INTRODUCTION TO BUSINESS LAW
COURSE CODE: 2202
LECTURE 3: OFFER AND ACCEPTANCE
PRIMARY SOURCE: CHAPTER 2, COMMERCIAL LAW AND INDUSTRIAL LAW, 27TH EDITION BY
ARUN KUMAR SEN AND JITENDRA KUMAR MITRA
Course Instructor: Farzana Tazin
Formation of Contract
2
Recap: All contracts are made by the process of a lawful
offer by one party and the lawful acceptance of the
offer by the other party.
Example: X says to Y “Will you buy my house for 80 Lac
Taka?”. This is an offer. If Y says “Yes”, the offer is accepted
and a contract is formed.
It is both a specific offer and an express offer, which will be
discussed in later slides.
Terms to remember
Offeror: The person making the offer is called the offeror.
Offeree: The person to whom the offer is made is called the
offeree.
Specific and General Offers `
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When the offer is made to a specific person it is known as a
specific offer , but when it is not made to any particular
person but to the public at large it is known as general
offer.
Example 1 (General offer): an offer to give reward to
anybody who finds a lost dog is a general offer. This
general agreement will be deemed to be accepted by
anyone who actually finds the lost dog. The person, who
accepts this offer, generally by performing the condition
of the offer, can bind the person making the offer.
Specific and General Offers
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Example 2 cntd.
Example 2 (Specific offer): X offers to sell his
motor car to y at the price of Rs. 5000. This is
a proposal. X is the promisor or the offeror. Y is
the offeree. If Y agrees to buy the car at the
price stated; Y becomes the promisee or the
acceptor. There is a contract.
Rules Regarding offer
5
1. An offer may be express or may be implied from
the circumstances:
- an express offer is stated in words or in writing
(see example in slide 2)
- The offer which could be understood by conduct of
parties is called an implied offer. For example, when
a bus company runs its bus on a particular route,
there is an implied offer by the bus company to
carry passengers to the specified destination at a
certain fair.
Rules regarding offer cntd.
6
2. An offer may be made to a definite person, to some
definite class of persons, or to the public at large.
3. The offer must be capable of creating a legal
relationship.
Example: An invitation to play cards does not create a
legal relationship.
4. The terms of an offer must be certain, definite,
unambiguous and not vague.
Example: X says to Y “ I will give you some money if you
fix my car”. It is not an offer which can be accepted
because the amount of money to be paid is not certain.
Rules regarding offer cntd.
7
5. A mere statement of intention is not an offer: Price lists and
catalogues are merely statements of intention. They are not
regarded as offers but as invitation to others to make
offers.
For example, at a computer store a laptop has a price tag
attached to it which says the price of the laptop is 85,000
Taka. The price tag is considered to be the expression of an
intention to sell the laptop at 85,000 Taka. It is not an offer
to the world at large which can be accepted by anybody.
The intending purchaser who wished to buy the laptop is the
proposer/offeror. The shopkeeper may or may not accept
the proposal.
Rules regarding offer cntd.
8
6. An offer must be communicated to the offeree:
A person cannot accept the offer unless he knows about
the existence of the offer.
Example: P offers a reward to anyone who returns his
lost dog. Q finds the dog and brings it to P without
knowing about the offer. Therefore, Q is not entitled
to the reward.
7. An offer may be conditional: In such cases the
conditions must be clearly communicated.
Acceptance
9
An offer can be accepted only by the person
or persons for whom the offer is intended. An
offer made to a particular person can only be
accepted by him because he is the only person
intended to accept.
Example: X says to Y “Will you buy my house
for 80 Lac Taka?”. This is an offer. If Y says
“Yes”, the offer is accepted and a contract is
formed.
Rules regarding acceptance
10
1. It must be an absolute and unconditional
2. Conditional acceptance: An acceptance with a
variation is no acceptance. It is simply a counter
proposal/offer. Which must be accepted by the
original offeror.
Example: X offered to sell his house to Y for 45 lac
taka. Y said “accepted for 40 lac taka”. This is not
an acceptance. It is a counter offer. Which X may
or may not accept.
Rules regarding acceptance cntd.
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3. The acceptance must be expressed in some
usual or reasonable manner, e.g. by word of
mouth, telephone, telegram, or by post.
Example: Oral or by writing. P offers to buy Q's
bicycle at Rs. 50. Q may accept this offer by
stating so orally or through telephone or by
writing a letter or by sending a telegram to
that effect.
Rules regarding acceptance cntd.
12
4. Mental acceptance or uncommunicated assent
does not result in a contract.
5. Mode of acceptance: If the offeror prescribes
a particular mode of acceptance then the
offeree must follow it.
6. Time of acceptance: If the offeror prescribes a
time. The offeree must accept it within that time.
Rules regarding acceptance cntd.
13
7. When acceptance is complete:
A proposes, by letter, to sell a house to B at a
certain price, the communication of the
proposal is complete when B receives the letter.
8. Before offer: There cannot be acceptance
before the offer is given.
Revocation
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An offer comes to an end and is no longer open to
acceptance under the following circumstances.
1. By notice: If the offeror gives notice of revocation to
the other party the offer comes to an end. An offer
may be revoked anytime before acceptance but not
afterwards. Once an offer is accepted there is a
binding contract.
2. By lapse of time: when the offeror prescribes a time
within which the offer must be accepted, the
proposal lapses as soon as the time expires.
Revocation cntd.
15
3. After expiry of the reasonable time: when no time has
been prescribed, the proposal lapses after the expiry of a
reasonable time. “What is reasonable time’ depends on
the circumstances of the case.
4. By failure of condition as precedent: An offer lapses by
the failure of the acceptor to fulfill a condition precedent
to acceptance.
Example: A says to B “I will sell my house to you for 50 Lac
taka if you are married”. The offer cannot be accepted
until or unless B is married.
Revocation cntd.
16
5. By death of the offeror, if the fact of his death comes to
the knowledge of the acceptor of the acceptance.
6. Counter offer: when a counter offer is given, the original
offer lapses.
7. By refusal: A proposal once refused is dead.
Example: A offers to sell his firm to B for 50,000 taka. B
replies offering to pay 30,000 taka. A refuses. Then B
writes to A accepting the original offer. There is no
contract because original offer has lapsed.
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Note: The students are strictly advised to follow the
assigned text book for details. Examples borrowed
from external sources have been used for a better
understanding of the material. It is mandatory for
the students to read and understand all the given
examples.
