Offer and Acceptance of Contract in Nepal

What is Offer in Contract?

An offer, within the context of any contract, signifies the proactive act of conveying or suggesting a proposition.

An offer is the manifestation of a party’s readiness to engage in a contractual arrangement, driven by the purpose of establishing a legally binding commitment under a mutually agreed-upon accord with unobstructed concurrence.

In accordance with Section 504 of the National Civil Code, an offer denotes a presentation made by an individual to another individual, characterized by the intent to secure their concurrence in performing or refraining from a specific action.

In the realm of Corporate Law, Offer whether they are specific or general, express or implied, the purpose remains to present an offer to another party, intending to elicit their acceptance and thus establish a binding legal obligation through a candid display of willingness.

The party initiating the offer is identified as the offeror, while the party receiving the offer assumes the role of the offeree.

Principles of a Legitimate Offer

For an offer to be considered valid, it must adhere to the subsequent principles:

1. It must establish legal relations or possess the potential to result in legal ramifications.
2. The offer must be definite and explicit.
3. The offer must be effectively communicated to the other party.
4. An offer can be conveyed either through verbal communication or through actions.
5. The offer may be specific or of a general nature.
6. The terms and conditions accompanying the offer must be precise, lucid, and unambiguous.

Types of Offers

Offers are classified into different types based on the manner of presentation and the underlying intent:

Express or Implicit Offer

An offer is termed as express when the offeror presents it in either written or spoken form.

On the other hand, if the offer is communicated through the actions or behavior of the offeror, it is regarded as an implicit offer.

Direct or Indirect Offer

When the offeror directly presents the offer to the other party, it constitutes a direct offer.

Conversely, if the offer is communicated to the offeree via a third party, advertisement, or other indirect means, it is classified as an indirect offer.

Particular or General Offer

A specific offer pertains to a proposal made for a specific individual or a well-defined group of individuals.

In contrast, a general offer is one that is structured in a manner enabling anyone to accept it.

Counter Offer

When the second party to whom the original offer was extended responds by proposing an alternate offer rather than outright acceptance, it is denoted as a counteroffer.

Termination or Expiry of an Offer

In accordance with Chapter 2 of the National Civil Code, an offer terminates or lapses under the following circumstances:

1. Upon the expiration of the stipulated time period.
2. Due to the demise or mental incapacitation of the offeror.
3. As a consequence of dual notification.
4. In case of illegality or destruction of the subject matter.
5. Following the issuance of a revocation notice.
6. Upon rejection.
7. Due to the presentation of a counteroffer.
8. If the conditions of a conditional offer remain unfulfilled.

In essence, an offer denotes a proposal put forth by one party to another, with the intention of establishing a legal association, underpinned by lawful consideration and unobstructed concurrence.

Definition of Acceptance

Acceptance is the act of assenting or granting consent in response to an offer. It is undertaken by the recipient of the offer.

Within the realm of contracts, acceptance constitutes a fundamental component. As explicated in Section 504 of the National Civil Code, acceptance pertains to the acknowledgment provided by the individual to whom the offer has been extended, aligning with the very essence of the offer.

According to S.W. Anson, the acceptance of an offer encompasses the verbal or behavioral expression of agreement with the terms set forth in the offer, conforming to the manner stipulated or implied by the offeror.

Types of Acceptance

Express Acceptance

Express acceptance denotes the explicit agreement to an offer, conveyed through written or spoken means.

The acceptance must be unconditional, faithfully adhering to the terms and conditions outlined in the offer.

Implied Acceptance

Implicit acceptance transpires through actions or conduct, signifying an acceptance. It materializes through the behavior and context of the party involved.

Principles of Acceptance

Acceptance of an offer necessitates adherence to specific principles, rendering the contract legally binding and enforceable:

1. An offer can only be accepted by the intended recipient.
2. The acceptance must be unambiguous, unconditional, and faithful to the terms outlined in the offer.
3. The method of acceptance should mirror the manner in which the offer was presented. In essence, the acceptance must be communicated to the offeror.
4. The communication of acceptance must be directed towards the offeror.
5. Acceptance should occur within a reasonable timeframe, adhering to customary or prescribed practices.
6. If an offer is renewed, the previously declined offer can still be accepted.

Termination or Expiry of Acceptance

Chapter 2 of the Provisions relating to Contracts and Other Obligations in the National Civil Code of 2017 outlines the modes through which acceptance terminates:

1. Through notice of revocation.
2. Due to the passage of time.
3. Through lack of communication.
4. Following the death or incapacity of the offeree.
5. Through a counter-offer.
6. In cases of non-fulfillment of stipulated terms.

Nepali Legal Framework on Offer and Acceptance

National Civil Code of 2017 Section 505 of the National Civil Code enlists the prerequisites for a legally enforceable contract:

1. Express consent
2. Capacity or qualification
3. Elements for creating obligations.
4. Lawful obligations.

The code acknowledges contracts in written or verbal form. Additionally, sections 508, 509, and 510 of the National Civil Code address the completion of offer and acceptance, revocation of offer or acceptance, and the revocation of an offer, respectively.

Case on Offer and Acceptance

Balfour vs. Balfour, 1919

It is commonly assumed that, prior to forming a contract, the involved parties possessed the intention to establish a legal relationship.

Rekha Kumari vs. Ratriya Banijya Bank, 2068

Invitations for proposals, auctions, bids, tender notices, and similar communications do not inherently constitute offers.

Himal Cement Company vs. Dhrub Bahadur Karki

Contractual acceptance gives rise to contractual liability, encompassing negligence or other forms of responsibility.

Conclusion

Offer and acceptance serve as the defining components of a contract, emblematic of contractual liability and responsibility.

The formulation of a valid contract necessitates both an offer and an acceptance by the respective parties.