Indian Contract Act, 1872

Essentials of Contract

Offer and Acceptance

Case Study 12 : A asks B, the shopkeeper, `what is price of apple?’ B says `130 Rs. per Kg.’

A says: Fine, give me 2 Kgs of apple. Is there any valid contract between A and B?

Case Analysis : No contract between A and B.

When B says Rs. 130 per Kg. It is invitation to make an offer. It is not an offer and therefore it
cannot be said as contract.

Case Study 13 : 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 Analysis : Person cannot file suit for any loss against auctioneer.

- Advertisement by auctioneer in newspaper is an invitation to make an offer. Hence, it does not

create any obligation or responsibility on part of auctioneer.

Case Study 14 : SBI Bank has communicated voluntary Retirement Scheme to all its
employees. One of manager has applied under it but bank has refused his application. Does
bank manager has any right against the bank? Why?

Case Analysis : Bank manager has no right against the bank.

Voluntary Retirement Scheme (VRS) is considered as an invitation to make an offer. When

employee apply under scheme, it is regarded as an offer to bank. As it is invitation to make an
offer, no contract is said to be made between the bank and the bank manager.

Case Study 15 : A and his wife book a room in a hotel, and paid rent in advance. When they
entered into the room, they found a notice exempting the proprietor of the hotel from the liability
for loss of theft or articles of clients, staying therein. Due to the negligence of the hotel staff,
their articles were stolen. A filed a suit on the proprietor for compensation of damages.

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Case Analysis : The court held the proprietor liable to pay compensation, since the terms of
proposal were communicated after acceptance. Hence, the terms were not a part of the contract
and A was not bound by them.

Case Study 16 : A says to B `I offer to sell my car to you for Rs. 2 lakhs’ and B accepts the
offer by saying clearly `I accept your offer’. Is it valid offer? If so, which kind of offer it is?

Case Analysis : Yes it is valid offer.

It is express offer as it is carried out by use of words. At the same time, it can be said as specific
offer because A has made offer to B, specific offer.

Case Study 17: A advertises in a paper that any person who found his lost certificate can get a
reward of Rs. 5000. Can advertisement be said as general offer? If any person who finds lost
certificate claim the reward money?

Case Analysis : Yes, advertisement is general offer.

General offer is made to public at large which can be accepted by any one.

Any person who found lost certificate can claim reward if he has knowledge about the offer.
Person cannot accept the offer without its knowledge.

Case Study 18: A offers B to sell his house for Rs. 15 lakh and directs him to send his
acceptance only by e-mail. B sends a letter of acceptance by post. Is there valid contract
between parties? What would be your opinion if A does not reject the acceptance made by e-
mail within reasonable time?

Case Analysis : No valid contract if A writes rejection notice to B within reasonable time.

Offer should be accepted as per method prescribed by offeror. If it is accepted by some other
method, offeror is required to write letter of rejection notice in writing to the offeree. If offeror
does not write rejection notice, he has deemed to accepted acceptance. Therefore, if A does not
write rejection letter, valid contract is made between them.

Case Study 19: 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 Analysis : A contract is concluded when tender of either B, C or D is accepted.

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Tender is an offer. While acceptance of tender will be regarded as acceptance of offer makes
contract.

Case Study 20: Amar Posts a letter of offer to Kamla on 1 January 2011 which is received by
Kamla on 5 January 2011. Kamla posts letter of acceptance to Amar on 12 January 2011 which
is received by Amar on 17 January 2011.

 When communication of an offer is completed?

 When Amar is bound by an acceptance?

 When Kamla is bound by an acceptance?

Case Analysis :

Communication of offer completed on 5 January. Communication of offer is said to be

completed when offer comes to the knowledge of an offeree.

Amar is bound by acceptance on 12 January. Acceptance is bound to offeror when the letter of
acceptance is posted by the offeree (i.e. 12 January).

Kamla is bound by acceptance on 17 January. Acceptance is bound to offeree when the letter of
acceptance is received by the offeror (i.e. 17 January).

Case Study 21: Further assume that Amar revokes his offer by posting a letter on 7 January
2011, which is received by Kamla on 13 January 2011.

 Is revocation of an offer by Amar is binding on Kamla?

 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 letter on 14 January
2011 which is received by Amar on 16 January 2011.

 Is revocation of letter of acceptance binding on Amar?

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

 Case Analysis : Revocation of offer by Amar is not binding on Kamla as it is received to

Kamla on 13 January.

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  Kamla has accepted the offer on 12 January. Once offer is accepted, it becomes
contract and there is no possibility to withdraw offer.

 But if revocation of the offer by Amar is received by Kamla on 11 January.

 Offer is considered as withdrawn. Letter of revocation of offer is received by

Kamla on 11 January before she has accepted offer. Kamla has accepted offer
on 12 January.

 Revocation of letter of acceptance is binding to Amar.

But if Kamla post her revocation of letter of acceptance after she gets bound by acceptance,
it is not binding to Amar.

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