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B.B.A.LL.B , (Integrated Law degree course)Law Of Contract- I (II Semester)

“PROJECT TOPIC”

Project Submission as the Tender, Types; Offer and Acceptance

Submission To: Miss. Ayesha Mukherjee Submitted By: Mohit Sharma

(Faculty of Taxation Law) Roll no:-L/1552

Designation: Assistant/ Associate Professor Session:2015-2016

Semester- II

Raffles UniversitySchool of Law

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TABLE OF CONTENTS

Page No.

1. Acknowledgment.........................................................................................

2. Research Methodology................................................................................

3. Case list........................................................................................................

4. Abstract........................................................................................................

5. Tender and its types......................................................................................

6. Format of an ideal tender notice...................................................................

7. Procedure for inviting tender.........................................................................

8. Difference between Tender and Contract.....................................................

9. Acceptance and withdrawl of tenders and bid..............................................

10. Offer and Acceptance (Introduction).............................................................

11. Difference b/w General and Specific Offer.....................................................

12. Difference Between Offer And Invitation To Treat...............................................

13. What is acceptance?..........................................................................................

14. Legal rules regarding acceptance.......................................................................

15. Conclusion...........................................................................................................

16. Bibliography...........................................................................................................

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ACKNOWLEDGEMENT

I take this opportunity to express our humble gratitude and personal regards to

Ms./Dr.Ayesha Mukherjeefor inspiring me and guiding me during the course of this project

work and also for his cooperation and guidance from time to time during the course of this

project work on the topic.

Neemrana

Date of Submission: Name of Student:

Mohit Sharma

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RESEARCH METHODOLOGY

Aims and Objectives:

The aim of the project is to present a detailed study of the topic “Tender, Types; Offer &

Acceptance ” forming a concrete informative capsule of the same with an insight into its

relevance in the Indian market.

Research Plan

The researchers have followed Doctrinal method.

Scope and Limitations:

In this project the researcher has tried to include different aspects pertaining to the

concept of Tender, it’s types; offer and acceptance, special attention is also provided on section

2(a) and 2(b), basis of Offer & Acceptance, legal rules regarding offer & acceptance, and lastly

conclusion.

.

Sources of Data:

The following secondary sources of data have been used in the project-

Case Study

Websites

Case Laws

Books

Method of Writing and Mode of Citation:

The method of writing followed in the course of this research project is primarily

analytical. The researcher has followed Uniform method of citation throughout the course of this

research project.

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CASE LIST

Bengal Coal Co. Ltd. V. Homee Wadia & Co. Carlill v Carbolic Smoke Ball Co. Lalman Shukla V. Gauri Dutt Pharmaceutical Society of Great Britain v Boots  Harvey v Facey  Adams v Lindsell Hyde v Wrench Brogden v Metropolitan Railway Co. Paul Felthouse v Bindley Powell v Lee (1908) Countess of Dunmore V. Alexander

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ABSTRACT

This project aims at studying the concept of Tender, it’s types; offer & acceptance and

critically analyzing it. It deals with the application of the provision of the Indian Contract

Act, 1872 regarding procedure of tender, offer and acceptance.The motion that contracts

require an offer and an acceptance is one of the last remaining bastions of classical contract

law. On reflection, it is striking how poorly the offer-and-acceptance paradigm fits large

areas of contracting practice; it is simply untrue that all or even most contracts are formed by

means of a salient or even recognizable offer followed by a similarly salient acceptance.

Instead, contracts are formed in different ways as suit the different circumstances of

contracting parties. For example, the parties might contemporaneously sign a common

document, shake hands, use a series of escalatingly certain verbal cues to indicate that they

believe themselves to be bound, or allow for a third party or computer technology to match

them firmly with one another. Moreover, even in cases that may fit factually into the classical

offer-and-acceptance paradigm, the model tends to obscure the substantive and interpretive

questions that underlie contract formation.

The problem is not necessarily debilitating. Perhaps surprisingly, doing away with the

paradigm and terminology of “offer” and “acceptance” would not, on its own, amount to a

radical change to modern contract law. Nonetheless, there are several reasons to highlight the

weakness of the offer-and-acceptance paradigm. Most directly, highlighting the weakness of

the model may discourage courts and commentators from extending it beyond the cases to

which it is most directly applicable; stretching the paradigm in this way invites at best

awkwardness and at worst poor decisions. Similarly, brushing away the offer-and-acceptance

paradigm can highlight useful modes of contract formation that have not received sufficient

attention or study.

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Tender:

It is an invitation from the owner to the contractor to execute some work at specified cost or in specified time. It is published in the form of tender notice in newspapers , notice boards, gussets, etc. according to the cost of works.

an offer to contractor to do the work for a certain amount of money

incorporate time and other conditions required

to carry out the contract requirements

main reason is to complete a project

The tender which is submitted by the contractor is generally based on a bill of quantities & specifications of the statement of work.

Classification of tenders:

1. Open tender: An oral talk or written document between the engineer and the contractor for certain small jobs to be performed. Sometimes it is advertised.

It is an bidding process that is open to all qualified bidders. Tender usually published in the newspaper and internet. It is chosen on the basis of price and quality. This is most effective way of obtaining many competitive rates.

Open tender – Advantages

Any contractor can tender their work. No favoritism occurred. Maximum competition. No commitment to tender, all tender received will be genuine.

Open tender - Disadvantages

Client must bear expensive cost of tendering. The wrong contractor may be chosen because they are from unknown background. Time consuming.

2. Sealed tender: Invited for important or huge projects; wide publicity s given; always written documents are made.

3. Limited tender: Only a selected no. of contractors are invited to quote their rates.

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4. Single tender: Invitation is given to only one firm to render a service by quoting their rates. If the quoted rates are high, it will be negotiated prior to the agrrement of the contract.

5. Rate contract: Usually adopted for supply of materials, machine, tools & plant etc. (items to the store) . It specifies the supply at a fixed rate during the period of contract. The quantities are not mentioned in type of contract and the contractor is bound to accept any order which would be placed before him.

TENDER SYSTEM:

The process of finalization of contracts is achieved through the tender process.

Advantages of the Tender process

Most effective method of locking competitive rates. New technologies and options are received through open tender process.

TENDER NOTICE:

The Tender Notice is a brief description of the job being tendered. To be published in Newspapers and on the Internet. The Internet is a very cost effective way of publishing the tenders.

Format of an ideal tender notice:

1. Name of the Project.

2. Name & Address of the Company offering the tender.

3. Name of work, materials or services.

4. Place of work location.

5. Approximate estimated cost of work.

6. Earnest Money.

7. Period of completion.

8. Date on which the Tender Document sale commences.

9. Date and time up to which tender documents can be obtained.

10. The cost of tender documents.

11. Due date of submission.

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12. Eligibility Criteria.

Procedure for inviting tender:

Preparation of tender documents Issue of notice inviting tender or tender call notice Submission and opening of tenders and their scrutiny Acceptance of tender and award of contract

Information to be given in a tender notice:

Name of the department inviting tender Name of work and location Designation of officer inviting tender Last date and time of receipt of tender Period of availability of tender document Cost of tender document Time of completion and type of contract Earnest money Deposit to be paid Date, time and place of opening the tender Designation of the officer opening the tender

Difference between Tender & Contract:

TENDER

The term tender formally means an invitation to trade under the terms of offer.

The main reason of tender is to complete a project.

CONTRACT

A contract is the term used as an exchange of promises between two or more parties to do, or refrain from doing, an act which is enforceable in a court of law.

It is a binding legalagreement.

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Acceptance and withdrawl of tenders and bids:

A tender is in the same category as a quotation of prices. It is not an offer. When a tender is approved, it is converted into a standing offer. A contract arises only when an order is placed on the basis of tender. These principles were laid down by the Bombay High Court in the well known case of :

Bengal Coal Co. Ltd. V. Homee Wadia & Co.

A agreed in writing to supply coal to B at certain prices and up to a stated quantity, or in any quantity which may be required for a period of twelve months, is not a contract unless B binds himself to take some certain quantity, but a mere continuing offer which may be accepted by B from time to time by ordering goods upon the terms of the offer. In such a case, each order given by B is an acceptance of the offer and A can withdraw the offer, or, to use the phraseology of the Act revoke the proposal, at any time before its acceptance by an order from B. Such a transaction may be reduced to a statement by the intending vendor in this form If you will send me orders for coal, I shall supply it to you for a period of twelve months at a particular rate.’ This is merely a proposal from A to B. If in reply to such a proposal, B says to A ‘I agree’, it does not constitute an acceptance of the proposal. An acceptance can take place only by B sending an order to A”.

Important note:

For a CONTRACT to be valid, there must be an offer from the owner in the form of tender notice to get some specified work to be executed and there must be an acceptance from the contractor to execute the work, both the offer and the acceptance must be definite and legal.

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Offer and Acceptance: 

What is an offer?An offer is a statement of the terms which the client (the offeror) is prepared to be contractually bound. The offer must be complete, specific and capable of being accepted. It must include the fundamental terms of the agreement with the intention that no further negotiations are to take place. Client offer contractor the work and therefore the contractor must carry out the work under the client’s terms and conditions. It is possible to make a conditional offer. The effect of this is that an offer cannot be accepted if the condition has not been satisfied.

For example, the client requires the contractor to have a specific tool or machine before an offer can be made.

General offer and Specific offer

Case Law:

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Court of AppealA Newspaper advert placed by the defendant stated:-

£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball...

£1000 is deposited with the Alliance Bank, shewing our sincerity in the matter."

Mrs Carlill purchased some smoke balls and used them according to the directions and caught

GENERAL OFFER

General offer made to the whole world at large.

General offer can be accepted by any person having notice of the offer by doing what is required under the offer.

SPECIFIC OFFER

Specific offer made to some specific person.

Specific offer can be accepted only by person to whom it was made.

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flu. She sought to claim the stated £100 reward.

The defendant raised the following arguments to demonstrate the advertisement was a mere invitation to treat rather than an offer: 

1. The advert was a sales puff and lacked intent to be an offer.2. It is not possible to make an offer to the world.3. There was no notification of acceptance.4. The wording was too vague to constitute an offer since there was no stated time limit as to catching the flu.5. There was no consideration provided since the 'offer' did not specify that the user of the balls must have purchased them. 

Held:

The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert constituted an offer of a unilateral contract which she had accepted by performing the conditions stated in the offer. The court rejected all the arguments put forward by the defendants for the following reasons:

1. The statement referring to the deposit of £1,000 demonstrated intent and therefore it was not a mere sales puff.2. It is quite possible to make an offer to the world.3. In unilateral contracts there is no requirement that the offeree communicates an intention to accept, since acceptance is through full performance.4. Whilst there may be some ambiguity in the wording this was capable of being resolved by applying a reasonable time limit or confining it to only those who caught flu whilst still using the balls.5. The defendants would have value in people using the balls even if they had not been purchased by them directly.

Proposal or Offer :

A proposal and its acceptance is the universally acknowledged process for the making of an agreement. The proposal is the starting point. Section 2(a), defines “proposal” as follows:

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.

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Termination of offer:An offer may be terminated or revoked if:

The offer is withdrawn or revoked at any time prior to acceptance provided there has been communication between the client and the contractor;

The client making the offer dies; Failure of a condition; A reasonable period of time has elapsed – a time limit is specific on the offer made.

Legal rules regarding valid offer: An offer may be express or implied It should give rise to legal consequences and be capable of creating legal relations The term of the offer must be certain An offer can be made subject to any terms and conditions It should be made with a intent to obtain the assent of the other party An offer should not certain a term the non compliance of which would amount to

acceptance Two identical cross offers do not make a contract An invitation of offer is not an offer

Communication, acceptance and revocation of proposals:It is defined in Section 3, of the Indian Contract Act,1872 that the communication of proposal the acceptance of proposal and the revocation of proposals and acceptance respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicated such proposals, acceptance or revocation, or by which has the effect of communicating it.

For Example: It can be done by words of mouth, or by writing, or even by conduct.

Implied Proposals:An offer which is expressed by conduct is called an implied offer.

For Example: A bid at an auction is an implied offer to buy. Similarly, steeping into an omni bus and consuming eatables at a self-service restaurant, both creates implied promise to pay for the benefits enjoyed.

An offer which is expressed by words, written or spoken is called an express offer.

Communication when complete:

It is defined in Section 4, of the Indian Contract Act, 1872 that the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.

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The communication of an acceptance is complete, …as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the acceptor, as against the acceptor, when it comes to the knowledge of the proposer.

Illustrations:

a) A proposes, by letter, to sell a house to B at a certain price.

The communication of the proposal is complete when B receives the letter.

b) B accepts A’s proposal by a letter sent by post.

The communication of the acceptance is complete, as against A when the letter is posted, as against B, when the letter is received by A.

c) A revokes his proposal by telegram.

The revocation is complete as against A when the telegram is dispatched. Is is complete as against B when B receives it.

B revokes his acceptance by telegram. B’s revocation is complete as against B when the telegram is dispatched, and as against A when it reaches him.

Case Laws:

Lalman Shukla V. Gauri Dutt:

The facts of this case is like that the defendant’s nephew absconded from home. He sent his servant in search of the boy. When the servant had left, the defendant by hand bills offered to pay Rs 501 to anybody discovering the boy. The servant came to know of this offer only when he had already traced the missing child. He, however, brought an action to recover the reward. But his action failed. The court said that Lalman Shukla was unaware of the announcement of the reward, Lalman Shukla located the, the missing nephew and brought back. It was said that Lalman Shukla has no right in the reward because he has no knowledge of the proposal.

Hence, an action without the knowledge of the proposal is no acceptance.

Invitation To Treat:An invitation to treat is different to an offer as it only invites the party to make an offer and it is not intended to be binding. The contractors are invited to bid on the job, by calculating the total work cost and to have the tenders submitted in a specified time. The main difference between this situation and an auction is that person submitted the tender, does so in ignorance of other’s bids because the final decision is up to the client.

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For example, Display of goods by a shopkeeper in his window, with prices marked on them, is not an offer but merely an invitation to the public to make an offer to buy the goods at the marked prices.

Case Law:

Pharmaceutical Society of Great Britain v Boots: 

Boots introduced the then new self- service system into their shops whereby customers would pick up goods from the shelf put them in their basket and then take them to the cash till to pay. The Pharmaceutical Society of Great Britain brought an action to determine the legality of the system with regard to the sale of pharmaceutical products which were required by law to be sold in the presence of a pharmacist. The court thus needed to determine where the contract came into existence.

Held:Goods on the shelf constitute an invitation to treat not an offer. A customer takes the goods to the till and makes an offer to purchase. The shop assistant then chooses whether to accept the offer. The contract is therefore concluded at the till in the presence of a pharmacist.

Harvey v Facey: Harvey sent a Telegram to Facey which stated: -

"Will you sell us Bumper Hall Pen? Telegraph lowest cash price-answer paid;" 

Facey replied by telegram:-

"Lowest price for Bumper Hall Pen £900."

Harvey then replied:-

"We agree to buy Bumper Hall Pen for the sum of nine hundred pounds asked by you. Please send us your title deed in order that we may get early possession." 

Held: The Privy Council held that there was no contract concluded between the parties. Facey had not directly answered the first question as to whether they would sell and the lowest price stated was merely responding to a request for information not an offer. There was thus no evidence of an intention that the telegram sent by Facey was to be an offer.

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Essential of offer:

It must be an expression of the willingness to do or to abstain from doing something It must be made to another person It should be done with a objective to obtain the assent of the other person The objective of offer should be legal one

Lapses and Revocation of offer:

An offer lapses after stipulated or reasonable time An offer lapses by not being accepted in the mode prescribed An offer lapses by rejection An offer lapses by the death or the insanity of the offeror or the offeree before acceptance An offer lapses by revocation before acceptance An offer lapses by subsequent illegality or destruction of subject matter

Time of revocation of offer and acceptance:

Revocation of offer (section 5)-A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer but not afterwards.

Revocation of acceptance (section 5)-An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

Adams v Lindsell:The defendant wrote to the claimant offering to sell them some wool and asking for a reply 'in the course of post'. The letter was delayed in the post. On receiving the letter the claimant posted a letter of acceptance the same day. However, due to the delay the defendant's had assumed the claimant was not interested in the wool and sold it on to a third party. The claimant sued for breach of contract.

Held:There was a valid contract which came in to existence the moment the letter of acceptance was placed in the post box.This case established the postal rule. This applies where post is the agreed form of communication between the parties and the letter of acceptance is correctly addressed and carries the right postage stamp. The acceptance then becomes effective when the letter is posted.

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Counter offer:

A counter offer is where an offeree responds to an offer by making an offer on different terms. This has the affect of destroying the original offer so that it is no longer open for the offeree to accept. Case Laws:

Hyde v Wrench: 

The defendant offered to sell a farm to the claimant for £1,000. The claimant in reply offered £950 which the defendant refused. The claimant then sought to accept the original offer of £1,000. The defendant refused to sell to the claimant and the claimant brought an action for specific performance.

Held:There was no contract. Where a counter offer is made this destroys the original offer so that it is no longer open to the offeree to accept.

Difference Between Offer And Invitation To Treat:

An invitation to treat is when a client invites contractors to make him/her an offer. For example, when the client advertises a job on internet or newspaper, it is usually an invitation to treat rather than an offer. The offer only comes into existence after the client reviews the tenders handed in by the contractors and accept the offer.

An offer on the other hand is when the client offers the job to one contractor without advertising the job or having contractors to submit in the tender.

Making an invitation to treat, rather than an offer, protects the client from finding him/her self agreed into a contract he/she cannot fulfil. Instead the client can refuse the contractor’s offer for many different reasons.

This can be a very important protection for the client making the offer if the advertisement for the job offers at long distance: for example, through the internet or newspaper. Always ensure that any website, advertisement etc make it clear that it is only an invitation to treat, not an offer.

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ACCEPTANCE

What is an Acceptance:

Once valid acceptance takes place a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance:

1. The acceptance must be communicated to the offeree.2. The terms of the acceptance must exactly match the terms of the offer.3. The agreement must be certain.

Section 2(b), states that when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted becomes a promise.

Legal rules regarding acceptance:

Acceptance must be given only by the person to whom the offer is made Acceptance must be absolute and unqualified It should be communicated by the acceptor It should be given within reasonable time or time stipulated Acceptance must succeed the offer

Case law:

Brogden v Metropolitan Railway Co.

The claimants were the suppliers of coal to the defendant railway company. They had been dealing for some years on an informal basis with no written contract. The parties agreed that it would be wise to have a formal contract written. The defendant drew up a draft contract and sent it to the claimant. The claimant made some minor amendments and filled in some blanks and sent it back to the defendant. The defendant then simply filed the document and never communicated their acceptance to the contract. Throughout this period the claimants continued to supply the coal. Subsequently a dispute arose and it was questioned whether in fact the written agreement was valid.

Held:The written contract was valid despite no communication of the acceptance. The acceptance took place by performing the contract without any objection as to the terms.

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Communication to offeror himself:

Further, acceptance must be communicated to the offeror himself. A communication to any other person is as ineffectual as if no communication has been made. For Example,

Paul Felthouse v Bindley A nephew discussed buying a horse from his uncle. He offered to purchase the horse and said if I don't hear from you by the weekend I will consider him mine. The horse was then sold by mistake at auction. The auctioneer had been asked not to sell the horse but had forgotten. The uncle commenced proceedings against the auctioneer for conversion. The action depended upon whether a valid contract existed between the nephew and the uncle.

Held:There was no contract. You cannot have silence as acceptance.

Communication by acceptor himself:

This principle means that the communication of acceptance should be from a person who has the authority to accept . Information received from an unauthorized person is ineffective.

Case Law:

Powell v Lee (1908)

The facts of this case is like that the claimant applied for a job as a headmastership in a school. The school managers decided to appoint the claimant whereupon one of the managers, without authority, told the applicant that he had been appointed. The managers then reconsidered their decision and appointed someone else. The claimant brought an action for breach of contract but the court found that no contract existed as there had only been an unauthorised communication of the school's intention to employ the claimant.

Held:The court held that there must be notice of acceptance from the contracting party in some way. Information by an unauthorized person is as insufficient as overhearing from behind the door.

Acceptance must be absolute:

In order to convert a proposal into a promise, the acceptance must-

(1) be absolute and unqualified,

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(2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted.

Revocation of acceptance:

An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

Case Law:

Countess of Dunmore V. Alexander:

The facts of this case is like that, a proposal of service made by a letter was sent through an agent. The agent received the acceptance and forwarded it to the principal, but the principal was away that day. The next day the agent received the revocation and forwarded it to the principal, who received the two letters together.

Held:The revocation was held to be effective, the court saying that “the admission that the two letters were received together puts an end to the case”.

Conclusion:

Clients and contractors should have a clear understanding of the rules of offer and acceptance and the invitation to treat in order to have a contract. Offer and acceptance are the essential of a contract because without them there would not be a contract. The building contractor can negotiate with the client through the use of quoting and tendering and the client can choose the contractor based on the tender pricing, experiences, reputations, available of resources and so on. The client can decline the contractor for any reason because of the invitation to treat. The contractors are invited to bid for the work and the final decision is up to the client.

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BIBLIOGRAPHY

Books referred:

Singh Avtar, “Contract and Specific Relief”, 11th edition, Eastern Book Company

Websites referred:

https://indiancontractlaw.wordpress.com/ www.legalserviceindia.com

http://www.e-lawresources.co.uk / http://www.inbrief.co.uk / www.emarketservices.com

Acts referred:

Indian Contract Act, 1872 IT ACT, 2000

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