree that the acceptance is not according to the mode prescribed.
3. Acceptance must be communicated to the offeror: Acceptance must be communicated to the offeror to create a binding contract. Mental acceptance is no acceptance in the eyes of law. But where the offer is to be accepted by being acted upon, no communication to the offer will be necessary.
Example: The manager of a railway company received a draft agreement. The manager wrote the word “approved” and put the draft in the drawer of his table. By some oversight the document remained in the drawer and was never communicated. It was held that there was no contract as the acceptance had not been communicated. (Brogden V. Metropolition Rly. Co.) (1877).
4. Silence cannot be prescribed as mode of acceptance: The offer cannot frame his offer in such a way as to make the silence or inaction of the offeree to operate as an acceptance. In other words, the offeror can prescribe the mode of acceptance but not the mode of rejection.
Leading case: Felthouse V. Bindley (1863). F offered by letter to buy his nephew’s horse for £30 adding, “If I hear no more about it, I shall consider the horse as mine for £30. Nephew did not give any reply, but he told an auctioneer who was selling his horses not to sell that particular horse becaue it was sold to his uncle. By mistake auctioneer sold the horse. Held: F had no claim against the auctioneer because the horse had not been sold to him and the horse did not belong to F. Silence cannot be prescribed as a mode of acceptance because if that was so the offeree will be put to a great deal of inconvenience because he shall have to unnecessary write in clear terms that he is not accepting the offer.
5. Acceptance must be given within the time stpulated or within a reasonable time if time is not mentioned.Further, acceptance must be given beforre the offer lapses or before the withdrawn.
6. There can be no acceptance before the communication of the offer. There can be no acceptance of an uncommunicated offer. Acceptance cannot precede an offer. A person who has no knowledge of an offer cannot be said to have accepted it merely because he happened to act just by chance in the manner prescribed by the offer. (Lalman V. Gauri Dutt).
7. Acceptor must in indicate intention to fulfil the promise. Acceptance, in order to be valid, must be made under circumstances which would show that the acceptor is able and willing to fulfil the promise. Acceptance must show an intention on the part of the acceptor to fulfil the promise. If no such intention is present, the acceptances is not valid.
8. If the proposal is made through an agent, it is sufficient if the acceptance is communicated to him: If A sends the offer to B by an agent C, and B give his acceptance to C, the acceptance is complete resulting into a valid contract. It is immaterial whether C communications the acceptance of B to his principal A or not.
9. Acceptance of the proposal will mean acceptance of all the terms of the offer. Acceptance subject to contract, when an offer is accepted by an offeror “subject to contract” or subject to formal contract” or “subject to contract to be approved by solicitors,” the matter is known to be at the negotiation stage and the parties do not intend to be bound until a formal contract is made and signed by them.
Agreement to agree in future. If the parties have failed to agree upon the terms of the contract but have made an agreement to agree in future, there is no contract, example: An actress was engaged by a theatrical company for a certain period. One of the terms of the agreement was that if the party was, shown in London, she would be engaged at a salary to be mutually agreed upon. Held, there was no contract. (Luftus V. Roberts, (1902) 18 T.L.R. 532).
Communication of offer: Acceptance and Revocation
An offer and its acceptance, to be valid must be communicated to the other party.
Communication of offer: (Se.4)
The communication of an offer is complete when it comes to the knowledge of the person to whom it is made. When an offer is made by post, its communication will be complete when the offeree receives the letter.
Example: A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter.
Communcation of Acceptance (Sec.4)
The communication of an acceptance is complete:-
(i) as against the proposer, when it is put in the course of transmission to him, so as to be out of the power of the acceptor to withdraw, and
(ii) as against the acceptor, when it comes to the knowledge of the offeror.
Example: B accepts A’s proposal by a letter sent by post. The communication of the acceptance is complete as against A, when the letter is posted; as against B when the letter is received by A.
Communication of Revocation : (Sec.4)