Cross Offer and Counter Offer
In contract law, a cross-offer refers to a situation where two parties make offers to each other, and there is no acceptance of either offer. This type of situation can create confusion about whether a contract has been formed or not. In this note, we will discuss the concept of cross offers under the Indian Contract Act, 1872 and examine some landmark judgments related to cross offers.
Section 2(a) of the Indian Contract Act, 1872 defines an offer as
“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 an act or abstinence, he is said to make a proposal.”
What is a cross offer?
Cross offer arise when two parties make offers to each other simultaneously or almost simultaneously, and neither offer is accepted. In this situation, there is no contract as neither party has accepted the offer made by the other.
Tinn v Hoffman
This concept was explained in the case of Tinn v Hoffman (1873) LR 29 Ch D 271, where two parties, Tinn and Hoffman, were negotiating the sale of some iron goods. Tinn sent a letter offering to sell the goods to Hoffman at a particular price, and Hoffman replied with a letter offering to buy the same goods at a lower price.
Tinn did not accept Hoffman’s offer, and Hoffman did not accept Tinn’s offer. The court held that there was no contract as neither party had accepted the other party’s offer.
Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas and Co.
The concept of cross offers was further explained in the case of Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas and Co. (1966) AIR 1966 SC 543. In this case, the plaintiff and the defendant exchanged several letters negotiating the sale of certain goods. The plaintiff offered to sell the goods to the defendant, and the defendant made a counteroffer to buy the same goods at a lower price.
The plaintiff did not accept the defendant’s offer, and the defendant did not accept the plaintiff’s offer. The court held that there was no contract as both parties had made cross offers, and neither offer was accepted.
A counteroffer is an offer made in response to an initial offer made by the other party. It is a rejection of the original offer and a new proposal made by the offeree. In other words, the offeree rejects the initial offer and proposes different terms, indicating a willingness to enter into a contract on those terms. This is because a counter-offer modifies the terms of the original offer and proposes new terms, thus becoming a new offer altogether.
For instance, if Party A offers to sell a car to Party B for $10,000, and Party B responds by saying they are willing to buy the car for $9,000, this would be a counter-offer. Party B is rejecting the initial offer and proposing a new offer with different terms.
It is important to note that a counter offer terminates the initial offer and creates a new offer. Therefore, the original offer cannot be accepted after a counter offer has been made, unless the original offeror accepts the counter-offer.
There are several landmark cases related to counter offers, such as Hyde v Wrench (1840) and Stevenson, Jaques & Co. v McLean (1880). These cases have helped to establish the legal principles surrounding counter offers in contract law.
Hyde v Wrench (1840) 3 Beav 334
In this case, Wrench made an offer to sell his farm to Hyde for £1,000. Hyde made a counteroffer of £950, which Wrench rejected. Hyde then attempted to accept Wrench’s original offer of £1,000, but Wrench refused to sell the farm. The court held that there was no contract as Hyde’s counteroffer of £950 had terminated Wrench’s original offer, and therefore, Hyde’s attempted acceptance of the original offer was not valid.
Cross Offer v. Counter Offer
Cross-offer and counter-offer are two distinct concepts in contract law. While a cross-offer refers to a situation where two parties simultaneously make identical offers to each other, a counter-offer is a response made by one party to an initial offer by the other party that changes the terms of the original offer.
A cross-offer occurs when two parties make identical offers to each other, without either party knowing about the other’s offer. In such a situation, there is no acceptance because both parties are making offers at the same time, and neither party has had the opportunity to accept or reject the other’s offer.
This is because acceptance requires an unequivocal expression of agreement to the terms of the offer. In a cross-offer situation, there is no such clear agreement because both parties are simultaneously making identical offers to each other.
On the other hand, a counter-offer is a response made by one party to an initial offer made by the other party that changes the terms of the original offer. In other words, it is a rejection of the initial offer and a simultaneous making of a new offer.
This new offer becomes the basis of any subsequent agreement. For example, if Party A offers to sell a car to Party B for $10,000, and Party B responds by saying that they will only buy the car for $9,000, Party B has made a counter-offer.
The difference between a cross-offer and a counter-offer lies in the fact that in a cross-offer, there is no acceptance. In contrast, in a counter-offer, there is a rejection of the initial offer and a simultaneous making of a new offer.
This means that a counter-offer terminates the initial offer, and the offeree cannot subsequently accept the original offer. In contrast, a cross-offer does not terminate either offer, and both parties are free to accept or reject the other’s offer.
There have been several landmark cases dealing with cross-offers in India. In the case of Lalman Shukla v. Gauri Dutt (1913), the court held that a cross-offer does not result in a valid contract because neither party has accepted the other’s offer.
Similarly, in the case of Bengal Coal Co v Homee Wadia & Co (1909), the court held that a cross-offer does not result in a contract because there is no clear acceptance of either offer.
It is important to note that cross-offers can also occur unintentionally. For example, if Party A offers to sell a car to Party B for $10,000, and Party B simultaneously offers to buy the same car from Party A for $10,000, a cross-offer situation arises. In such cases, it is important to clarify the terms of the offer to avoid any confusion or misunderstanding.
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