Question

Legal Principle: A counter offer does not give rise to contractual binding.
Factual Situation: A offered to sell a farm for $pounds$ 1,000, X said he would give $pounds$ 950. A refused and X then said he would give $pounds$1,000, and when A declined to adhere to his original offer tried to obtain specific performance.
Issue: Is there a valid contract between A and X?

• A. There is not valid contract as X's offer to pay $pounds$ 950 is a refusal of the offer and a counter offer.
• B. There is a valid contract and A is liable for specific performance.
• C. It is voidable contract at the option of X.
• D. None of these.

Answer 1

The correct option is A There is not valid contract as X's offer to pay $pounds$ 950 is a refusal of the offer and a counter offer.

• The Indian Contract Act, 1872 distinguishes between an offer and an invitation to offer. Section 2(a) of the Act defines a proposal or an offer as: when one person conveys his willingness to do or abstain from doing something for the purpose of obtaining the other person's assent to such act or abstinence, he is said to make a proposal or offer.' But an invitation to offer is one where the person calls for an offer or proposal. There must be an intention on the part of the offeror to enter into contract after making the offer.
  
• The present case represents a landmark case of Col. DI McPherson v MN Appanna (1951), where the defendant agent had offered to sell a lodge for Rs 10,000. The plaintiffs replied that they were ready to purchase it if sold at Rs. 6000. But the agent replied that he would not sell it at less than Rs. 10,000. The plaintiffs agreed this time and expressed their willingness to buy. The defendant refused to sell. It was held by the Supreme Court that there was no offer or counter-offer but only an invitation to offer by the defendant to which the final offer was made by the plaintiff. The defendant did not assent to this final offer of Rs. 10,000 so no conclusive contract was made. In the absence of contract there cannot be any specific performance.