OFFER AND ACCEPTANCE

Offer and Acceptance is the first essential of a valid contract. The words ‘offer’ and
‘proposal’ are synonymous. To create an agreement there must be a definite offer by one
party and its acceptance by the other.
OFFER
According to Sec. 2(a) of the Indian contract Act defines ‘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 act or abstinence, he is said to make a proposal.”
Elements of Offer are as follows:
- There must be an expression of willingness to do or to abstain from doing something
- This expression must be made to another person
- The expression must be made with a view to obtain the assent/ approval of the
other person regarding the act
The person making the proposal is called ‘promisor’ or ‘offeror’. The person to whom the
offer is made is called ‘ promisee’ or ‘acceptor’.
RULES REGARDING A VALID OFFER
An offer to be valid must have the following essentials:
1. An offer may be ‘express’ or ‘implied’: An offer may be made either by words or
conduct. An offer expressed by words, written or spoken is called an ‘express offer’.
An offer may be implied from the conduct of the parties or circumstances of the
case, it is called an ‘implied offer’.
2. An offer may be specific or general: A general offer is one which is made to the
world at large and maybe accepted by anyone who fulfils the requisite conditions. A
specific offer is made to definite/ particular person or persons.
Case Law- (General offer) Carlill Vs. Carbolic Smoke Ball Co. 1893
3. An offer must give rise to legal obligation: An offer to be valid must create legal
relationship between the parties. The very purpose of entering into an agreement is
to make it enforceable at a court of law.
4. The terms of the offer must be definite and certain: The terms/ clause of an offer
should not be vague or indefinite.
 5. The offer must be communicated: An offer must be communicated to the person for
whom it is made. There can be no acceptance without the knowledge of the
existence of an offer.
Case Law- Lalman Shukla Vs. Gauridutt, 1913
Communication of Special terms: It as extension of rule no. 9, this requires that the
special terms of the offer must be specially brought to the notice of the person to
whom it is made, otherwise the terms are not binding on the acceptor.
Case Law- Henderson Vs. Stevenson
6. An offer must be distinguished from an invitation to offer: Where a party proposes
certain terms on a person with whom he is willing to negotiate, he does not make an
offer, but merely invites the other party to make an offer. Examples Advertisements,
prospectus, price tags, catalogues etc.
7. An offer should not contain a term the non-compliance of which would amount to
acceptance.
8. The offer must be made with a view to obtaining the consent of the other party.
9. Two identical cross offers do not create a contract: When two parties make
identical offers to each other, in ignorance of each other’s offer, the offers are ‘cross
offers’. Cross-offers do not constitute of one’s offer by the other and as such there is
no completed.
10. An offer can be made subject to any terms and conditions: An offeror can attach
any terms and conditions to the offer he is making. Eg. Prescribing a mode of
acceptance
KINDS OF OFFER
1. Standing Offer: A continuous offer is known as Standing offer.
2. Specific Offer: Sometimes tenders are invited for the supply of specific quantity of
goods or service. In such case when accepted it becomes a contract.
3. Cross Offer: When two parties make similar offers to each other without knowing
the offer made by the other. In such a case no binding contract will be created as no
one has accepted the offer made by the other.
ACCEPTANCE
Acceptance indicates the willingness of the party to whom the offer has been made to agree
to the terms of the offer. According to Sec 2(b) of the act acceptance is , “when the person
to whom the proposal is made signifies his assent thereto, the proposal is said to be
accepted.”

LEGAL RULES REGARDING ACCEPTANCE

1. The proposal must be accepted to whom it is made: An offer can be accepted only
by the person or persons to whom it is made. However, in the case of a general
offer, acceptance can be accepted by any person who has the knowledge of the
offer.
2. Acceptance may be either express or implied, unless the manner of acceptance has
been prescribed: The acceptance must be communicated according to some usual
and reasonable manner, if the offeror has not prescribed any mode of acceptance.
Where the offeror has prescribed any mode of acceptance it must be accepted in
that mode/manner.
It should be noted that law does not allow an offeror to prescribe ‘silence’ as the
mode of acceptance.
3. Acceptance must be absolute and unqualified: The acceptance of the offer must be
in totality i.e. all the terms of the offer must be accepted. A qualified i.e. conditional
acceptance will be counter offer and not an acceptance.
4. The offer must be communicated: An offer must be communicated to the person to
whom it is made. A person can accept the offer only when he knows about it.
Case law- Powell Vs. Lee 1908
5. Acceptance must be communicated by the acceptor/ offeree: Acceptance must be
communicated by, or with the authority of, the offeree to the offeror.
6. Mental Acceptance is no acceptance: Mental acceptance or quiet assent not
supported by words or conduct does not amount to a valid acceptance.
Case law- Borgden Vs. Metropolitan Railway Co 1877
7. Acceptance must be given within Specified Time or Reasonable time: If the terms of
the offer specify certain period within which the offer has to be accepted, the
acceptance must be accepted within that specified time. Where no time has been
specified, the acceptance must be communicated within a reasonable time.
‘Reasonable time’ would depend upon the facts particular case.
Case Law- Ramsgate Victoria Hotel Vs. Montefiore
 8. Acceptance must be given before the offer lapses or is revoked: It is important that
the offer should be accepted before it lapses or is revoked or withdrawn by the party
making the offer.
9. Acceptance must be made with an intention to fulfil the terms.
10. Acceptance must succeed the offer: Acceptance must be given after receiving the
offer. It should not precede the offer.
11. Rejected offers can be accepted only, if renewed: offer once rejected cannot be
accepted again unless a fresh offer is made.

MODES OF RECOVOCATION OF PROPOSAL Section 5

According to section 5, an offer may be revoked at any time before its acceptance is complete as
against the proposer but not afterwards.
Methods of Revocation of Offer (Section 6)
1. By communication of notice of revocation
2. By lapse of time within which the offer was to be accepted
3. By failure of the offeree to fulfil a condition precedent to acceptance
4. By the death or insanity of the proposer provided the acceptor comes to know of it before
acceptance
5. An offer may be accepted or rejected. Rejection of the offer may be of the following two
types:
Express rejection- Rejection by words spoken or written
Implied rejection- i. Counter offer made by the offeree
ii. Conditional or qualified acceptance given by the offeree
6. By counter offer of the offeree
REVOCATION BY ACCEPTANCE SECTION 5
An acceptance may be revoked at any time before the communication of acceptance is complete as
against the acceptor but not afterwards.
Communication of Revocation Section 4
The communication of a revocation is complete:
- As against the person who makes it, when it is put into a course of transmission to the
person to whom it is made, so as to be out of the power of the person who makes it
- As against the person to whom it is made, when it comes to his knowledge
Eg when a letter of revocation is posted (i) and when the letter of revocation is received by the person
against whom it is made
Time during which an offer or acceptance can be revoked:
A proposal may be revoked any time before the communication of its acceptance is complete as
against the proposer, but not afterwards.
An acceptance can revoked at any time before the communication of acceptance is complete as
against the acceptor, but not afterwards.