Page 18 - DMGT407Corporate and Business Laws

Unit 1: Laws of the Contract

7. The offer must be made with the intention of creating legal relationship. An offer of Notes
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.
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.
9. An offer must be distinguished from a mere invitation to offer.

Did u know? Irrevocable offers. Generally, a proposer specifies a period within which the
offeree must accept. Thus, if A makes an offer to B on 1st June, valid up to 6th June, but
revokes it on 5th 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”.

Counter-offer: When in place of accepting the terms of an offer as they are, the offeree
accepts the same subject to certain conditions or qualifications, he is said to make a counter
offer.
Example: An offer to sell rice was accepted by the offeree with an endorsement on the Sold
and Bought Notes that yellow and wet grain will not be accepted [Ali Shain v. Moothia
Chetti, 2 Bom L R 556]. Held, there was no contract.

1.5.3 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 insanity of the offeree before acceptance, (iii) An offer terminates when rejected by the
offeror, (iv) An offer terminates when revoked by the offeror before acceptance by the offeree,
(v) An offer terminates by not being accepted in the mode prescribed, or if no mode is prescribed,
in some usual and reasonable mode (or manner), (vi) A conditional offer terminates when the
condition is not accepted by the offeree, (vii) An offer terminates by counter-offer by the offeree.

1.5.4 Special Terms in a Contract

Many times, there are certain special terms, which form part of the offer, but they are not duly
brought to the notice of the offeree (i.e., consumer or a customer or a client), at the time the offer
is made. If these special terms are not brought to the customer’s notice, then there is no valid
offer. In case the offer is accepted, and the contract is formed, the customer is not bound by the
special terms. The terms may be brought to the customer’s notice either (i) By drawing his
attention to them specifically or (ii) By inferring that a man of ordinary prudence could find
them by exercising ordinary diligence.
However, if the special conditions forming part of an offer are contained in a document which
is delivered after the contract is complete, then the customer is not bound by them. Such a

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