Offer and Acceptance – Indian Contract Act- 1872

Offer and Acceptance – Indian Contract Act- 1872: Our Legal World

Proposal or Offer

A proposal and its acceptance is the universally acknowledged process for the making of an agreement[1]. In other words, there must be an offer and acceptance to constitute a contract. The proposal is the starting point and Section 2(a) of the Indian Contract Act, 1872 defines “proposal or offer” as follows:

“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.”[2]

The person who makes the proposal is known as the ‘promisor’ or ‘offeror’, and the person to whom it is made is known as the ‘promisee’ or ‘offeree’ and when he accepts it , he is called as a ‘promisee’.

Essential Elements of a Valid offer

1. It must be communicated to the offeree

The proposal should be communicated to the other party or it can be called as communication of proposal is compulsory. For a proposal to be completed it must be clearly communicated to the person to whom it is made i.e. offeree. No offer can accept the proposal without knowledge of the offer[3].

Also Read: VOID AGREEMENT UNDER SECTION 24 to 30 OF INDIAN CONTRACT ACT, 1872

2. There must be two parties

There must be two parties i.e. a person to make proposal is required and the other person to accept it is also required to make a valid offer. There is no hard and fast rule for the type of persons, legal or artificial person all are included in person[4].

3. It must create legal relation

If an offer not lead to a contract that creates legal relations like social contracts, then it will not be a valid offer. So it is necessary that offer must lead to a contract that creates legal relations and legal consequences in case of non-performance.

4. It must be definite and clear

No contract will come into existence if the terms of the offer should be vague or unclear. Therefore, the offer or proposal must be clear certain and definite.

5. It may be specific or general

Both specified and general offer or proposal are valid. Offer made to a specific person or group of persons, it is known as specific offer whereas when an offer which is made to public in general is known as general offer.

Case laws

In Balfour v. Balfour[5], the husband and wife went to England from Ceylon on leave but due to health problem wife was unable to accompany the husband Ceylon. Her husband promised to pay £30 a month as maintenance until she come back to Ceylon. The husband failed to pay the said amount and was sued by his wife. It was held that there was no intention between the parties to create legal relationship, therefore the husband was not liable to pay the amount.

In Lalman Shukla v. Gauri Dutta[6], the defendant’s nephew absconded from home and in search of the missing boy, the servant(plaintiff) was sent by the defendant. Meanwhile, the defendant announcing a reward of Rs. 501 and issued handbills to anyone who find out the boy. The servant was successful in searching the boy but he was unaware about the reward and when he came to know about the same, he claim the reward. The court held that he was not entitled to claim the reward as the servant was ignorant of the offer and accordingly his act of searching the boy did not amount to the acceptance of the offer.

In the case of Carlill v. Carbolic Smoke Ball & Co[7], the defendant advertised Carbolic Smoke Ball as a preventive remedy against influenza and they also offered to pay £100 as reward to anyone who after using the product, contracted influenza, cold or any disease. The plaintiff still caught influenza after using the product. Thus, she sued the defendants to claim the said reward. It was held that the plaintiff was held entitled to claim reward as the reward is considered as general offer.

Acceptance

Section 2(b) of the Indian Contract Act, 1872 defines the acceptance as follows:

“When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.”[8]

Thus “acceptance” is the assent given to a proposal, and it has the effect of converting the proposal into promise[9].

Essential Elements of a Valid Acceptance

1. It must be communicated

For a valid contract, the acceptance must be clearly communicated to the offeror. Mere expression of intention regarding the acceptance of an offer or proposal is not a valid acceptance.

2. It must be absolute and unqualified

Section 7 of the Indian Contract Act, 1872 requires that the acceptance must be absolute and unqualified. Thus, a valid contract arises only if the acceptance is absolute and unconditional. No conditional acceptance leads to a valid acceptance because the same would amount to counteroffer and it nullifies the offer.

3. It must be in a prescribed Manner

Acceptance of the proposal must be in the prescribed manner that is demanded by the offeror. If the offeror in his offer has not prescribed any particular manner, then acceptance should be made in a reasonable and usual manner.

4. It may be express or implied

Acceptance may be express or implied. When an acceptance is given by words spoken or written, it is known as express acceptance and when it is given by conduct, it is known as implied acceptance.

Case Laws

In Felthouse v. Bindley[10], it was held that the acceptance should be communicated to the offeree and also the offeror cannot impose duty to reply on offeree. Therefore, an offeror cannot say that failure to reply will be considered as the acceptance of offer.

In Sewak Ram & Ors. v. Municipal Board[11], two parties agreed upon the terms of a contract of sale, “contract in due course” was the word used for concluding the writing. The court held that it is not concluded the contract.

Conclusion

Thus, offer and acceptance are the essential elements of a contract. If either the offer or acceptance is lacking it leads to no agreement as the formation of a valid contract requires the agreement of the parties and it consists of an offer and acceptance i.e. a lawful offer by one party(offeror) and on the other hand a lawful acceptance by the other party(offeree).

References

  • [1] Avtar Singh, Contract & Specific Relief, Page- 5, 12th Edition, EBC Publishing (P) Ltd.

  • [2] https://indiankanoon.org/doc/831280/

  •  [3] https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-i/proposal-or-offer/

  • [4] https://www.srdlawnotes.com/2017/06/what-is-offer-what-are-essential.html

  • [5] [1919] 2 KB 571

  • [6] 1913 40 ALJ 489

  • [7] [1893] 1 QB 256

  • [8] https://indiankanoon.org/doc/1845680/

  • [9] Avtar Singh, Contract & Specific Relief, Page- 24, 12th Edition, EBC Publishing (P) Ltd.

  • [10] [1862] EWHC CP J35

  • [11] AIR 1937 All 328