INTRODUCTION TO BUSINESS LAW

COURSE CODE: BUS 360

SECTION: 07

LECTURE 2: OFFER AND ACCEPTANCE

PRIMARY SOURCE: CHAPTER 2, COMMERCIAL LAW AND INDUSTRIAL LAW, 27TH EDITION BY
ARUN KUMAR SEN AND JITENDRA KUMAR MITRA

Course Instructor: Afnan Ashfaque

E-mail: afnan.ashfaque@iub.edu.bd
 Formation of Contract
2

Recap: All contracts are made by the process of a lawful offer by one
party and the lawful acceptance of the offer by the other party.

Example: X says to Y “Will you buy my house for 80 Lac Taka?”. This is
an offer. If Y says “Yes”, the offer is accepted and a contract is
formed.
It is both a specific offer and an express offer, which will be
discussed in later slides.

Terms to remember
Offeror: The person making the offer is called the offeror.
Offeree: The person to whom the offer is made is called the offeree.
 Specific and General Offers
3

When the offer is made to a specific person it is known as

a specific offer , but when it is not made to any
particular person but to the public at large it is known
as general offer.
Example 1 (General offer): an offer to give reward to
anybody who finds a lost dog is a general offer. This
general agreement will be deemed to be accepted by
anyone who actually finds the lost dog. The person, who
accepts this offer, generally by performing the condition
of the offer, can bind the person making the offer.
 Specific and General Offers cntd.
4

Example 2 (General offer): Carlill v Carbolic Smoke Ball Co

It is often the first legal case a student studies under the law
of contract. The case concerned a flu remedy called the
"carbolic smoke ball". The manufacturer advertised that
buyers who found it did not work would be awarded
£100. The company was found to have been bound by its
advertisement, which was construed as an offer which the
buyer, by using the smoke ball, accepted, creating a
contract. The essential elements of a contract were all
present, including offer and acceptance, consideration
and an intention to create legal relations.
 Specific and General Offers
5
Example 2 cntd.
The plaintiff (Mrs. Carlill ) relying on the advertisement
purchased a Smoke Ball, used it in accordance with the
directions of the defendants (Carbolic Smoke Ball Co),
but still caught influenza. She sued the defendants to
claim the reward of 100 pounds advertised by them. It
was held that this being a general offer addressed to
all the world had ripened into a contract with the
plaintiff by her act of performance of the required
conditions and thus accepting the offer. She was
therefore, entitled to claim the reward.
Example 3 (Specific offer): See example in slide 2.
 Rules regarding offer
6

1. An offer may be express or may be implied from the

circumstances:
- an express offer is stated in words or in writing
(see example in slide 2)
- The offer which could be understood by conduct of
parties is called an implied offer. For example,
when a bus company runs its bus on a particular
route, there is an implied offer by the bus company
to carry passengers to the specified destination at a
certain fair.
 Rules regarding offer cntd.
7

2. An offer may be made to a definite person, to some

definite class of persons, or to the public at large.
3. The offer must be capable of creating a legal
relationship. Example: An invitation to play cards does
not create a legal relationship.
4. The terms of an offer must be certain, definite,
unambiguous and not vague. Example: X says to Y “ I
will give you some money if you fix my car”. It is not an
offer which can be accepted because the amount of
money to be paid is not certain.
 Rules regarding offer cntd.
8

5. A mere statement of intention is not an offer: Price lists

and catalogues are merely statements of intention. They
are not regarded as offers but as invitation to others to
make offers.
For example, at a computer store a laptop has a price
tag attached to it which says the price of the laptop is
85,000 Taka. The price tag is considered to be the
expression of an intention to sell the laptop at 85,000
Taka. It is not an offer to the world at large which can
be accepted by anybody. The intending purchaser who
wished to buy the laptop is the proposer/offeror. The
shopkeeper may or may not accept the proposal.
 Rules regarding offer cntd.
9

6. An offer must be communicated to the offeree: A

person cannot accept the offer unless he knows
about the existence of the offer.
Example: P offers a reward to anyone who returns his
lost dog. Q finds the dog and brings it to P without
knowing about the offer. Therefore, Q is not entitled
to the reward.
7. An offer may be conditional: In such cases the
conditions must be clearly communicated.
 Rules regarding acceptance
10

1. It must be an absolute and unqualified acceptance

of all the terms of the offer.
2. Conditional acceptance: An acceptance with a
variation is no acceptance. It is simply a counter
proposal/offer. Which must be accepted by the
original offeror.
Example: X offered to sell his house to Y for 45 lac
taka. Y said “accepted for 40 lac taka”. This is not
an acceptance. It is a counter offer. Which X may
or may not accept.
 Rules regarding acceptance cntd.
11

3. Contracts subject to condition: There are cases where

rights and obligations may be dependent upon the
happening of a particular event.
4. The acceptance must be expressed in some usual or
reasonable manner, e.g. by word of mouth, telephone,
telegram, or by post.
5. Mental acceptance or uncommunicated assent does not
result in a contract.
6. Mode of acceptance: If the offeror prescribes a
particular mode of acceptance then the offeree must
follow it.
 Rules regarding acceptance cntd.
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7. Time of acceptance: If the offeror prescribes a time.

The offeree must accept it within that time.
8. When acceptance is complete:
A proposes, by letter, to sell a house to B at a certain
price, the communication of the proposal is complete
when B receives the letter.
B accepts the proposal by a letter sent by post. As against
A, the communication of acceptance is complete when B
posts the letter. As against B, the communication of
acceptance is complete when A receives the letter.
 Rules regarding acceptance cntd.
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9. Before offer: There cannot be acceptance before

the offer is given.
10. The acceptance must be made while the offer is in
force: before the offer is revoked.
 Revocation
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An offer comes to an end and is no longer open to

acceptance under the following circumstances.
1. By notice: If the offeror gives notice of revocation
to the other party the offer comes to an end. An
offer may be revoked anytime before acceptance
but not afterwards. Once an offer is accepted there
is a binding contract.
2. By lapse of time: when the offeror prescribes a
time within which the offer must be accepted, the
proposal lapses as soon as the time expires.
 Revocation cntd.
15

3. After expiry of the reasonable time: when no time has

been prescribed, the proposal lapses after the expiry
of a reasonable time. “What is reasonable time’
depends on the circumstances of the case.
Note: See example on page 30 of textbook.
4. By failure of condition as precedent: An offer lapses by
the failure of the acceptor to fulfill a condition
precedent to acceptance.
Example: A says to B “I will sell my house to you for 50
Lac taka if you are married”. The offer cannot be
accepted until or unless B is married.
 Revocation cntd.
16

5. By death or insanity of the offeror, if the fact of his

death or insanity comes to the knowledge of the
acceptor of the acceptance.
6. Counter offer: when a counter offer is given, the
original offer lapses.
7. By refusal: A proposal once refused is dead.
Example: A offers to sell his firm to B for 50,000 taka. B
replies offering to pay 30,000 taka. A refuses. Then B
writes to A accepting the original offer. There is no
contract because original offer has lapsed.
17

Note: The students are strictly advised to follow the

assigned text book for details. Examples borrowed
from external sources have been used for a better
understanding of the material. It is mandatory for
the students to read and understand all the given
examples.