At the inception of every agreement, there must a definite offer by one person to another and its unqualified acceptance by the person to whom the offer is made. As per section 2(a) of Indian Contract Act, 1872 “when a person signifies his willingness to do or abstain from anything with a view to obtaining the assent of other to such act or abstinence” is called an offer. In this definition we must note that there are two important points:
There must be an expression of willingness
Expression of willingness must be made with an intention to take the assent of the other party to the contract.
In law, ‘intention’ is very important as it distinguishes an act from a normal event.
On the other hand, declaration of intention is just an expression of one’s views, ideas and concepts. It is never made with an intention to take the assent of the other party. As was given in the case of Executive Engineer, Sundergarh v. Mohan Prasad Sahu [A.I.R. (1990) ORI.26] where a declaration or announcement of an auction sale was made which was eventually cancelled. It was held that declaration of intention or announcement does not amount to offer. The underlying intention behind an advertisement is always to invite offers. They do not generally are made with an intention to get the parties legally bound as offer generally follows some kind of negotiations. For example, a father wrote to his would be son in law that he will give him half of his property after his death. This doesn’t amount to offer as the intention was never to take the assent of the other party.
If we observed the case V. Rao v. A.Rao, a widow promised to settle some immovable property on her niece if the niece stayed with her in her residence. The niece stayed with her in her residence till her death. Held, it was a contract. The difference in this case was that it is clear from the language of the case that there was an intention to get any kind of assent. Though, it was a kind of implied acceptance. But there was an intention on the part of the widow to get the assent of the niece. What strengthened the case in favor of niece was the flow of consideration.
If any one makes an advertisement, it cannot be construed as an offer. The major exception of this is an GENERAL OFFER. GENERAL OFFER IS DIFFERENT FROM MERE EXPRESSION OF WILLINGNESS.
The most important case of a general offer was CARLILL V. CARBOLIC SMOKE BALLS LIMITED; in that case, one Mrs Carl ill used smoke balls as per the instructions given. She contracted influenza. The company advertised that a reward of â‚¤100 would be given to any person who contracted influenza by using smokes balls as per the company directions. Held she would get the reward.
If one says that” HE WANTS TO SELL HIS HORSE FOR RS 750”. And a person goes to him for buying that horse. The advertiser has no obligation to sell the horse. As he just signified his willingness.
As such a person displaying selected goods in a showroom is under no obligation to sell goods at that rate. As it is just an expression of willingness. It is an invitation to offer. A contract will come into existence when the seller and buyer agree.
As was given in the case of PHARMACEUTICAL SOCIETY OF GREAT BRITAN V. BOOT CASH CHEMIST. WHRE GOODS ARE SOLD UNDER SELF SERVICE METHOD THE CONTRACT COMES INTO EXISTENCE WHEN THE CASIER ACCEPTS THE OFFER. IT DOES NOT COME INTO EXISTENCE WHEN CUSTOMER PICKS THE ITEMS.
An important example of expression of willingness is share issue of company. A company never offers shares. They invite offers. People submit money as ‘application’. Company is under no obligation to provide shares to all the applicants. Because it never makes an offer.
TENDER on the other hand is an offer. Tender submitted is in response to an advertisement (invitation to offer), companies invites tenders. The people interested, submit the tenders. So they make an offer in response to an advertisement.
A STATEMENT OF PRICE IS NOT AN OFFER. THIS WAS OBSERVED IN THE CASE OFHARVEY V. FACEY. If any person gives a statement of price to any other person it does not amount to an offer.
[CA Final, LLB (3RD YR)]