FACTS OF THE CASE
In this case the defendant, Tinn indicated his willingness to sell 800 tonnes of iron at the same rate of 69 sh. per ton. In the letter, Tinn stated that Hoffman should reply by post specifically. On the same day the claimant, Hoffman wrote on same day offering to buy 800 tons of iron at the same rate of 69 sh. per ton. The two letters crossed each other while in the post.
The defendant later refused to supply the goods at the price stated in the letter. The claimant, Hoffman contended that his letter to the defendant was a valid acceptance, even though he sent it before receiving the defendant’s letter. But Tinn refused to supply the iron to Hoffman.
ISSUES BEFORE THE COURT
The issue, in this case, was whether there was a valid contract between Mr Tinn and Mr Hoffman for the sale of the iron? There was also the issue of acceptance had to be by post for it to be valid, as this was specified in the offer.
JUDGEMENT
The claimant contended before the court that his letter to the defendant was a valid acceptance, even though he send it before receiving the defendant letter.
Justice Blackburn stated that a “promise or offer made on each side in ignorance of the promise or offer is made on the other side, neither of them can be construed as an acceptance of the other.”
It was held in this case that there was no contract between Mr Tinn and Mr Hoffman for the iron. No contract for purchasing iron could be established between Tinn and Hoffman. For a valid contract, there must be offer and communication between the parties on acceptance of that offer.
The two offers were made at the same time and did not bind parties to perform any further actions.
The two cross offers were made simultaneously and without the knowledge of another party. So this was not a contract that would bind the parties for the sale of iron. There is a huge difference between a cross offer and a counteroffer.
For a valid contract, there must be communication that consists of an offer and acceptance. There was no acceptance by post when the offer was made. The court also said that while post had been indicated in the offer, another equally fast method could have been used to make it successful, such as a telegram or verbal message.
LEGAL PRINICPLE INVOLVED
The most basic and essential element of a valid contract is that there should be an offer and acceptance of the same. The intention to create a legal obligation is necessary for the existence of a valid contract. Communication of offer and acceptance is absolutely required. There are provisions for revocation of offer and acceptance as well.
As per Section 2(h) of the Indian Contract Act, 1872, a “contract” means an agreement enforceable by law. A proposal/offer and its acceptance is an acknowledged process for making a contract of which the former is the beginning point.
Section 2(a) defines a proposal as “when one person signifies to another his willingness to do or abstain from doing anything, with a view of obtaining the assent of that other to such act or abstinence, he is said to make a proposal.”
Acceptance
A proposal becomes a promise when it is accepted. Section 2(b) of the Act defines “acceptance” as “when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.” Essentials of a valid acceptance are:-
- #Acceptance may be express or implied – According to sections 3 and 9, if acceptance is made with words spoken or written, it is an express acceptance, and if acceptance is made otherwise than in words, it is implied. What is necessary is that there should be some external manifestation of acceptance. A mere mental determination to accept unaccompanied by any external indication will not be sufficient.
- #Communication must be communicated to the offeror himself- Communication of acceptance of a proposal should be communicated to the offerer himself. If it is made to any other person, it will be ineffectual as if there was no communication. It is also pertinent that the communication of acceptance should be from a person who has the authority to accept.
- #Necessity of communication –In the case of a specific offer, communication of acceptance must be made by the acceptor, and to the offerer himself. But in all cases of general offers, it can be accepted by anyone, who fulfils the condition of the offer.
- #Acceptance must be absolute and unqualified- Section 7 of the Act provides that ‘In order to convert a proposal into a promise, the acceptance must be absolute and unqualified. An acceptance with variation is no acceptance, but simply a counter-proposal which has to be accepted by original promisor before a contract is made.
Cross offer
When two persons make identical offers to each other and both such parties are unaware about each other’s offer, then such offers are known as cross-offer. The essentials of a cross offer are as follows:
- • Same offer to one another: The first pre-requisite of a cross offer is that two or more persons should make similar offers with the same details.
- • Without knowledge: Such identical offers must be made in ignorance of the offer made by the other party.
- • The terms and conditions: The terms and the object of the offers must be the same. A set of offers would be considered to be cross offers only when the terms and conditions as well as the object of the offers are the same. If not, then such offers cannot be called a cross offer but a counter offer.
- A cross offer does not mean acceptance of the offer. No binding contract is created between the parties.
Illustration
A from Delhi by a letter offers to sell his car to B of Bombay for Rs. 10 lakh. At the same time, B also makes an offer to A to buy A’s car for Rs. 10 lakh.
Both the parties made an exact offer to each other without knowing about the offer being made by the other. The two letters cross each other. There is no concluded contract between A and B because both parties are made a cross offer.
In the landmark case of Bhagwandas Goverdhandas Kedia v M/S Girdharilal Parshottamdas & Co. and Others (1966), it was observed by the Hon’ble Supreme Court that “the acceptance and such an intimation of acceptance of the offer are both necessary to form a binding contract.”
Thus, this case shows that an offer and acceptance are essential ingredients of a contract. This thus renders cross offers invalid. They can never be contemplated as contracts.
