2. The Indian Contract Act 1872: Offer and Acceptance of an Offer – Business Law

2

The Indian Contract Act 1872: Offer and Acceptance of an Offer

Learning Objectives

In this chapter, the students come to know the

  • Offer and its essential elements.

  • Kind of offer.

  • Lapse of offer.

  • Acceptance of an offer and its requirements.

  • Rule of communication for an offer and acceptance.

An offer is the first step in the formation of a contract. An offer is a proposal by one person to another to enter into a contract. The term offer is defined under Section 2(a) as under:

‘When one person signifies to another, his willingness to do or abstain from doing anything with a view to obtaining the assent of the other, to such an act or abstinence, he is said to make a proposal’.

2.1 ESSENTIAL ELEMENTS OF AN OFFER (PROPOSAL)

From the above definition, we can understand the following elements of an offer.

2.1.1 Two Parties

For a valid offer, there must be two parties. A person cannot make an offer to himself.

2.1.2 Communication

The offer must be communicated to the offeree. If it is never communicated to the offeree, it cannot be accepted and no valid contract comes into existence.

2.1.3 Willingness

The offer must show willingness of the offeror. Mere telling or sharing a plan is not an offer. Sharing the idea or the feelings is not willingness. If the party proposes certain terms on which he is willing to negotiate, in such a case, he is not making an offer because he is not expressing his willingness to enter into a contract.

2.1.4 With Intention of Obtaining Assent

The offer must be made with a view to obtaining the assent of the offeree. The offer made out of a prank or as a joke is not a valid offer, and therefore if accepted, it can never make the valid contract.

2.1.5 Offer May Be Positive or Negative

The offer may involve doing something or not doing something—Section 2(o). The offer to do something is a positive offer or not to do something is a negative offer.

Examples

  1. A proposes to B to make a TV serial. The proposal is to do something, i.e., to make a serial. It is a positive proposal.
  2. A proposes to B, ‘If you do not file a suit against me for defamation, I shall give you 1 lakh’. The proposal is to abstain from doing something. It is a negative proposal.
2.2 LEGAL RULES AS TO OFFER

The offer is the first step in a valid contract. If the offer itself is not valid, the contract can never be valid. Following are the legal rules of an offer.

2.2.1 Offer Should Not Bind the Other Party to Reply

The offer should not bind the other party to reply. In the same way, if the offer should not contain terms, non-compliance of which may be assumed as acceptance.

Example

A writes a letter to B. I offer to sell my house for 10,00,000. If I do not receive your reply by next week, I will assume that you have accepted offer. If B does not reply, it means non-acceptance of the offer.

2.2.2 Offer Must Be Definite, Unambiguous and Certain

The terms of an offer must be definite, clear and certain. If the terms are vague and uncertain, contract cannot come into existence.

Example

A made a contract with B and promised that if he was satisfied as a customer, he would favorably consider his case for the renewal of the contract. The promise is too vague to create a legal relationship.

2.2.3 Offer Must Be Made to Create Legal Relationship

A social invitation is not regarded as an offer because if it is accepted it does not give rise to any legal relationship.

Example

Amar invites Bansi for dinner. It is social invitation.

2.2.4 Invitation to Offer is Not an Offer

An invitation to an offer or an intention to put a proposal does not amount to an offer. A catalogue or price list of goods or services for sale is not a proposal but the invitation of proposal. Hence, no business house is bound to sell its goods for the price stated in it. Price-tags attached with the goods displayed in any showroom or supermarket is also an invitation to proposal. If the salesman or the cashier does not accept the price, the interested buyer cannot compel him to sell. If he wants to buy it, he must make a proposal. The menu card of a restaurant is an invitation to put an offer. A job or tender advertizement inviting applications for a job or inviting tenders is an invitation to the offer. A prospectus inviting public to apply for shares in a company is an invitation to put the offer to buy shares. However, the offer for the right shares or for shares from a reserve quota to its existing members is the offer.

Examples

  1. A, father, wrote to his intended son-in-law that his daughter would have a share of what he left after his death. Held, statement was merely an intention to put a proposal.
  2. A sent a letter to B stating the terms on which he is ready to do business as an agent. It was not an offer but only a statement on intention.
  3. An advertizement for auction sale is merely an invitation to make an offer, and not an offer for sale. Therefore, an advertizement of an auction can be withdrawn without any notice. The persons going to the auction cannot claim for the loss of time and expenses, if the advertisement for auction is withdrawn.

2.2.5 Terms and Conditions Communicated Along with an Offer

The terms and conditions of the offer must be communicated with the offer. If the terms and conditions are communicated or informed before or at the time of making an offer, it gives an opportunity to the offeree to decide about the acceptance of the offer. But if the terms and conditions are informed after the offer is made or after the contract is made, it is not binding to the offeree.

Example

A and his wife booked a room in a hotel, and paid rent in advance. When they entered into the room, they found a notice exempting the proprietor of hotel from the liability for loss or theft of articles of clients, staying therein. Due to negligence of hotel staff, their articles were stolen. A filed a suit on the proprietor for compensation of damages. Held, the proprietor was liable to pay compensation, since the terms of proposal were communicated after the acceptance. Hence, the terms were not a part of the contract and A was not bound by them.

A ticket purchased for entrance into places of amusement, ticket issued by railway or bus companies and many other contracts set out in printed documents contain numerous terms. Many of which the party receiving the ticket or document is ignorant of. If a passenger on a railway train receives a ticket on the face which is printed ‘this ticket is issued subject to the notices, regulations and conditions contained in current time-tables of railways’, the regulations and conditions referred to are deemed to be communicated to him, and he is bound by them whether or not he has read them. He is bound, even if he is illiterate and unable to read them. But the notice of the conditions must be given at the time of making a contract and not after the contract is made.

Case Study

A asks B, the shopkeeper—‘What is the price of apples’? B says, ‘ 10 per kg’. Is there any valid contract between A and B?

Case Study

A offered to take a house on lease for a period of three years, if the house was handsomely decorated. Is it valid offer? Why?

Case Study

An auctioneer advertised in a newspaper that a sale of office furniture would be held on a certain date. A person, with the intention to buy furniture, came from a distant place for the auction but the auction was cancelled. Can he file a suit against the auctioneer for his loss of time and expenses?

Case Study

SBI Bank has communicated voluntary Retirement Scheme to all its employees. One of the managers has applied under it but the bank has refused his application. Does the bank manager has any right against the Bank? Why?

2.3 DISTINGUISH BETWEEN INVITATION TO OFFER AND AN OFFER
Basis Invitation to Offer An Offer
Meaning A person proposes certain terms on which he is willing to negotiate, and invites the other party to make an offer on those terms. A person, expresses his willingness to be bound by the terms of his offer if the other party to whom he is making it, accepts it.
Willingness It expresses initial intention. It expresses final willingness.
Lead towards Invitation to offer leads towards offer. There is a possibility to get many offers. Offer lead towards acceptance and contract.
Binding Intends to do some other/further act, before becoming bound by his act. Shows or intends to be bound by the acceptance of invitation by the other.
2.4 CLASSIFICATION OF OFFERS OR KINDS OF OFFERS

An offer or a proposal can be classified on a number of different bases. We can summarize the kinds of offer in the following manner.

2.4.1 Express Offer

The offer made by using words spoken or written is known as an express offer.

Example

A says to B—‘Will you purchase my car for 2,00,000’?

2.4.2 Implied Offer

The offer which could be understood by a conduct of parties or circumstances of case is called the implied offer.

Example

Withdrawal of money from the card holder from the ATM. It creates an implied contract between the card holder and the bank.

2.4.3 Specific Offer

The offer made to a specific person or a particular person or two or more than two specific persons. The specific offer is made to an ascertained person.

Example

A says to B—‘Will you purchase my house for 2 lakhs’? It is a specific offer as it is made to B. Only B can accept it.

2.4.4 General Offer

It is not necessary that the offer should be made to a specific person. The offer can be made to the world at large. If the offer is made to the world at large, it is known as the general or public offer. The general offer is one which is not made to a specific person. The general offer can be accepted by any one.

Example

An advertisment in a newspaper, ‘Any one who will find my lost dog will be rewarded with 2000’.

2.4.5 Cross Offer

If two parties made offer to one another in ignorance of the offer made by other party, and terms-conditions in both the offers are same. Two cross offers do not conclude a contract.

Example

A offers by a letter to sell 100 tons of steel at 1000 per ton. On the same day B also writes to A offering to buy 100 tons of steel at 1000 per ton.

2.4.6 Continuous Offer

It is the offer which is open for a continuous period of time, it is also known as the open offer or the standing offer.

Example

A tender to supply goods as and when required, amounts to a standing offer.

2.4.7 Counter Offer

The offer made by the offeree in return of the original offer is called as the counter offer.

Example

A offered to sell his pen to B for 1000. B replied, ‘I am ready to pay 950’. On A's refusal to sell at this price, B agreed to pay 1000. Held, there was not contract, as the acceptance to buy it for 950 was a counter offer, i.e. rejection of the offer of A. the subsequent acceptance to pay 1000 is a fresh offer from B to which A was not bound to give his acceptance.

2.4.8 Legal Effects of Counter Offer

It amounts as a rejection of the original offer. In the above example, when the counter offer of 950 is made by B, it amounts as a rejection of the original offer (i.e., 1000) made by A.

When the counter officer is made, the original offer is lapsed. It means when the counter offer of 950 is made, and not accepted by A, B cannot accept the original offer of 1000.

The counter offer results in a new offer which may be accepted or rejected by the other party. If he accepts it, the contract is said to be concluded.

Case Study

A says to B—‘I offer to sell my car to you for 2 lakhs and B accepts the offer by saying clearly ‘I accept your offer’. Is it a valid offer? If so, which kind of offer it is?

Case Study

B makes to memorise a proposal to his parrot and sends him to A to recite the proposal. The parrot does so. Is it valid proposal?

Case Study

A advertizes in paper that any person who found his lost dog can get a reward of 5000. Can the advertizement be said as the general offer? Can any person who finds the lost dog claim the reward money?

2.5 DISTINGUISH BETWEEN GENERAL OFFER AND SPECIFIC OFFER
Basis General Offer Specific Offer
Meaning It is the offer made to the public at large. It is the offer made to a specific person or a group of specific persons.
Continuation It continues, until accepted by any person. It continues up to reasonable time, or until it gets revocked.
Acceptance It is accepted from any one from public who has knowledge of offer. It can be accepted only by the person to whom it is made.
Method of acceptance It can be accepted by performance of condition. It can be performed by performance of condition or by giving an acceptance.
2.6 LAPSE OF OFFER OR WHEN OFFER COMES TO AN END

The offer may come to an end in any of following ways.

2.6.1 Notice of Withdrawal

If a notice of withdrawal given by an offeror to the offeree before the acceptance of offer then the offer cannot be accepted by the offeree.

2.6.2 Lapse of Time

The offeree must accept the offer within the time prescribed in the offer, and if no time is prescribed, it must be accepted within a reasonable time. Thus, the offer lapses if it is not accepted within the time prescribed in the offer or within a reasonable time. What is a reasonable time that depends upon the circumstances in each case.

2.6.3 Non-fulfillment of Condition Attached with an Offer

When there is a condition in the offer which must be fulfilled before the acceptance of the offer, the offer lapses if the acceptance is given without fulfilling that condition.

2.6.4 Counter Offer

A counter offer means making a fresh offer instead of accepting the original offer. The counter offer amounts to rejection of the original offer. Hence, as soon as the counter offer is made, the original offer stands lapsed.

2.6.5 Acceptance Is Not Made in the Prescribed Mode or Usual Manner by the Offeree

Sometimes, the offeror prescribes the mode of acceptance. In such a situation the offer must be accepted in that very manner, and if it is not accepted in the prescribed mode, the offer stands lapsed.

2.6.6 Death or Insanity of an Offeror or Offeree

The offer lapses by the death or insanity of an offeror, if the fact of his death or insanity comes to the knowledge of the acceptor, before he makes his acceptance. But if the offer is accepted in ignorance of the death or insanity of the offeror, there will be a valid contract. The offer comes to an end on the death of the offerer also because the offer can be accepted only by the offeree and not by any other person. It cannot be accepted even by the legal heirs of the offeree.

2.6.7 Rejection of an Offer by the Offeree

The offer lapses as soon as it is rejected by the offeree. Once the offer is rejected, it cannot be received subsequently. The offer is said to be rejected, if the offeree expressly rejects it or accepts it, subject to certain conditions.

2.6.8 Destruction of Subject–Matter

The offer lapses if it becomes illegal before it is accepted, or the subject matter of the offer is destructed.

2.6.9 By Change in Provision of Act or Any Law

If there is a change in law, which makes the offer illegal or unlawful or impossible in terms of its performance, the offer comes to an end.

2.7 LEGAL RULES FOR THE ACCEPTANCE

The acceptance is the assent given by the offeree to an offer made to him. It is a communication of his intention to be bound by the terms of the offer. As per Section 2(b) ‘when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. The proposal when accepted, becomes a promise’.

Sir William Anson has explained the effect of acceptance while saying that ‘acceptance is to an offer what a lighted match is to a train of gunpowder’.

When a lighted match stick comes in contact with gunpowder, it creates a blast. Thereafter it will not be possible to bring things in normal. In the same way on acceptance to the offer, it gives rise to an agreement. Once the acceptace is given, immediately the contract comes into effect, and then there is no possibility to go back. The parties to contract are bound by the terms and conditions of the contract.

2.7.1 Acceptance Must Be Absolute and Unqualified

To form a valid contract, the acceptance must be absolute and unqualified. Unqualified means unconditional. The acceptance must be for the whole offer including all its terms and conditions if any. It may be noted that conditional acceptance will result into a counter offer.

Example

A offers to sell his house to B for 2 lakhs. B accepts the offer and promises to pay the price in four installments. This is not a valid acceptance as the acceptance is with variation in the terms of the offer.

2.7.2 Acceptance Must Be Communicated

Mere mental acceptance is no acceptance. But there is no requirement of communication of acceptance of the general offer. The general offer can be accepted by the performance of a condition.

Example

The Manager of railway company received a draft agreement relating to the supply of coal. The manager marked the draft with the words ‘Approved’, and put the same in the drawer of his table and forgot all about it. Held, there was no contract between the parties as the acceptance was not communicated. It may, however, be pointed out that the Court construed a conduct of parties, as railway company was accepting the supplies of coal from time to time.

2.7.3 Manner of Acceptance

The general rule says that it must be as per manner prescribed by the offeror. If no mode is prescribed, it can be accepted by some usual and reasonable manner.

If there is a deviation in communication of the acceptance of offer, the offeror may reject such acceptance by sending a notice within a reasonable period of time. If the offeror does not send a notice of rejection, he has accepted the acceptance of offer.

Example

A offers B and indicates that the acceptance be given by telegram. B sends his acceptance by ordinary post. It is a valid acceptance unless A insists for acceptance in the prescribed manner.

2.7.4 Acceptance of Offer Must Be from Competent Person

For a valid contract, the acceptance must be given by the competent person or an authorized person. The acceptance given by any person who is not authorized will not create any contact.

Example

A applied for the headmastership of a school. He was selected by the appointing authority but the decision was not communicated to him. However, one of the members in his individual capacity informed him about the selection. Subsequently, the appointing authority cancelled its decision. A sued the authority for breach of contract. The Court rejected A's action and held that there was no notice of acceptance. ‘Information by unauthorized person’ is as insufficient as overhearing from behind the door.’

The acceptance of the specific offer must be made by the person to whom it is made. The general offer can be accepted by anyone who fulfills the terms and conditions of the offer and has knowledge of it. Communication to the offeror is not required.

2.7.5 Time Limit for Acceptance

If the offer prescribes the time limit, it must be accepted within a specified time. If the offer does not prescribe the time limit, it must be accepted within a reasonable time.

Example

A applied (offered) for shares in a company in early June. The allotment (acceptance) was made in late November. A refused to take the shares. Held, A was entitled to do so as the reasonable time for acceptance had elapsed.

2.7.6 Acceptance May Be Express or Implied

The acceptance of offer may be expressly (by words spoken or written) or impliedly (by the acceptance of consideration) or by performance of conditions (e.g., in case of the general offer). Implied acceptance is inferred from the conduct or activities of the party. Implied acceptance does not require any formal acceptance.

2.7.7 Mere Silence Is Not Acceptance of an Offer

Generally, silence is not amounted as the acceptance of an offer.

Example

A offers to B to buy his house for 5 lakhs and writes ‘If I hear no more about it within a week, I shall presume the house is mine for 5 lakhs’ B does not respond. Here, no contract is concluded between A and B.

However, following are two exceptions to the above rule. It means silence amounts as acceptance of offer.

  1. Where the offeree agrees that non-refusal by him within a specified time shall amount to the acceptance of offer.
  2. When there is a custom or usage of trade which specifies that silence shall amount for the acceptance.

2.7.8 Acceptance Subject to Contract Is No Acceptance

If the acceptance has been given ‘subject to contract’ or subject to approval by certain persons, it has no effect at all. Such an acceptance will not create a binding contract until a formal contract is prepared and signed by all the parties.

Case Study

A offers B to sell his house for 15 lakhs and directs him to send his acceptance only by e-mail. B sends a letter of acceptance by post. Is there the valid contract between parties? What would be your opinion if A does not reject the acceptance made by e-mail within a reasonable time?

Case Study

‘A’ invites tenders for the supply of 10 quintals of cotton. ‘B’, ‘C’ and ‘D’ submit their tenders. When the contract can be concluded?

Case Study

A offered a reward to anyone who has returned his lost dog. B brought the dog to A without having heard of the offer. Can B claim the reward from A?

2.8 GENERAL RULES AS TO COMMUNICATION OF ACCEPTANCE

The general rules relating to communication of acceptance are the following:

2.8.1 In Case of Acceptance by Post

Where the acceptance is given by post, the communication of the acceptance is complete as against the proposer, when the letter of the acceptance is posted. Thus, a mere posting of the letter of the acceptance is sufficient to conclude the contract. However, the letter must be properly addressed and stamped.

2.8.2 Delayed or No Delivery of Letter

Where the letter of acceptance is posted by the acceptor but it never reaches the offeror or it is delayed in transit, it will not affect the validity of acceptance. The offeror is bound by the acceptance.

2.8.3 Acceptance by Telephones, Telex or Fax

If communication of the acceptance is mady by telephone, teleprinter, telex and fax machines, it completes when the acceptance is received by the offeror. The contract is concluded as soon as the offeror receives or hears the acceptance.

2.8.4 Place of Contract

In case of the acceptance by post, the place where the letter is posted is the place of contract. Where the acceptance is given by instantaneous means of communication (telephone, fax, teleprinter and telex), the contract is made at the place where the acceptance is received.

2.8.5 Time of Contract

In case of acceptance by post, the time of posting the letter of acceptance is the time of contract. But in case of acceptance by instantaneous means of communication, the time of contract is the time when the offeror gets the communication of the acceptance.

2.8.6 Communication of Acceptance in Case of Agent

Where the offer has been made through an agent, the communication of the acceptance is completed, when the acceptance is given either to the agent or to the principal. In such a case, if the agent fails to convey the acceptance received from the offeree, still the principal is bound by the acceptance.

2.8.7 Acceptance on Loudspeakers

The acceptance given on loudspeaker is not a valid acceptance.

2.9 COMMUNICATION OF OFFER AND ACCEPTANCE—SECTIONS 4 AND 5

The rules relating to communication of the offer and its acceptance are the following.

2.9.1 Communication of Offer

The communication of the offer is complete when it comes to the knowledge of the offeree.

2.9.2 Communication of Acceptance—Against the Offeror

The communication of the acceptance is complete as against the offeror, when it is put in a course of transmission to him so as to be out of the power of the offeree. It means the offeror is bound by acceptance as soon as the letter of the acceptance is duly posted by the offeree.

2.9.3 Communication of Acceptance—Against the Offeree

The communication of the acceptance is complete against the offeree, when it comes to the knowledge of the offeror. It means the offeree is bound by the acceptance when the letter of the acceptance reaches the offeror.

2.9.4 Communication of Revocation of an Offer

In case of revocation of the offer, the offeror is bound by revocation of the offer as soon as he duly posts the letter of revocation of the offer. He cannot cancel the revocation made by him. But revocation of the offer is binding on the offeree only if the letter of revocation of the offer is received by the offeree before the letter of acceptance is duly posted by the offeree.

2.9.5 Communication of Revocation of an Acceptance

In the case of revocation of the acceptance, the offeree is bound by revocation of the acceptance as soon as he duly posts the letter of revocation of the acceptance. But revocation of the acceptance is binding on the offeror only if the letter of revocation of the acceptance is received by the offeror before the letter of the acceptance is received by the offeror.

Case Study

Amar Posts a letter of offer to Kamla on 1 January 2011, which is received by kamla on 5 January 2011. Kamla posts a letter of acceptance to Amar on 12 January 2011, which is received by Amar on 17 January 2011.

  1. When is the communication of offer completed?

  2. When is Amar bound by an acceptance?

  3. When is Kamla bound by an acceptance?

Further assumes that Amar revokes his offer by posting a letter on 17 January 2011, which is received by kamla on 13 January 2011.

  1. Is revocation of offer by Amar binding on Kamla?

  2. Would your answer be different in any manner if Kamla has received the said letter on 11 January 2011?

Further assume that if Kamla revokes her acceptance by posting the letter on 14 January 2011, which is received by Amar on 16 January 2011.

  1. Is revocation of letter of the acceptance binding on Amar?

  2. Would your answer be different if Kamla revokes her acceptance by posting the letter on 18 January 2011?

LIST OF LANDMARK JUDGEMENTS
  1. Banwarilal vs. Sukhdarshan Dayal (1973)

    The promises made over loud speaker have no legal binding.

  2. Felthouse vs. Bindley (1863)

    The acceptance of the offer cannot be presumed from silence.

  3. Olley vs. Marborough Court Ltd (1949)

    No excluding or limiting term will be effective, unless it is brought to the notice of the party or to the attention of the party at the time of making a contract.

  4. Carllic vs. Cabolic Smoke Ball Co. (1893)

    The offer could be made to public at large. The performance of the conditions in the offer is sufficient enough to be considered as the acceptance, and it need not to be communicated.

  5. Ramsgate Hotel Co. vs. Montefiore (1966)

    The acceptance of the offer should be made within the prescribed time if the time limit is given. If no time limit is given, acceptance of the offer should be made within a reasonable time. The term ‘reasonable time’, depends on the facts and circumstances of each case.

  6. Gopi vs. Raghu (1949)

    When the offeror says that the acceptance will be presumed if no reply is received, the absence of reply cannot mean the acceptance of an offer. Mere silence is not assent or acceptance.

  7. Hajee vs. Murugesa (1958)

    The contract to enter into contract is not a valid contract.

  8. Foley vs. Classique Ltd (1934)

    The agreement to agree in future is not a contract.

  9. Khwaja Muhammed vs. Hussaini Begam (1910)

    The benefit can be given to the third party to a contract by creating a trust or charge in favour of such a person. The beneficiary under the trust or charge may enforce the contract. However, it must be noted that the stranger must be clearly designated as a beneficiary, and the trust or charge in his favour, must also be of some specific property.

  10. Harris vs. Nickerson (1973)

    A mere statement of intention is not an offer.

  11. Partodge vs. Critterden (1968)

    An invitation to receive an offer is not an offer.

  12. U. P. State Electricity Board vs. Goel Electric Store (1977)

    The proposal gets revoked when the counter offer is made.

  13. Bhagwandas vs. Girdharilal (1966)

    The acceptance of the offer can be made by conduct.

  14. Sharad Trading Co. vs. State (1980)

    If a person agrees to keep open a proposal for a certain time and accepts certain considerations for keeping the proposal open, he cannot withdraw the proposal before that date.

TEST YOUR KNOWLEDGE
1. Define the term offer.
2. What are the essential elements of a valid offer? (Ref. Para-2.1)
3. An offer may be positive but not negative. Comment. (Ref. Para-2.1)
4. An offer must show willingness of the offeree. Is it a correct statement? (Ref. Para-2.1)
5. What are the legal rules as to proposal? (Ref. Para-2.2)
6. A valid offer should bind the other party to reply compulsarily. Comment. (Ref. Para-2.2)
7. Can a proposer add terms and conditions after an offer is made? (Ref. Para-2.2)
8. Write a short note on the invitation to make an offer. (Ref. Para-2.2)
9. Distinguish between the offer and the invitation to make an offer. (Ref. Para-2.3)
10. Write a short note on kinds of offer. (Ref. Para-2.4)
11. Explain counter offer with suitable examples. (Ref. Para-2.4)
12. A counter offer to an offer lapses the offer. Comment. (Ref. Para-2.4)
13. What are the main difference between an express offer and an implied offer? Explain with suitable examples? (Ref. Para-2.4)
14. What are the effects of a counter offer? (Ref. Para-2.4)
15. Distinguish between a general offer and a specific offer. (Ref. Para-2.5).
16. When does an offer come to an end? (Ref. Para-2.6)
17. An acceptance must be made before the proposal lapses. Comment. (Ref. Para-2.6)
18. Define the term acceptance. (Ref. Para-2.7)
19. Who is competent to accept the offer? (Ref. Para-2.7)
20. State the rules relating to the acceptance of an offer. (Ref. Para-2.7)
21. Silence does not amount to the acceptance of an offer. Is it correct? (Ref. Para-2.7)
22. The acceptance subject to contract is no acceptance. (Ref. Para-2.7)
23. When can silence amount to acceptance? (Ref. Para-2.7)
24. Mere mental acceptance is no acceptance of an offer. Explain. (Ref. Para-2.7)
25. Explain the general rules as to the communication of the acceptance? (Ref. Para-2.8)
26. When is the communication of an offer and its acceptance complete? (Ref. Para-2.9)
MULTIPLE CHOICE QUESTIONS
  1. When a person signifies to another, his willingness to do or to abstain from doing anything, with a view to obtaining the assent of the other to such an act or abstinence, he is said to
    1. enter into a contract.
    2. make a proposal.
    3. have entered into agreement.
    4. enter into agreement.
  2. An implied offer means an offer made
    1. by spoken words.
    2. by SMS.
    3. by body language.
    4. by both (i) and (iii).
  3. A proposal may consist of a promise for
    1. doing an act.
    2. abstaining from doing an act.
    3. either (i) or (ii).
    4. returning the consideration.
  4. An offer may be made
    1. by words.
    2. by conduct.
    3. either (i) or (ii).
    4. neither (i) nor (ii).
  5. An offer can be accepted by
    1. offeror.
    2. offeree.
    3. promisor.
    4. either (i) or (ii).
  6. The acceptance of offer may be made
    1. by words.
    2. by conduct.
    3. either (i) or (ii).
    4. neither (i) nor (ii).
  7. A specific offer is one which is made
    1. by A to B.
    2. by a father to his only son for the sale of his factory to him.
    3. by a father of a girl to the father of an only son for her marriage.
    4. by all of the above.
  8. A offers to sell his car on internet, it is
    1. an express offer.
    2. an implied offer.
    3. a particular offer.
    4. no offer.
  9. A bid at an auction sale is
    1. an implied offer.
    2. an express offer.
    3. an invitation to offer.
    4. an invitation to come.
  10. The forbearance of a party from doing something also constitutes a valid offer.
    1. True
    2. Partly true
    3. False
    4. None of the above
  11. The offer which is allowed to remain open for the acceptance over a period of time is known as a/an
    1. standing offer.
    2. specific offer.
    3. express offer.
    4. implied offer.
  12. The offer made to a specific person is known as a
    1. standing offer.
    2. specific offer.
    3. special offer.
    4. separate offer.
  13. The offer made to a group of persons is known as a
    1. standing offer.
    2. specific offer.
    3. special offer.
    4. separate offer.
  14. A ............... can be accepted only by the person or group to whom the offer is made.
    1. Standing offer
    2. Special offer
    3. Specific offer
    4. Separate offer
  15. To make a valid general offer, it is necessary for the offeree to be known to the offeror at the time of making the offer.
    1. True
    2. Partly true
    3. False
    4. None of the above
  16. In a specific offer, it is necessary for the offeree to be known to the offerer at the time of making the offer.
    1. True
    2. Partly true
    3. False
    4. None of the above
  17. Communication of the proposal is complete when it comes to the knowledge of
    1. the person to whom it is made.
    2. the Proposer.
    3. either (i) or (ii).
    4. the Central government.
  18. A proposes by letter, to sell his horse to B at 10,000. Communication of the proposal is complete when
    1. A posts the letter.
    2. B receives the letter.
    3. B acknowledges to A that he has received the letter.
    4. either (ii) or (iii), whichever is earlier.
  19. The terms of the offer must be intended to create legal relations.
    1. True
    2. Partly true
    3. False
    4. None of the above
  20. Terms of the offer must be
    1. ambiguous.
    2. uncertain.
    3. definite.
    4. vague.
  21. An offer may be
    1. conditional.
    2. unconditional.
    3. both (i) and (ii).
    4. either (i) or (ii).
  22. An offer may be
    1. expressed.
    2. implied.
    3. both (i) and (ii).
    4. either (i) or (ii).
  23. An offer should not contain a term, the non-compliance of which would amount to acceptance.
    1. True
    2. Partly true
    3. False
    4. None of the above
  24. Which of the following conditions is not necessary for a valid offer?
    1. The intention to create legal relation.
    2. The unconditional terms.
    3. The certainty of terms.
    4. The communication to the person to whom it is made.
  25. Which of the following conditions is not necessary for a valid offer?
    1. The intention to obtain consent of the offeree.
    2. The communication to the person to whom it is made.
    3. The intention to create legal obligation.
    4. Expressed in written form.
  26. When a person invites the other party to make an offer, he is said to make a/an
    1. proposal.
    2. offer.
    3. invitation to offer.
    4. acceptance.
  27. An/A ............................ is expression of initial intention.
    1. invitation to offer
    2. offer
    3. proposal
    4. acceptance
  28. An/A ............................ is expression of final willingness to perform a promise.
    1. invitation to offer
    2. offer
    3. bid
    4. acceptance
  29. An application filled in by a prospective applicant to the company is an example of
    1. an invitation to offer.
    2. an offer.
    3. bid.
    4. an acceptance.
  30. The statement of lowest price at which the seller would sell his goods constitutes
    1. a valid contract.
    2. a implied contract.
    3. an express contract.
    4. no contract.
  31. Which of the following results in an offer?
    1. A declaration of intention.
    2. An invitation to offer.
    3. An advertisement offering reward to anyone who finds the lost dog of the advertiser.
    4. An offer made in a joke.
  32. Which of the following is an invitation to offer?
    1. A tender to supply goods at a certain time.
    2. A request for a loan.
    3. A bid in an auction sale.
    4. A catalogue of goods for sale.
  33. Price lists and catalogues, advertisements in newspapers and enquiries from customers are
    1. offers.
    2. invitations to offer.
    3. acceptances.
    4. cross offers.
  34. Goods displayed in a shop with a price label is
    1. an offer.
    2. an invitation to offer.
    3. a counter-offer.
    4. a contra-offer.
  35. There is a counter-offer when
    1. the offeree gives conditional acceptance.
    2. the offerer makes a fresh offer.
    3. the offeree makes some query.
    4. the offeree accepts it.
  36. When the offers made by two persons to each other containing similar terms of bargain cross each other in post, they are known as
    1. cross offers.
    2. implied offers.
    3. direct offers.
    4. express offers.
  37. A offers to sell his car for 50,000 to B. B says he would buy it for 40,000. This is a case of
    1. counter offers.
    2. implied offers.
    3. direct offers.
    4. express offers.
  38. A sends a letter to B proposing to sell his land. B sends his acceptance by post. A can revoke the offer at any time before B posts his letter of acceptance but not afterwards.
    1. True
    2. Partly true
    3. False
    4. None of the above
  39. In which of the following circumstances, the offer comes to an end?
    1. Lapse of time.
    2. Counter offer.
    3. Death of offerer or offeree before acceptance.
    4. All of the above.
  40. In which of the following circumstances, the offer comes to an end?
    1. Non acceptance of condition.
    2. Acceptance not in the prescribed mode.
    3. Change in law or circumstances.
    4. All of the above.
  41. An offer comes to an end after the expiry of
    1. time stipulated for acceptance.
    2. a reasonable time.
    3. either (i) or (ii).
    4. neither (i) nor (ii).
  42. An offer lapses to an end when the offeree
    1. fails to fulfill a condition precedent to acceptance.
    2. does not accept the condition.
    3. either (i) or (ii).
    4. neither (i) nor (ii).
  43. A proposal is revoked by the death of the proposer, if the fact of his death comes to the knowledge of the acceptor
    1. before acceptance.
    2. after acceptance.
    3. during acceptance.
    4. any of the above.
  44. Death of the offeree before acceptance terminates the offer.
    1. True
    2. Partly true
    3. False
    4. None of the above
  45. A applied for 1000 shares in a Company on 1st May. The company allotted shares on 1st November of that year. A refused the shares. Is A's action valid?
    1. Yes, shares cannot be allotted on the faith of letter written by A.
    2. Yes, shares cannot be allotted in the second half of a calendar year.
    3. Yes, offer lapsed as it was not accepted within a reasonable time.
    4. No, A has to accept and pay for the shares of revocation of offer have been.
  46. An offer can be accepted by
    1. a notice of acceptance.
    2. a performance of condition specified in the offer.
    3. an acceptance of consideration for a reciprocal promise.
    4. all of the above.
  47. The acceptance may be
    1. express.
    2. implied.
    3. neither (i) nor (ii).
    4. either (i) or (ii).
  48. The implied offers can be proved only by
    1. words.
    2. conduct.
    3. circumstantial evidence.
    4. prima facie evidence.
  49. The acceptance containing additions, limitations or other modifications shall amount to
    1. rejection of the offer.
    2. a counter offer.
    3. a valid acceptance.
    4. both (i) and (ii).
  50. The specific offer can be accepted by
    1. any person.
    2. any friend of the offerer.
    3. only the person to whom it is made.
    4. any friend of the offeree.
  51. The general offer can be accepted by
    1. sending a communication of acceptance.
    2. mental acceptance of offer.
    3. complying with the conditions of offer.
    4. making a counter offer.
  52. In cases of the general offer, for a valid contract, the acceptor
    1. must have the knowledge of the offer.
    2. need not have the knowledge of the offer.
    3. may acquire the knowledge of the offer after the performance of the condition amounting to acceptance.
    4. should not accept at all.
  53. The acceptance can precede an offer.
    1. True
    2. Partly true
    3. False
    4. None of the above
  54. The acceptance is valid
    1. When the offeree adds his conditions with acceptance.
    2. When the offeree accepts all the conditions of the offer.
    3. When it is not against the interest of any person.
    4. When the acceptance is caused by coercion.
  55. The acceptance to the offer may be given by
    1. any person.
    2. competent person.
    3. authorized person.
    4. both by (ii) and (iii).
  56. In order to convert a proposal into a promise, the acceptance must be
    1. absolute.
    2. unqualified.
    3. express.
    4. all of the above.
  57. The acceptance to the offer may be given by
    1. adding conditions.
    2. accepting conditions of the offer.
    3. accepting consideration sent by the offer.
    4. both (ii) and (iii).
  58. Which of the following constitute an invalid acceptance?
    1. Mental acceptance without communicating to proposer.
    2. Failure to respond to the proposer.
    3. Silence on the part of the offeree.
    4. All of the above.
  59. An offer was sent by post. The acceptor wrote ‘accepted’ on the letter, put it in his drawer and forgot about it. The transaction is
    1. a valid contract.
    2. not an agreement as the acceptance was never communicated to the Proposer.
    3. a voidable contract.
    4. a void contract.
  60. A sends a letter of acceptance to an offer made by B. Letter is still in the transit of post. The party bound by the acceptance is
    1. A
    2. B
    3. both A and B
    4. none
  61. When no mode is prescribed by the offerer for the acceptance of his offer, such acceptance shall be made
    1. By telephone.
    2. As desired by the offeree.
    3. In some usual and reasonable manner.
    4. None of the above.
  62. The acceptance is not according to the mode prescribed but the offerer decides to keep quiet. In such a case there is
    1. a contract.
    2. no contract.
    3. a voidable contract.
    4. an unenforceable contract.
  63. The communication of the acceptance is complete as against the proposer
    1. only when it comes to the knowledge of the proposer.
    2. only when the acceptance is communicated to the proposer.
    3. only when it is put in the course of transmission to him so as to be out of power of the acceptor.
    4. none of the above.
  64. The communication of the acceptance is complete as against the acceptor, only
    1. when it is put in the course of transmission.
    2. when it comes to the knowledge of the proposer.
    3. when it is communicated to the acceptor that the acceptance has reached the proposer.
    4. all of the above.
  65. Where a letter of the acceptance sent by post is lost in transit there is
    1. no contract as the acceptance has not come to the knowledge of the offerer.
    2. is no contract as the acceptance has not been communicated to the offerer.
    3. a contract as the letter of acceptance is put in the course of transmission.
    4. all of the above.
  66. Which of the following is incorrect?
    1. A valid contract results from identical cross offers.
    2. Communication of the offer is complete when the letter of offer is posted though it has not reached the person to who the offer is made.
    3. An offer and invitation to offer are the same.
    4. All of the above.
  67. Even if the letter is lost in transit, the acceptance is still valid provided that the acceptor has
    1. properly addressed it.
    2. affixed correct value of postage stamps.
    3. either (i) and (ii).
    4. both (i) and (ii).
  68. In case of special conditions in a contract, it should be communicated to the offeree
    1. at any time.
    2. before entering into contract or at the time of making the offer
    3. after a contract is made.
    4. both (i) and (ii).
  69. Conditions on the reverse of a train ticket, air ticket, bill issued by service providers are examples of
    1. normal business policy.
    2. space saving measure.
    3. special conditions.
    4. general rules of Contract Law.
  70. Where the acceptance is given on telephone or fax, the place of the contract is
    1. the place from where the telephone call is booked.
    2. the place where the acceptance is heard or received.
    3. the place from where the offer was made.
    4. the place where the offeror resides.
  71. The acceptance on telephone should be
    1. heard by the offerer.
    2. audible to the offerer.
    3. understood by the offerer.
    4. all of the above.
  72. Where a contract is made by post, the place of the contract is
    1. the place from where the offer is made.
    2. the place where the offer is received.
    3. the place where letter of acceptance is posted.
    4. the place where offeror resides.
  73. If the acceptance on phone is drowned by noise and is not heard by the proposer
    1. a valid contract is concluded.
    2. there is a voidable contract.
    3. the contract is void.
    4. no contract is concluded.
  74. When two persons agree to enter into an agreement in the future, there is .............. between them.
    1. a valid contract
    2. no contract
    3. an agreement
    4. a consensus
  75. The person making the offer is known as the ‘offeror’ or the ‘promisor’ and to whom it is made is known as
    1. acceptor.
    2. acceptor for honour.
    3. offeree or promisee.
    4. contracting party.
  76. The mode of revocation of a proposal other than by communication is/are
    1. verbal notice.
    2. lapse of time.
    3. death or insanity of the offeror.
    4. both (ii) and (iii) above.
  77. Which of the following statements is incorrect?
    1. An offer may be made to the world at large.
    2. An offer may be positive or negative.
    3. An offer may be expressed or implied.
    4. An offer must be made to a specific person.
  78. The general offer made to the public at large is valid and a binding contract is made with person who having the knowledge of the offer
    1. comes forward and acts accordingly.
    2. acts accordingly and his act is ratified by the offeror.
    3. seeks the offeror's permission to accept the offer.
    4. informs the public that he is willing to accept the offer.
  79. On the acceptance of the offer by the offeree, which of the following persons becomes legally bound by the contract?
    1. Only the acceptor, as he has accepted the offer.
    2. Only the offeror, as his terms are accepted.
    3. Both the acceptor and the offeror.
    4. None of the above.
  80. Which of the following is the legal rule of the valid acceptance?
    1. An acceptance must be given within prescribed or reasonable time.
    2. An acceptance must be given before the lapse of an offer.
    3. An acceptance may be expressed or implied.
    4. All of the above.
  81. Which of the following statements is incorrect?
    1. Death of the proposer automatically revokes the proposal.
    2. Cross offers constitute valid agreement.
    3. The acceptor cannot revoke his acceptance even if the letter of acceptance sent by him to the offeror is lost in the transit.
    4. All of the above.
  82. Which of the following is not the mode of the lapse of an offer?
    1. lapse of time.
    2. case against the offeror.
    3. insanity of the offeror.
    4. failure to accept condition precedent.
  83. The acceptance of an offer, in ignorance of the fact of death or insanity of the offeror, is
    1. valid acceptance.
    2. not valid.
    3. illegal acceptance.
    4. fraudulent acceptance.
  84. Which of the following is correct?
    1. the acceptance can be made even without the knowledge of the offer.
    2. the agreement with intention to create legal liability is not enforceable in law.
    3. if the offeree does not accept the offer according to the mode prescribed by the offeror, the offer does not lapse automatically.
    4. communication of the offer is complete when the letter of the offer is posted.
  85. A proposes, by letter, to sell a house to B for 10,000. The communication of the proposal is complete
    1. when B receives the letter.
    2. when A dispatches the letter.
    3. when A signs the letter.
    4. when B knows about the letter.
  86. B accepts A's proposal by a letter sent by post. The communication of the acceptance is complete as against A
    1. when A receives the letter of acceptance.
    2. when B acknowledges it.
    3. when it comes to the knowledge of A.
    4. when the letter is posted.
  87. Which of the following is correct?
    1. The acceptance is to the offer what a lighted match to a train of gun powder.
    2. Two identical cross offers are two independent and separate offers.
    3. The counter offer is the conditional acceptance.
    4. All of the above statements.
  88. A revokes his proposal to B by telegram. The revocation is complete as against A
    1. when the telegram is dispatched.
    2. when B receives the telegram.
    3. when B confirms.
    4. when A receives confirmation from B.
  89. A revokes his proposal by telegram to B. It is complete as against B
    1. when the telegram is dispatched by A.
    2. when B confirms it.
    3. when B receives it.
    4. when A dispatches the telegram.
  90. B revokes his acceptance by telegram. B's revocation is complete as against B
    1. when the telegram is dispatched.
    2. when the porposer receives the telegram.
    3. when the proposer confirms.
    4. when B receives the confirmation.
  91. B revokes his acceptance to A by a telegram. B's revocation is complete as against A
    1. when B dispatches the telegram.
    2. when it reaches him.
    3. when B confirms it.
    4. when A notifies it to B.
  92. Which of the following statements is correct?
    1. The valid contract cannot result from identical cross offers.
    2. The proposal when accepted becomes a promise.
    3. The rejected offer cannot be accepted.
    4. All of the above.
  93. Which of the following is correct?
    1. The offer may be made to a particular individual.
    2. The offer may be made to the public of the whole world at large.
    3. The offer may be made to a section of the public at large.
    4. All of the above.
  94. Which of the following is correct?
    1. The acceptance must precede an offer.
    2. The acceptance may be given in any manner unless the offeror insists acceptance in the prescribed manner.
    3. Silence always amounts to acceptance.
    4. The acceptance may be valid even if the offeree adds certain conditions.
  95. Which of the following is incorrect?
    1. The rejected offer cannot be accepted.
    2. Cross offers cannot be constructed as an agreement.
    3. Counter offer constitutes the valid acceptance.
    4. All of the above.
ANSWERS—MULTIPLE CHOICE QUESTIONS
1 (ii) 2 (iii) 3 (iii) 4 (iii) 5 (ii)
6 (iii) 7 (iv) 8 (i) 9 (i) 10 (i)
11 (i) 12 (ii) 13 (ii) 14 (iii) 15 (iii)
16 (i) 17 (i) 18 (ii) 19 (i) 20 (iii)
21 (iv) 22 (iv) 23 (i) 24 (ii) 25 (iv)
26 (iii) 27 (i) 28 (ii) 29 (ii) 30 (iv)
31 (iii) 32 (iv) 33 (ii) 34 (ii) 35 (i)
36 (i) 37 (i) 38 (i) 39 (iv) 40 (iv)
41 (iii) 42 (iii) 43 (i) 44 (i) 45 (iii)
46 (iv) 47 (iv) 48 (ii) 49 (iv) 50 (iii)
51 (iii) 52 (i) 53 (iii) 54 (ii) 55 (iv)
56 (iv) 57 (iv) 58 (i) 59 (ii) 60 (ii)
61 (iii) 62 (i) 63 (iii) 64 (ii) 65 (iii)
66 (iv) 67 (iv) 68 (ii) 69 (iii) 70 (ii)
71 (iv) 72 (iii) 73 (iv) 74 (ii) 75 (iii)
76 (iv) 77 (iv) 78 (i) 79 (iii) 80 (iv)
81 (iv) 82 (ii) 83 (i) 84 (iii) 85 (i)
86 (iv) 87 (iv) 88 (i) 89 (iii) 90 (i)
91 (ii) 92 (iv) 93 (iv) 94 (ii) 95 (iii)