Answer to Question #252700 in Management for Selina

Question

Identify the three essential of an offer and discuss briefly the requirements associated with each? 

Answer 1

Discussion

An offer refers to a promise that one party makes in exchange for another party's performance. In other words, it is an invitation to enter into a contract on certain terms. It can be expressed in many different ways, from a short and simple oral statement to a long and detailed written statement. However, one has to make sure that their offer is clearly communicated and reasonable in order to convince the other party that they are actually making an offer.

In order to create a valid contract, one party must make an offer, another party must accept the offer, and consideration must be exchanged. The one who makes the offer is known as the “offerer,” while the person who receives the offer is called the “offeree.” Although one can make an offer with just a single-sentence verbal statement, the two parties will generally benefit from a detailed written description of the offer and its terms.

Determining whether a party has actually made an offer is a common challenge in a contract case. As a rule of thumb, the offer must be definite and reasonable enough for the receiving party to believe that it is indeed an offer. If the offer includes terms such as quantity, price, quality, and place and time of delivery, the court may find that it is indeed an offer.

There are two types of offer: general offer and specific offer. A general offer is made to a group of people, while a specific offer is specifically made to one person. In order for an offer to be considered valid, it must meet the following requirements;

• Communication

The person making the offer (the offeror) must communicate his/her offer to a person who may then choose to accept or reject the offer (the offeree). Often, this is not a serious issue to analyse, as the offeror is free to communicate his/her offer in any means, whether orally or in writing.

• Commitment

Whether the offeror is committed requires an analysis of whether the offeror, in his/her communication of the offer, intended to be bound by the offer. An intent to be bound may arise through course of conduct, such as explicitly stating “That is my final offer.” There may be a question as to whether the alleged offer is an actual offer or merely an invitation to receive offers. Auctions are a common example of invitations to receive offers, rather than a contractual offer in itself.

• Definite Terms

It is essential for a valid proposal that it must be made with the intention of creating a legal relationship otherwise it will only be an invitation. A social invitation may not create a social relationship. An offer must lead to a contract which creates legal obligations and legal consequences in the case of non-performance of the contract. All offers must be definite and specific in their terms. The essential terms of the deal, such as price, manner of acceptance and timing, must be stated.

Reference

Rana, A. A. (2020). Essentials of a Valid Contract: A Comparative Study of Islamic Law and the Contract Act, 1872. Available at SSRN 3753738.