Question

Legal Principle: A counter offer does not give rise to contractual binding.

Factual Situation: D wrote to P on 28 November, 1971, offering to sell 800 tonnes of iron at Rs.6,900 per tonne. On the same day, P wrote to D offering to buy 800 tonnes of iron Rs.6,900 per tonne. The two letters crossed in post and neither of them knew any thing about the offer to the other. P contended that there was a good contract.

Issue: What is the nature of contract and liabilities of the parties?

• A. There was no valid contract because an agreement results into a contract when there is an offer from one side and its acceptance from the other side, so no question of any liability rises.
• B. It is a voidable contract at the option of D because D had offered to sell the product.
• C. It is voidable contract at the option of P because P had offered to buy the product.
• D. None of these.

Answer 1

Answer: (A)

There was no valid contract because an agreement results into a contract when there is an offer from one side and its acceptance from the other side, so no question of any liability rises.

Here there is no contract as one of the essential elements for constituting a contract is that there should be an offer and it should be accompanied by an acceptance to it. As it can be noted in the given circumstances that both P and D gave offer to each other which are identical in all the respect this does not constitute a contract as it is just an offer from both the sides ( P and D) and there is no acceptance from any of them. This might constitute a contract only when one of them asserts to it, meaning gives acceptance to it. A cross offer is just an offer until and unless someone gives acceptance to it.