By Chartered Accountant
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 accepts it.
OFFER
Definition :
Section 2(a) defines a proposal as, " When one person 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, he is said to make a proposal. '
It means that when a person shows his willingness to do or not to do something to obtain the consent of other person, he is said to make a proposal.
The person making the offer is called the offeror or promisor. The person accepting the offer is called the promisee or acceptor. The word offer in English Law is similar to the word proposal in Pakistani law but the word offer is used in our practical life.
EXAMPLES :
a. A offer to sell his watch to B for Rs. 100. A makes an offer to B.
b. A promises to sell his car to B for Rs. 3.lac. A makes an offer to B.
Essentials Of A Valid Offer :
The following are the legal rules or essentials of a valid offer.
1. It May Be Express Or Implied :
An offer may be made by words or by conduct. An offer which is made by words spoken or written is called an express offer. The implied offer appears from the actions, conduct of parties, course of dealings or circumstances of the case.
EXAMPLES :
a. M says to N that he will sell his motorcycle to him for Rs 40,000. It is an express offer.
b. A railway coolie carries the luggage of B without asking to do so. B allows him to do so. It is an implied offer.
c. A transport bus company runs buses to carry passengers at scheduled fares. This is an implied offer by the company.
2. It Must Create Legal Relations :
The offer must be made to create legal relations otherwise there will be no agreement. If an offer does not give rise to legal obligations between the parties, it is not a valid offer. In business transactions there is a presumption that the parties intend to create legal relations.
EXAMPLES :
a. A invites B to dinner and B accepts the invitation. It does not create legal relations, so there is no agreement.
b. A offers to sell his watch to B for Rs. 200 and B agrees. There is an agreement because the parties intend to create legal relations.
c. Three friends agreed to enter a newspaper competition and share any winnings. It was held that they intended to create legal relations so there was a contract. (Simpkins vs. Pays)
3. It Must Be Definite And Clear :
An offer must be definite and clear. If the terms of an offer are not definite and clear, it cannot be called a valid offer. If such offer is accepted, it cannot be called a valid offer. If such offer is accepted, it cannot create a binding contract. An agreement to agree in future is not a contract because the terms of an agreement are not clear.
EXAMPLES :
A has two motorcycles. He offers B to sell one motorcycle for Rs. 27,000. It is not a valid offer because it is not clear which motor cycle A want to sell.
X purchased a horse from Y and promised to buy another, if the first one proved lucky. X refused to buy the second horse. Y could not enforce the agreement, as it is unclear. (Taylor vs. Portington)
4. It Is Different From Invitation To Offer :
An offer is different from an invitation to offer. In an invitation to offer, the person making the invitation does not make an offer but only invites the other party to make an offer. His object is to inform that he is willing to deal with anybody who is willing to deal with him.
EXAMPLES :
a. X displays goods for sale for an auction sale. It is not an offer. The offer will come from the buyer in the form of bid.
b. N advertised to sell his furniture at Bury on specified day. H came from London to attend the auction but all furniture was withdrawn from sale. H sued N for loss of time and expenses. H could not recover expenses because the advertisement was an invitation to offer. (Haris vs. Nickerson)
Definition :
Section 2(a) defines a proposal as, " When one person 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, he is said to make a proposal. '
It means that when a person shows his willingness to do or not to do something to obtain the consent of other person, he is said to make a proposal.
The person making the offer is called the offeror or promisor. The person accepting the offer is called the promisee or acceptor. The word offer in English Law is similar to the word proposal in Pakistani law but the word offer is used in our practical life.
EXAMPLES :
a. A offer to sell his watch to B for Rs. 100. A makes an offer to B.
b. A promises to sell his car to B for Rs. 3.lac. A makes an offer to B.
Essentials Of A Valid Offer :
The following are the legal rules or essentials of a valid offer.
1. It May Be Express Or Implied :
An offer may be made by words or by conduct. An offer which is made by words spoken or written is called an express offer. The implied offer appears from the actions, conduct of parties, course of dealings or circumstances of the case.
EXAMPLES :
a. M says to N that he will sell his motorcycle to him for Rs 40,000. It is an express offer.
b. A railway coolie carries the luggage of B without asking to do so. B allows him to do so. It is an implied offer.
c. A transport bus company runs buses to carry passengers at scheduled fares. This is an implied offer by the company.
2. It Must Create Legal Relations :
The offer must be made to create legal relations otherwise there will be no agreement. If an offer does not give rise to legal obligations between the parties, it is not a valid offer. In business transactions there is a presumption that the parties intend to create legal relations.
EXAMPLES :
a. A invites B to dinner and B accepts the invitation. It does not create legal relations, so there is no agreement.
b. A offers to sell his watch to B for Rs. 200 and B agrees. There is an agreement because the parties intend to create legal relations.
c. Three friends agreed to enter a newspaper competition and share any winnings. It was held that they intended to create legal relations so there was a contract. (Simpkins vs. Pays)
3. It Must Be Definite And Clear :
An offer must be definite and clear. If the terms of an offer are not definite and clear, it cannot be called a valid offer. If such offer is accepted, it cannot be called a valid offer. If such offer is accepted, it cannot create a binding contract. An agreement to agree in future is not a contract because the terms of an agreement are not clear.
EXAMPLES :
A has two motorcycles. He offers B to sell one motorcycle for Rs. 27,000. It is not a valid offer because it is not clear which motor cycle A want to sell.
X purchased a horse from Y and promised to buy another, if the first one proved lucky. X refused to buy the second horse. Y could not enforce the agreement, as it is unclear. (Taylor vs. Portington)
4. It Is Different From Invitation To Offer :
An offer is different from an invitation to offer. In an invitation to offer, the person making the invitation does not make an offer but only invites the other party to make an offer. His object is to inform that he is willing to deal with anybody who is willing to deal with him.
EXAMPLES :
a. X displays goods for sale for an auction sale. It is not an offer. The offer will come from the buyer in the form of bid.
b. N advertised to sell his furniture at Bury on specified day. H came from London to attend the auction but all furniture was withdrawn from sale. H sued N for loss of time and expenses. H could not recover expenses because the advertisement was an invitation to offer. (Haris vs. Nickerson)
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