R7602160 General Offer Project PDF

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Summary

An agreement enforceable by law is a contract. Two most essential elements for a valid contract are offer and acceptance. An offer and acceptance must be definite and certain. If the offer or acceptance is not clear enough to conclude a contract, it is considered invalid. An offer and acceptance ...

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UNIVERSITY OF PETROLEUM & ENERGY STUDIES COLLEGE OF LEGAL STUDIES

B.B.A, LL.B. (HONS.) CORPORATE LAWS, SECTION B

SEMESTER I

ACADEMIC YEAR: 2016- 21

SESSION: JULY-DECEMBER, 2016

ASSIGNMENT FOR Law of Contract - I (LLBL101) Under the Supervision of: Dr. SUJATA BALI (TO BE FILLED BY THE STUDENT)

NAME:

POOJA BHARDWAJ

SAP NO:

500053585

ROLL NO:

R760216078 INTRODUCTION

An agreement enforceable by law is a contract. 1 Two most essential elements for a valid contract are offer and acceptance. An offer and acceptance must be definite and certain. If the offer or acceptance is not clear enough to conclude a contract, it is considered invalid. An offer and acceptance must be communicated to the other person in order to be valid. When one person signifies to another his willingness to do or to abstain from doing something with a view to obtaining the assent of other, such act or abstinence is said as proposal.2 A shopkeeper displays items on his window and mark prices on them. It is not an offer but merely an invitation to the public to make an offer to buy the goods at the marked prices. For example X sees an item marked price Rs. 50 in Y’s store. He offers Y Rs. 50 for the item. Y refuses to sell saying the item is not for sale. X cannot force Y to sell him the item at Rs.50.Marking of price of an item is considered as an invitation to offer and not an offer. The essentials of an offer are as follows:  The offeree must have the expression to do or to abstain from doing something willingly.  There should be an offeror and an offeree.  It should be done with an objective to obtain the assent of the other person.  The objective of offer should be legal, immoral and not against the public policy. When the person to whom the proposal is made signifies his assent thereto the proposal is said to be accepted.3 The essentials of acceptance are as follows:  Acceptance should be given only by the offeree. 1The Indian Contract Act, 1872 (9 of 1872), §. 2 2 Id. 3Id.

 Acceptance should be absolute and not uncertain.  It should be given within reasonable time.  Acceptance must precede the offer. An offer is an expression of a person showing his willingness to another person to do or not to do something, to obtain his consent on such expression. The acceptance of the offer by such person may result in a valid contract. An offer must be definite, certain and complete in all respects. It must be communicated to the party to whom it is made. The offer is legally binding on the parties. There are following types of offer:  General offer: It is a type of offer that is made to the world/public at large.  Specific offer: It is a type of offer that is made to a specific person.  Cross offer: The offeror and the offeree ignore the offer that was made earlier and create a new contract.  Counter offer: It is a type of offer in which the offeree does not accept the offer that was made earlier and accepts that previous offer with inserting some modifications into it.  Standing offer: It is a type of offer that is made to the public and remains open for only a specific period of time.

MEANING AND NATURE OF GENERAL OFFER

In the book of Avtar Singh, the author has explained that before 1605 it was not clear that if offer can be made to the whole world at large or it has to be made to a definite person. After 1605 it was considered that an offer must be made to a definite person only. The difficulty suggested was that if an offer of this kind addressed to several persons could be accepted, the offeror would find him bound in innumerable contracts. This was, however, soon overruled. “The modern position is that an offer may be made to the world at large. But the contract is not made with the entire world. Contract is made only with that person who comes forward and performs the condition of the proposal. An offer need not be made to a particular person. It can be made to a person, a class of people, or to the whole world (such as the offer of a giving a reward). An offer is a certain promise to be bound, provided the terms of the offer are accepted. This means that there must be acceptance of specifically what has been offered.” 4 For example, in an auction a painting is offered to the group of people sitting there but the contract is made with the person who pays the maximum amount of money for the painting.

“An offer need not be made to an ascertained person, but no contract can arise until it has been accepted by an ascertained person.” 5

The one which is made to a definite person or particular group of persons is known as specific offer. Specific offer can be accepted only by the person to whom it is made. The one which is not made to a definite person, but to the world at large is known as General Offer. 4 AVTAR SINGH, Contract and Specific Relief, (10th ed.) 5ANSON, Law of Contract, 40 (A.G. Guest ed., 23rd edition, 1971)

In the case of General Offer, there is no need for communicating acceptance to the offeror. General offer can be accepted by any person having notice of the offer by doing what is required under the offer. Merely fulfilling the conditions of the offer itself is treated as acceptance to create a contract. Though an offer may be made to the whole world, a contract can arise only by the acceptance of the offer.

ESSENTIALS OF OFFER

Offer may be general or specific: offers are mainly of two types; specific and general. Offer that is made specifically to one person is called specific offer while the offer that is made to a group of persons is called general offer. General offer is as powerful as specific offer.  A case on this occasion is Mrs. Carlill V. Carbolic Smoke Ball Company; the smoke ball company is a pharmaceutical company. Influenza was spreading rapidly which started from a rat bite. This fever is characterized by propagation from an individual to the other. The company invented smoke balls to cure influenza. The company made a general offer saying that those smoke balls can cure influenza very quickly and prior consumption of their capsules will terminate the attack by influenza. The company also said that if any person gets attacked by influenza even after the consumption, the company will pay 100 pounds to such person. Mrs. Carlill consumed the smoke balls as per the instructions but gets attacked by influenza again. The court held that general offer was valid and the company was under obligation to pay 100 pounds to Mrs. Carlill as it was mention in their advertisement for which they kept 1000 pounds in the bank to give surety to the people as it was a valid offer and if they wish to challenge the company, they can. Further, The Company was held under the obligation

to

pay

her

the

amount.6

Offer must be communicated: offer attains validity only after communication. All the offers that are not communicated are not valid. As explained in SCC online, in the precedent of Lalman Shukla v. Gauri Datt (1932) 11 ALJ 489, the defendant’s nephew absconded from home. When the servant had left, the defendant by handbills offered to pay Rs.501 to anybody discovering the boy. The servant came to know of this offer only when he had already traced the missing child. He, however, brought an action to recover the reward. But his action failed. 7

6 www.australiancontractlaw.com/cases/carlill.html 7Avtar Singh, Contract and Specific Relief 10 (10th ed.)

The plaintiff did not know the handbills when he found the boy. It was held that the plaintiff was not entitled to the reward. It has been held that contractual obligations do not arise if services are offered which in fact fulfil the terms of the offer, but are performed in ignorance of the fact that the offer exists.8

Invitation to offer: Price declaration, advertisement, prospectus etc. are not offers. These things are only invitations to make offer, but not offers. Catalogue is invitation to make offer not an offer. An Invitation to Offer is an act before an offer, in which one person persuades another person to make an offer to him, it is known as invitation to offer. When properly responded by the other party, an invitation to offer results in an offer. It is made to the general public with objective to accept offers and negotiate the conditions on which the contract is created. The invitation to offer is made to notify the public, the terms and conditions on which a person is interested in entering into a contract with the other party. Although the person who is notifying people with offers to the public is not an offeror as he is not making an offer instead he is thought- provoking people to offer him. The acceptance does not amount to a contract, but an offer. When the former party accepts the offer made by offeror or the customer it becomes a contract, which is binding on the parties. For example,  A restaurant’s Menu card shows the prices of food items.  Railway timetable showing the train timings and fares.  Recruitment advertisement inviting application.  Government Tender  A Company invites application from public to subscribe for its shares. The following are the major differences between offer and invitation to offer.

8Pollock & Mulla, The Indian Contract Act, 1872 51 (14th ed.)

1. An offer is the final willingness of the party to create legal relations. An invitation to offer is not the final willingness but the interest of the party to invite public to offer him. 2. An offer is defined in section 2 (a) of the Indian Contract Act, 1872. Conversely, an invitation to offer is not defined in the Indian Contract Act, 1872. 3. An offer is an essential element to make an agreement between the parties, but an invitation to offer is not an important element until it becomes an offer. 4. An offer becomes an agreement when accepted. On the other hand, an invitation to offer becomes an offer when the public responds to it. 5. The main objective of making an offer is to enter into the contract, whereas the main purpose of an invitation to offer is to negotiate the conditions on which the contract can be made.

Related case is Harvey v. Facey [1893] AC 552 Privy Council.9 Harvey sent a Telegram to Facey asking to sell the bumper hall pen and the lowest cash price. Facey replied by telegram the lowest price for Bumper Hall Pen as £900.Harvey then replied that he agrees to buy Bumper Hall Pen for the sum of nine hundred pounds asked by him. And asking for his title deed in order that he may get early possession. The Privy Council held that there was no contract done between the parties. Facey had not directly answered the first question as to whether they would sell and the lowest price stated was merely responding to a request for information not an offer. There was thus no evidence of an intention that the telegram sent by Facey was to be an offer. Offer may be expressed or implied: an offer which is expressed by conduct is known as implied and the offer which is expressed by words (written, oral, email, etc.) is known as expressed. General offer need not be expressed. It is mainly implied. As in the case of Mrs. Carlill v. Carbolic smoke ball co., Mrs. Carlill didn’t inform the company that she has accepted their offer instead she impliedly accepted it. Impliedly accepting an offer means fulfilling the terms and conditions of the offer as mentioned. 9 www.e-lawresources.co.uk/Harvey-v-Facey.php

LEGISLATIVE PROVISIONS AND PRECEDENTS

The major issues related to the project are: Identification of the existing legislations if they are sufficient for the society or not.  The elements and characteristics associated with this process. Philosophers, jurists are unanimous regarding the legislations of General Offer. It has not been explained differently by different jurists. The broad aim of this project was to investigate, through a combination of desk based analysis and empirical research to find the main points of friction and overlap between many countries for General Offer, with a view to achieving the following objectives:  Knowledge of the topic and its terminology, principles, skills and processes.  Improving research skills and processes. Philosophers, jurists are unanimous regarding the legislations of General Offer. It has not been explained differently by different jurists. This project will bring out the laws that are made for General Offer. The existing laws are sufficient for the society. Every law is derived from somewhere and that is known as source of law:  Custom  Precedent  Legislation The Indian Contract Act, 1872 do not defines general offer in any of the provisions. Laws related to General offer have been derived from the Precedents. The very important Precedents that define the laws of general offer are as follows:  Weeks v. Tybald (1605) NOY 11  Carlill v. Carbolic smoke ball co. (1893) 1 QB 256  Lalman Shukla v. Gauri Datt (1913) 11 ALJ 489

Weeks V. Tybald (1605) NOY 11 Plaintiff -weeks Defendant -Tybald Year- 1605 Facts: A father declared that he would give £100 to anyone who marries his daughter with his consent. The plaintiff married his daughter and claimed for the amount.10 Issues: If an offer of this kind addressed to several persons could be accepted, the offeror would find him bound in innumerable contracts. Held: “It is not reasonable that the defendant should be bound by such general words spoken to excite suitors”. It was suggested that an offer must be made to a definite person. The court held that “it is not averred nor declared to whom the words were spoken.” Later: This decision was soon overruled. The modern position is that an offer maybe made to the world at large. But contract is not made with the world at large. Contract is made only with the person who comes forward and performs the conditions of the proposal. 11 “An offer need not be made to an ascertained person, but no contract can arise until it has been accepted by an ascertained person.” 12

10 Avtar Singh, Contract and Specific Relief, (11th ed.) 11supra note no.10 12supra note no.4

Carlill V. Carbolic Smoke Ball Co. (1893) 1 QB 256 Plaintiff–Mrs. Carlill Defendant–Carbolic Smoke Ball Company Year- 1893 Court- Queen’s Bench

“Facts: The Carbolic Smoke Ball Co produced the 'Carbolic Smoke Ball' designed to prevent users contracting influenza or similar illnesses. The company's advertisement for the product read, in part: “100 pounds reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. 1,000 pounds is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter”. After seeing this advertisement Mrs Louisa Elizabeth Carlill bought one of the balls and used it as directed, three times a day, from November 20, 1891, to January 17, 1892, when she contracted influenza. She claimed the reward. The company refused to pay, even after receiving letters from her husband, who was a solicitor. The claim: Mrs Carlill sued, arguing that there was a contract between the parties, based on the company's advertisement and her reliance on it in purchasing and using the Smoke Ball. It was argued:  The advertisement was clearly an offer; it was designed to be read and acted upon and was not an empty boast

 The advertisement was made to the public and as soon as a person does the specified act there is a contract  Merely performing the act constitutes acceptance; further communication is not necessary: in particular, it 'never was intended that a person proposing to use the smoke ball should go to the office and obtain a repetition of the statements in the advertisement. ... Where an offer is made to the entire world, nothing can be imported beyond the fulfilment of the conditions. Notice before the event cannot be required; the advertisement is an offer made to any person who fulfils the condition ...'  The terms are not too vague and uncertain  It would not matter if Mrs Carlill had not bought the balls directly from the defendant, as an increased sale would constitute a benefit to the defendants even if via a middleman.  On the issue of the absence of a time limitation, it was noted that there were several possible constructions; it may be that 'a fortnight's use will make a person safe for a reasonable time.' The defence Carbolic Smoke Ball Co argued there was no binding contract. They argued that, while the words in the advertisement expressed an intention, they did not amount to a promise. They further argued:  the advertisement was too vague to constitute a contract (in particular, it is not time limited and it would not be possible to check whether the ball had been used or used correctly)  there was no consideration from the plaintiff - the terms of the alleged contract would enable someone who stole and used the balls to claim the reward

 to make a contract by performing a condition there needs to be either communication of intention to accept the offer or performance of some overt act; in particular, merely performing an act in private is not sufficient  if there was a contract it was a 'wagering' contract (void under statute at the time) At trial Justice Hawkins held that Mrs Carlill was entitled to recover the reward. Held: Lord Justice Lindley Promise or puff? Lord Justice Lindley observed that there was an express promise to pay £100 in certain events: 'Read the advertisement how you will, and twist it about as you will, here is a distinct promise expressed in language which is perfectly unmistakable £100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball." ' It was not a mere puff; this conclusion was based on the passage in the advertisement stating that £1,000 was deposited with the bank to show sincerity. This could have no other purpose than to negate any suggestion that this was a mere puff. Was it a binding promise? Is notification of acceptance required? Noted this advertisement was an offer to pay £100 to anyone who performed the stated conditions, 'and the performance of the conditions is the acceptance of the offer'. On the issue of whether notification of acceptance was required:

Unquestionably, as a general proposition, when an offer is made, it is necessary in order to make a binding contract, not only that it should be accepted, but that the acceptance should be notified. But cases such as this constitute an exception to this general proposition or, 'If not an exception, they are open to the observation that the notification of the acceptance need not precede the performance. This offer is a continuing offer. It was never revoked, and if notice of acceptance is required - which I doubt very much ... the person who makes the offer gets the notice of acceptance contemporaneously with his notice of the performance of the condition. If he gets notice of the acceptance before his offer is revoked, that in principle is all you want. I, however, think that the true view, in a case of this kind, is that the person who makes the offer shows by his language and from the nature of the transaction that he does not expect and does not require notice of the acceptance apart from notice of the performance.' Was the advertisement too vague? His Lordship observed that the language is vague and uncertain in some respects. However, in relation to 'time' for which someone who used the smoke ball would be 'protected', his Lordship noted that it was for the defendants to show what it means and he preferred the meaning that 'the reward is offered to any person who contracts the epidemic or other disease within a reasonable time after having used the smoke ball'. He considered that what constituted a ...