Page 23 - DMGT102_MERCANTILE_LAWS_I

Unit 2: Offer and Acceptance

2. An offeree must have knowledge of the offer before he can accept it. The offer must be Notes
communicated to the other party. The communication of offer is complete only when it
comes to the knowledge of the offeree. If the offer is lost on the way in transit it is no offer.
This is true of specific as well as general offers.

3. An offer cannot contain a term the non-compliance of which may be assumed to amount
to acceptance. An offeror cannot say that if the offeree does not accept the offer within
two days the offer would be deemed to have been accepted. Such a burden cannot be
imposed on the offeree. It is for the offeree to accept the offer or not; and therefore, he may
communicate his acceptance accordingly.
4. If a person makes a statement without any intention of creating a binding obligation this
does not amount to an offer. It is only a mere declaration of intention to offer.

Example: An auctioneer, L, advertised that a sale of office furniture would take place at
a particular place on a stated day. H travelled down about 100 km. to attend the sale but found
the furniture was withdrawn from the sale. He claimed compensation from the auctioneer. Held,
that auctioneer was not liable.
5. Where two parties make identical offers to each other in ignorance of each other’s offer this
does not result in a contract. Such offers are known as cross offers and neither of the two
can be called an acceptance of the other.
6. The offer must be made with a view to obtain acceptance thereto.
7. The offer must be made with the intention of creating legal relationship. An offer of a
purely social or domestic nature is not a valid offer.
8. The offer must be communicated to the offeree before it can be accepted. This is true of both
specific and general offers.

9. If no time is fixed by the offeror within which the offer is to be accepted, the offer does

not remain open for an indefinite period. Where no time is specified, then the offer is to be

accepted within a reasonable time. Thus, if no time is specified then the offer lapses after

a reasonable time. What is a reasonable time is a question of fact and would depend upon
the circumstances of each case.
10. An offer must be distinguished from a mere invitation to offer.
Irrevocable offers. Generally, a proposer specifies a period within which the offeree must accept.

Thus, if A makes an offer to B on 1 June, valid upto 6 June, but revokes it on 5 June, before its
acceptance by B the revocation is effective, and the offeree has no remedy. However, the courts
will bind an offeror to his promise to hold an offer open in exchange for a consideration given
by the offeree. For instance, in the above case, if B had given some consideration to A to keep the

offer open, then A could not revoke the same before the specified time. Sometimes such contracts
are called “option contracts”.

Task Discuss Irrevocable offer by giving relevant example.

2.5 Revocation of Offer

There are many reasons due to which the offer lapses or is revoked such as: (i) An offer is revoked
by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge
of the acceptor before acceptance. Therefore, if the acceptance is made in ignorance of the death,
or insanity of the offeror, there would be a valid contract, (ii) An offer lapses by the death or

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