Offer and Acceptance under Law of Contracts
Contracts assume a significant part in our regular daily existence going from insurance policies to business contracts. In Fact, we go into contracts even without speculation, for instance, while purchasing a film ticket or downloading an application. The contract is oral or written agreements between at least two parties. Parties going into a contract may incorporate distinctive individuals, organizations, non-profits or government offices. The entire cycle of entering into an agreement begins with a offer by one party, an acceptance by another party, with the exchange of consideration i.e., something of significant worth. A contract has 4 essential elements that should be satisfied without which it won’t be perceived as a contract.
The four essential elements are:
- Legal enforceability.
OFFER / PROPOSAL
The whole cycle of entering into a contract starts with the proposition or an offer made by one party to another. In order to enter into an agreement, the proposal has to be accepted by the other party.
As indicated by the Indian Contract Act 1872, proposal has been defined in Section 2(a) as “when one person will signify to another person his willingness to do or not do something (abstain) with a view to obtain the assent of such person to such an act or abstinence, he is said to make a proposal or an offer.”
FEATURES OF A VALID CONTRACT
The individual making the offer or proposal is said to be the “promiser” or the “offeror”. Furthermore, the individual who accepts an offer is referred to as “promisee” or the “acceptor”.
- The offeror should communicate his ability to do or abstain from doing something. Just willingness isn’t satisfactory. Or on the other hand an inclination to accomplish something or not to do anything won’t be an offer.
- An offer can either be positive or negative. It tends to be a promise to do some act, and can likewise be a promise to avoid doing any act or service. Both are valid offers.
ELEMENTS OF AN OFFER:
Here are the essential elements which make the offer valid:
- There should be two parties: There has to be two parties an individual making the proposal and the other individual consenting to it. All the people are incorporated i.e., Legal persons as well as artificial persons.
- Each proposal should be communicated: Communication of proposal is required and mandatory. An offer is valid on the off chance that it is communicated to the offeree. The communication can either be expressed or implied. It tends to be imparted by terms, for example, informal, courier, message, and so forth Section 4 of the Indian Contract Act says that the communication of a proposal is finished with regards to the awareness to the individual to whom it is made.
- For example:
- ‘A’ proposes, to sell a vehicle to ‘B’ at a specific cost. Once ‘B’ gets the letter, the communication of proposal is finished.
- In Lalman Shukla V. Gauri Dutt case, the nephew of the defendant departed suddenly and the defendant sent his workers to different places to look for the boy. The plaintiff, one of the defendant’s workers was sent off to Haridwar when the defendant advertised for a prize of Rs. 501 for any individual who finds the boy. The plaintiff followed the kid however he didn’t think about the prize and from that point he kept working for the defendant until he was excused and afterward filed a suit to claim the prize. The courts held that the plaintiff was not qualified for the reward since he didn’t know about the offer.
- It should make Legal Relations: An offer should be with the end goal that when accepted it will result to be a valid contract. A simple social greeting can’t be viewed as an offer, since, supposing that such a greeting is accepted it won’t give rise to any legal relationship.
- For example:
- ‘A’ invited ‘B’ to lunch and ‘B’ accepted the greeting. It is a simple social greeting. ‘A’ won’t be obligated on the off chance that he neglects to give lunch to B.
- In the Balfour V. Balfour case, Mr. Balfour and his wife who lived in Sri Lanka, had traveled to England where Mrs. Balfour fell genuinely sick and was encouraged not to make a trip back to Sri Lanka. Mr. Balfour agreed to his wife staying in England while he got back to Sri Lanka in the wake of promising his wife to pay her a month to month amount of 30 Euros. After some time, the connection between the couple got stressed and Mr. Balfour quit sending month to month cash to his wife. Mrs. Balfour filed a case against her husband however the judge decided that the courts don’t have any dominion over social agreements and that Mr. Balfour made that promise to his wife with no aim to make legal obligations.
- It should be Certain and definite: The conditions of the offer should be certain and clear to make a valid contract; it should not be vague.
- It could be specific or general: A specific offer is an offer that is accepted by a particular or specific individual or by any group to whom it is made. While, the general offers are accepted by any individual. In the Carlill V. Carbolic Smoke Ball Co. case, the respondents were in the business of making certain balls, a medical preparation against influenza and they had given a commercial in a paper which read that in the event that anybody contracted influenza subsequent to utilizing some ball, at that point they would be offered a prize of 100 Euro. As a generosity gesture the respondent kept 1000 Euros in a bank. Mrs. Carlill, the plaintiff contracted influenza and after utilizing some ball in the way prescribed on it and she sued the litigants for compensation. The litigants were held liable since it was an general offer and they had breached the contract when Mrs. Carlill contracted influenza.
- The offer must be expressed or implied: Section 3 of the Indian Contract Act says that an express offer is one which is made in words, composed or spoken while Section 9 of the Indian Contract Act says that an offer which is made by a act or by the conduct of the offeror is called an implied offer. In the Uptron Rural District Council V. Powell case, a fire had broken out on the defendant’s farm and he had called Uptron Fire Brigade since he accepted that he was qualified for its free service. The fire was extinguished by the brigade and the brigade asked for payment for its service since the respondent’s farm didn’t lie in the free service zone of the unit. The court decided that the respondent needed and requested the services of Upton and accordingly the services were given by them. Consequently, it was held that the services were delivered on an implied promise to pay for them.
CLASSIFICATION OF OFFER
On the basis of design, timing, purpose, etc. the offer can be classified as under:
- Express Offer: An offer might be made by express words, spoken or written. This is known as Express offer.
- For example: At the point when ‘A’ says to ‘B’, “will you buy my vehicle for Rs 2,00,000”?
- Implied Offer: An offer might be gotten from the activities or conditions of the parties. This is known as Implied offer.
- For example: There is an implied offer by the transport company to carry travellers for a specific fare when a vehicle organization works a transport on a specific route.
- General Offer: A general offer isn’t made by any particular party. It is one that is made by people in general on the loose. Any individual from public at large can, in this way, accept the offer and will have the right to get rewards or get compensation.
- For example: ‘A’ publishes in the paper that whosoever discovers his missing child will get 2 lakhs. ‘B’ after reading this and after finding the kid, he calls ‘A’ to inform about his missing child. Thus, ‘A’ is entitled for pay 2 lakhs to ‘B’ as a reward.
- Specific Offer: It is the offer made to a particular individual or group of people and can be accepted by the equivalent, not any other person.
- For example: ‘A’ offers to sell his home to ‘B’. Accordingly, a specific offer is made to a particular individual, and no one but ‘B’ can accept the offer.
- Cross Offer: Two parties make a cross-offer in specific situations. It implies that both make a same proposal at the specific time to one another. However, in one or the other case, the cross-offer won’t add up to accepting the offer.
- For example: ‘A’ and ‘B’ both send letters to one another offering to sell and purchase B’s home simultaneously. This is the cross offer made where one party needs to accept the proposal of another.
- Counter Offer: A counter-offer is an answer given to an underlying offer. A counter-offer implies that the first offer has been refused and replaced by another. The counteroffer offers three decisions to the original offerer i.e., to accept, deny, or make another offer.
COMMUNICATION OF OFFER
Communication of the offer is the most fundamental condition to be satisfied for making of a valid contract. An offer is valid on the off chance that it is communicated to the offeree. As said earlier, communication can be either expressed or implied.
Section 4 of Indian Contract Act says that, the communication of a proposal is complete when it comes to the knowledge of the person to whom the proposal is made.
In the Household Fire Insurance Co. V. Grant case, the court decided that when an offer is appropriately accepted by methods such as a letter or any acceptable method of communication, the acceptance is finished and a binding contract comes into power when the letter is posted, despite the fact that the letter is lost in the post and never arrives at the offeror.
REVOCATION OF OFFER
According to Section 5 of the Indian Contract Act, 1872 a proposal may be revoked at any time before the communication of acceptance is complete as against the proposer, but not afterwards. This infers that the communication of revocation of offer can be compelling just when the revocation comes to the offeree before he posts his acceptance and makes it out of his capacity.
For example: ‘A’ consented to sell the property to ‘B’ by a written document which expressed “this proposal to be left over until Friday 9 AM”. on Thursday ‘A’ made an contract to sell the property to ‘C’. ‘B’ knew about this from ‘X’ and on Friday 7 AM he conveyed to ‘A’ acceptance of his offer. Held ‘B’ couldn’t accept A’s proposal after he realized it had been revoked by the sale of the property to C.
Acceptance is defined in Section 2(b) of the Indian Contract Act 1872 “When the person to whom the proposal is made signifies his assent thereto, the offer is said to be accepted. Thus the proposal when accepted becomes a promise.” Before the offer is accepted it can be revoked.
As indicated in the definition, if the offer is accepted genuinely by the offeree to whom the offer is made, it will add up to acceptance. At the point when the offer is accepted it turns into a promise.
For example: ‘A’ offer to purchase B’s home for rupees 40 lacs and ‘B’ accepts this offer. Thus, it has become a promise. At the point when an offer is accepted and it becomes a promise, it no longer can be revoked. No legal obligation made by an offer.
TYPES OF ACCEPTANCE
- Expressed Acceptance: In the event that the acceptance is written or oral, it turns into an Expressed Acceptance.
- For example: ‘A’ offers to sell his telephone to ‘B’ over an email. ‘B’ reacts to that email saying he accepts the proposal to purchase.
- Implied Acceptance: In the event that the acceptance is shown by conduct, it is known as implied acceptance.
- For example: The Arts Museum holds a sale to offer a historical book to gather charity. In the media, they promote the same. This says that a mere Invitation to an Offer according to Indian Contract Act, 1872. The invitees offer for the equivalent. Offer is communicated orally, so the proposal to purchase is an Express offer, yet by striking the sledge threefold the last call is made by the salesperson. This is called Implied acceptance.
- Conditional Acceptance: A conditional acceptance additionally alluded to as an eligible acceptance, happens when an individual to whom an offer has been made tells the offeror that the person is willing to accept the offer given that certain changes are made to the state of the offer. This type of acceptance works as a counter-offer. The first offeror should consider a counter-offer before an agreement can be set up between the parties.
MERE SILENCE IS NOT ACCEPTANCE
On the off chance that the offeree fails to respond to an offer made to him, his silence cannot be mistaken for acceptance. However, there is an exception for this rule. It is expressed that, inside 3 weeks of the date on which the offer is made, the non-acceptance will be communicated to the offeror. Or else, the silence will be communicated as acceptance.
WHEN COMMUNICATION IS COMPLETE
According to Section 4 of Indian Contract Act, Communication of acceptance is complete when it is placed over the span of transmission to him as to be out of the intensity of the acceptor to withdraw the same and with it comes to the knowledge of the proposer.
TIME OF REVOCATION OF ACCEPTANCE
An acceptance might be revoked whenever, but not afterwards, before the communication of the acceptance is finished as against the acceptor.
Examination of offer and acceptance is a standard contract law strategy used to evaluate whether a two-party arrangement exists. An offer is an indication of their ability to concur on specific terms starting with one individual then onto the next. On the off chance that there is an express or implied agreement, a contract will be formed. A contract is said to appear when the acceptance of an offer has been told to the offeror by the offeree.
The communication of the offer will be finished with regards to the information on the individual to whom the offer is made and the communication of the acceptance will be finished when the acceptance is placed in a course of transmission to the offeror. Hence, offer and acceptance are the basic components of an agreement and in one or the other case, it should be done based on one’s free will and with the goal of finishing up a legally binding agreement.
Author: PRISHITA SARAIWALA,
KIIT SCHOOL OF LAW / 2ND YEAR