1. UNIT – I FORMATION OF CONTRACT
Dr. G. MAHESWARAN/AP
DEPARTMENT OF MANAGEMENT STUDIES
UNIT – I FORMATION OF CONTRACT
5/16/2018
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2. Offer
An offer is a proposal by one party to another to enter into a legally binding agreement with him. OR
Proposal is made when he “signifies to another his willingness to do or to abstain from doing any thing, with a view to obtaining the assent of that other to such act or abstinence.”
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3. Essentials of offer
It must be an expression of the willingness to do or to abstain from doing something.
It must be made to another person.
It should be done with a objective to obtain the assent of the other person.
The objective of offer should be legal one.
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4. Types of Offer Express Offer – by words spoken or written.
Implied Offer – from the conduct of parties.
Specific Offer – can be accepted only by person to whom it is made.
General Offer – to the world at large.
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5. Invitation to offer
Display of goods by a shopkeeper in his window, with prices marked on them, is not an offer but merely an invitation to the public to make an offer to buy the goods at the marked the prices.
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6. When does an offer come to an end?
Revocation.
Lapse of time.
Non- fulfillment of a condition.
By death or insanity.
If counter-offer is made.
Not accepted according to prescribed mode.
If the law is changed.
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7. Lapses and revocation of offer
An offer lapses after stipulated or reasonable time.
An offer lapses by not being accepted in the mode prescribed.
An offer lapses by rejection.
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8. Contd…
An offer lapses by the death or the insanity of the offeror or the offeree before acceptance.
An offer lapses by revocation before acceptance.
An offer lapses by subsequent illegality or destruction of subject matter.
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9. Example
A proposes by a letter sent by post to sell his Laptop to B. The letter is posted on the 1st of March. B accept the proposal by a letter sent by post on the 4th of March. The letter reaches A on 6th of March.
A may revoke his offer at any time before B post his letter of acceptance i.e. on 4th of March but not afterwards.
B may revoke his acceptance at any time before the letter of acceptance reaches A. i.e. on 6th of Marchbut not afterwards.
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10. Case
Abhishek and Bharat were talking one day after college. Abhishek would turn 16 on the upcoming June and wanted to buy Bharat’s car. Bharat, 21, had been working and saving his money to buy a new car. Selling old car for Rs. 2,80,000 would give him enough to do so. He offered to Abhishek for that amount, and he accepted.
Is it a legally enforceable contract by applicability of Indian Jurisdiction ?
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11. Difference between Offer and Invitation to offer
 A proposal by a person in which he makes his willingness to enter into a legally binding contract for some conside­ration.
An Invitation to offer means an intention of a person to invite others with a view to enter into an agreement.
 An offer is made with the object of getting consent of the offeree.
An invitation to offer on the other hand is made with.
 An offer can be accepted by the offeree.
An invitation to offer cannot be accepted by the person to whom it is made.
An offer when accepted becomes an agreement.
An invitation to offer cannot be accepted at all.
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12. Acceptence
According to Section 2(b) states that a proposal when the person to whom the proposal is made signifies his assent thereto the proposal is said to be accepted. OR
Is the act of assenting by the offeree to an offer. It is the manifestation by the offeree of his willingness to be bound by the terms of the offer.
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13. Legal rules regarding acceptance
Acceptance must be given only by the person to whom the offer is made.
Acceptance must be absolute and unqualified.
It should be communicated by the acceptor.
It should be given within reasonable time or time stipulated.
Acceptance must succeed the offer.
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14. WHAT IS REQUIRED OF AN ACCEPTANCE?
Acceptance must be communicated to the offerer.
Silence cannot be an acceptance of an offer.
bilateral acceptance –
Most offers are these (bilateral contracts) Contains two promises.
Can be accepted by giving a promise.
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15. Cont. unilateral acceptance –
Indicate acceptance by offeree by performing a certain act.
Unilateral Contracts.
Example promise to pay reward to anyone who returns a lost camera. When camera returned is acceptance of offer.
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16. Who can Accept?
When an offer is made to a particular person, it can be accepted by that person alone.
If it is accepted by any other person, there is no valid acceptance.
If the offer is made to the world at large, any person to whom it is made can accept it.
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17. Rules of Acceptance Communication of acceptance.
Acceptance must be absolute and unqualified.
Mental acceptance is not sufficient(Silnece).
Acceptance of a proposal with the terms and conditions mentioned and implied.
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18. Cont. Need not be expressed in words always.
Ignorance of a proposal, is no acceptance.
Acceptance must be given within a reasonable time.
Acceptance must be given before lapse or revocation or withdrawal.
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19. Case: Harbhajan lal vs. harcharan lal
In this case a young boy had run away from his father’s house. the father issued a pamphlet stating ,anybody who finds trace the boy and bring him home will get Rs 500.
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20. Contd…
Harbajan Lal who knew of the reward, found the boy at a Railway station Dharamshala ,and took to the police station. It was held that the handbill was a general offer and therefore he was entitled to the reward.
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