Questions and Answers ForLAW OF CONTRACTS

Questions and AnswersLAW OF CONTRACTS

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What is an Offer and what are the types of offer?

A: Proposal is the first step towards the formation of a contract. Proposal is termed as an “Offer” in English Law. The term proposal in Indian Contract law is defined under Section 2(a) of the Indian Contract Act, 1872 and states, 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.

Firstly, an offer, in order to give rise to a contract, must be intended to create and be capable of creating, legal relations. Mere social or moral relations will not give rise to legal obligations e.g an invitation to dinner or an agreement to accompany another for a walk does not constitute an offer. Thus, it is necessary that, to amount to a contract, there must be a promise to do or to abstain from doing something as a legal duty. A promises to consider favorably the application of B , a contractor, for renewal of a contract, if satisfied with B’s bona fides. Court held that this does not create any legal relation between the parties. Secondly a mere statement of intention, made in the course of conversation, will not constitute a binding promise, even though acted upon by the party to whom it was made. Thirdly, there is no offer till communication i.e till the offer is communicated to the offeree. Fourthly, the person to whom the offer is made indicates his willingness to buy at a lesser price than what he is offered.

  • Invitation to Offer: It invites the party to make an offer and it is not intended to be binding. An offer must be distinguished from an invitation to offer. Many statements which seem to be offer are, very often, merely invitation to offer. Thus, the following are not invitation to offer: quotations to a trader, enquiry, catalogue of books and advertisement for tender or an auction. It is the purchaser who makes the offer and it is for the trader, bookseller or the auctioneer to accept or reject the offer.,

    In case of Pharmaceutical Society of Great Britain v Boot, it was held that display of products at supermarkets and on shelves is invitation to offer. The advertised price results in an ‘invitation to an offer’ only. The offer does not become a contract until the merchandise is taken to the counter and the price checked. At this point the customer can accept the merchandise and pay the price, thereby completing the transaction and forming the contract.

  • General offer: Offer made to world a large and can be accepted by anybody who fulfils the terms and conditions.

    In case of Carlill v Carbolic Smoke Ball Co, (1893) 1 QB 256, a newspaper advert placed by the defendant stated that £100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. Also £1000 is deposited with the Alliance Bank, showing their sincerity in the matter.

    Mrs Carlill purchased some smoke balls and used them according to the directions and caught flu. She sought to claim the stated £100 reward. The defendant stated that there was no contract between the parties. The Court of held that Mrs Carlill was entitled to the reward as the advert constituted an offer of a unilateral contract which she had accepted by performing the conditions stated in the offer.

  • Counter Offer: An offer made in response to the original offer. It revises the initial offer permits a person to decline a previous offer and allows offer negotiations to continue.
  • Invitation to tenders: A person who invited tenders for the purchase or sale of goods does not make an offer. It is the person who submits a tender that makes an offer, which it is for the person who invites the tender to accept or reject.
  • Auction Sales: The same principle governs the case of auction sales. In auction sales, the offer proceeds from the bidder and it is for the auctioneer to accept or reject the bid. In auction sales, the acceptance is signified by the fall of hammer, but the offer can be revoked before such acceptance.

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