Formation of a Contract with Special Focus on Offer and Acceptance and their Interpretation and Application in Pakistan

Abstract

This paper discusses a contract, an agreement, the differences between the two, how a contract is formed, what the two different types of contracts are, what are the elements of a contract, what is an offer, how has it been defined by our domestic law and how our Superior Courts interpret the same? It also examines whether there can be an offer to the public at large; what is an invitation to treat; and what is the difference between an offer and invitation to treat. What an acceptance is, how both offer and acceptance are to be communicated, how an offer can be terminated. The main findings of this work are that a contract is a legally binding agreement; that a contract has elements in it which distinguishes it from an agreement, namely consent, capacity/competence, consideration and lawful objectives; that a contract is formed by an offer, unqualified acceptance, consent of both parties who should have the capacity to enter into a contract or be competent under the law to be able to contract; that both parties should be able to give consideration to one another and the objective of the contract should be lawful; that an offer is a statement of the terms and conditions through which the offeror is ready to be bound; that a counter offer is the adding of a condition or not accepting a particular condition of the original offer, hence terminating the original offer and also making a new offer; that the other way to terminate an offer is by revoking it, that is to say taking it back or withdrawing it before it is accepted. Problems arises when the offer is accepted through the post but since the offeror does not know about it, he withdraws his offer through a letter of his own. In other words, the offeror genuinely believes that he has withdrawn his offer whereas the offeree thinks that he has accepted the offer and that there is a contract. This is where the famous postal rule applies; that an offer can be communicated both expressly or by implication. An acceptance is the unconditional assent to all the terms and conditions of the offer. That an acceptance like offer can be both express or implied and that it can be revoked like an offer as well. Finally, the Hon’ble Superior Courts of Pakistan have interpreted and applied all the essential aspects of an offer and acceptance since the birth of Pakistan.

Keywords: Contract, Agreement, Elements, Offer, Acceptance, Mutual consent, Competence, Consideration, Lawful Objective