The Concept of Offer and Acceptance under the Indian Contract Law

Introduction

An agreement enforceable by law becomes a contract. It involves both rights and obligations. An agreement involves promises from both sides, and thus, there is the creation of both rights and obligations. The agreement between the parties is one of the essentials of a valid contract. The constitution of an offer occurs by an offer or the proposal by one of the parties and the acceptance of such an offer or proposal by the other party. Offers refer to the significance of willingness by one party to a contract to do or abstain from doing anything, with a motive to obtain the assent of the other party to such act or abstinence. Acceptance refers to the significance of the assent by one party to the proposal made by the other party and if such assent is signified, the proposal is said to be accepted and such accepted proposal is called a promise.

The distinction between Offer and Invitation to Offer

There is a distinction between an offer and an invitation to offer. The offer and acceptance of the offer are essential for the constitution of a valid contract. An offer, as defined above, refers to signifying willingness to do or to abstain from doing something and to obtain the assent of others to such an act or abstinence. In case of an invitation to offer/treat, there is an offer to negotiate or may be considered as an offer to receive offers. When a party, without expressing his/her final willingness, offers/proposes certain terms on which he is willing to negotiate, he/she is only making an invitation to the other party to make an offer on those terms.

Intention to Create a Legal Relationship: An Essential of a Valid Offer

An important essential of a valid offer is the intention to create a legal relationship, that is, the parties must have intended their agreement to be legally binding. A mere social contract arrangement, such as an agreement with a friend to meet for a meal or visit a cinema will not be treated as a contract because of the lack of intention to create a legal relationship.

Communication of the offer: An Essential of a Valid Offer

Another important essential of a valid offer is the communication of the offer. An offer is valid only when it is brought to the notice of the offeree. The communication of the offer can be both expressed or implied. The communication of the offer has been elaborated in section 4 of the Indian Contract Act, 1872 which states that the communication of the offer is complete when it comes to the awareness/knowledge of the offeree. It has been stated that acting in ignorance of the offer will not amount to the acceptance of the offer. 

Classification of Offer

There are many kinds of offers such as general and specific offers, express and implied offers, cross offers, counteroffers, etc. A general offer is accepted by any person, that is, the offer is made to the public at large, then such an offer is called a general offer. For instance, the reward for an individual who finds a lost commodity is a general offer as the reward will be given to anyone who finds the lost commodity. Specific offer, on the other hand, is made to a specific person or a group of persons and can be accepted by the same, not by anyone else. For instance, A offers to sell his plot of land to B. In this case, the offer is made to a specific person, that is, Y and thus, it is a specific offer.

An express offer is an offer made by the express words, written or spoken. For instance, A offers to sell his car to B for Rs. 200,000 by sending him a letter containing the offer. This is an expressed offer. Implied offer, on the other hand, may be derived from the actions or circumstances of the parties. For instance, entering the bus for reaching a certain place is acceptance of the offer to pay the ticket fare indicates an implied acceptance of the offer. 

Cross offer arises when the offers made by two parties to each other contain similar terms of bargain cross each other in the post. It means that both the parties make the same offer at the exact time to each other. A counteroffer is an answer given to an initial offer or proposal. A counteroffer signifies the rejection and subsequent replacement of the original offer by another offer. 

Essentials of a Valid Acceptance 

Just like an offer, certain essentials need to be fulfilled to ensure the valid acceptance of the offer made. These essentials are: 

1. Acceptance Shall Be Communicated To The Offeror By The Offeree

If the offeree just accepts the offer without communicating the same to the offeror, then it cannot be considered a valid acceptance. In case the parties are face to face, then the communication can be oral and when the parties are at a distant place, then communication of the acceptance can be made through telegram, post, or any other reasonable manner. Acceptance can also be implied. Thus, to constitute a valid contract, acceptance of the offer and the intimation of the same to the offeror by some external manifestation, which the law regards as reasonable and sufficient is necessary. 

2. Acceptance Should be Absolute And Unqualified

The basic contention behind this necessity is to state that a rejection or a counteroffer would not amount to acceptance of the offer. Acceptance must be absolute and unqualified to constitute a valid acceptance. The offeree’s acceptance of the offer should be unconditional. For instance, if the letter of acceptance contemplates future negotiations for the finalization of the terms and conditions of the contract, then there exists no contract as the acceptance is not valid.

3. Acceptance Should be Expressed in a Usual/Prescribed Manner

It has been stated in section 7(2) of the Indian Contract Act, 1872 that acceptance should be expressed in some usual or reasonable manner, in case, there is no prescribed manner of acceptance mentioned in the agreement. The acceptance through telegram, post, and telephone are some examples of the usual manner of acceptance. It has also been held that a mere silence will not amount to the acceptance of the offer. But there are some exceptional situations where silence amounts to acceptance of the offer. 

4. Acceptance Should be Made while the Offer is still Subsisting

Another important essential of a valid acceptance is the acceptance of the offer while the offer is still existing. Under section 5, it has been stated that an offer can be invoked any time before the communication of the acceptance of the offer is complete. If the offer is revoked by the offeror or lapses because of reasons such as lapse of reasonable time, etc., then nothing can be done to accept the same. Thus, acceptance of the offer while the offer is still subsisting is an important essential of a valid acceptance. 

Conclusion

Offers refer to the significance of willingness by one party to a contract to do or abstain from doing anything, with a motive to obtain the assent of the other party to such act or abstinence. Acceptance refers to the significance of the assent by one party to the proposal made by the other party and if such assent is signified, the proposal is said to be accepted and such accepted proposal is called a promise.

Certain essentials need to be fulfilled to ensure the constitution of a valid offer such as an intention to create a legal relationship, communication of the offer, etc. There are several types of offers such as general and specific offers, expressed and implied offers counteroffers, cross offers standing offers, etc. 

Four essentials need to be fulfilled to ensure the valid acceptance of the offer made. These are: acceptance shall be communicated to the offeror by the offeree, acceptance should be absolute and unqualified, acceptance should be expressed in a usual/prescribed manner, and acceptance should be made while the offer is still subsisting. 

Edited by: Harsh Nath Tiwari

Approved by: Purnima Ojha

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I am Raghav Sehgal, a 1st Year FYIC BALLB student at Rajiv Gandhi National University of Law, Patiala. I am new to the arc of law. I am actively seeking opportunities in Academic Writing, Networking and Critical Skills Development. My fields of interest include International Humanitarian Law, Human Rights Law, Current Affairs and Legal Developments around the law. I have two publications under my belt, and this is indicative of my orientation towards academic writing. My career objective is to be an expert in my profession and improve my standard of thought and mental capabilities and to add wealth to my nation and make my nation and family proud.