Chapter 3: Offer, acceptance and Agreement Legal Aspects of Business, 3 rd Edition

1. Chapter 3: Offer, acceptance and AgreementLegal Aspects of Business, 3rd Edition

2. Offer, acceptance and Agreement

3. Case: Acceptance of an Offer Gyan is a carpenter who is going to make a book shelve for Arman. They have decided the dimensions, material and design. With reference to this, they are settling on the price. Identify the offer and acceptance in the following possible conversations they could have:

4. Situation 1 Arman say, “You have made the same book shelve for my friend for Rs. 12, 000, a month back. I will also give you Rs. 12, 000 only.” Gyan says, “This is fine.”

5. Situation 1 Arman say, “You have made the same book shelve for my friend for Rs. 12, 000, a month back. I will also give you Rs. 12, 000 only.” Gyan says, “This is fine.” Arman offers and Gyan accepts.

6. Situation 2 Gyan says, “I will charge you Rs. 13, 000 for it.” Arman says, “All right.”

7. Situation 2 Gyan says, “I will charge you Rs. 13, 000 for it.” Arman says, “All right.” Gyan offers and Arman accepts.

8. Situation 3 Gyan says, “I will charge you Rs. 30, 000 for it”. Arman says, “I know you have made the same book shelve for a friend of mine for Rs. 12, 000. You are trying to cheat me. Sorry, I do not want to get a book shelve made by you.”

9. Situation 3 Gyan says, “I will charge you Rs. 30, 000 for it”. Arman says, “I know you have made the same book shelve for a friend of mine for Rs. 12, 000. You are trying to cheat me. Sorry, I do not want to get a book shelve made by you.” Gyan offers but Arman rejects the offer. Thus, no agreement gets formed between the parties.

10. Situation 4 Gyan says, “I will charge you Rs. 13, 000.” Arman says, “Rs. 11, 000.” Gyan says, “Rs. 12, 500.” Arman say, “12, 000.” Gyan says, “All Right.”

11. Situation 4 Gyan says, “I will charge you Rs. 13, 000.” Arman says, “Rs. 11, 000.” Gyan says, “Rs. 12, 500.” Arman say, “12, 000.” Gyan says, “All Right.” Arman offers and Gyan accepts.

12. Case: Implied Communication Rajesh hurriedly enters a shop selling cold drinks and refreshments. He picks up a packet of wafers, he knows it costs Rs. 10. He shows the wafer packet to the shopkeeper in one hand and moves a note of Rs. 10 with the other hand. The shopkeeper pulls the note from Rajesh’s hand. Rajesh is out of the shop in no time. 1. Was an agreement formed between the parties? 2. Who offered and accepted? 3. How did the parties communicate the offer and acceptance?

13. Summary Offer and acceptance can be express (spoken or written in words) or implied in gestures, body language, actions, commissions and omissions.

14. Case: Express and Implied Offer Gyan visits a shop to buy a shirt. The price listed on the shirt packet is Rs. 800. Gyan tells the shopkeeper, “Will you sell me the shirt for Rs. 700.” The shopkeeper nods. Identify the modality of offer and acceptance.

15. Case: Express and Implied Offer Gyan visits a shop to buy a shirt. The price listed on the shirt packet is Rs. 800. Gyan tells the shopkeeper, “Will you sell me the shirt for Rs. 700.” The shopkeeper nods. Identify the modality of offer and acceptance. Gyan offers in express terms. The shopkeeper accepts impliedly by his nod.

16. Case: Express and Implied Offer A hotel room is stacked with cold drinks in the fridge and wafers and biscuits. The customer can consume and pay while checking out from the hotel. Identify the modality of offer and acceptance.

17. Case: Express and Implied Offer A hotel room is stacked with cold drinks in the fridge and wafers and biscuits. The customer can consume and pay while checking out from the hotel. Identify the modality of offer and acceptance. The hotel offers impliedly, the food articles being there in the hotel room. The customer accepts implied by opening a cold drink bottle or tearing open a wafer packet.

18. Case: Express and Implied Offer Ajay puts a Rs. 5 coin to get a cup of coffee from a coffee vending machine. Identify the modality of offer and acceptance.

19. Case: Express and Implied Offer Ajay puts a Rs. 5 coin to get a cup of coffee from a coffee vending machine. Identify the modality of offer and acceptance. The offer is made by the owners of the coffee machine by putting it up there. It is an implied offer in the act of putting up the machine. Ajay accepts the offer impliedly by inserting a coin of Rs. 5.

20. Case: Contract on a Bus Sunil got onto a bus and instead of approaching the conductor, tried to hide behind other people. When the conductor called out for him, he pretended not to hear. By now, two stops had gone by and the bus was stopping at the third one. Sunil got down from the back door. The conductor got hold of him and thrust on him a ticket for the distance he had travelled to pay. Sunil can be required to pay only if there is a contract. 1. Is there an agreement between the parties? 2. Who offered and accepted? 3. When was the agreement been made?

21. Case: Contract on a Bus The moving bus is an implied offer. The offer is accepted the moment a person get onto the bus. Thus, the acceptance is also implied in the action of a person getting onto the bus. The agreement is for the passenger to pay the minimum fare. The exact fare, however, is to be settled later, depending on the distance travelled by the passenger.

22. Case: Bargaining Ajay says, “I can sell my computer to you for Rs 30,000.” Bimal replies, “I can only pay Rs. 25,000 for it.” Ajay responds, “I can settle for Rs. 29,000.” Bimal says, “I can come up to Rs. 26,000.” Ajay nods his head. Let us explore the communication between Ajay and Bimal.

23. Case: Bargaining Ajay says, “I can sell my computer to you for Rs 30,000.”

24. Case: Bargaining Ajay says, “I can sell my computer to you for Rs 30,000.” (Ajay begins by making an offer).

25. Case: Bargaining Ajay says, “I can sell my computer to you for Rs 30,000.” (Ajay begins by making an offer). Bimal replies, “I can only pay Rs. 25,000 for it.”

26. Case: Bargaining Ajay says, “I can sell my computer to you for Rs 30,000.” (Ajay begins by making an offer). Bimal replies, “I can only pay Rs. 25,000 for it.” (Bimal, in putting up his offer, impliedly rejects Ajay’s offers. For this reason, the offer made by Bimal is called ‘Counter-offer’)

27. Case: Bargaining Ajay says, “I can sell my computer to you for Rs 30,000.” (Ajay begins by making an offer). Bimal replies, “I can only pay Rs. 25,000 for it.” (Bimal, in putting up his offer, impliedly rejects Ajay’s offers. For this reason, the offer made by Bimal is called ‘Counter-offer’) Ajay responds, “I can settle for Rs. 29,000.”

28. Case: Bargaining Ajay says, “I can sell my computer to you for Rs 30,000.” (Ajay begins by making an offer). Bimal replies, “I can only pay Rs. 25,000 for it.” (Bimal, in putting up his offer, impliedly rejects Ajay’s offers. For this reason, the offer made by Bimal is called ‘Counter-offer’) Ajay responds, “I can settle for Rs. 29,000.” (Ajay makes a counter-offer.)

29. Case: Bargaining Bimal says, “I can come up to Rs. 26,000.”

30. Case: Bargaining Bimal says, “I can come up to Rs. 26,000.” (Bimal makes a counter-offer) Ajay nods his head.

31. Case: Bargaining Bimal says, “I can come up to Rs. 26,000.” (Bimal makes a counter-offer) Ajay nods his head. (Ajay impliedly accepts the offer made by Bimal.)

32. Case: Auction A person had described in detail a construction job. Through an auction, the most competitive price was being sought. The bids in the auction in Lakhs were as follows: Bid 1: Gyan: Rs. 1.9 Bid 6: Dina: Rs. 1.59 Bid 2: Chanda: Rs. 1.7 Bid 7: Chanda: Rs. 1.57 Bid 3: Elam: Rs. 1.65 Bid 8: Gyan: Rs. 1.56 Bid 4: Amit: Rs. 1.64 Bid 9: Bhuvani: Rs. 1.55 As no further bids were coming, the auctioneer struck the hammer. The construction job was awarded to Bhuvani. 4000. Identify the offeror and acceptor.

33. Case: Auction Bid 1: Gyan: Rs. 1.9 Bid 2: Chanda: Rs. 1.7 Bid 4: Amit: Rs. 1.64 Bid 6: Dina: Rs. 1.59 Bid 7: Chanda: Rs. 1.57 Bid 8: Gyan: Rs. 1.56 Bid 9: Bhuvani: Rs. 1.55 As no further bids were coming, the auctioneer struck the hammer. The construction job was awarded to Bhuvani. Identify the offeror and acceptor.

34. Case: Auction The last act before the formation of an agreement between the auctioneer and Bhuvani is by the auctioneer in striking the hammer. The auctioneer impliedly accepts the offer made by Bhuvani. Thus, in an auction, the bidders offer and the auctioneer accepts.

35. Case: Electric Iron in a Showcase A person saw an electric iron in the showcase of a shop. A label below the iron mentioned the price as Rs 600. He had been looking for that model of electric iron for a long time. He approached the shop to buy one such iron. However, he was told that the shop did not have that model in stock. The shopkeeper also said that he could not promise him one later either, as the manufacturing company of that iron was facing financial difficulties and it was being closed down. The person insisted that he had a right to buy the one kept in the showcase.

36. Fisher v. Bell

37. Facts Fisher owned a retail shop trading under the name of Bell's Music Shop. One of the articles on display in the shop window was a knife, behind which was a ticket upon which the words "Ejector knife - 4s." were printed. Such knifes were also called a flick knife. The blade of the knife open by pressing a button on the handle of the knife.

38. … Cond A visiting police officer examined the knife and assessed it to be a flick knife. The Restriction of Offensive Weapons Act, 1959 provided that ‘Any person who manufactures, sells or hires or offers for sale or hire, or lends or gives to any other person’ was punishable with imprisonment and/or fine. Fisher passing the onus on manufacturers said, "Why do manufacturers still bring them round for us to sell?" The constable, Mr. Bell, said that he would be reported for offering for sale a flick knife. Mr. Bell was prosecuted for offering for sale a flick knife.

39. Judgement I confess that I think most lay people and, indeed, I myself when I first read the papers, would be inclined to the view that to say that if a knife was displayed in a window like that with a price attached to it was not offering it for sale was just nonsense. … It is perfectly clear that according to the ordinary law of contract the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract. That is clearly the general law of the country. …In those circumstances I am driven to the conclusion, though I confess reluctantly, that no offence was here committed.

40. Case: Self-Service Store A customer in a self-service store finds CDs at a very low price. The customer is a music artist and uses 25–30 CDs every month for storing music. He picks up all the CDs from the shelf, and puts them in his shopping trolley. At the cash counter, the CDs are counted and found to be 396 in number. The girl at the cash counter tells him that he can take only five CDs. The manager of the store explains that AMPM comes up with such ‘deals’ from time to time to attract customers. If one customer were to go away with the entire lot, the very purpose of putting the goods on deals and discounts would be lost. The customer is insistent that he has a right to take all the CDs. Decide.