Topic name -
CONTRACT
LAW: UNDERSTANDING OFFER AND ACCEPTANCE
Author- Sunaina Kumari, B.A.LLB(Hons), CMP Degree College, University of Allahabad, Prayagraj
Abstract –
Contract law helps make sure that agreements between people, businesses, or groups are fair and trustworthy. The two most important parts of a valid contract are offer and acceptance. These two steps are needed to form a legal agreement. An offer is when one person clearly shows that they are willing to make a deal on specific terms. This offer must be properly shared with the other person, and it should show that the person truly wants to be legally bound by the agreement. Acceptance is when the other person agrees to the offer exactly as it is, without changing any terms. To make the contract valid, the acceptance must be clear, complete, and sent or told to the person who made the offer in the correct way. If the offer or acceptance is not done properly, the contract may not be valid in the eyes of the law.
For example, if someone agrees to the offer but adds new terms or changes the conditions, it is not real acceptance it becomes a counter offer. A counter offer means the original offer is rejected, and a new offer is made in its place. Also, the person who made the offer can cancel or withdraw it at any time before it is accepted.
Clear communication is very important. Both the offer and the acceptance must be clearly understood by both parties. This helps avoid confusion and ensures both sides agree to the same thing.
Knowing these basic rules is important, not just for law students or lawyers, but for everyone. Whether you are buying a house, signing an employment contract, or selling products online, understanding how offer and acceptance work can help protect your rights and prevent legal problems or disputes.
Keywords:
Contract law, offer, acceptance, agreement, legal binding, communication,
counter-offer, enforceable contract, legal agreement, consent.
INTRODUCTION
Contracts are a part of our daily lives. Whether we are buying a product online, booking a cab, renting a house, or signing a job agreement, we are entering into contracts. A contract is a legal agreement between two or more people that the law can make sure is followed.¹ It gives each person certain rights and duties. The two most important parts of a contract are offer and acceptance.² These are the basic steps needed to make any agreement legal. When one person makes a proposal (offer) and the other agrees to it (acceptance), a contract is formed. But not every conversation or promise becomes a contract.³ Certain rules must be followed to make sure the contract is valid and binding. Understanding offer and acceptance is important because it helps us know when a legal agreement starts and what makes it enforceable. This article will explain these key parts of contract law in a simple and easy-to-understand way. We will look at their meanings, types, legal rules, and real-life examples to get a better understanding of how contracts work in practice.
___________________
¹ A contract is enforceable by law under Section 2(h) of the Indian Contract Act, 1872.
² An offer is defined in Section 2(a), and acceptance in Section 2(b) of
the Indian Contract Act, 1872.
³ Not all promises are contracts. According to Section 10 of the Indian Contract Act, a contract must have free consent, lawful consideration, and a lawful object to be valid.
WHAT
IS AN OFFER?
An offer is a clear and specific proposal made by one person (called the offeror) to another person (called the offeree). It shows that the offeror is ready to be legally bound by certain terms if the other person accepts it.
Section 2(a) of the Indian contract act defines a proposal 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.”
Example- If ram says to shyam,” I will sell you my bicycle for 5000,” this is an offer.
Ram is showing a willingness to enter into a deal. He is expecting shyam to agree. Once shyam accepts the offer, a contract is formed.
Key Characteristics:
·
Communication: The offer must be communicated to the
offeree to be effective. One cannot accept an offer they are unaware of.
·
Definite Terms: The terms of the offer must be clear
and definite, allowing the offeree to understand the scope of the agreement.
Example “I will sell my laptop to you for $800” is a valid offer.
·
Intention to Create Legal Relations: The offeror must
intend to create a legally binding agreement if the offer is accepted.
·
Unconditional: The offer must be unconditional,
meaning there are no additional terms or conditions imposed by the
offeror.
Case Example- Carlill v. carbolic
smoke ball co (1893)
A
company advertised that it would pay 100euro to anyone who used its smoke ball
as instructed and still contracted influenza. Mrs. Carlill did, and when she
got sick, the court ruled the advertisement was a unilateral offer to the
world, and her action constituted acceptance.
___________
¹Carlill
v. Carbolic Smoke Ball Co. [1893] 1 QB 256 – This case remains a landmark
judgment in contract law regarding unilateral offers and acceptance by conduct.
Legal Rules for a Valid Offer
An offer is also called a “proposal” is first step
in the formation of a contract. For an offer to be legally valid, it must
satisfy certain rules and conditions. These rules ensure that the offer is
clear, fair and intended to create legal relation.
Intention
to create legal obligation- An offer must indicate that the
person making it intends to be legally bound if the other party accepts it.
Casual remarks, jokes, or invitations made in social settings do not count as
valid offers
Example- If a says to B jokingly,
“I’ll sell you my car for ₹10,” and both know it’s a joke, its not a valid
offer.
Clear
and definite- The must be clear, specific, and
unambiguous. If the terms are vague or incomplete, the offer is not valid as
courts cannot enforce unclear agreements.
Example- “I will sell you a vehicle
at a reasonable price” is to vague and not a valid offer.
Communicated
to the offeree- The offeree must know about the offer
before accepting it. There is no valid acceptance of an offer that the offeree
is unaware of.
Case:
Lalman Shukla v. Gauri dutt (1913)
A servant who found a missing boy
without knowing that a reward had been offered for it could not claim the
reward.
Not
merely an invitation to treat – There’s a difference
between an offer and an invitation to offer, also known as an invitation to
treat. An invitation to offer is just a step before actual offer.
Example
1.
Display of goods in a shop window, advertisements, auction catalogues
Example
2. A
pricetag on a shirt in a store is not an offer; it is an invitation to offer.
When the customer approaches the cashier, they are making an offer to buy.
___________
¹Carlill
v. Carbolic Smoke Ball Co. [1893] 1 QB 256 – This case distinguished an
invitation to treat from a unilateral offer made through an advertisement.
Because the ad showed intent and a deposit was made by the company, the court
treated it as a valid offer.
TYPES
OF OFFERS
1. Express Offer
An offer that is clearly stated in words, either spoken or
written, is known as an express offer.
Example:
A says to B, “I offer to sell my watch to you for ₹2,000.” This is an express
offer made through spoken words.
If
A writes in a letter: “I offer to sell you my book for ₹500,” this is a written
express offer.
Key
Point: There is no confusion in an express offer because
the offeror clearly communicates their intention.
2. Implied Offer
An
implied offer is not made in words but is inferred from the conduct, actions,
or circumstances of the parties involved.
Example:
A public bus stops at a bus stop and opens its door. This implies an offer to
take passengers. If you board the bus, you are accepting the offer.
At
a self-service restaurant, picking up food and taking it to the counter implies
you are accepting their offer to sell.
3. General Offer
A
general offer is made to the public at large and can be accepted by any person
who fulfills the conditions of the offer.
Example:
A company advertises: “Whoever finds and returns our lost dog will be rewarded
₹5,000.” Anyone who finds and returns the dog can claim the reward. This is a
general offer.
Case-
Carlill v. Carbolic Smoke Ball Co. (1893)
The
company advertised that users of its product would get 100euro if they caught
the flu. The court held it was a general offer, and Mrs. Carlill, who fulfilled
the condition, was entitled to the money.
4. Specific Offer
A
specific offer is made to a particular person or group and can only be accepted
by that person or group.
Example:
A offers to sell his bike to B for ₹10,000. This offer can only be accepted by
B, not by anyone else.
Key Point:
If someone other than the intended offeree tries to accept, it is not valid.
5. Cross Offer
When
two parties make identical offers to each other in ignorance of each other’s
offer, it is called a cross offer. Since there is no acceptance, no contract is
formed.
Example:
A sends a letter to B offering to sell a laptop for ₹20,000. On the same day, B
sends a letter to A offering to buy the same laptop for ₹20,000.
Both
letters cross in the post. This is a cross offer, and no contract is formed
until one party accepts the other’s offer.
Key Point:
A cross offer is not acceptance.
6. Counter Offer
When
the offeree changes the terms of the original offer while accepting it, it is
called a counter offer. It rejects the original offer and becomes a new offer.
Example:
A offers to sell a chair to B for ₹2,000. B replies, “I will buy it for
₹1,500.”
This
is a counter offer. A is not bound to accept this new term.
Legal Effect:
The original offer is terminated. A counter offer needs to be accepted
separately to form a contract.
_____________
What
is Acceptance?
Contract law is the set of rules that manages agreements between people or parties that the law can enforce. One of the most important steps in making a contract is acceptance. If there is no acceptance, there is no contract even if someone has made an offer. Acceptance means that both sides agree to the terms of the offer and are ready to follow the agreement legally.
According
to section 2(b) of the Indian contract act:
“when
the person to whom the proposal is made signifies his assent thereto, the
proposal is said to be accepted.”
Example – If shyam says, “yes, I will buy your
bicycle for ₹5000,” it is an acceptance.
Legal Rules for Valid Acceptance
To make a proper
and legal contract, the acceptance of an offer must follow some basic rules. If
these rules aren't followed, the acceptance may not count, and the contract
might not be legally valid.
·
Acceptance Must Be
Clear and Without Any Conditions
To be valid, acceptance must fully match the terms of the offer
without any changes or conditions.
You can’t say “yes” and then add new terms or ask for something
extra.
Example- If A offers to sell his car for ₹1,00,000 and B simply
says, “Yes, I agree,” that’s a valid acceptance. But if B says, “I agree, but
only if you paint the car first,” it’s not real acceptance it’s a new
offer or counter-offer.
Case- Hyde v. Wrench
(1840)– A counter-offer cancels the original offer.
·
Acceptance Must
Be Clearly Communicated
The person who made the offer needs to be told that
their offer has been accepted.
Just thinking “I accept” in your mind or staying
silent is not enough you have to
lettheotherpersonknow.
Case-Felthouse
v. Bindley (1862) – The court said that staying silent does not
mean you accepted the offer.
·
Acceptance Must
Be in the Prescribed Mode
If the offer says how you should accept it like by
email, phone call, or letter you must follow that method.
If the offer doesn’t say anything about how to
accept, then you can reply in any normal or reasonable way.
Example- If A tells B, “Please reply by email,”
but B sends a letter instead, A can reject it but only if A does so without
delay.
___________
¹When an offer requires a specific
mode of acceptance, deviating from it may invalidate the acceptance unless the
offeror waives the requirement or does not object promptly.
·
Acceptance
Must Be Given by the Person to Whom the Offer Is Made
An offer can only be accepted by the person it’s made to. No one else can accept it unless they are officially allowed to act for that person.
Example- If A offers to sell a bike to B,
then only B can say “yes.” C (a third person) can’t accept the
offer unless B has clearly allowed C to do it for them.
Case-¹Boulton v.
Jones(1857)
– The court said the person who gets the offer is the only one who can accept
it.
____________
¹Boulton v. Jones(1857)
Communication
of Offer and Acceptance
In contract law, both the offer and
the acceptancemust be clearly communicated between the
parties. Without proper communication, a contract cannot be legally valid.
Communication
of Offer
When a
person wants to make a deal, they first give an offer. But for that offer to count legally, it must be properly shared with the otherperson.
- The offer must be clearand understandable.
- The person receiving the
offer should know about it
if they never heard about it, they can’t accept it.
Offers can be:
· Written (letter, email, message)
· Spoken (face-to-face or phone)
· Through actions (putting items in a shop window for sale)
Communication
of Acceptance
Once a person receives an offer and wants to accept it, they must clearlylet theofferor know that they accept.
· Just thinkingabout accepting is not enough.
· Staying silent also doesn’t count.
· You must tell,write, orshowthroughactions that you accept.
Example:
If B gets an offer from A and just nods silently, it’s unclear whether B
accepts or not. But if B says, “Yes, I accept your offer,” that’s clear
communication.
Case-¹Adams v. Lindsell (1818)– This case established the postal rule, which says posting a letter of acceptance is enough to form a contract.
_____________
¹Adams v. Lindsell (1818)
conclusion
Therefore,
the ideas of offer and acceptance are the starting points of
any valid contract. An offer is when one person clearly says what they are
willing to do or give. Acceptance is when the other person agrees to those
exact terms. This shows that both people agree, which is very important to form
a contract. For a contract to be valid, the offer and acceptance must be
clearly shared and understood. The acceptance must match the offer exactly and
must be given by the person the offer was made to. Also, both sides must show
they seriously want to make a legal agreement. Knowing how offer and acceptance
work helps people and businesses make strong, legal agreements. Without these
two steps, a contract cannot be made. That’s why they are the most basic and
important parts of contract law.
Bibliography
·
The Indian Contract Act, 1872
·
Pollock & Mulla - The Indian
Contract Act,
·
Sanjiva Rows: The Indian Contract Act, 1872
and Tenders with Latest Case laws
·
The Principles of Law of Contract Paperback
2018
·
Understanding laws –contracts
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