Chapter 2

 The first essential of a valid contract is an agreement i.e., offer and acceptance. An agreement arises when one party makes an offer and the other party accept it.  The person making an offer is called offeror or promisor. The person accepting the offer is called the promisee or acceptor or offeree.  Examples  A offer to sell his watch to B for $100. A makes and offer.

1. It may be express or implied: An offer may be made by words or by conduct. An offer made by words spoken or written is called an express offer. The implied offer appears from the action or conduct of the parties i.e.,  M says to N that he will sell his car to him for $5000. It is an express offer.  A railway coolie carries the luggage of B without asking to do so. B allow him to do so. It is an implied offer.

2. It must create legal relationship.  A invite B to dinner and B accept it. It does not create any legal relations, so there no agreement.  A offer to sell his watch to B for $200 and B agrees. In this case both parties intend to create legal relation. A will give his watch to B and B in return pays $200 to A.

3. It must be definite and clear.  Ali purchased a horse from Ahmad and promised to buy another one, if the first one prove to lucky. Ali refused to buy the second horse. Ahmad could not enforce the agreement, as it is unclear.

4. It may be specific or general: When an offer is made to a specific person or group of persons, it is called specific offer, but a general offer is the one which is made to public in general and it may be accepted by any person who fulfill the required condition.  M makes an offer to N to sell his mobile to him for 1000, it is a specific order. In this case N can accept or reject it.  A announce in newspaper a reward of 500 for any person who will return his lost bag. It is a general offer.

5. It must be communicated to the offeree. If an offer is not communicated to the offeree, it can not be accepted.  Ali’s dog was missing from home. He send his servant in search of his dog. When the servant left the house Ali announced a reward of $500 for any one who bring his dog back home. The servant before knowing about the reward found the dog and bring him back home. Later he claimed the reward. He faild on the ground that he could not accept the offer unless he had knowledge of it.( Practical)

6. It may be subject to any condition.  A asks B to send the reply of his offer by letter but B sends the reply by . A may reject such acceptance

An offer can be revoked by any of the following ways; 1. Notice of Revocation: An offer can be revoked by sending a notice of revocation to the other party before the expiry date.  A, at an auction gives the highest bid to buy B’s goods. He withdraws the bid before the fall of hammer. The offer is revoked.

2. Lapse of Time: When offer is kept open until specified time, it terminates if it is not accepted by that time. The reasonable time depends up the circumstances of each case. If the commodity is of perishable nature, the reasonable time will be shorter.  M offered to buy the shares of X company on 1 May. X allotted shares to M on 1 August. M refused to accept them. Held, that the offer had lapsed by delay in accepting

3. Failure to fulfill the condition. An offer us revoked if the offeree fail to fulfill the condition mentioned in it. A offers to sell his scooter to B for if B get admission in medical college. B fails to get admission, the offer is revoked.

4. Death or Insanity of the Offeror: An offer is revoked by the death or insanity of the offeror if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. If the offeree does not know that the offeror has died or become insane and gives his acceptance, it is a valid acceptance. It will result in a valid contract and legal representative of the deceased offeror shall be bound by the contract.

5. Death or insanity of the offeree. An offer can be accepted only by the offeree. It cannot be accepted by his legal representative on his death. If the offeree dies or become insane before acceptance, the offer terminates.  X offer to sell his camera to Y. Y dies before acceptance. The offer terminates.

6. Subsequent Illegality: An offer may also terminate, when it becomes illegal due to change in law before its acceptance by the offeree. A offers to sell 10 bags of rice to B for before its acceptance, law bans the sale of rice. The offer terminates

7. Destruction of Subject matter: An offer terminates if the subject matter of the offer is destroyed before its acceptance by the other party.  A offer to sell his horse to B. The horse died before the acceptance of offer by B The offer terminates.

When the offeree signifies his assent to accept the offer then it become acceptance. A offers to sell his house to B for B accept the offer. This is an acceptance.

1. It must be given by the offeree. 2. It must be absolute and unconditional. 3. It must be in a prescribed manner 4. It must be communicated to the offeror. 5. It must be given within reasonable time period.

6. It may be expressed or implied. Example: A widow promised to give some property to her nice if she stayed with her. the niece stayed in her residence till her death. Held the niece was entitled to the property.

When the offer is accepted by the offeree or acceptor then it is called acceptance. Example: X offer to sell his house to Y for 300,000. Y accept the offer. This is an acceptance.

1. It must be given by the offeree. 2. It must be absolute and unconditional i.e., A offer to sell his watch to B for 500 and B replies that he can buy it for 300, there is no acceptance on the part of B. 3. It must be in a prescribed manner. 4. It must be communicated to the offeror. 5. It may be expressed or implied 6. It must follow an offer.

 When the contracting parties are face to face there will be immediate communication of offer and acceptance. When the parties are at the distance, postal services are used to enter in to a contract. In these cases the following rules will apply:

 The communication of offer completes when the letter containing an offer comes to the knowledge of offeree.  Example: A offers, by letter, to sell a van to B for 500,000. The letter reaches B on 8 June. Communication of offer is complete on 8 June.

 The communication of Acceptance is complete: Against the offeror, when it is put in the course of transmission to him, so as to be out of power of acceptor. As against the acceptor, when it comes to the knowledge of the offeror.

 Example: A offers, by letter, to sell a van to B for 500,000. The letter reaches B on 8 June. B accept the offer and sent a letter by post on 9 th June. The letter reaches A on 11 June. The communication of acceptance is completed;  As against A, when the letter is posted, i.e. 9 June and  As against B, when the letter is received by A on 11 June.

 Revocation means cancellation. The communication of revocation completes, as against the person who makes it, when the letter of revocation is posted. The communication of revocation completes as against the person, to whom it is made, when the letter of revocation comes to his knowledge.

 Example: A revoke the offer by letter on 8 th June. The revocation is complete as against A on 8 th June, when the letter of revocation is posted, and it is completed as against B on 10 June, when the letter of revocation reaches him.