Essential Characteristics of A Valid Offer
Essential Characteristics of A Valid Offer
Essential Characteristics of A Valid Offer
The terms of an offer must be clear and certain or at least capable of being made
certain.
Offer must be communicated to the offeree.
An offer must be made with an intention of creating legal obligations.
Invitation to an offer is not an offer.
Special terms attached to an offer must be communicated.
An offer may be to an individual or to the public at large.
Offer may be expressed or implied.
Offer must be made with a view to obtaining the assent of the other party
Offer may be conditional.
Offer should not contain a term, the non compliance of which would amount to
acceptance.
1. The terms of an offer must be clear and certain or at least capable of being made
certain.
Example - A agrees Ba hundred tons of oil. There is nothing whatsoever to show what kind
of oil was intended to be sold. Hence the agreement is void for uncertainty and vagueness.
2. Offer must be communicated to the offeree.
Example - In Fitch Vs Snedakar, a person gave information without knowing that an award
was offered for it and claimed the award subsequently. It was held that he was not entitled to
the award since he was not aware of the same.
3. An offer must be made with an intention of creating legal obligations.
Example - A invited B for a dinner and when B came, dinner was not ready. B could not
enforce it since it is just a social agreement.
4. Invitation to an offer is not an offer.
Example - When a merchant sends his quotation, it is not an offer but is only an invitation
on his part of his readiness to transact business on those terms.
5. An offer may be to an individual or to the public at large.
Example - In Carlil Vs Carbolic Smoke ball company, the company has offered by
advertisement a reward of $ 100 to anybody contracting influenza after using their smoke
ball. Mrs Carlil did and she was entitled for $ 100 since it was a general offer and she
accepted it.
6. An offer may be to an individual or to the public at large.
Example In Carlil Vs Carbolic Smoke ball company, the company has offered by
advertisement a reward of $ 100 to anybody contracting influenza after using their smoke
ball. Mrs Carlil did and she was entitled for $ 100 since it was a general offer and she
accepted it.
7. Offer may be expressed or implied.
Example - A writes to B that he is prepared to sell his house for Rs. 2 Lakhs. This is an
express offer. If a person hires a taxi, it is implied that he has to pay the fare.
Kinds of offers
1. General offer - If an offer is addressed to an unascertained body of individuals, it is called
general offer.
Example- A issues a public advertisement that he would give Rs 100 to anyone who brings
back his missing dog, it is a general offer.
2. Special offer - If an offer is addressed to a definite individual or body of individuals, it is
called a specific offer.
Example- A promises to give Rs 100 to B if he brings back his missing dog, it is a special
offer.
3. Standing offer - An offer for a continuous supply of a certain article at a certain rate over
a definite period is called a standing order.
Example - A, by means of an offer agrees to supply coal to B at a particular price for a
period of two years. It is a standing offer.
4. Cross offer- When two parties make identical offer to each other in ignorance of each
other's, such offer is called cross offer.
Example - A by letter offers to sell his car to B for Rs 50,000. B by letter offers A to buy the
same car for Rs. 50,000. It is a cross offer.
Lapses of offer
Revocation by communication of notice.
By lapse of prescribed time.
Death of the offeror.
Insanity of the offeror.
Non- Fulfillment of conditions.
Offer not accepted according to the mode prescribed.
Rejection by a counter offer
Consideration
Definition
The term consideration is defined in Sec. 2 (d) of the Indian contract Act as "When at the
desire of the promisor, the promise or any other person has done or abstained from doing, or
promises to do or to abstain from doing something, such act, abstinence or promise is called a
consideration for the promise."
Consideration backbone of all promises.
Consideration means something in return to the promisor.
Essentials of consideration
Consideration must move at the desire of the promisor.
Consideration may move from promisee or any other person.
Consideration may be past, present or future.
Consideration need not be adequate.
Consideration must be real and not illusory.
Consideration must be lawful.
Consideration must be something which the promisor is not already bound to.
Offer:
Definition
Section 2 (b) of the contract Act defines 'Acceptance as follows: "When the person to whom
the offer is made signifies his assent thereto, the offer is said to be accepted."
The offeree, when he accepts the offer, is called the acceptor.
Acceptance can be made by words, spoken or written.
An offer can be accepted only by the person to whom it is made.
Essentials of a valid acceptance
Acceptance must be absolute and unqualified.
Example A says to B, " I offer to sell my house for Rs. 2 Lakhs." B replies " I will purchase
it only for Rs 1 Lakh". It is only a partial acceptance.
Acceptance must be communicated to the offeror.
Acceptance must be made within a reasonable time.
Acceptance must be communicated in some usual and reasonable manner.
Acceptance may expressed or implied.
Acceptance must be communicated to the offeror.
Acceptance must be made within a reasonable time.
Acceptance must be communicated in some usual and reasonable manner.
Acceptance may expressed or implied.
Acceptance must be made by the offeree.
Acceptor must be aware of the proposal at the time of the offer.
Acceptance must be made only after the offer is made.
Acceptance must be given before the offer lapses or is revoked.
Acceptance concludes the contract.
Performance
Definition
Performance of a contract consists in doing or causing to be done what the promisor has
promised to do. A contract creates legal obligations. Performance of a contract means the
carrying out of these obligations.
Example A promises to deliver 100 bags of wheat to B and B promises to pay Rs. One lakh
on delivery. The contract is said to be performed when A delivers 100 bags wheat to B and B
pays Rs. One Lakh to him.
Who may perform the contract?
Promisor - If a contract involves the exercise of personal skill and qualifications of the
promisor, then it must be performed by the promisor himself.
Legal representative -If the promisor dies before the performance of the contract, his legal
representatives like sons and daughters who inherit the property of the deceased promisor are
bound to perform it.
Who can demand performance?
Naturally, it is only the promisor who can demand performance of the promise. It
makes no difference whether the promise is for the benefit of the promise or for any
other person.
In certain cases, a third party can also enforce a promise under a contract even though
he is not a party to contract.
In the case of death of promisor, his legal representatives can demand performance.
Example-A promises to B to pay C a sum of Rs. 500. A does not pay the sum to C. C cannot
take any against A. It is only B or his representatives who can enforce this promise against A
since B is the promisee.
Time and Place of performance: It is for the parties of the contract to determine the time
and place of performance of contract.The following rules regarding time and place of
performance of contract are discussed in the Contract Act.
Where the time is not fixed - According to section 46, where the contract is to be
performed without any demand by the promise and where no time for performance is
fixed, then the contract must be performed within reasonable time.
Example- A borrowed certain sum of money from Band B directed to pay the said sum to C,
a third party. A also agreed to repay to C but A did not fulfill his promise for three years. It
was held that the failure to pay the amount to C by A amounted to a breach of contract since a
period of three years considered a reasonable time for performance.
Where the time is fixed - According to section 46, when a promise is to be
performed on a certain day and the promisor has undertaken to perform it without
application by the promise, the promisor may perform it at any time during the usual
hours of business on such a day and at the place at which the promise ought to be
performed.
Example X promises to deliver goods at Y's godown on the 1st of January. On that day, X
brings the goods to y's godown, but after the usual hour for closing it. Hence the goods are
not received. In this case, X has not performed his contract in time.
Discharge of Contract
Definition
Discharge of contract means termination of the contractual relationship between the parties.
A contract is said to be discharged when the parties thereto are freed from the task of
performing their respective obligations as arising from the contract.
Various modes of discharge
1. By performance of contract.
- Actual Performance.
- Attempted performance.
2. By agreement.
- By Novation.
- By alteration.
- By recession.
- By remission.
- By waver.
- By merger.
3. By lapse of time.
4. By operation of law.
- By death.
- By insolvency.
5. By impossibility of performance.
- At the time of contract.
- Subsequent to contract.
6. By breach of contract.
By performance of contract
When persons who have undertaken the obligations perform it within the time and in the
manner prescribed, the contract will be properly discharged.
Performance is classified into two:-
• Actual performance Section 37 states that in order to claim performance, the parties to a
contract must have actually performed their part of the contract.
Example - If A agreed to supply 20 bags of rice to D, A must have actually supplied the
entire 20 bags of rice. Then only it can be stated that the contract has actually been
performed.
• Attempted performance - A person who is bound to perform a promise will be ready to
perform his promise but sometimes the other party refuses to accept that performance. This is
known as attempted performance or tender.
By agreement
As contract emerges from an agreement of both parties, it may also be terminated by another
agreement or consent of both parties.
-By Novation (substation of a new contract) Sometimes, the contracting parties may agree to
substitute a new contract in the place of the original contract between themselves and
different parties. The substitution of new contract is called "Novation".
Example A owes Rs 5000 to B. It is agreed between A, B and C that henceforth, C will repay
the amount of Rs. 5000 to B. Old contract disappears and new one is formed.
-By recession - Recession means cancellation of contract. In that case, the original contract
need not be performed. Both the contracting parties may agree, by mutual agreement, to
rescind the contract by cancelling some or all the terms of the contract.
Example X agrees to supply Y certain luxurious good within six months. By the time, the
said goods go out of fashion. Both X and Y agree to cancel the contract. By such
cancellation, the contract between X and Y is discharged.
-By remission - Remission means acceptance of a lesser performance than what was actually
due under the contract. It is a unilateral act of promise discharging at his will and pleasure the
obligation of another.
Example X owes Rs. 500 to Y. Y agrees to accept a lesser sum namely, Rs 400 instead of Rs.
500. As soon as Rs. 400 is paid by X, the whole debt of discharged. Rs. 500 is
-By waver- When both parties by mutual consent, agree of abandon their respective rights,
the contract need not be performed and the same is discharged. It is called waiver.
Example A agrees to supply B 10 bags of rice. B, in return agrees to supply A, 10 bags of
wheat. Subsequently, both A and B agree to abandon their respective rights. Accordingly A
need not supply rice to B. Likewise B need not supply wheat to A. Now contract is
discharged.
-By merger - Sometimes, both parties, who have already entered into contract rights, a
within inferior may enter subsequently new contract and the new contract creates superior
rights. Now the previous contract with lesser right is said to be merged with subsequent
contract with superior rights.
Example Y is the owner of the house in which X is residing as a tenant. Subsequently X buys
the property from Y. In such case, X's lesser rights as leasee will be merged into his superior
rights as an owner.
By lapse of time
Every contrac must be performed within specified period and it is called the period of
limitation. If the contract is not performed and the promise fails to take any action within the
period of limitation, then the contact is terminated or discharged by lapse of time.
Example X borrows Rs. 500 from Y through a promissory note. If X does not pay any
amount, Y must file a suit to recover the amount in a court of law within three years from the
date of execution of the promissory note. If no action is taken by Y within three years, the
promissory note is completely barred by limitation and Y can't recover the amount from X.
By operation of law
A contract may be discharged by operation of law. In other words, law itself discharges the
contract in the following circumstances.
- By death - An contract which is based upon personal skill and qualification of the promisor
is terminated on the death of the promisor. In other contracts, the rights and liabilities of
deceased person pass of his legal representatives.
- By insolvency - If a person is adjudicated insolvent by a competent court, all his rights and
liabilities are vested with the official receiver and the insolvent is discharged from all his
rights and liabilities arising from all his earlier contracts.
By impossibility of performance
-At the time of contract - when both the contracting parties are aware of impossibility of
performance of the contract even at the time of formation of the contract itself, then the
agreement becomes void. If they are not aware, contract becomes void when such
impossibility is discovered.
-Subsequent to contract - As a general rule, the impossibility of performance will not
excuse the promisor and in case of non performance, the promisor is liable to pay damages to
the promise. But there may be some cases in which non performance of the contract may be
due to some even beyond the control of the parties. In such cases, performance of contract
will be discharged. This is called "Doctrine of Supervening impossibility'.
Example A and B contracts to marry each other. Before the time fixed for marriage, A goes
mad. This supervening factor renders the contract impossible. So the contract becomes void.
By breach of contract
Breach means failure of a party to perform his obligation under a contract. When a promisor
has failed to perform his part of contract, he has committed a breach of contract. Breach of
contract is of two kinds.
Example X agrees to supply Y, 10 bags of sugar on the 1st of March. In this case,
performance is due on 1st March. On the 1st march, he fails to supply sugar. This is actual
breach of contract at the time when the performance is due.