Offer and acceptance of an offer.

 

PRELIMINARY

Offer/proposal and acceptance of offer/proposal are among basic elements through which a contract come to its existence. All contracts are born through these essential elements in formation of a binding legal obligation between parties who intends to enter into enforceable agreement . A contract starts with offer or proposal made by offeror to an offeree, acceptance of offer by a person to whom offer is made, and finally the offer become a promise/a contract. Acceptance of an offer by offeree creates legal obligation to offeror to perform agreed duty of a contract, failure to perform such obligation of a contract amounts to breach of a contract which may attract suit against offeror .

 Offer/proposal is defined under section 2(1)(a) of The Law of Contract Act  as “when  one  person  signifies  to  another  his  willingness  to  do  or to  abstain  from  doing  anything,  with  a  view  to  obtaining  the assent  of  that  other  to  such  act  or  abstinence,  he  is  said  to make  a  proposal”. The Indian Contract Act  provides the same concerning the meaning of a proposal. This meaning disclose that, any act of a person or entity which intends to invite another party to act on a particular matter or issue is said to be offer 

An offer can be made by (a) any act or (b) omission of the party proposing by which he intends to communicate such offer or which has the effect of communicating it to the other, see section 3 of The Law of Contract Act .  An offer can be made  by an act  in the following ways: (a) by words  (whether written or oral). The written offer can be made by letters, telegrams, telex messages, advertisements, etc. The oral offer can be made either in person or over telephone. (b) by conduct.  The offer may be made by positive acts or signs so that the person acting or making signs means to say or convey. However silence of a party can in no case amount to offer by conduct.

An offer can also be made by a party  by omission  (to do something). This includes such conduct or forbearance on one’s part that the other person takes it as his willingness or assent.

An offer or proposal can be specific or general. Specific offer is that which is made to a specific person or a group of people who are known to a proposer or not known but are expected to act upon offer. While general offer is an offer given to a general public and any one can act upon that offer, general offer is not selective since it invites general public to an offer. Specific offers are made mostly through private communication i.e (letter (s) directed to a person or specific group, mails, telegram etc), for general offer, the common means to communicate an offer is through public advertisements (on television, radios, social medias and banners etc). Modes to communicate offer may be used interchangeably depending the situation 

Carlili  v.  Carbolic Smoke Ball Co  is a good example of a general offer where a medicine company made a general offer to reward 100E to a person who will contract influenza after using a medicine, one contracted influenza and sued the company for damage .

An offer to be accepted must be valid, the essential elements to determine the validity of an offer is that, the offer must be given to attract acceptance, the offer must be made with the intention of creating legal relations, see Balfour  v. Balfour , the terms of offer must be definite, unambiguous and certain or capable of being made certain (Section 29), the terms of the offer must not be loose, vague or ambiguous. All terms attached to an offer must be in conformity to state laws, unlawful terms of an offer may nullifies acceptance.

Acceptance of an offer is defined under section 2(1)(b) of The Law of Contracts Act , acceptance is “when  the  person  to  whom  the  proposal  is  made  signifies  his assent  thereto,  the  proposal  is  said  to  be  accepted,  and  a proposal, when accepted,  becomes  a  promise”. Acceptance is when another party consent to act upon an offer as given by offeror, when an offer is accepted it become a promise.

Acceptance can be express or implied acceptance, express acceptance is when offeree assent offer through writing, or through word of mouth or by performance of certain acts which indicates acceptance of an offer by offeree. Acceptance through writing or through word of mouth is self explanatory acceptance, but, acceptance by performance require performance of an act needed to be performed.

Example: An advocate loses his office keys and he announces a reward of 10,000 Tsh/= to anyone who will find and hand him those keys, a person who will find advocate's keys need not to convey acceptance through writing or word of mouth, but to find keys and hand it over to him, acceptance here is by performing a required act.

Acceptance is implied when it is to be gathered from the surrounding circumstances or the conduct of the parties.Example: A  enters into a bus for going to his destination and takes a seat. From the very nature of the circumstance, the law will imply acceptance on the part of  A. here there is no need to explanatory acceptance.

One of the essentials of a valid acceptance is “Acceptance must be absolute and unqualified”, see section 7 of The Law of Contracts Act . Validity of acceptance depends on terms set by offeror, acceptance must be absolute and unqualified, all terms of an offer as stipulated by offeror must be accepted to say acceptance was valid. Any variation to the terms of offer by offeree brings mere counter offer and an original offeror may reject the counter offer without any legal problem.

Example: X offers to sell his car to  Y  for Tsh. 10,000,000.  Y  replies,  “I can pay Tah. 8,000,000 for it.” The offer of  X  is rejected by  Y  as the acceptance is not unqualified. However,  Y subsequently changes his mind and is prepared to pay Tsh. 10,000,000. This will also be treated as a counter offer and it is up to  X  whether to accept the same or not .

This rule is relevant to the scenario of this question and it constitute a part in advice which will be given herein below;

ADVICE TO ELIZABETH

There was no contractual obligation between Elizabeth and Maria. The offer made by Elizabeth to public was a hand bag with price of Rs. 25000. Maria rejected the price and suggested new price of Rs. 20,000 for a hand bag, Elizabeth (original offeror) rejected and made a new offer to Maria to sell her a hand bag for Rs. 22,000, Maria rejected this offer too and she left, later she realized the price was reasonable and she went back to the shop to purchase the same bag for Rs. 22,000 as offered for the second time, Elizabeth rejected.

Elizabeth is entitled a right to reject counter offer as provided under section 7 of The Law of Contracts Act , section 7 requires acceptance to be “absolute and unqualified”, any variation to original terms of the offer creates counter offer which may be rejected by an original offeror.

There was a contractual obligation between Elizabeth and Veronica. Here Elizabeth is bound to perform her obligation to sale the hand bag to Veronica since she made an offer and Veronica accepted the offer to its entirely (with all terms) still she refused to let her purchase a bag. In this situation, Elizabeth failed to perform her contractual duties and suit may be filed against her in case of damage or loss suffered by Veronica.

CONCLUSION

Failure to perform contractual obligation by offeror when offer is already accepted to its entirely by offeree may attract suit against offeror who failed to perform his duties as stated in an offer. Offers are to be made careful to avoid unreasonable damage or loss to offerees, in some cases, companies suffer serious loss for making uncertain terms in their offers (see carlili vs carbolic smoke ball as explained above.

REFERENCE

STATUTES

1. THE LAW OF CONTRACTS ACT, CAP 345 R:E 2002

2. THE INDIAN LAW OF CONTRACT 1872

CASE LAWS

1. Carlil v. Carbolic Smoke Ball EWCA Civ 1,,1 qb 256

2. Donoghue v. Stevenson [1932] A.C. 562, [1932] UKHL 100 

3. Credit Finance Corporation Ltd. vs Alli Mwakasanga [19591 E.A. 79

BOOKS

4. Luoga, F.D.A. Makinyika , Law of contracts, (form, contents and vitiating factor),University of Dar es salaam.

5. N.N.N Nditi, Law of contracts, The Open University of Tanzania, Learning material for Ll.b programme.