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Introduction
Contracts play an important role in our everyday life ranging from insurance
policies to employment contracts. In Fact, we enter into contracts even without
thinking for example while buying a movie ticket or downloading an app.
Contracts are oral or written agreements between two or more parties. Parties
entering into a contract might include individual people, companies, non-profits
or government agencies. The whole process of entering into a contract starts
with an offer by one party, an acceptance by another party, and an exchange of
consideration (something of value). Let us take a look at the definition of an
offer and the essentials of a valid offer.
Definition of an offer
The person who makes an offer is called “Offerer” or “ Promiser” and the person
to whom the offer is made is called the “Offeree” or “Promisee”.
Example-Ram offers Shyam to sell fruits worth Rs 600/-. This is not a valid
offer since what kinds of fruits or their specific quantities are not mentioned.
(2) By conduct
The offer may be communicated by making positive acts or signs to the offeree.
However, the silence of a party does not amount to an offer.
Example– When you board a taxi, you are accepting to pay the taxi fare via
your conduct.
An offer is defined in section 2 (a) of the Indian Contract Act, 1872. Conversely,
an invitation to offer is not defined in the Indian Contract Act, 1872.
The major difference between the two is that the purpose of an offer is to enter
into a contract whereas the purpose of an invitation to offer is to receive an
offer in order to enter into a contract.
Therefore an offer is the final willingness of the party to create legal relations.
An invitation to offer is not the final willingness but the interest of the party to
invite the public to offer him.
Case Laws
Mr. Balflour was a civil engineer and worked for the government as the Director
of Irrigation in Ceylon(now Sri Lanka).In 1915 both of them came back to
England when Mr. Balflour was on leave but due to an illness(arthritis) of Mrs.
Balfour, she was unable to come back to Ceylon with her husband. The husband
promised to pay 30 euros per month to his wife until she rejoined him in
Ceylon. The husband failed to pay her the said amount hence the wife sued him
for the amount. The court held that the husband was not liable as there
was no intention to create a legal relationship.
Mrs. Violet Laglee Jones agreed with her daughter Mrs. Ruby Padavatton that if
she would give up her job in the USA and studied for the bar exam in England,
the mother would pay her an allowance of 200$ per month. In 1964 the mother
bought a house and varied the agreement by giving the daughter a part of the
house to stay and a part to rent so as to cover her expenses and her
maintenance. In 1967 the parties had an argument and as a consequence, the
mother brought an action for the possession of the house. The mother based
her claim on the allegation that the agreement was not made with the intention
of creating a legal relationship. It was held that there was no intention to
create a legal relationship and gave possession to the mother.
Definition of Acceptance
The Indian Contract Act 1872 defines acceptance in Section 2 (b) as “When the
person to whom the proposal has been made signifies his assent thereto, the
offer is said to be accepted. Thus the proposal when accepted becomes a
promise.”
Example -Anita offers to buy Priya’s car for Rs.10 lakhs and Priya accepts such
an offer. Now, this has become a promise.
Section 7 of The Indian Contract Act,1872 lays down two essentials of a valid
acceptance.
If the offeror does not describe any prescribed manner then it must be
expressed in the normal and reasonable manner, i.e. as it would be in the
normal course of business.
Difference between an acceptance and a counter offer
A counter offer is an offeree’s new offer that varies the terms of the original
offer and therefore, constitutes a rejection of the original offer.
Case Laws
Conclusion
Offer and acceptance analysis is a traditional approach in contract law used to
determine whether an agreement exists between two parties. An offer is an
indication by one person to another of their willingness to contract on certain
terms without further negotiations. A contract is then formed if there is an
express or implied agreement. A contract is said to come into existence when
acceptance of an offer has been communicated to the offeror by the offeree.