Legal Environment of

Business

Chapter 2 Offer and Acceptance

by
Barrister Shahrina R. Juhi
Barrister-at-Law, Honourable Society of Lincoln’s Inn, UK
PGDL, Northumbria University, UK
MBA, Bangladesh University of Professionals
LL.B, University of London, UK
Diploma in Law, University of London, UK
OBJECTIVES
AFTER STUDYING THIS CHAPTER,
YOU SHOULD BE ABLE TO LEARN:

1. Definition of offer
2. Rules regarding valid offer
LEARNING

3. Lapse and revocation of offer

4. Definition of acceptance
5. Rules regarding valid acceptance
6. Communication of an offer
7. Communication of an acceptance
8. Communication of revocation
1–2
 Proposal Or Offer
sec 2(a) Contract Act 1872
The essentials of a ‘proposal or offer’ –

(i) It must be an expression of the willingness

to do or to abstain from doing something
(ii) The expression of willingness to do or to
abstain from doing something must be to
another person.
(iii) The expression of willingness to do or to
abstain from doing something must be
made with a view to obtaining the assent
of the other person to such act or
abstinence.
 Rules Regarding a Valid Offer

1. An offer may be ‘express’ or ‘implied’.

2. An offer must contemplate to give rise
to legal consequences and be capable
of creating legal relations.
3. The terms of the offer must be certain
and not loose or vague.
4. An invitation to offer is not an offer.
5. An offer may be ‘specific’ or ‘general’.
6. An offer must be communicated to the
offeree.
 Rules Regarding a Valid Offer,
Contd.,
7. An offer should not contain a term the
non-compliance of which would
amount to acceptance.
8. An offer can be made subject to any
terms and conditions.
 An offer may be ‘express’ or
‘implied’
Example 1 Express Offer
X writes to Y that he offers to sell his house to hi
m for tk. 80,000. There is an express offer.

Example 2 Implied Offer

The Citi Bus Company runs buses on different r
outes to carry passengers at the scheduled fa
res. This is an implied offer by the Citi Bus.
 An offer must contemplate to give
rise to legal consequences and be
capable of creating legal relations

Example
An offer to a friend to dine at the offe
ror’s place, or an offer to one’s wife t
o show her a movie is not a valid offer
and as such cannot rise to binding ag
reement.
 The terms of the offer must be
certain and not loose or vague

Example
X purchased a horse from Y and promi
sed to buy another, if the first one pr
oves lucky. X refused to buy the seco
nd one. Y could not enforce the agree
ment, as it is loose and vague. (Taylor
vs. Portington)
 ITT
• It can also be viewed as an invitation
to negotiate but is not, itself, an offer
as there is no immediate intention to
be legally bound.
• Some examples of an invitation to
treat include advertisements, the
display of goods in shops, and
auctions.
ITT vs Offer
Quotations, catalogues of prices or displ
ay of goods with prices marked thereon
do not constitute an offer.(Case: Grai
nger & Son vs Gough)
An invitation to treat is not
an offer
Example
•Goods displayed in a shop window is
ITT- Fisher v Bell
•Mere statement of a price is ITT-
Harvey v Facey (what is the lowest price
you can sell the Bumper Hall pen?)
Fisher v Bell (1961)
•Under the ordinary law of contract,
the court determined, that the
display of an article with a price on it
in a shop window is an invitation to
treat and therefore not an offer for
sale.
CASE SUMMARY
•Claimant: Fisher (a police officer)
•Defendant: Bell (Shop owner)
Facts: A flick knife was exhibited in a shop
window with a price tag attached to it, the court
had to determine whether this amounted to an
invitation to treat or an offer for sale. If the
presentation in the window was an offer for sale,
the defendants had committed an offence under
the Restriction of Offensive Weapons Act 1959
which prohibited the offering of flick knives for
sale. The police sought a prosecution for the
offence, but the court used the law of contract to
determine the display as an invitation to treat
and therefore not an offer for sale. The police
officer (Fisher) sought an appeal.
• Outcome: Not liable
• Legal principle: It is perfectly
clear that according to the
ordinary law of contract the display
of an article with a price on it in a
shop window is merely an
invitation to treat
 Harvey vs Facey
• Telegram said “Will you sell us Bumper Hall Pen? Telegraph lowest cash
price.” Replying to the question Mr. Facey said “Lowest price for Bumper
Hall Pen £900.” Furthermore, Mr. Harvey Replied “We agree to buy
Bumper Hall Pen for the sum of nine hundred pounds asked by you. Please
send us your title deed in order that we may get early possession.”
• The first conversation is only a request for information, not an offer that could be
accepted. Therefore, the telegram sent by Mr. Facey was not credible. It was
concluded that the telegram sent by Mr. Facey is only a piece of information. At no
point in time, Mr. Facey made an offer that could be accepted.
 Proposal Or Offer, Contd.,

A mere statement of intention is not an

offer.

For Example,
“I may sell my motorcycle if I can get tk.
14,000 for it”. This is a mere intention to
offer.
But if M says to N, “Will you buy my
motorcycle for tk. 14,000”? It is a proposal
or offer.
 An offer may be specific or
general
Example 1
M makes an offer to N to sell his bicycle f
or tk. 500, there is an specific offer and
N alone can accept it.
A general offer is one which is made to
the world at large or public in general
and may be accepted by any person.
Carlill v Carbolic Smoke
Ball Co (1892)
 An offer may be specific or
general
Example 2
Carbolic Smoke Ball Company issued an adver
tisement in which the company offered to pay
$100 to any person who contracts influenza, af
ter having used their Smoke Balls three tim
es daily for two weeks. Mrs Carlill, on the faith
of the advertisement, bought and used the B
alls according to the directions, but she never
theless subsequently suffered from influenza.
She sued the company for the promised rewar
d. The company was held liable.
 An offer must be
communicated to the offeree
Example
G sent his servant L in search of his mis
sing nephew. Subsequently G announc
ed a reward for information concerning
the boy. L brought back the missing boy
and claimed the reward, without having
known of the reward. Held, there was n
o contract between L and G and the re
ward cannot be claimed.(Case: Lalman
Shukla vs Gauri Dutt)
 No burden to inform decision about the
offer
Example
An offeror cannot say that if acceptance
is not communicated up to a certain dat
e, the offer would be presumed to have
been accepted. If the offeree does not r
eply, there is no contract, because no o
bligation to reply can be imposed on hi
m, on the ground of justice.
An offer can be conditional

An offer can contain conditions the non-

compliance of which would cause
automatic revocation of the offer.
Lapse and Revocation of Offer
1. An offer lapses after stipulated or
reasonable time.
2. An offer lapses by not being
accepted in the mode prescribed, or
if no mode is prescribed, in some
usual and reasonable manner.
3. An offer lapses by rejection.
4. An offer lapses by the death or
insanity of the offeror or the offeree
before acceptance.
5. An offer lapses by notice of
revocation.
6. Revocation can be by non-
fulfillment of a condition precedent
to acceptance.
7. An offer lapses by subsequent
illegality or destruction of subject
matter.
 After the expiry of
reasonable time
Example 1

An offer made on 8th June cannot be

accepted on 23rd November (Ramsgate
Victoria Hotel Co. vs Montefiore). If there
is no mention of reasonable time for
acceptance, then it will be determined
based on individual facts and
circumstances of the case.
An offer lapses by rejection

An offer lapses if it is rejected by the o

fferee.
The rejection may be express or implie
d.
Implied rejection is one:
(a) where either the offeree makes a c
ounter offer or
(b) where the offeree gives a conditio
nal acceptance.
An offer lapses by rejection ,

Contd.,
Example

A offered to sell his house to B for tk.

50,000. B said that he accepted the
offer if he was appointed as General
Manager of A’s factory. B’s acceptance
is a ‘conditional acceptance’ which
amounts to rejection of A’s offer and
there is no contract.
“An offer may be conditional but
acceptance must always be
An offer lapses by death or
insanity
Example

An offer lapses by the death or insanit

y of the proposer, if the fact of his de
ath or insanity comes to the knowled
ge of the acceptor. (Ronalds vs Athert
on).
An offer lapses by revocation
Example

A proposal is sent by X to Y and is

accepted by Y by letter. The proposal
might have been revoked any time
before the letter of acceptance was
posted but it cannot be revoked after
the letter is posted.
Promise to keep an offer open for
a certain time
• An offeror is entitled to revoke his offer at any
time until it has been accepted. An offeror's
promise to keep his offer open is not legally
binding because it is unsupported by
consideration. If the offeree provided even a
nominal consideration (eg. £1) to keep the offer
open then the offeror cannot not revoke. It is
essential that revocation be communicated to the
offeree. Routledge v Grant 1828
Revocation by non- fulfillmen
t of a precedent to acceptan
ce
Example

A offers to sell his scooter to B, for tk.

4,000, if B joins the Lions Club within
a week. The offer stands revoked and
cannot be accepted by B, if B fails to
join the Lions Club.
An offer lapses by subseque
nt illegality or destruction of
subject matter
Example

An offer is made to sell 10 bags of

wheat for tk. 6,500, and before it is
accepted, a law prohibiting the sale of
wheat by private individuals is
enacted, the offer comes to an end.
 The Acceptance

Section 2(b) of the Contract Act 1872

defines ‘acceptance as “when the
person to whom the proposal is made
signifies his assent thereto, the
proposal is said to be accepted.”

Thus ‘acceptance’ is the manifestation

by the offeree of his assent to the
terms of the offer.
• According to sec 7 of the Contract Act, the
acceptor shall communicate his acceptance
to the offeror. As per sec 8, a proposal may
be accepted in 3 ways which are:
1. By communication of acceptance
2. By reciprocal acceptance of consideration
3. By performing the conditions of the
proposal.
• There can be no tacit acceptance of an offer
that is, a mere mental acceptance not
evidenced by words or conduct is in the eye
of law no acceptance.
 Acceptance of proposal by
performance
• Sec 8- Performance of the conditions of a proposal
or acceptance of any consideration which may be
offered with a proposal is an acceptance of the
proposal. If a man proposes to give a reward to the
person who will bring back his missing dog, the
person who recovers that dog will be deemed to
have accepted that offer (Carlil v Carbolic smoke
ball Co.)- in this case the defendant raised the plea
that the plaintiff did not communicate his
acceptance.
• The plaintiff performed the condition of the
proposal and that amounted, according to
the court, to acceptance. (Important for
General and Tacit/implied offers). Where
there are many offerees, the first informer is
considered to have accepted the proposal
(missing dog) or while stocks last
(discounted goods, or any rewards, etc. )
Legal Rules Regarding a Valid
Acceptance

1. Acceptance must be given only by the

person to whom the offer is made.
2. Acceptance must be absolute and
unqualified.
3. Acceptance must be expressed in some
usual and reasonable manner, unless
the proposal prescribes the manner in
which it is to be accepted.
Legal Rules Regarding a Valid
Acceptance

4. Acceptance must be communicated

by the acceptor.
5. Acceptance must be given within a
reasonable time and before the
offer lapses and/or is revoked.
6. Acceptance must succeed the offer.
7. Rejected offers can be accepted
only, if renewed.
Acceptance must be absolute
and unqualified

Example
M offered land to N at tk. 5,000. N accept
ed by enclosing, tk. 4,000, and promising
to pay the balance by monthly installme
nts of tk. 1,000. Held, there was no contr
act, as there was no unqualified accepta
nce. (Neale vs Merrett).
Acceptance must be expressed
in the prescribed method by
the offeror
Example
If the offeror prescribes ‘acceptance by te
legram’ and the offeree sends acceptanc
e through a messenger, there is no acce
ptance of the offer.
Mental acceptance is not an
acceptance

Example
A person received an offer by letter. In re
ply he wrote a letter of acceptance, put
the letter in his drawer and forgot all abo
ut it. Held, this uncommunicated accepta
nce did not amount to acceptance and so
did not complete the contract. (Brogde
n vs Metropolitan Rly Co.)
 Acceptance must be
communicated by the offeree

Example
P was a candidate for the post of head m
aster in a school. The managing committ
ee of the school selected him. One of the
members informed it to P. But before pre
paring letter, his appointment was cance
lled by the committee. P filed a suit agai
nst the committee. Held, there was no co
ntract. (Powell vs Lee)
 Acceptance must be given
within a reasonable time before

Example
the offer lapses

M applied for certain shares in a company

in June but the allotment was made in
November and he refused to accept the
allotted shares, it was held that the
offeror (M) could refuse to take shares as
the offer stood withdrawn and could not
be accepted because the reasonable time
period during which the offer could be
accepted had elapsed.
Acceptance must succeed the
offer
Example
Acceptance must be given after
receiving the offer.
It should not precede the offer.
Rejected offers can be accepted
only, if renewed

Example
Offer once rejected cannot be
accepted again unless a fresh offer
is made (Hyde vs Wrench).
 Communication of an
offer

The communication of an offer is

complete when it comes to the
knowledge of the person to whom it
is made.
i.e., when the letter containing the
offer reaches the offeree.
Communication of an offer,
Contd.,
Example

A proposes, by letter, to sell a house

to B for tk. 80,000. The letter is
posted on 6th instant. The letter
reaches B on 8th instant. The
communication of the offer is
complete when B, the offeree,
receives the letter i.e., 8th.
 Communication of an
acceptance
The communication of an acceptance is
complete –

(a) as against the offeror, when it is put

in a course of transmission to him, so
as to be out of power of the acceptor,
and
(b) as against the acceptor, when it
comes to the knowledge of the
proposer, i.e., when the letter of
acceptance is received by the offeror.
 Communication of an
acceptance
Example

Ben accepts Adam’s offer by letter

sent by post 9th instant. The letter
reaches A on 11th instant. The
communication of the acceptance is
complete:
as against Adam, when the letter is
posted, i.e., 9th, and
as against Ben, when the letter is
received by A, i,e., on 11th.
Effect of delay or loss of letter
of acceptance in postal transit
So far as the offeror is concerned, he is
bound by the acceptance the moment
the letter of acceptance is posted,
although the letter is delayed or wholly
lost through an accident of the post and
the letter never in fact reaches him.
So far as the acceptor is concerned, he
is not bound by the letter of acceptance
till it reaches the offeror.
 Proving That Acceptance Was
Posted
• If the letter of acceptance is lost and never reaches the
offeror, the onus is on the offeree to prove that they did, in
fact, post the letter. Some common ways of proving this
include:
1. Receipt or Proof of Postage: The offeree can retain a
postal receipt or tracking number issued by the postal
service. This is considered reliable evidence that the letter
was posted.
•Witness Testimony: If someone else was present when the
letter was posted, that person could serve as a witness to
confirm the event.
•Affidavit or Declaration: The offeree can provide a sworn
affidavit stating that they posted the acceptance on a
particular date.

According to Section 4 of the Contract Act, the communication of

acceptance is complete as against the offeror when the letter of acceptance
is posted, even if the offeror does not actually receive it. This rule has
historical significance and aims to ensure fairness in the process of
contract formation.
Contracts over the Telephone
- Each party is able hear the voice of the
other. There is instantaneous communication
of offer and acceptance, rejection and counter
offer.

- The contract is complete only when the

acceptance is received by the offeror also
applies to contracts made over the telephone.

- If the acceptance is not in fact

communicated to the offeror because the
telephone suddenly goes ‘dead’, there will be
no contract.

- No question of revocation arises in such

 Any Question?

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