A proposal is also called an
offer. The promisor or the
person making the offer is
called the offeror. The
person to whom the offer is
made is called the offeree.
An offer can be accepted only by
the person or persons for whom the
offer is intended. An offer made to
a particular person can only be
accepted by him because he is the
only person intended to accept.
A contract is an agreement
enforceable at law made between
two or more persons, by which
rights are acquired by one or
more to acts or forbearances on
the part of the other or others.
 An Offer Maybe An offer maybe Terms must be certain,
Legal relationship
Expressed/ Implied To a definite definite, unambiguous
is required
Individual/ class & not vague

A mere statement of An offer must be Printed Contracts

An offer may
intention is not communicated With Terms &
be conditional
an offer to the offeree Conditions
Express Offer: When an offer is made by stating so in words or in writing
Implied Offer: When an offer is implied from the conduct of a person

Implied Offer Example: A person who buys a product from a

seller assumes that the product functions properly
without the seller explicitly claiming that
the product works.
Specific Offer: An offer made to a definite person or a definite class of people
General Offer: An offer sent to all persons (or the world at large)

General Offer Example: A transport company runs Railway Trains in the city.
This is an offer by the company to carry passengers at the scheduled fares.
The offer is accepted when a passenger gets up on a train with the
Intention of becoming a passenger.
The offer must be one which is capable of creating a legal relationship.
A social party or an invitation to play cards is not.

Binding Contract Example: Agreement that adheres to the rules that govern a
contract, which technically can range from a rental lease agreement
to buying groceries at the super store. The contracts are
protected by the constitution of the country.
Certain & Definite: Clearly expressed and stated usually in writing for the offeree.
Unambiguous & Not Vague: There should be no reading between the lines in the offer.

Example: A offered to sell B, a hundred tons of oil. The offer does not specify
the type of oil for sale. Thus, the offer is vague,
ambiguous and uncertain. Therefore,
the offer is invalid.
Offer: An understanding between two parties has been reached.
Statement of Intention: Invitation to others to make offers.

Example of Transition between intention to offer acceptance: In an auction,

the articles displayed are with an intention for invitation of offers
from prospective bidders. Therefore, when the hammer falls
on a bid with the most price, the offer is accepted.
The offeree must deliberately know the existence of the offer with the full implications.
Ignorance in such matters is seen adversely by the court of law.

Example: G sent his servant L in search of his missing nephew . Subsequently,

G announced a reward for information concerning the boy. L brought back
the missing boy, without having known of the reward. Held, there was
no contract between Land G and the reward cannot be claimed.
The offeror cannot claim fulfilment of the conditions if the offeree does not know them.
The offeree cannot plead ignorance of the conditions if clearly stated/ expressed.

Strict Enforcement Example: X agreed to buy goods from Y and signed an order
form given by Y containing a number of clauses in small print, without reading
them. Held, clauses were binding on X.
(L‘Strange v. Graucob Ltd.)
A standard form contract is a contract, which does not allow for negotiation.
It is often a contract that is entered into between unequal bargaining partners.

Example: Adhesion contract is a standardized contract form that offers goods or services
to consumers on essentially a "take it or leave it" basis without giving consumers realistic
opportunities to negotiate terms that would benefit their interests. When this occurs,
the customer has to acquiesce to the demands set by the corporation.
Acceptance:
The action of consenting to receive or undertake something offered.

Who can accept?

- An offer can be accepted only by the person or persons for whom the
offer is intended.

- An offer made to a class of persons can be accepted by any member

of that class (Remember? Offers can be general and specific?)

- An offer made to the world at large can be accepted by any person

whatsoever.
Rules of Acceptance:
What it takes for an acceptance to be legally effective?
1. It must be an absolute and unqualified acceptance of all the terms
of the offer.
2. Conditional Acceptance: An acceptance with a variation is no
acceptance; it is simply a counter-proposal.
3. Contracts subject to condition
4. Clarification: asking for a clarification in the offer is not an
acceptance
5. The acceptance must be expressed in some usual or reasonable
manner
• Oral or by writing
• Conduct
 Rules of Acceptance (continued):
6. Mental acceptance or uncommunicated acceptance does not result
in a contract.
7. The mode of acceptance
8. Time of acceptance
9. When acceptance is complete: when it is communicated
10. There cannot be acceptance before the offer.
11. The acceptance must be made while the offer is in force.
 Communication of Offer and Acceptance:

How is an Offer to be Communicated?

An offer may be communicated to the offeree or offerees by
word of mouth
by writing
by conduct
Offer and Acceptance by Post

• An Offer can be both made and accepted by post

• When a proposal is made through a post, the post office is the agent of the proposer
• To accept a proposal via post:
→ the letter must be correctly addressed
→ the letter must be posted

Example 1: X applied for shares in a company. A letter of allotment was posted but
the letter did not reach X. Held there was a binding contract and X was a
shareholder of the company

Example 2: A registered envelope was tendered by the postman to the addressee.

who refused to accept it. It is to be presumed that the addressee has the
knowledge of the content thereof
Offer and Acceptance through Telephone

• An Offer can be both made and accepted by orally over telephone

• The offer and acceptance must be:
→ audible
→ heard
→ understood

✓ If these conditions are satisfied and the other essential elements of contract exist, the
parties are bound through a telephone conversation
✓ Offer made using telex or teleprinted is also valid
✓ Microphones are not yet the carrier of bounded representations
 Options

An “option” is a conditional contract to do something

Example: Suppose that P the owner of a house, agrees in consideration of Rs. 200, to give Q an option to buy
the house within six months at a certain price. This is a contract binding upon P to allow Q to purchase the
house at the agreed price at any time within six months. A promise to keep an offer open to acceptance for a
certain time is not binding on the proposer unless there is a consideration separately given for that
promise, as in the example given above.
STANDING CONTRACT AND OPEN PROPOSALS
Definition
• Contracts for the supply of goods
over a period of time are some times
so worded that the buyer has an
option as regards the quantity to be
purchased and the time of purchase.
Such contracts are called "Standing
Contracts" or "Open Proposals
Example
• P signed a tender addressed to the London
County Council, agreeing, on acceptance, to
supply. all the goods specified in the schedule,
to the extent ordered.
• The tender was accepted but the L. C. C. did
not order any goods. Held, the L. C. C. was not
bound to order any goods, but if it did so, P
was bound to deliver the goods as and when
ordered. In such cases as above. a contract
comes into existence when a definite quantity
is ordered.
Revocation of an Offer (When does an Offer Lapse?)

1. By notice
• If the offerer gives notice of revocation to the other party.
• An offer may be revoked any time before acceptance. but not
afterwards
• Once an offer is accepted there is a binding contract,
• The proposal might have been revoked any time before the letter of
acceptance was posted but it cannot be revoked after the letter is
posted.

2. By lapse of time
• When the proposer prescribes a time within which the proposal must
be accepted, the proposal lapses as soon as the time expires
Revocation of an Offer (When does an Offer Lapse?)

3. By death or insanity
• An offer lapses by the death or insanity of the proposer, if the fact of
his death or insanity comes to the knowledge of the acceptor before
acceptance.

4. Counter Offer
• When a counter offer is given, the original offer lapse. See the Case of
Hyde v. Wrench. (Page 23)
Revocation of an Offer (When does an Offer Lapse?)

5. After expiry of reasonable time

• If no time has been prescribed, the proposal lapses after the expiry of a
reasonable time, What is reasonable time will depend on the circumstances
of the case
• On 8th June, M offered to take shares in R company, He received a letter of
allotment on 23rd November, M refused to take the shares, Held, M was
entitled to refuse as the offer had lapsed by the delay in acceptance

6. By failure of a condition precedent

• An offer lapses by the failure of the acceptor to fulfil a condition precedent to
acceptance, where such a condition has been prescribed.
• P says to Q. "I will sell my house at Delhi to you for Rs. 50,000 if you are
married." The offer cannot be accepted until and unless Q is married.
Revocation of Acceptance

Definition Section 5 of the Contract Act provides that an acceptance can be

revoked any time before the acceptance comes to the
knowledge of the proposer but not afterwards.

P proposes, by a letter sent by post, to sell his house to Q. Q

Example accepts the proposal by a letter sent by post. Q may revoke his
acceptance any .time before the letter communicating it reaches
P but not afterwards.

The English law on this point is different. Under English law an

Elaboration acceptance is irrevocable once it is put in course of
communication to the offerer. Thus in the above example Q
could not have revoked the acceptance once he had posted the
letter of acceptance.
Communication of Revocation

Section 3 According to Section 3 of the Act. the revocation of a proposal

or an acceptance is deemed to be made by any act or omission
of the party by which he intends to communicate such
revocation, or which has the effect of communicating it.

According to Section 4 of the Act, the communication of

Section 4 revocation is completes 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

Example P makes a proposal to Q. Q sends a letter of acceptance.

Subsequently Q revokes his acceptance by telegram. Q's
revocation is complete, as against Q when the telegram is
dispatched, and as against P when it reaches him.