Formation of a contract

1. UNIT – I
FORMATION OF
CONTRACT
DEPARTMENT OF MANAGEMENT STUDIES
1/28/2023
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Dr. G. MAHESWARAN/AP
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2. Offer
 An offer is a proposal by one party to another to
enter into a legally binding agreement with him.
OR
 Proposal is made when he “signifies to another
his willingness to do or to abstain from doing any
thing, with a view to obtaining the assent of that
other to such act or abstinence.”
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3. Essentials of offer
 It must be an expression of the willingness to do
or to abstain from doing something.
 It must be made to another person.
 It should be done with a objective to obtain the
assent of the other person.
 The objective of offer should be legal one.
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4. Types of Offer
 Express Offer – by words spoken or written.
 Implied Offer – from the conduct of parties.
 Specific Offer – can be accepted only by person
to whom it is made.
 General Offer – to the world at large.
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5. Invitation to offer
 Display of goods by a shopkeeper in his
window, with prices marked on them, is not
an offer but merely an invitation to the
public to make an offer to buy the goods at
the marked the prices.
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6. When does an offer come to an end?
 Revocation.
 Lapse of time.
 Non- fulfillment of a condition.
 By death or insanity.
 If counter-offer is made.
 Not accepted according to prescribed mode.
 If the law is changed.
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7.  An offer lapses after stipulated or
reasonable time.
 An offer lapses by not being accepted in the
mode prescribed.
 An offer lapses by rejection.
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Lapses and revocation of offer
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8. Contd…
 An offer lapses by the death or the insanity
of the offeror or the offeree before
acceptance.
 An offer lapses by revocation before
acceptance.
 An offer lapses by subsequent illegality or
destruction of subject matter.
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9. Example
 A proposes by a letter sent by post to sell his
Laptop to B. The letter is posted on the 1st of
March. B accept the proposal by a letter sent by
post on the 4th of March. The letter reaches A on
6th of March.
 A may revoke his offer at any time before B post
his letter of acceptance i.e. on 4th of March but
not afterwards.
 B may revoke his acceptance at any time before
the letter of acceptance reaches A. i.e. on 6th of
Marchbut not afterwards. 28 January 2023
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10. Case
 Abhishek and Bharat were talking one day after
college. Abhishek would turn 16 on the upcoming
June and wanted to buy Bharat’s car. Bharat, 21,
had been working and saving his money to buy a
new car. Selling old car for Rs. 2,80,000 would
give him enough to do so. He offered to Abhishek
for that amount, and he accepted.
 Is it a legally enforceable contract by applicability
of Indian Jurisdiction ?
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11. Difference between Offer and Invitation to offer
Offer Invitation to offer
A proposal by a person in which he
makes his willingness to enter into a
legally binding contract for some
consideration.
An Invitation to offer means an
intention of a person to invite others
with a view to enter into an agreement.
An offer is made with the object of
getting consent of the offeree.
An invitation to offer on the other hand
is made with.
An offer can be accepted by the
offeree.
An invitation to offer cannot be
accepted by the person to whom it is
made.
An offer when accepted becomes an
agreement.
An invitation to offer cannot be
accepted at all.
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12. Acceptence
 According to Section 2(b) states that a proposal
when the person to whom the proposal is made
signifies his assent thereto the proposal is said to
be accepted.
OR
 Is the act of assenting by the offeree to an offer.
It is the manifestation by the offeree of his
willingness to be bound by the terms of the
offer.
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13. Legal rules regarding acceptance
 Acceptance must be given only by the person to
whom the offer is made.
 Acceptance must be absolute and unqualified.
 It should be communicated by the acceptor.
 It should be given within reasonable time or time
stipulated.
 Acceptance must succeed the offer.
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14. WHAT IS REQUIRED OF AN ACCEPTANCE?
 Acceptance must be communicated to the
offerer.
 Silence cannot be an acceptance of an offer.
 bilateral acceptance –
Most offers are these (bilateral contracts)
Contains two promises.
Can be accepted by giving a promise.
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15. Cont.
 unilateral acceptance –
Indicate acceptance by offeree by
performing a certain act.
Unilateral Contracts.
Example promise to pay reward to anyone
who returns a lost camera. When camera
returned is acceptance of offer.
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16. Who can Accept?
 When an offer is made to a particular person, it
can be accepted by that person alone.
 If it is accepted by any other person, there is no
valid acceptance.
 If the offer is made to the world at large, any
person to whom it is made can accept it.
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17. Rules of Acceptance
 Communication of acceptance.
 Acceptance must be absolute and unqualified.
 Mental acceptance is not sufficient(Silnece).
 Acceptance of a proposal with the terms and
conditions mentioned and implied.
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18. Cont.
 Need not be expressed in words always.
 Ignorance of a proposal, is no acceptance.
 Acceptance must be given within a reasonable
time.
 Acceptance must be given before lapse or
revocation or withdrawal.
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19. Case: Harbhajan lal vs. harcharan lal
 In this case a young boy had run away from
his father’s house. the father issued a
pamphlet stating ,anybody who finds trace
the boy and bring him home will get Rs 500.
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20. Contd…
 Harbajan Lal who knew of the reward, found the
boy at a Railway station Dharamshala ,and took
to the police station. It was held that the handbill
was a general offer and therefore he was
entitled to the reward.
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21. 28 January 2023
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