9/3/2018 Study Material-1: (1) OFFER AND ACCEPTANCE

(Paper-5) Business Law

Study Material-1

1 Contents
1.2 (1) OFFER AND ACCEPTANCE
OFFER AND ACCEPTANCE
  

Offer or Proposal
Essential Elements of a Valid Contract discussed in detail
Section 2(a) defines an offer as, “a proposal made by one person to another to do an act or abstain from
doing it.” The person who makes the offer is known as the promisor or offer or and the person to whom
an offer is made is known as the promisee or the offeree.
An offer may require a unilateral act or an acts by two or more parties. Thus if X gifts Y his horse, it is
an offer of unilateral acts as Y has to do nothing or pay nothing to X in return of the gifts of X. But in
case of offers of bilateral acts or requiring actions by two or more persons, then the offeree is supposed
to act or respond in a specified manner. Now suppose X offers to sell his horse for Rs. 1000 to Y then
here Y also is expected to pay Rs. 1000 to X. It is only the second type of offers about which we are
concerend in the Indian Contract Act. Thus an offer can be analysed into two parts comprising of :-
(a) a promise by the offeror, and
(b) a request to the offeree for something in return of the offer.
When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be
accepted. A proposal, when accepted, becomes a promise.

Determination of an Offer (Test of an offer)

Every proposal made by an offeror is not legally regarded as an offer. Three tests are applied to
determine whether or not an offer has actually been made:
1. Does the offer show a clear intenton on the part of the offeror to be bound by it.
2. Whether the proposal is definite?
3. Whether the offer is communicated to the offeror?

Offer must be distinguished from

(i)        Mere invitation to an offer. Offer should be distinguised from a mere invitation to an offer.
Catalogue of goods, an advertisement inviting tenders or application for a job, a prospectus of a
company; an auctioneer’s request for bids or display of goods in showcase with prices marked upon
them etc., are mere invitations to offers and not actual offers. A statement of the lowest price at which
a landowner is prepared to sell has been held not to be an offer thus, when an owner of property says
he will not accept less than Rs. 5,000 he does not make an offer, but merely invites offer. Similarly, a
term in a partnership deed that any of the parties wishing to sell his share will sell to the others at the
market value is not an offer but an undertaking to make an offer. Thus, in such cases the person who
responds to an invitation to an offer, makes the actual offer. The party issuing an invitation for the
offers has a right to accept or not to accept the offers received. As such in a case where brokers in
Bombay wrote to merchants in Delhi stating their terms of business and the merchants afterwards
placed orders with the brokers; no contract was made until the orders given by the brokers were
accepted by the merchants. A bank’s letter with quotation as to particulars of interest on deposits, in
answer to an enquiry, is not an offer but only a quotation of business terms.

Example: A shopkeeper displays goods for sale in a shop with price tags attached to each article. This
is only an invitation to an offer. The shopkeeper cannot be compelled to sell the goods at the price
mentioned.

(ii)        Mere statement of Intention: A declaration by a person that he has the intentions to do
something does not amount to an offer. The person making the declaration will not be liable to the
person who has suffered some loss because of relaince on the delcared intention.
Seller cannot be held liable for any loss caused to a prospective buyer by not adhering to the
advertisement for sale of goods by auction at a particular time and place because the advertisement
was a mere statement of intention (Hari V. Naickersor (1873). Similarly, the announcement made on
loudspeakers do not result into any binding offers.

Examples : T said in conversation to W that he would give Rs. 1000 to anyone, who married his
daughter with his consent. W married T’s daughter with his consent. Therefater, T refused to pay Rs.
1000/- We filed a case against T for the alleged promise. It was held that words used by T were mere
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 statement
9/3/2018 of intentioin and do not constitute an offer, therefore, W(1)could
Study Material-1: OFFER not succeed in his claim
AND ACCEPTANCE

(Weeks V. Tybald 1605).

(b) A father wrote to his would be son-in-law that his daughter would have a share in all the assets that
he would leave. It was merely a statement of intention and, therefore, neither the daughter nor the
son-in-law can hold the promisor liable for anything if he does not leave any assets. (Farina V. Fickus)
(1900).
Essentials of a Valid Offer

1.        The offer must disclose an intention to create legal relations: If the offer does not
contemplate to give rise to legal relationship, it is no offer in the eyes of law, e.g. invitation to a dinner
which has no intention to create relationship. An offer must impose some legal duty on the party making
it.
2.    The terms of offer must be clear and certain and not indefinite, lose or ambiguous: The
terms of the offer must be definite, unambiguous, clear and certain and not lose and vague. The offer
must not be based on a condition which is uncertain or incapable of performance. Though the proposer
is free to lay down any terms and conditions in his offer, but they should be certain and legal, otherwise
its acceptance will amount to a vague agreement which the courts will not enforce. But, where an
agreement contains its own machinery for clarifying vague term, the agreement will not be vague in
Law. (Foley V. Classque Coaches Ltd.) (1934). In some circumstances, the courts might imply a term
based upon the presumed, intention to the parties.

Examples:-(a) A says to B “I will sell you my clar:. A owns four different cars. The offers is not valid
because it is not definite.
(b) A made a contact with B and promised that if he was satisfied with him as a customer he would
favourably consider his application for the renewal of the contract. The promise is too vague to create
any legal relationship.
3.    Offer may be general or specific: An offer may be made to definite person or persons or to the
world at large. When it is made to some specific person or persons it is called a specific offer. When it is
made to the world at large it is called a General offer. A specific offer can be accepted only by the
person to whom the offer has been made and in the manner, if any specified in the terms of the offer.
But a general offer can be accepted by any persons having notice of the offer by doing what is required
under the offer. The most obvious example of such an offer is where a reward is publicity offered to any
about that object, who will recover a lost object or wll give some information, there the party claiming
the reward has not to prove anything more than that he has performed the conditions on which the
reward was offered. The time table of railways is a general proposal to run trains according to the
table, which is accepted by an intending passenger tendering the price of the ticket.

Carlill V. Carbolic Smoke Ball Co. (1983). In this case, the Company advertised that a reward of £
100 would be given to any person who contracted influenza after having used the smoke-balls of the
Company as directed. Mrs. Carlill used the smoke-balls according to the directions of the company. but
contracted influenza. It was held, that the offer was a general one, and Mrs. Carlill had accepted it by
acting in accordance with the advertisement, and therefore, the company could not get away from its
responsibility by saying that they had not meant it seriously. She was entitled to the reward.
In India, the principle was applied in the case of Har Bhajan. Lal V, Han Charan Lal. In this case offer of
reward was made to any one tracing a lost boy and bringing him home. Harbhajan Lal who knew of the
reward. found out the boy and took him to the Police Station. It was held that he was entitled to the
reward.
4.      Offer may be express or implied: An offer made by words, spoken or written is termed as an
‘express offer’.
Example: If A says to B that he is willing to sell him his car for a sum of Rs. 10,000 it is an express
offer.
‘Imlied offer’ means an offer made by conduct, an offer may also be implied from the conduct of the
parties or the circumstances of the case. This is known as an implied offer. When one person allows the
other to perform certain acts under such circumstances that nobody would accept them without
consideration it will amount to an offer by conduct and the permission of the party, who is benefitted
by such performances, will amount to his acceptance.
Example : A bus company runs a bus on a particular route. This is an implied offer by the bus company
to take any person on the route who is prepared to pay the prescribed fare. The acceptance of the offer
is complete as soon as a passenger gets into the bus.

5.    Offer must be communicated: The offer, to be valid must be communicated to the offeree. An
offer becomes effective only when it has been communicated to the offeree so as to give him an
opportunity to accept or reject. An acceptance of the offer, in ignorance of the offer, is no acceptance
and, therefore, no valid contract can arise.

6.    Statement of Price: If a party makes a statement of price, it cannot be taken as an offer to sell at
that price. The decision made in case of Harvey and Facey, is important to note in this connection.

Example : A asks B, “Will you sell us Bumper Hall Pen? Telegraph lowest cash price-answer paid”. B
replies telegraphically “lowest price for Bumper Hall Pen £ 900”.
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 A responds
9/3/2018 by telegram “We agree to buy Bumper Ball Pen Study
for Material-1:
the sum(1)of £ 900
OFFER AND asked by you”. It was
ACCEPTANCE

held that no contract was concluded between A&B.

Leading case: Lalman Shukla V. Gauri Dut (1913):
In this case, G’s nephew has absconded. He sent his munim L in search of the missing boy. In his
absence, G issued hand bills oferring a reward of Rs, 501/- to anyone who might find out the boy L
found out the boy before seeing the hand bills. Later on, he came to know of the reward and sued G for
the reward. Here he could not claim the reward as he did not know about the offer.

6.    Offer nust be made with a view to obtain the consent: The offer must be made with a view to
obtain the consent of the other party and not merely with a view to disclosing the intention of making
an offer. A proposer cannot also dictate terms under which the offer can be refused. At best, he can lay
down the mode of acceptance.

7.    Offer should not contain a term the non-compliance of which would amount to
acceptance: The offer should not contain a term the non-compliance of which would amount to
acceptance for example a person cannot make such an offer that if the acceptance of the offer is not
received upto Monday, the offer would be presumed to have been accepted.

8.    Special conditions attached to an offer must also be communicated: Though an offeror is

free to lay down any terms and conditions in his offer, but it is the responsibility of the offeror to bring
all the terms of the offer to the notice of the other party, the acceptor is bound only for those
conditions which (i) have expressly communicated to him or (ii) have so clearly been written that he
ought to have known them or (iii) have reaonsable notice of the existence of those terms. He will also
be bound by the conditions if he knew of their existence, though they are in a language unknown to
him. It is his duty to get them explained.

Examples : (a) A passenger had purchased a ticket for a journey. On the back of the ticket, there were
certain terms and conditions. One of the terms was that the carrying company was not liable for losses
of any kind. But there was nothing on the face of the ticket to draw the attention of the passenger to
the terms and conditions on the back of ticket. Held, the passenger was not bound by the terms and
conditions on the back side of the ticket. (Henderson V. Stevenson) (1875).
(b)   T, an illiterate, purchased a railway ticket on the front of which was printed “for conditionsseek
back”. One of the conditions was that the railway company would not be liable for personal injuries to
the passenger. An accident caused some injuries to T. Suit for damages brought by T was dismised as he
was bound by the conditions printed on the reverse of the ticket. (Thompson V. L. M. & S. Rly.) (1930).
Now it is the established law that wherever on the face of a ticket words to the effect “for conditions
see back” are printed, the passenger concerned is bound by the conditions, it is immaterial whether he
actually reads them or not. If conditioins are printed on the back of the ticket, but there is nothing on
the face of it to draw attention of the person to these conditions, he is not bound by the conditions.
Thus, it is to be noted that a person, who accepted without objection a document containing terms of
the offer, which he knows or ought to have known, will be bound by those terms even if he had not read
them. However, this rule will not be applicable if the conditions are so irrelevant for unreasonable that
an assent to them cannot reasonably be presumed. Similarly, where a condition to an offer is against
public policy, it will not be enforced merely because it has been accepted by the acceptor.
Example: A garment of B was lost due to the negligence of laundry owner. On the back of the laundry
receipt, it was mentioned that in the event of loss only 15% of the market price or value of the article
would be recovered by the customer. In a suit by R, it was held that the term being prima facie opposed
to public policy it could not be enforced even though there was tacit acceptance by the customer of the
terms (Lily White V. Munnuswami) 1966.
The acceptor would be bound by the terms and conditions only when all the following conditions are
satisfied:
1.    The acceptor knows about the writing or printing on the ticket.
2.      He also knew the writing or printing on the ticket contained conditions regarding terms of the
contract.
3.    The conditions must not be against public policy or the fundamental principles of contracts.
4.      The offeror had done all that was reasonably sufficient to give the acceptor notice of the
conditions. For example, if printing of the ticket is not clearly visible due to the smallness of the type it
could not be taken that the carrying company had made sufficient arrangement for the communication
of the conditions. (Richardson V. Rowntree) (1894).
5.      The notice of the conditions should be given before or at the time of the contract but not
afterwards. A sbusequent notice about the conditions will not bind the other party.

Example: A hotel put up a notcie in a bed room. “The proprietors will not hold themselves responsible
for articles lost or stolen unless handed to the manager for safe custody”. Held, the notice was not
effective as it came to the knowledge of the customer only after the contract had been made and the
customer had already paid the rent.
6.    Conditions must not be contained in a voucher or receipt for payment of money because they will
not bind the person receiving the voucher or receipt (chapleton V. Barry U.D.C.) 1940.

Tender
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 A person
9/3/2018 may invite tenders for the supply of specific goodsStudy
or Material-1:
services. (1) Thus, a tender,
OFFER AND in response to
ACCEPTANCE

an invitation, is an offer. A tender may be either:

(i)    A definite or single offer, or
(ii)  A standing or an open offer.

Tender as a definite offer : If a tender has been submitted for goods or services in specified
quantities it is termed as a definite offer, A binding contract comes into existence as soon as the tender
is accepted.
Example: A invites tenders for the supply of 100 tons of local X, Y and Z submit the tenders. A accepts
Y’s tender. There is binding contract between A and Y.

Tender as a standing offer. Standing offer or tender may be of the nature of a continuing offer.
Thus, a tender to supply goods as and when required over a certain period amounts to a standing offer.
Here, the tenderer must supply whenever an order is placed. But he cannot insist on any order being
made at all.
Example: (a) A tendered to supply goods upto a certain amount to B over a certain period. B’s order
did not come upto the amount expected and A sued for breach of contract. Held, each order made was
a separate contract and A was bound to execute the orders made. B was under no obligation to make
any order at all. (Percival Ltd. V.L.C.C.) (1918).
(b)    A railway company invited tenders for the supply of certain iron articles over a period of 12
months. W’s tender was accepted. After supplying for sometime, W refused to execute on order placed
during the currency of the tender. Held, W could not refuse within the terms of the tender.  (Great
Northern Railway V. Witam).

Cross Offers :
Identical offers made by two parties in ignorance of each other’s offer, are termed as cross offers. They
will not constitute acceptance of one’s offer by the other. (Tinn V. Hoffman) 1873.

Example: A, by a letter offers to sell his car to B for Rs. 10,000 B, by a letter which crosses A’s letter in
the post, offers to buy it for Rs. 10,000. The offers are cross- offers and no binding contract will arise.
Both A and b are ignorant of each other’s offer. There can be no automatic acceptance of each other’s
offer, rather a new acceptance from either of the two parties would be required.
Acceptance
A contract comes into being from the acceptance of an offer. When the person to whom the offer is
made signifies his assent thereto, the proposal is said to be accepted (Sec. 2(b). Thus, acceptance of
the offer must be absolute and unqualified. It cannot be conditional.
Who can give acceptance
When an offer is made to particular person or to a group of persons, it can be accepted only by that
person or member of the group. If it is accepted by any other persons, there is no valid acceptance.
Example: B sold his business to P without disclosing the fact to his customers. J, who had a running
account with B, placed an order with B for supply of certain goods. The new owner without disclosing
the fact of himself having purchased the business, executed the order. J refused to pay P for the goods
because he, by entering into contract with B intended to set off his debt against B. Held, the new owner
of could not recover the price. “The rule of law is that if you promise to make a contract with A, then B
cannot substitute himself for A without your consent and to your disadvantage, securing to himself all
the benefits of the contract”.
When an offer is made generally to the public at large, any person or persons who have the notice of
the offer, may come forward and accept the offer. By doing what is required to be done under the
offer, offer is said to be as accepted and there will be valid contract, (Carlill V. Carbolic Smoke Ball Co.
1893).
Essentials of a valid acceptance

1.    Acceptance must be absolute and unqualified: Section 7 of the Contract Act requires that the
acceptance must be absolute and unqualified. It must correspond with all the terms of the offer.
Conditional acceptance is no acceptance. If there is a variation in the terms of the acceptance, it is not
an acceptance, but a counter-offer, which the proposer may or may not accept. A counter-offer
destroys the original offer. Thereafter the offeree cannot rever to the original offer and purport to
accept it. (Erollope & Colls Ltd. V. Atomic Power Construction Ltd. (1963)

Example: A offers to sell his house for a sum of Rs. 20,000 B sends his acceptance to purchase it for a
sum of Rs. 19,000. There is no acceptance. It will be taken as a new offer from B, which may not be
accepted by A.

2.        Acceptance must be in the mode prescribed: A proposal must be accepted accroding to its
terms. If the proposal lays down a mode of acceptace, the acceptance must be according to the mode
prescribed. Therefore, if the proposer choses to require that the goods shall be delivered at a particular
place, he is not bound to accept delivery at any other place. It is not for the acceptor to say that some
other mode of acceptance which is not according to the terms of the proposal will do as well. If the
acceptance is not given in the made prescribed, the proposer may reject the acceptance and intimate
the offeree within a reasonable time. But if he does not inform the offeree, he is deemed to have
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9/3/2018 the acceptance. Study Material-1: (1) OFFER AND ACCEPTANCE

If the proposer has not prescribed any mode of acceptance, it must be given and communicated in some
usual and reasonable manner.
Example: An offer is made to take shares indicating that the acceptance is to come by a telegram. If
the acceptance is sent by ordinary post then it is not an acceptance according to the mode prescribed
and the offer will be deemed to be not accepted. The offeror need not inform the offeree that the
acceptance is not according to the mode prescribed.

3.    Acceptance must be communicated to the offeror: Acceptance must be communicated to the

offeror to create a binding contract. Mental acceptance is no acceptance in the eyes of law. But where
the offer is to be accepted by being acted upon, no communication to the offer will be necessary.

Example: The manager of a railway company received a draft agreement. The manager wrote the word
“approved” and put the draft in the drawer of his table. By some oversight the document remained in
the drawer and was never communicated. It was held that there was no contract as the acceptance had
not been communicated. (Brogden V. Metropolition Rly. Co.) (1877).
4.    Silence cannot be prescribed as mode of acceptance: The offer cannot frame his offer in such
a way as to make the silence or inaction of the offeree to operate as an acceptance. In other words, the
offeror can prescribe the mode of acceptance but not the mode of rejection.
Leading case: Felthouse V. Bindley (1863). F offered by letter to buy his nephew’s horse for £30
adding, “If I hear no more about it, I shall consider the horse as mine for £30. Nephew did not give any
reply, but he told an auctioneer who was selling his horses not to sell that particular horse becaue it
was sold to his uncle. By mistake auctioneer sold the horse. Held: F had no claim against the auctioneer
because the horse had not been sold to him and the horse did not belong to F. Silence cannot be
prescribed as a mode of acceptance because if that was so the offeree will be put to a great deal of
inconvenience because he shall have to unnecessary write in clear terms that he is not accepting the
offer.
5.    Acceptance must be given within the time stpulated or within a reasonable time if time is
not mentioned.Further, acceptance must be given beforre the offer lapses or before the withdrawn.
6.        There can be no acceptance before the communication of the offer. There can be no
acceptance of an uncommunicated offer. Acceptance cannot precede an offer. A person who has no
knowledge of an offer cannot be said to have accepted it merely because he happened to act just by
chance in the manner prescribed by the offer. (Lalman V. Gauri Dutt).
7.    Acceptor must in indicate intention to fulfil the promise. Acceptance, in order to be valid,
must be made under circumstances which would show that the acceptor is able and willing to fulfil the
promise. Acceptance must show an intention on the part of the acceptor to fulfil the promise. If no such
intention is present, the acceptances is not valid.

8.    If the proposal is made through an agent, it is sufficient if the acceptance is

communicated to him: If A sends the offer to B by an agent C, and B give his acceptance to C, the
acceptance is complete resulting into a valid contract. It is immaterial whether C communications the
acceptance of B to his principal A or not.

9.    Acceptance of the proposal will mean acceptance of all the terms of the offer. Acceptance
subject to contract, when an offer is accepted by an offeror “subject to contract” or subject to formal
contract” or “subject to contract to be approved by solicitors,” the matter is known to be at the
negotiation stage and the parties do not intend to be bound until a formal contract is made and signed
by them.
Agreement to agree in future. If the parties have failed to agree upon the terms of the contract but
have made an agreement to agree in future, there is no contract, example: An actress was engaged by a
theatrical company for a certain period. One of the terms of the agreement was that if the party was,
shown in London, she would be engaged at a salary to be mutually agreed upon. Held, there was no
contract. (Luftus V. Roberts, (1902) 18 T.L.R. 532).
Communication of offer: Acceptance and Revocation
An offer and its acceptance, to be valid must be communicated to the other party.

Communication of offer: (Se.4)

The communication of an offer is complete when it comes to the knowledge of the person to whom it is
made. When an offer is made by post, its communication will be complete when the offeree receives
the letter.
Example: 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.

Communcation of Acceptance (Sec.4)

The communication of an acceptance is complete:-
(i)    as against the proposer, when it is put in the course of transmission to him, so as to be out of the
power of the acceptor to withdraw, and
(ii)  as against the acceptor, when it comes to the knowledge of the offeror.
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 Example:
9/3/2018 B accepts A’s proposal by a letter sent by post. The
Study communication
Material-1: of the acceptance is
(1) OFFER AND ACCEPTANCE

complete as against A, when the letter is posted; as against B when the letter is received by A.

Communication of Revocation : (Sec.4)

The word ‘revocation’ means “taking back”. Both an offer as well as an acceptance may be revoked.
The communication of Revocation is complete:
(i)    as against the person who makes it, when it is put into the course of transmission to the person to
whom it is made, so as to be out of the power of the person who makes it;
(ii)  as against the person to whom it is made, when it comes to his knowledge.
Example: Thus in the above example:
A revokes hs proposal by telegram. The revocation is complete as against A, when the telegram is
despatched. It is complete as against B when B received it.
B revokes his acceptance by telegram. B’s revocation is complete as against B when the telegram is
despatched, and as against A when is reaches him.
The time during which an offer or acceptance may be revoked is dealt with in Sec.5 as follows:

Revocation of a proposal
According to Sec.5 “proposal may be revoked at any time before the communication of its acceptance is
complete as against the proposer, but not afterwards”.
Example: A proposes, by a letter sent by post, to sell his house to B.
B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the
moment when B posts his letter of acceptance, but not afterwards.
In an auction sale, a bidder may withdraw his bid at any time before the any time before or at the
moment when B posts his letter of acceptance, but not afterwards.
In an auction sale, a bidder may withdraw his bid at any time before the fall of the hammer
(acceptance).

Revocation of an Acceptance
An acceptance may be revoked at any time before the communication of the acceptance is complete as
against the acceptor but not afterwards.

Example: In the above example, B may revoke his acceptance at any time before or at the moment
when the letter communicating it (acceptance) reaches A but not afterwards.
In case, the letter of acceptance and the letter of revocation of acceptance reach simultaneously,
which of the two is opened first will decide the issue. When the letter of revocation reaches prior to the
letter of acceptance, the acceptance will be treated as revoked.
Modes of Revocation or lapse of offer 
Sec.6 deals with various modes of revocation of offer, these cases are as follows: 
1.        By communication of the notice of revocation: An   offer   may   be   revoked   by   the
communication of the notice of revocation. It may be revoked only before its acceptance is complete as
against the offeror. The acceptance is complete as against the offeror when the letter of acceptance is
put in transmission to him. Notice of revocation will take effect only when it comes to the knowledge of
the offeree.
2.    By lapse of specified time: If time is mentioned in the offer for its acceptance, it is revoked by
the lapse of time. If no time is mentioned then it lapses on the expiry of reasonable time.
Example: M applied for shares of a company in June. Allotment was made in November held, the offer
had lapsed, because period of five months was not a reasonable time. So M could not be treated as
shareholder of the company.

3.    By the failure of the acceptor to fulfil a condition precedent to the acceptance: An offer
lapses if the offeree fails to fulfil a condition precedent to the acceptance.

Example: A offers to sell his car to B for a sum of Rs. 10,000 provided B sends an advance of Rs. 500
with his acceptance. B accepts the offer but does not send the advance. The offer may be taken as
revoked.
4.    By the death or insanity of the proposer. The death of the proposer puts an end to the offer,
provided the fact of death or nstantly comes to the knowledge of the acceptor before acceptance. If
the proposer dies after the acceptance of the offer, the legal representatives of the proposer shall be
bound by the contract. The acceptance of an offer in ignorance of the death or insanity of the proposer
is valid. But according to English Contract Law, no notice of death is required to the offeree. An offer
shall automatically stand revoked in the case of death or insanity of the proposer.
No provision has been made in the Act for a case where the person to whom the proposal is made dies
before the acceptance for the obvious reason that the prop0sal can never be meant to be made to a
dead or his executors.

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 In addition
9/3/2018 to the above-mentioned cases dealt with in Sec.6
Studyfollowing
Material-1: (1)two more
OFFER cases should also be
AND ACCEPTANCE

added.
5.    A counter offer also amounts to a revocation of the original offer. 
6.    If an offer is not accepted according to the mode prescribed it will lapse provided the offeror gives
notice for the offeree that the acceptance is not according to the prescribed mode.
It is to be noted here that the rejection of a proposal by the person to whom it is made is wholly
distinct from revocation.

Contract through Post:

When the contracting parties make contracts through post, i.e. by letter or telegram, it is observed that
“The Post Office is the servant employed by the party making the offer to deliver the offer and receive
the acceptance.”
The rules of contract by post may be summarised as follows:-
(a)   An offer is made only when it reaches to the offeree and not before.
(b)   An acceptance is complete when the letter of acceptance is put in the course of transmission, so as
to be out of the control of acceptor. If the letter of acceptance is properly addressed, stamped and
posted, it is immaterial whether it reaches the offeror or not. Loss of letter in the post, late delivery or
miscarriage etc. will not affect the valdity of the contract. It was observed in Dunlop V. Higgins (1866)”.
If the party accepting the offer puts his letter into the post on the correct day, has he not done
everything that he was bound to do? How can be responsible for that over which he has no control?
(c)   An offer may be revoked before the letter containing the acceptance is posted and not therefater.
(d)   An acceptance may be revoked before, it reaches the offeror. But the acceptor will be bound by
his acceptance only when the letter of acceptance has reached the proposer.
In English law an acceptance cannot be revoked, once the letter of acceptance is properly posted, the
contract is concluded for both the parties.
Contracts over telephone :
Contracts over telephone or telex are treated on the same principles as those when the parties are
facing each other. In both cases offer is made and oral acceptance is expected.
The Supreme Court, in the case of Bhagwandas Goverdhandas Kedia V. Girdharilal Purshottam Dass &
Co. (1966) ruled by a majority judgement that post office rules of communication are not applicable to
contracts over telephone or telex. In case of such contracts, the contract will be complete only when
the acceptance has been communicated to the offeror and not when it is put in the transmission as in
the case of post.
In case a person makes an offer to another person and in the course of his reply the line goes dead, on
account of which the offeror does not hear the offeree’s word’s of acceptance there is no contract at
that time. If the whole conversation is repeated and the offeror hears the words of acceptance, the
contract is complete (Kanhaiyalal V. Dineshwar Chand’s (1959). Contract will come into existence at the
place where the acceptance has been recieved.
Ananson has beautifully compared an offer with a train of gunpowder and acceptance with a lighted
match in the following words”- Acceptance is to an offer what a lighted match is to a train of
gunpowder. It produces something which cannot be recalled or undone. But the powder may have laid
until it has become damp, or the men who has laid the train may remove it before the match is applied.
So an offer may lapse for want of acceptance or be revoked before acceptance. Acceptance converts
the offer into a promise and then it is too late to remove it.”
Just as when the lighted match is brought near the gunpowder, it explodes. Similarly an offer when
accepted becomes a contract and will give rise to legal obligations. Further, explosion can be prevented
if the gunpowder becomes damp or is removed before the lighted match is brought near it. Similarly, no
contract arises if the offer has already lapsed on account of no acceptance, or acceptance not being
given within a reasonable or fixed time or it has been withdrawn by the offeror before its acceptance. 

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