ESSENTIAL OF A VALID CONTRACT

Essential of a valid offer
1. It must be capable of creating legal relations:

    Offer must be such as in law is capable of being accepted and giving rise to legal relationship. If the offer does not intend to give rise to legal consequences and creating legal relations, it is not considered as a valid offer in the eye of law. A social invitation, even if it is accepted, does not create legal relations because it is not so intended. 

2. It must be certain, definite and not vague:

     If the terms of an offer are vague or indefinite, its acceptance cannot create any contractual relationship. Thus, where A offers to sell B 100 quintals of oil, there is nothing whatever to show what kind of oil was intended. The offer is not capable of being accepted for want of certainty.

3. It must be communicated to the offeree: 

    An offer, to be complete, must be communicated to the person to whom it is made, otherwise there can be no acceptance of it. Unless an offer is communicated, there can be no acceptance by it. An acceptance of an offer, in ignorance of the offer, is not acceptance and does not confer any right on the acceptor.

This can be illustrated by the landmark case of Lalman Shukla v. GauriDutt

  Facts: G (Gauridutt) sent his servant L (Lalman) to trace his missing nephew. He then announced that anybody who traced his nephew would be entitled to a certain reward. L traced the boy in ignorance of this announcement. Subsequently when he came to know of the reward, he claimed it. Held, he was not entitled to the reward, as he did not know the offer.

4. It must be made with a view to obtaining the assent of the other party: 

  Offer must be made with a view to obtaining the assent of the other party addressed and not merely with a view to disclosing the intention of making an offer.

5. It may be conditional: 

   An offer can be made subject to any terms and conditions by the offeror.

Example: Offeror may ask for payment by RTGS, NEFT etc. The offeree will have to accept all the terms of the offer otherwise the contract will be treated as invalid.

6. Offer should not contain a term the non compliance of which would amount to acceptance: 

     Thus, one cannot say that if acceptance is not communicated by a certain time the ouer would be considered as accepted.

Example: A proposes B to purchase his android mobile for `5000 and if no reply by him in a week, it would be assumed that B had accepted the proposal. This would not result into contract.

7. The offer may be either specific or general:

         Any offer can be made to either public at large or to the any specific person. (Already explained in the heading types of the offer) 

8. Offer is Different from a mere statement of intention, an invitation to offer, a mere communication of information, Casual Equity, A prospectus and Advertisement.
(i) An invitation to make an offer or do business. In case of “an invitation to make an offer”, the person making the invitation does not make an offer rather invites the other party to make an offer. His objective is to send out the invitation that he is willing to deal with any person who, on the basis of such invitation, is ready to enter into contract with him subject to final terms and conditions.

Example: An advertisement for sale of goods by auction is an invitation to the offer. It merely invites offers/bids made at the auction. Similarly, Red Herring Prospectus issued by a company, is only an invitation to the public to make an offer to subscribe to the securities of the company.

(ii) A statement of intention and announcement.

(iii) Offer must be distinguished from an answer to a question. 

Case Law: Harvey vs. Facie [1893] AC 552
In this case, Privy Council succinctly explained the distinction between an ouer and an invitation to ouer. In the given case, the plaintius through a telegram asked the defendants two questions namely,

(i) Will you sell us Bumper Hall Pen? and

(ii) Telegraph lowest cash price.

The defendants replied through telegram that the “lowest price for Bumper Hall Pen is £ 900”. The plaintius sent another telegram stating “we agree to buy Bumper Hall Pen at £ 900”. However the defendants refused to sell the property at the price.

The plaintius sued the defendants contending that they had made an ouer to sell the property at £ 900 and therefore they are bound by the ouer.

However the Privy Council did not agree with the plaintius on the ground that while plaintius had asked two questions, the defendant replied only to the second question by quoting the price but did not answer the first question but reserved their answer with regard to their willingness to sell. Thus they made no ouer at all. Their Lordships held that the mere statement of the lowest price at which the vendor would sell contained no implied contract to sell to the person who had enquired about the price.

The above decision was followed in Mac Pherson vs Appanna [1951] A.S.C. 184 where the owner of the property had said that he would not accept less than £ 6000/- for it. This statement did not indicate any offer but indicated only an invitation to offer.

Similarly when goods are sold through auction, the auctioneer does not contract with any one who attends the sale. The auction is only an advertisement to sell but the items are not put for sale though persons who have come to the auction may have the intention to purchase. Similar decision was given in the case of Harris vs. Nickerson (1873).

9. The offer may be express or implied: 

    An offer may be made either by words or by conduct.

Example: A boy starts cleaning the car as it stops on the traffic signal without being asked to do so, in such circumstances any reasonable man could guess that he expects to be paid for this, here boy makes an implied offer.
1. A statement of price is not an ofer