Important legal rules regarding to a valid offer in business agreement are given below:
1. An offer may be ‘express’ or ‘implied:
An offer may be made either by words or by conduct. An offer which is expressed by words, spoken or written, is called an ‘express offer’ and the one which is inferred from the conduct of a person or the circumstances of the case is called an ‘implied offer’.
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Illustrations:
(a) M says to N that he is willing to sell his motorcycle to him for Rs 20,000. This is an express offer.
(b) A shoe shiner starts shining some one’s shoes, without being asked to do so, in such circumstances that any reasonable man could guess that he expects to be paid for this, he makes an implied offer.
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2. An offer must contemplate to give rise to legal consequences and be capable of creating legal relations:
If the offer does not intend to give rise to legal consequences, it is not a valid offer in the eye of law. An offer to a friend to dine at the offeror’s place, or an offer to one’s wife to show her a movie is not a valid offer and as such cannot give rise to a binding agreement, even though it is accepted and there is consideration, because in social agreements or domestic arrangements the presumption is that the parties do not intend legal consequences to follow the breach of agreement.
But in the case of agreements regulating business transactions the presumption is just the other way. In business agreements it is taken for granted that parties intend legal consequences to follow.
3. The terms of the offer must be certain and not loose or vague:
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If the terms of the offer are not definite and certain, it does not amount to a lawful offer. Maugham L.J. has rightly observed: “Unless all the material terms of the contract are agreed, there is no binding obligation.” Thus an agreement to agree in future is not a contract, because the terms of agreement are uncertain as they are yet to be settled.
Illustrations:
(a) X purchased a horse from Y and promised to buy another, if the first one proves lucky, X refused to buy the second horse. Y could not enforce the agreement, it being loose and vague (Taylor vs Portington]).
(b) A offers to B lavish entertainment, if B does a particular work for him. A’s offer does not amount to lawful offer being vague and uncertain.
4. An invitation to offer is not an offer:
An offer must be distinguished from an ‘invitation to receive offer’ or as it is sometimes expressed in judicial language an ‘invitation to treat.’
In the ease of an ‘invitation to receive offer’ the person sending out the invitation does not make an offer but only invites the other party to make an offer.
His object is merely to circulate information that he is willing to deal with anybody who, on such information, is willing to open negotiations with him. Such invitations for offers are therefore not offers in the eye of law and do not become agreements by their acceptance.
For example, quotations, catalogues of prices or display of goods with prices marked thereon do not constitute an offer. They are instead an invitation for offer and hence if a customer asks for goods or makes an offer, the shopkeeper is free to accept the offer or not.
5. An offer may be ‘specific’ or ‘general’:
An offer is said to be ‘specific’ when it is made to a definite person or persons. Such an offer can be accepted only by the person or persons to whom it is made. Thus, where M makes an offer to N to sell his bicycle for Rs 200, there is a specific offer and N alone can accept it.
A ‘general offer’, on the other hand, is one which is made to the world at large or public in general and may be accepted by any person who fulfils the requisite conditions. The leading case on the subject of ‘general offer’ is that of Carlill vs Carbolic Smoke Ball Co.2
Illustration:
In the above case the Carbolic Smoke Ball Co., issued an advertisement in which the Company offered to pay £ 100 to any person who contracts influenza, after having used their Smoke Balls three times daily for two weeks, according to the printed directions.
Mrs. Carlill, on the faith of the advertisement, bought and used the Balls according to the directions, but she nevertheless subsequently suffered from influenza. She sued the company for the promised reward. The company was held liable.
Offers of reward made by way of advertisement, addressed to the public at large, for the rendering of certain services, or the restoration of lost article are also examples of general offers.
Such offers may be accepted by performance of the conditions by an individual person in order to give rise to a contractual obligation to pay the reward.
6. An offer must be communicated to the offeree:
An offer is effective only when it is communicated to the offeree. Until the offer is made known to the offeree, there can be no acceptance and no contract. Doing anything in ignorance of the offer can never be treated as its acceptance, for; there was never a consensus of wills. This applies to both ‘specific’ and ‘general’ offers.
Illustrations:
(a) A, without knowing that a reward has been offered for the arrest of a particular criminal, catches the criminal and gives the information to the superintendent of police. A, cannot recover the reward as he cannot be said to have accepted the offer when he was not at all aware of it.
(b) In Lalman Shukla vs Gauri Datt, the defendant’s nephew absconded from home. He sent his servant, the plaintiff, in search of the boy. After the servant had left, the defendant announced a reward of Rs 501 to anybody giving information relating to the boy.
The servant, before seeing the announcement, had traced the boy and informed the defendant. Later, on reading the notice of reward, the servant claimed it. His suit was dismissed on the ground that he could not accept the offer, unless he had knowledge of it.
7. An offer should not contain a term the non-compliance of which would amount to acceptance:
Thus an offeror cannot say that if acceptance is not communicated up to a certain date, the offer would be presumed to have been accepted. If the offeree does not reply, there is no contract, because no obligation to reply can be imposed on him, on the grounds of justice.
8. An offer can be made subject to any terms and conditions:
An offeror may attach any terms and conditions to the offer he makes. He may even prescribe the mode of acceptance. The offeree will have to accept all the terms of the offer.
There is no contract, unless all the terms of the offer are complied with and accepted in the mode prescribed.
As regards mode of acceptance, it must be noted that in case of deviated acceptance, for example, if the offeror asks for sending the acceptance ‘by telegram’ and the offeree sends the acceptance ‘by post’, the offeror may decline to treat that acceptance as valid acceptance provided he gives a notice Jo that effect to the offeree within a reasonable time after the acceptance is communicated to him.
If he does not inform the offeree as to this effect, he is deemed to have accepted the deviated acceptance (Sec.7).
9. Two identical cross-offers do not make a contract:
When two parties make identical offers to each other, in ignorance of each other’s offer, the offers are ‘cross-offers’. ‘Cross-offers’ do not constitute acceptance of one’s offer by the other and as such there is no completed agreement.
Illustration:
On 15 October, 2008 A wrote to B offering to sell him 100 tons of iron at Rs 25,000 per ton. On the same day, B wrote to A offering to buy 100 tons of iron at Rs 25,000 per ton. The letters crossed in the post.
There is no concluded contract between and B, because the offers were simultaneous, each being made in ignorance of the other, and there is no acceptance of each other’s offer.