Definition of Offer1

OFFER-FYBBI

What is Contract?Section 10 defines all agreements are contracts if they are entered by the free consent of the parties, competent to a contract for a lawful object and a lawful consideration and are not expressly declared to be void.

Section 2(h) of the Act defines the term contract “as an agreement enforceable by law”

Section 2(e) defines agreement as “every promise and every set of promises, forming the consideration for each other”.

Again section 2(b) defines promise in these words:

“When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted becomes a promise”.

There must be an offer or a proposal which the other person accepts and when he accepts he knows that the acceptance will give rise to a binding contract.

Types of contract:

1)Void Contract : It is a contract without any legal effects and cannot be enforced in a Court of Law.

2) Voidable contract: As per section 2(i), “an agreement which is enforceable by law at the option of one or more the parties but not at the option of the other or others is a voidable contract,”

3)Illegal contract : It is a contract which the law forbids to be made. The court will not enforce such a contract and also connected contracts. ALL ILLEGAL AGREEMENTS ARE VOID BUT ALL VOID AGREEMENTS OR CONTRACTS ARE NOT NECESSARILY VOID.

4)Unenforceable contract : Where a contract is good in substance but because of some technical defect i.e., absence in writing, barred by limitation etc. one or both the parties cannot sue upon it, it is described as an unenforceable contract.

5)Express contracts : A contract which is made by words either spoken or written is said to be an express contract.

6)Unilateral contract : A unilateral contract is one-sided contract in which only one party

has to perform his promise or obligation to do or forbear.

7)Bilateral contract : Where the obligation or promise in a contract is outstanding on the part of both the parties, it is known as bilateral contract.

Definition of OfferA contract is an agreement enforceable by law [s. 2(h)]. A contract is formed if:

1) there is an agreement, and 2) the agreement is enforceable by law.Generally speaking, there is an agreement when one party accepts a proposal made by the other party to the agreement. Under the English Law, proposal is referred to as ‘offer’. The words ‘proposal’ and ‘offer’ are used interchangeably. Offer is the starting point of an agreement. According to section 2(a) of the Indian Contract Act, “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”

The person who makes the offer is called the promisor or offeror and the person to whom the offer is made is called the offeree. When the offeree accepts the proposal, he becomes the promise. And the accepted proposal is a promise.

As a contract is an agreement, an offer is an indication by one person (the "offeror") to another (the "offeree") of the offeror's willingness

to enter into a contract on certain terms without further negotiations. A contract is said to come into existence when acceptance of an offer (agreement to the terms in it) has been communicated to the offeror by the offeree.

Requisites of OfferExpressed or Implied

An offer may be expressed or implied [s. 9]. Offer may be by words – spoken or written; or it may be expressed by conduct. When the offer is by

words it is an express proposal and when it is expressed by conduct it is an implied proposal.

Illustrations

# A offers, orally or by letter, to sell a set of books to B for Rs. 2000. A makes an express offer to B.

# B picks up a book from the shelf in A’s bookstall and offers A the price of the book. B makes an implied offer to A.

To whom made?

An offer may be made to a definite person or persons; or to the world at large. An offer to a definite person can be accepted only by that person. An offer to the world at large can be accepted by anyone.

Illustrations

#A offers to sell his house to B for Rs.2,00,000. This is an offer to a definite person B; and can be accepted by B only.

#A advertises, in a newspaper, offering a reward of Rs. 501 to anyone who returns his lost dog to him. This is an offer to the world at large and can be accepted by anyone who finds and returns the dog to A.

Act or abstinence

An offer may be to do an act or to abstain from doing an act. Abstinence amounts to a valid offer.

For example, A owes B Rs. 5,000. He fails to pay B the amount on the due date. B offers not to sue A if A will deposit security of an equal amount with B. B’s offer is a valid proposal.

Assent of offeree

An offer must be made with an intention to obtain the assent of the other party to the agreement. In other words, it must be made for the purpose of being agreed to. A statement amounting to a threat or expressing one’s patriotic feelings or religious sentiments is not a proposal because it is not made with a view that the other person should agree to it.

Certain and specific

Proposal must be certain and specific and should be such that it may be acted upon by the other party.

In Gorakh Nand Yadav v/s District Magistrate & Anr., the Collector of Gorakhpur, by an advertisement, declared that the entire river bed consisting of sand would be leased out by auction-cum-tender method and that desirous persons may participate. Persons submitting tenders were required to comply with certain rules, one of which was that the tender must specify, in words and figures, the sum of money offered. The tenderer submitted his tender without complying with the rule. Held, the requirement was mandatory, as an offer must be certain and specific and it must be such that it can be acted upon by the authorities.

Legal obligations

To create a contract, parties must intend to enter into legal obligations. Hence, engagements of purely domestic or social nature, which are not intended to create legal obligations, are not contracts.

Example:

The defendant, who was a civil servant in Ceylon, was enjoying his vacation with his wife in England. When he was due to return to Ceylon, his wife was advised, by reason of her health, to remain in England. The defendant promised to

send her 30 pounds a month by way of household expenses until she became fit to join him in Ceylon. Later, differences arose between them and they separated. The wife sued for the allowance. The court held that moral or domestic obligation of the husband to send the allowance was not within the realm of a contract. The parties had never intended to create legal obligations.

Nor does an invitation to dinner amount to a proposal.

For example:

A invited B for dinner. B accepted the invitation but could not attend the dinner party. A sued B. A’s action for the price of the unconsumed food was dismissed on the ground that an invitation to dinner merely creates a social obligation.

But where the parties intend to create legal obligations, their agreement shall be enforceable by law notwithstanding the domestic or social relationship existing between them.

And in S.V.R Mudaliar & Ors. V/s Rajabu F. Buhari & Ors. (1995) SC 1607, the Supreme Court went a step further and observed: “ The proposition

that in addition to the existence of an agreement and the presence of consideration, there is also a third element in the front of intention of parties to create a legal relation on which depends the enforceability of contract, cannot be accepted. It is not possible to say that an agreement will not, by itself, yield legal obligations unless it is one which can reasonably be regarded as having been made between the parties in contemplation of legal consequences.”

Communication

An offer must be communicated to the offeree. Until an offer is made known to the offeree, he does not know what he has to accept. An offer becomes effective only when it has been communicated to the offeree. The mere desire to enter into an agreement, which remains hidden in the recess of one’s mind, can never constitute an offer. Lord Lindlay says: “A state of mind not communicated cannot be regarded in dealings between man and man.”

To the existence of a contract there must be mutual assent-offer and consent to the offer. Without that there is no contract. How can there be consent or assent to that of which the party has never heard.

In Lalman Shukla v. Gauri Dutt, 11, A.L.J. 489, G sent L, his servant, in search of his missing nephew. Subsequently, G announced a reward for information relating to the boy. L, before seeing the announcement had traced the boy and informed G. Later, on reading the notice of reward, L claimed it. His suit was dismissed on the ground that he could not accept the offer unless he had knowledge of it.

Essentials of an Offer

1) Offer should be clear, definite, not vague, loose or ambiguous: Court case: Taylor had a flat which he wanted to give on hire basis at 285 pounds p.a. He gets a customer and tells him that the flat is handsomely decorated. Portington agrees to buy the flat. After seeing the flat, Portington disagrees to buy the flat because it was not handsomely decorated according to him. Then Taylor files a case against Portington saying that Portington has broken the contract. The judge said that the word handsomely decorated is vague and not clear and hence there was no offer and no contract.

Court case: Mr. Gould offered Mrs. Gould 15 pounds per week on separation till he could manage but after some time he stopped paying to Mrs. Gould. So Mrs. Gould took him to the court and asked the judge to force Mr. Gould, and enforce him to pay her the maintenance charges. The judge held that as long as he can manage is not clear, but vague, so it is no offer so no contract and hence the judge could not force and enforce Mr. Gould to pay the maintenance charges to Mrs. Gould.

2) Offer should be made with an intention of creating a legal relationship.

3) Offer must be distinguished from:a.Intention of making an offerb.Invitation to making an offer

An advertisement or announcement in the newspaper is not an offer but an invitation to offer. An exception to this is an advertisement in the newspaper announcing a reward.

4) Offer or proposal should be communicated:Court case: Snedekar had a dog which was lost and hence he gave an advertisement in newspaper that ‘whoever will find the dog

will be rewarded’. Fitch who was unaware about this advertisement found the dog and took it to Snedekar. As soon as he returned the dog and was leaving the watchman asked him whether he received his prize or not. So Mr. Fitch went back to Snedekar and demanded his prize but Mr. Snedekar argued that when he had come to return the dog till that time the advertisement was not yet communicated to him. But Mr. Fitch said that he gave an offer and i accepted and now he was backing out which is a breach of contract and hence took him to the court. The judge held the case in Mr. Snedekar’s favour concluding that the main aspect of an offer is that it must be communicated, therefore Snedekar cannot be forced to give the reward.

5) Offer should not contain a term, non-complaince would lead to acceptance: Example: will you buy my car for Rs. 50,000 and if you don’t reply within, I will assume you have accepted.

6) Offer should be capable of being accepted: Example: putting life in a dead body.

7) A statement of price is not an offer:

Court case: Three telegrams were exchanged between Mr. Harvey and Mr. Facey. The first one was from Harvey to Facey saying that a) Will you sell your bumper hall pen?b) Quote the lowest price.

The second one was sent by Mr. Facey to Mr. Harvey in reply.....900 pounds.The third one was again sent by Mr. Harvey sayinga) I accept....kindly send/supply.

But Mr. Facey does not supply pens to Mr. Harvey. Therefore Mr. Harvey takes Mr. Facey to court saying the quoted the price which was an offer, I accepted the offer and now he is backing out which is a breach of law. But Mr. Facey argued saying that price quotation is not an offer and hence when there is no offer, no contract. The judge held in Facey’s favour saying that quoting a price is not an offer.

Classification of Offer

1)General offer : It is an offer made to the public in general and hence anyone can accept and do the desired act. Section 8 of the Indian Contract Act points out that performance of the conditions of a proposal is an acceptance of the proposal.

2)Special offer : When offer is made to a definite person. It is known as specific offer and such offer can be accepted only by that specified person.

3)Cross offers : When two parties exchange identical offers in ignorance at the time of each other’s offer, the offers are called Cross Offers. There is not binding contract in such a

case, as one’s offer cannot be construed as acceptance by the other.

4)Counter offer : When the offeree offers to qualified acceptance of the offer subject to modifications and variations in the terms of original offer, he is said to have made a counter offer. Counter-offer amounts to rejection of the original offer.

5)Standing, open or continuing offer : An offer is allowed to remain for acceptance over a period of time knows as standing, open or continuing offer. Tender for supply of goods is a kind of standing offer.

Requirements of an Offer

A valid offer must meet the tests of (1) contractual intention, (2) definiteness, and (3) communication to the offeree.

I. Contractual Intention: To constitute an offer, the offeror must intend to create a legal obligation. When there is a lack of such intention on his part, it makes no difference whether the offeree takes any action concerning the offer. Parties are free to make their own agreement, and if they agree that the breach of either party will not give rise to legal rights, there is no contract, even though the offer and acceptance have been reduced to writing. Hence, an offer must contemplate to give rise to legal consequences and be capable of creating legal relations. The following are the examples of a lack of contractual intention on the part of the offeror.a.Social Invitations: Ordinary invitations

to social affairs are not offers in the eyes of law, because the idea of bargain is absent in such cases and there is no intention to create a legal relationship.

An agreement between two persons to go together to pictures, or for a walk does not create a legal obligation on their part to abide by it, as it relates to social matters. A invited B to dinner at house on a specified date. On the stated date, A forgot all about his dinner and his invitation to B. When B arrived at A’s residence, A was not there and no dinner was ready. This agreement did not give rise to a legally binding agreement and B could not enforce it or claim compensation for expense and inconvenience. Agreements between a husband and wife who are living in friendly intercourse are not contracts but only domestic arrangements.

b.Offers made in jest or excitement: A person may make a proposal or statement in a jest without any thought or intention of creating a binding obligation. A proposal made in jest, cannot be expected by the offeree as a reasonable man, to have been made with the intention of making a contract. Also, a person, labouring under the stress of great emotion or excitement, may make

a statement that cannot be treated as an offer on account of the fact that it would be obvious to a reasonable man that a legal relation is not contemplated. Promises held out over the loudspeakers are often claptrap of politics.

c. Invitation to negotiate: The first statement made by one of the two persons is not necessarily an offer. In many cases there may be preliminary discussion or an invitation by one party to the other to negotiate or talk business. If A asks B, “Do you want to buy this care of mine?” he is not making an offer but is inviting an offer from B. If B then says, “I will pay you Rs. 3,000 for the car,” he is making an offer that A can accept or reject. On the other hand, after A’s invitation, B may continue the preliminary negotiations by saying, “What do you want for it?” If A then replies, “I will sell it to you for Rs. 8,000,” A makes an offer.

d.Invitation to offer: Ordinarily, marked prices of goods, do not constitute an offer

so as to compel the tradesman to sell those goods at the marked prices. Similarly, advertising is not held as offers. Advertisements are generally assumed to constitute ‘invitations to trade’ rather than offers. The trader merely indicates that he is willing to consider an offer made by a buyer on these terms. In other words, he is inviting an offer and not making one. Also, a circular inviting tenders for sale or purchase does not amount to an offer, but only an invitation to offer and unless an offer is accepted no contract is made. A bid is an offer which is accepted when the hammer falls, and until the acceptance of the bid is signified in some manner neither party assumes any legal obligation to the other. At any time before the highest bid is accepted, the bidder may withdraw his offer to purchase or the auctioneer his offer to sell. The owner’s offer to sell is made at the time through the auctioneer, and not when he advertises the auction sale.

II. Definite offer: An offer must be definite and certain. If it is indefinite, loose or vague or if an essential provision is lacking, it cannot be accepted. The reason is that

the courts cannot tell what the parties are to do. Thus an offer to conduct a business for such time as should be profitable is too vague to be considered a valid offer, as it does not consist of a definite promise to be bound. Where A, who has bought a horse from B, promises to buy another if the first one proves lucky, and refuses to buy the second horse, cannot enforce the promise, it being loose and vague.

Rules as to offer(a) The offer must be capable of creating

legal relation: A social invitation, even if

it is accepted, does not create legal relations because it is not so intended. An offer, therefore, must be such as would result in a valid contract when it is accepted.

(b) The offer must be certain, definite and not vague: If the terms of an offer are vague or indefinite, its acceptance cannot create any contractual relationship. Thus, where A offers to sell B a 100 quintals of oil, there is nothing whatever to show what kind of oil was intended. The offer is not capable of being accepted for want of certainty. But if the agreement contains reference for ascertaining a vague term, the agreement is not void on the ground of its being vague. If in the above example, A is a dealer in coconut oil only, it shall constitute a valid offer since the nature of

A’s trade affords an indication as to which oil is being offered.

(c) The offer may be expressed or implied.(d) The offer must be distinguished from an

invitation to offer.(e) An offer may be specific or general.(f) The offer must be communicated:

An offer, to be complete, must be communicated to the person to whom it is made. Unless an offer is communicated, there can be no acceptance by it. An acceptance of an offer, in ignorance of the offer, is not acceptance and does not create any right on the acceptance.

(g) The offer must be made with a view to obtaining the consent of the offeree.

(h) An offer may be conditional.(i) The offer should not contain a term the non

compliance of which would amount to acceptance. Thus a man cannot say that if acceptance is not communicated by a certain time the offer would be considered as accepted.

Offer and Invitation to Offer

An offer should be distinguished from an invitation to offer. An offer is definite and capable of converting an intention into a contract. Whereas an invitation to an offer is only a circulation of an offer, it is an attempt to induce offers and precedes definite offer. Acceptance of an invitation to an offer does not result contract and only an offer emerges in the process of negotiation.

When a person advertises that he has a stock of books to sell or houses to let, there is no offer to be bound by any contract. Such advertisements are offers to negotiate-offers to receive offers. In order to ascertain whether a particular statement amount to an ‘offer’ or an ‘invitation to offer’, the test would be intention with which such statement is made. Does the person who makes the statement intend to be bound by it as soon as it is accepted by the other or he intends to do some further act, before he becomes bound by it? In the former case, it amounts to an offer and in the latter case; it is an invitation to offer.

Communication of offer, when complete?

The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made [s.4]. Thus, A proposes, by letter, to sell his goods to B. Communication of the proposal is complete when B receives the letter.

When can an Offer be revoked?

A proposal may be revoked at any time before the communication of acceptance is complete as against the proposer, but not afterwards [s.5]. Thus, in the above example, A may revoke his offer at any time before or at the moment when B posts his letter of acceptance, but not afterwards.

An offeror may revoke an offer after 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, 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 a contract.

If the offer is one that leads to a unilateral contract, then unless there was an ancillary contract entered into that guaranteed that the main contract would not be withdrawn, the contract may not be revoked at any time.

How can a proposal be revoked?

A proposal can be revoked in any of the following ways:

By communication of notice of revocation by the proposer to the other party;

By lapse of time prescribed in the proposal for its acceptance, or if no time is prescribed, by lapse of a reasonable time;

By failure of the acceptor to fulfil a condition precedent to acceptance; or

By death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

1) Notice: Section 6(1), offer can be revoked by informing the other person i.e. giving notice to them.

2) Lapse of time: Section 6(2), certain offers are for a specific period. If the time comes to an end the offer also comes to an end.

3) Non-fulfilment of a condition given in the offer: Section 6(3), if the condition mention in the offer is not fulfilled by the offeree, the condition lapses. Example: if the offeror informs the offeree to make 50% payment on the same day to accept the offeror and if the offeree does not make the payment, the offer lapses.

4) Death of the offeror: Offer can be of two types i.e involving personal skills and non-involving personal skills. In case of contracts not involving personal skills, death of an offer brings an end to the offer irrespective of whether the offeree is aware or not. In case of contracts involving personal skills, if the offeree is aware of the death of the offeror then the offer lapses whereas if he is unaware of the death he can accept the offer and a binding contract.

5) Counter offer: court case- Wrench had a farm which he offered to sell at 1000pounds to Hyde. Hyde agrees to buy at 950 pounds. Wrench disagrees to sell the farm. Then Hyde again offered to buy at 1000 pounds but again Wrench disagreed to sell now. Therefore Hyde goes to the court saying that Wrench offered and I accepted but now he is backing out. Wrench argued that Hyde did not accept the offer as it is but gave a counter offer. The judge also held that it was counter offer number 2, hence as soon as a counter offer is given the original offer lapses hence Wrench cannot be forced or enforced to sell the farm.

6) Not accepting the offer as per mode prescribed: section 7(2)

7) Change of law: any change in the law brings an end to the offer since the change in law may have an impact on the price.

Special terms in an Offer

Incase of special terms of offer, for non-transferable transactions, it should be brought to notice before entering into the contract.

If the conditions are written behind, then there must be some indication in front to show some conditions are written behind.

Whether the person has read or not, whether he is literate or illiterate, he is bound by the same. In case of non-transferable transactions, if the condition is written on a receipt, the person is not bound by the condition.

An offer may be General or Specific

An offer may make an offer to a particular person because he wants only that person to do what he has in mind. When it is addressed to a particular

person the offer is called a Specific Offer, and it can accepted only by that person. The offeror may, on the other hand, make the offer to the public at large because he does not care by whom something is done so long as it is done. Such an offer is called a General Offer, but it cannot form the foundation of a contract until it has been accepted by an ascertained person. Offers made by advertisements are the commonest form of general offers made to the general public. For example, when a reward is offered to the public for the return of lost property, the offeror does not care who returns the property. Anyone who, after having read about the reward, returns the property is deemed to have accepted the offer by conduct and is entitled to get the reward. The leading case on the subject of general offer is Carllil v. Carbolic Smoke Ball Co.(1893) 1 Q.B. 256.

In this case, the Company offered by advertisements a reward of 100 pounds to anyone who contracted influenza after using their Smoke Ball for a fortnight according to printed directions. Mrs. Carllil, on the faith of the advertisements, bought a Smoke Ball and used it as directed, but was attacked by influenza. She sued for the advertised reward, the court decreed the suit on the ground that the

advertisement was not a mere statement of an intention to give reward but a definite promise, and although the offer was not made to any particular person but to the whole world, it was capable of being accepted by one or more persons who accepted by conduct or performance of conditions. In such a case acceptance and performance go together, and no communication of acceptance is necessary.

Duration of Offer An offer that has been communicated properly continues as such until it lapses, or until it is revoked, rejected, or accepted. The offeror is considered to be continually renewing the offer until one of the above takes place.

1. Offer lapses after stipulated or reasonable time:An offer does not remain open indefinitely, although the offeror fails to withdraw it. If the offer stipulates the period during which it is to continue, it automatically lapses at the end of that period. An attempted acceptance after that fate could only amount to a new offer being made by the offeree of the original offer. An offer which provides for no time limit remains open for a reasonable time- a reasonable time being such period as a reasonable person might conclude was intended.

a) In Head v. Diggon, 3 M. And R.97, a seller on Thursday offered wool to a buyer and gave him three days in which to accept. The buyer accepted the offer on Monday but the seller, after waiting for three days, had sold the wool. It was held that the offer had lapsed by Monday morning by its express terms, and the seller was not bound.

2. An offer lapses by the death or insanity of the offeror or the offeree before acceptance:If the offeror dies before acceptance, there is no offer to accept, and if the acceptance is made it becomes infructuous. “A dead man can no more continue to offer than he could begin to offer.” In the same manner, the offeree’s death without accepting the offer puts an end to the offer, and his heirs or executors cannot accept for him. But if the acceptance is made in ignorance of the death or insanity of the offeror, there would be a valid contract. In English Law, the death or insanity of the offeror or offeree causes an offer to lapse even though the other party has no notice of the death. S owned certain debentures of a company. K offered to buy them. S died without

accepting the offer. His administrator accepted the offer and sued K for damages when he refused to perform the contract. Held, the death of S termintated the offer to buy, and his administrator after S’s death could not accept.

3. An offer lapses by subsequent illegality: If the performance of the contract becomes illegal after the offer is made, it lapses. Thus if an offer is made to sell alcoholic liquors but a law prohibiting the sale of liquors is enacted before the offer is accepted, the offer is terminated.

4. An offer lapses by not being accepted in the mode prescribed, or if no mode is prescribed, in some usual and reasonable manner:According to English law, once the offer has lapsed on this account, there cannot be a further acceptance, unless the offeror agrees thereto. In Indian law, if the offer prescribes the manner in which it is to be accepted and the acceptance is not made in such a manner, the proposer or offeror may, within a reasonable time after the acceptance is communicated to him, insists that his offer shall be accepted in the prescribed manner

and not otherwise. If he fails to do so, he accepts the acceptance as made.

5. A conditional offer lapses by rejection of offer by the offeree:If the offeree rejects the offer by distinct refusal, he cannot revice the offer by attempting to accept, it unless the offeror renews the proposal.

6.An offer lapses by counter-offer by the offeree, as it amounts to rejection of the offer. If A makes an offer to B to sell his car for Rs. 5,000 and B, instead of accepting the offer, makes an offer to buy it for Rs. 4,000, the original offer by A is terminated, B is effect saying, “I refuse your offer, but in its place, I make a different offer.” Such an offer by the offeree is known as counter-offer. In substance, the counter-offer presupposes a rejection of the original offer. If the original offer, who is now the offeree, accepts the counter-offer, a binding contract results. Where, however, the offeree does not make a counter-offer, but only desires to know if the offer does not lapse and may be accepted at any time before it is withdrawn.

Tenders

A tender is an offer and may be either (a) a definite or specific offer to supply goods or services, or (b) a standing offer.

Tender as definite offer: Where tenders are invited for the supply of specified goods or services, each tender submitted is an offer.

The party inviting the tenders can accept any tender he chooses, and thus bring about a binding contract. For example, if A company requires a thousand tonnes of coal and invites tenders for the supply of this quantity, and accepts B’s tender there is a contract between A company and B. The terms of the contract are that B shall supply and the A company shall accept and pay for one thousand tonnes for coal.

Tender as a standing offer: Where tenders are invited to supply goods or services as and when demanded, a trader who submits a tender is making a standing or continuing offer. The ‘acceptance’ of such a tender does not convert the standing offer into a binding contract, for a contract of sale implies that the buyer has agreed to accept the goods. For example, where A invites tenders for the supply during the coming year of coal not exceeding 1,000 tonnes at the agreed price when A from time to time demands a precise quantity. A tender by B to

supply coal as and when demanded by A amounts to a standing offer and cannot be accepted generally so as to form a binding contract; it is accepted from time to time whenever an order is given for any quantity within the maximum quantity stated in the tender. An ‘acceptance’ of such a tender merely amounts to an intimation that the offer will be considered to remain open during the period specified. Thus where a standing offer has been made, there is a separate acceptance each time an order is placed and accordingly a distinct contract is made on each occasion with respect to the quantity ordered, resulting in a series of contract.

With regard to further supply, the offer nay be revoked by notice to the offeree just as the tenderor has the right to revoke his tender as to future orders, so also the acceptor of the tender has the right to refuse to place any orders.

Contract results only when an order has been placed, and once an order is placed it must be executed.

Court Cases1) Balfour v/s Balfour

Mr. Balfour offers Mrs. Balfour 30 pounds per month out of love, but after some time Mrs. Balfour started living separately and therefore Mr. Balfour stopped paying 30 pounds to Mrs. Balfour. So she filed a case against him and took him to the court saying that he offered and I accepted, offer and acceptance makes a contract and hence she pleaded the judge to force and enforce Mr. Balfour to give her 30 pounds per month. But the judge held that at the time of offer Mr. Balfour had only social relationship and not any legal relationship.

2) Pearce v/s. Brooks

Mr. Pearce had an open wagon which he used to give on hire basis to various people. One day Brooks who was a prostitute took the open wagon from Mr. Pearce saying that she wanted it to advertise her product. But Pearce did not know that she was a prostitute. She said that she would give him monthly hire charges. After some time as her business could not prosper she was not able to pay the hire charges. So Pearce took Brooks to court saying that she has not paid the hire charges. The judge held that though there was mutual consideration between both the object behind giving the wagon on hire basis is not lawful.

3) Scammel v/s Ouston

Scammel and Ouston both had motor vans. Scammel’s van was more expensive and Ouston’s van was cheaper. Ouston offered to exchange the vans and agreed to pay the remaining amount in instalments in more than two years. Scammel accepted the offer but later Ouston backed out. So Scammel dragged Ouston to the court and explained the whole story to the judge and demanded

and argued with the judge to force Ouston to pay the money. But the judge held that the words more than two years is not clear but vague and hence no offer and no contract.

4) Harris v/s Nickerson

Mr. Nickerson had some old furniture which he wanted to sell and hence he published an advertisement in a newspaper about the auction of the furniture. Mr. Harris was a lover of antiques who stayed at a very distant place from where the auction was supposed to be conducted. But yet he came especially for the auction. But just one day before Mr. Nickerson cancelled the auction. Harris filed a complaint against Nickerson for the breach of contract. Mr. Harris asked him either to sell the furniture or give compensation. Nickerson argued that his announcement was not an offer but it was an invitation to offer. And further said that if the auction would be held and bidding would have been conducted then it would have been an offer. So the judge held in favour of Nickerson saying that it is not an offer but an invitation to an offer and hence he could not force or enforce him to sell the furniture.

5) Parker v/s North East Railway Co.

Parker wanted to travel by train, but since the train was late he deposited his luggage in the luggage room of the railway company and went out to roam for some time. But when he returned he was told that the luggage is lost. Parker argued that his bag was of 24.50 pounds and demanded them to pay but the railway company said that on the ticket which he had received on behalf of depositing the luggage it was already written that if the luggage is lost the railway company will be liable only to a compensation of 10 pounds. The judge held in the favour of railway company saying that Mr. Parker was bound to the notice of the offer.

Recent Court Cases

1) Ramkanya Bai   vs   Bharatram   [SUPREME COURT OF INDIA, 22 Oct 2009]Family & Personal - Hindu Marriage Act, 1955, s. 13 - DNA test of child - Respondent-husband application u/s. 13 of the Act dismissed - Appeal thereaginst pending before HC - In said pending appeal, application filed by respondent-husband for order to perform DNA test of child born on ground that such child could not be taken to be a child born out of wedlock of parties - HC by impugned order, allowed said application - Present appeal - When a child is born out of a wedlock, there is a presumption in favour of his legitimacy - Held, HC not justified in allowing application for grant of DNA test of child only on ground that there will be a possibility of re-union of parties if such DNA test was made and if it was found from outcome of DNA test that son was born out of wedlock of parties - Impugned order set aside - Application of DNA test to be performed on child rejected - Appeal allowed.

2) Haryana Financial Corporation and Another   vs   Rajesh Gupta   [SUPREME COURT OF INDIA, 15 Dec 2009]Banking & Finance - Transfer of Property Act, 1882, s. 55(1)(a)(b) - Forfeiture of earnest money - Appellant Corporation issued an advertisement for sale of various units of a sick industry by way of auction - Respondent succeeded in the bid and deposited earnest money - Respondent informed that the selling units did not have any independent passage and brought it to the notice of the appellant - However, appellant asked respondent to deposit 25% of bid amount - Respondent did not deposit the amount - Appellant forfeited respondent's earnest money and issued advertisement inviting fresh tenders - Respondent filed writ petition, seeking refund of earnest money - HC allowed writ petition and directed the appellant to refund the earnest money - Whether HC order is proper - Held, appellants failed to disclose the material defect about the non-existence of independent passage to the selling property to the respondent, therefore, appellants breached s. 55(1)(a)(b) of the Act - Respondent has not failed to comply with the conditions of sale - Appellants have acted unfairly and is trying

to take advantage of its own wrong - Therefore, direction issued to appellant to pay the earnest money deposited by the respondent within the stipulated time - No interference on impugned HC order - Appeal dismissed.

3) Sharda   vs   State of Rajasthan   [SUPREME COURT OF INDIA, 15 Dec 2009]Criminal - Indian Penal Code, 1860, ss. 302, 498A and 307/34 - Murder - Conviction - Dying declaration - Deceased died on account of 90% burn injuries sustained - Three dying declaration of deceased recorded - Trial court convicted appellant u/s. 302 of IPC relying on third dying declaration of deceased - On appeal, HC affirmed conviction and sentence awarded by Trial Court - Hence, present appeal - Whether conviction of appellant u/s. 302 of IPC based on third dying declaration correct? - Held, first dying declaration of deceased stood fully corroborated from evidence of P.W-22 and P.W-31 in which she stated that no one had deliberately or intentionally put her on fire - Second dying declaration of deceased also stated that no one had put her to fire and no one should be blamed for it - Third dying

declaration is in question - answer form and perusal of original record clearly shows that it has many over- writings and some dates have been scored out to put new dates, which itself creates a doubt in mind with regard to correctness and veracity thereof - Moreover, until deceased third and last dying declaration was recorded, her relatives never suspected that she has been burnt by appellant - Hence, third dying declaration neither inspires confidence nor is wholly trustworthy to sustain conviction of appellant - It was an after-thought and has been got prepared after deceased appears to have been tutored to say so by her parents - Relying of her first two dying declaration which are not only consistent but also inspire confidence, impugned judgement and order passed by Trial Court and affirmed by HC set aside - Appeal allowed.

4) Ajay Lawania   vs   Shobhna Dubey  [SUPREME COURT OF INDIA, 11 Sep 2009]Family & Personal - Hindu Marriage Act, 1955, ss. 9 and 13 - Disposal of case - Divorce - Restitution of conjugal rights - Appellant filed petition u/s. 13 of Act for grant of decree of divorce - Respondent also filed a

petition u/s. 9 of Act for restitution of conjugal rights - Family Court directed that both petitions will be disposed of together because parties are common - Writ petition filed before HC - HC stayed operation of order passed by Family Court and directed Family Court to decide petition for restitution of conjugal rights - Whether order justified? - Held, if two petitions are filed under the Act, one u/s. 9 and the other u/s. 13, then, in order to avoid conflicting decisions, it is expedient that both the cases are heard by the same Court - HC not justified in staying operation of order passed by Family Court and, at same time, directing Family Court to decide petition for restitution of conjugal rights within period of one month - Procedure not sanctioned by law - Impugned orders set aside - Appeal allowed.

5) Industrial Investment Bank of India Limited   vs   Biswanath Jhunjhunwala  [SUPREME COURT OF INDIA, 18 Aug 2009]Banking & Finance - Industrial Reconstruction Bank of India Act, s. 40 - Recovery of Debts due to Bank and Financial Institutions Act, 1993, s. 19 - Respondent-company borrowed working capital loan from appellant-company

- Respondent-company made default in repayment - Appellant invoked provisions IRBI Act and got attached the properties of respondent-company - Appellant invoked provisions of Debt Recovery Act against the respondent-director who was the guarantor of the loan - Respondent-director filed an application in Debts Recovery Tribunal for staying the proceedings against him - Tribunal dismissed the application - Respondent-director filed writ petition before HC - HC allowed the writ petition and thereby stayed the proceedings against respondent - Legality - Appellant contended that the liability of guarantor was co-extensive with the borrower - Held, liability of the guarantor and principal debtors are co-extensive and not in alternative - HC was not justified to stay further proceedings against the respondent-director - Referred decisions of SC in Transcore v. UOI & another, (2008 1 SCC 125 ) and AP State Financial Corporation v. M/s. Gar Re-rolling mills & another, (1994 Indlaw SC 1633 ) - Appeal allowed.

6) Shipra Sengupta   vs   Mridul Sengupta and Others  [SUPREME COURT OF INDIA, 20 Aug 2009]Family & Personal - Indian Succession Act,

1956, s.372 - Service benefits - Succession of - Appellant, widow of the deceased bank employee claimed succession of service benefits of the deceased - Trial Court granted succession certificate to appellant and the mother of deceased entitled them 1/2 shares each for all the service benefits - Trial Court held that appellant alone was entitled to succession certificate with regard to other properties - Mother and brother of deceased filed appeal - District Court modified the order of Trial Court to the extent that mother of deceased entitled to 1/2 share of other properties too - Revision filed by mother and brother of deceased before HC - Meanwhile, mother of deceased expired and she executed a Will in favour of 1st respondent, her another son - HC allowed the revision by holding that 1st respondent alone entitled to the General Provident Fund (GPF) as the mother of deceased was the nominee in the service records of deceased and all other items to be share by appellant and 1st respondent equally - Legality - Held, nominee entitled to receive the amount, however, amount received is to be distributed according to law of succession - Nomination does not confer any beneficial interest on nominee - Appellant and 1st respondent

entitled 1/2 share of GPF - All other benefits of deceased received by the nominee to be distribute according to Hindu Succession Act, 1956 - Directed the bank to release half of the GPF amount to appellant - Appeal allowed.

7) Nand Kishore Ojha   vs   Anjani Kumar Singh  [SUPREME COURT OF INDIA, 09 Dec 2009]Practice & Procedure - Service - Contempt of Courts Act, 1971 - Bihar Education Code, Chapter 6 and 7 - Breach of undertaking - Appointment - Patna HC directed respondent - State of Bihar and its authorities to follow judgment and directions given by SC in Ram Vijay Kumar and Others v. State of Bihar and Others 1997 INDLAW SC 1368 and also judgment of Patna HC in Vinod Kumar & Ors. vs State of Bihar & Ors - Special Leave Petitions filed against said judgment withdrawn in view of state's decision to comply with HC judgment - Petitioner filed contempt petition against State of Bihar alleging that despite giving undertaking on 18-01-2006 and 23-01-2006 that priority would be given to trained teachers for appointment, no action has been taken -

State of Bihar provided various facts and figures, which had little bearing to question of recruitment of trained teachers to fill up vacant posts of primary teachers in Bihar - Whether contempt petition could be allowed? - Held, said available 34,540 vacancies shown in the advertisement for appointment of primary teachers be filled up with said number of trained teachers as a one-time measure to give effect to undertakings which had been given on 18-01-2006 and 23-01-2006 - Without issuing a Rule of Contempt, SC directed that 34,540 vacancies shown as available in advertisement be filled up from amongst trained teachers - Contempt Petition be adjourned for a further period of six weeks to enable State Government to implement this order and to submit a report on the next date - Order accordingly.

8) Reetu Marbles   vs   Prabhakant Shukla  [SUPREME COURT OF INDIA, 03 Dec 2009]Labour & Industrial Law - Industrial Dispute Act, 1947 - Termination - Respondent services were terminated without notice - Appellant contended that respondent was employed only as a part time accountant, therefore reference was not competent -

Labour Court held that respondent was removed from service without any notice or retrenchment compensation, which was clearly improper and illegal, therefore, he was entitled to reinstatement - Labour Court further held that appellant was not entitled for back wages for period he did not perform any work - Respondent filed writ petition seeking modification of award of Labour Court as it declines to grant full back wages to respondent - HC modified impugned award and held that respondent shall be entitled to full back wages from date of termination till date of reinstatement - Hence, present appeal - Whether HC was justified in granting full back wages to respondent in spite of denial thereof by Labour Court? - Held, payment of full back wages upon an order of termination being declared illegal cannot be granted mechanically - It does not automatically follow that reinstatement must be accompanied by payment of full back wages even for period when workman remained out of service and contributed little or nothing to industry - Respondent did not place on record any material or evidence to show that he was not gainfully employed during 15 years when he was out of service of appellant - HC unjustified in awarding full

back wages - Respondent to paid 50 per cent of back wages from date of termination of service till reinstatement - Appeal allowed.

9) Income Tax Officer, Udaipur   vs   Arihant Tiles and Marbles (Private) Limited  [SUPREME COURT OF INDIA, 02 Dec 2009]Income Tax & Direct Taxes - Income Tax Act, 1961, s. 80-IA - A/y 2001-2002 - Deduction u/s. 80-IA - Cutting and polishing marble blocks - Whether conversion of marble blocks by sawing into slabs and tiles and polishing amounts to 'manufacture or production of article or thing' so as to make assessee entitled to benefit of s. 80IA of Income Tax Act, 1961? - Held, blocks converted into polished slabs and tiles after undergoing process certainly results in emergence of a new and distinct commodity as original block does not remain marble block, it becomes a slab or tile - Hence, not only is there manufacture but also an activity which is something beyond manufacture and which brings a new product into existence - Therefore, activity undertaken by assessee did constitute manufacture or production in terms of s. 80IA of Act - Revenue's appeals dismissed

Income Tax & Direct Taxes - Manufacture and Production - Difference - Held, word 'production' is wider in its scope than word 'manufacture' - It means manufacture plus something in addition thereto - Word 'production', when used in juxtaposition with word 'manufacture', takes in bringing into existence new goods by a process which may or may not amount to manufacture - Word 'production' takes in all by-products, intermediate products and residual products which emerge in course of manufacture of goods - Revenue's appeals dismissed.

10) Ashok Kumar Sharma   vs   Oberoi Flight Services   [SUPREME COURT OF INDIA, 06 Nov 2009]Labour & Industrial Law - Misconduct - Dismissal from service - Labour Court held that dismissal of workman was justifiable, however, awarded full back wages from the date of dismissal until the date of award - Appeal before Single Judge by workman - Appeal dismissed by Single Judge - Appeal before DB by workman - DB directed employer-respondent to pay Rs. 60, 000/- as compensation to appellant-workman for full and final settlement - Whether award of monetary compensation of Rs. 60, 000/- is adequate in lieu of reinstatement and backwages - Held, view of the HC that monetary compensation in lieu of reinstatement of the appellant-workman

would be proper cannot be said to be unjustified - However, compensation of Rs. 60, 000/- awarded by DB is inadequate, hence compensation increased to Rs. 2 lacs - Appeal partly allowed.

AcknowledgementWe would like to thank Mrs. Mamta for giving us this opportunity to understand the importance of The Indian Contract Act and to be able to apply it in practical use. Through this project we all have studied in detail the various aspects of making an offer and hence have expanded and applied our knowledge.

Presented by:Dan Cherian (27)

Mansi Shah (25)

Deepika Gupta (12)

Hemangini Jain (16)

Richa Mishra (36)

Anuj Gurwada (13)

Rekha Tamang ( 57)

Eshant Jain (15)

Nikita Shah (51)

Topic: Offer

Subject: Business Law

Class: FYBBI