Under the Indian Contract Act, 1872
Meaning and Definitions
Offer (Proposal):
An offer is the expression of willingness by one person to another to do or abstain from doing something, with a view to obtaining the assent of the other to such act or abstinence.
Section 2(a) defines a proposal as:
“When one person signifies to another his willingness to do or 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.”
Acceptance:
As per Section 2(b):
“When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.”
Once a proposal is accepted, it becomes a promise.
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Legal Rules for a Valid Offer
- Must be communicated: The offer must be communicated to the offeree. A person cannot accept an offer without knowledge of it.
Case: Lalman Shukla v. Gauri Dutt (1913) - Intention to create legal relations: The offer must show an intention to create legal obligations, not social agreements.
Case: Balfour v. Balfour (1919) - Clear and unambiguous: The terms of the offer must be certain and not vague.
- Can be specific or general: A specific offer is made to a particular person, whereas a general offer is made to the public at large.
Case: Carlill v. Carbolic Smoke Ball Co. (1893) - Offer vs. Invitation to Offer: An invitation to offer is not an offer. It merely invites others to make an offer.
Examples: Display of goods in a shop, advertisement for bids.
Types of Offers
- Express Offer: Clearly stated in words (spoken or written).
- Implied Offer: Inferred from conduct or circumstances.
- General Offer: Made to the public and can be accepted by anyone fulfilling the conditions.
- Specific Offer: Made to a specific person or group.
- Cross Offers: Two offers made by parties in ignorance of each other do not constitute a contract.
- Counter Offer: An offer made in response to an original offer, which ends the original offer.
Legal Rules for a Valid Acceptance
- Must be absolute and unqualified: Acceptance must match the offer exactly, otherwise it becomes a counter-offer.
Case: Hyde v. Wrench (1840) - Must be communicated: Silence does not amount to acceptance.
Case: Felthouse v. Bindley (1862) - Mode of acceptance: If the offer prescribes a mode of acceptance, it must be followed.
- Acceptance must be made while the offer is subsisting: An offer can lapse by time, death, or revocation.
- Communication of acceptance in case of post/mail: Acceptance is complete when the letter is posted.
This is known as the “postal rule”.
Revocation of Offer and Acceptance
- An offer may be revoked at any time before its acceptance is communicated.
Section 5 of the Act
Case: Henthorn v. Fraser (1892) - Acceptance can also be revoked before it comes to the knowledge of the offeror.
Communication Rules
| Stage | Offeror | Offeree |
|---|---|---|
| Offer is made | Binding once communicated | Can accept only after knowing |
| Acceptance is sent (by post) | Binding when acceptance is received | Binding when posted |
| Revocation of offer/acceptance | Effective when received | Can revoke before it reaches the offeror |
Mind Map (Text Format)
Offer and Acceptance
↓
→ Offer
↳ Definition (Sec. 2a)
↳ Types: General, Specific, Express, Implied, Cross, Counter
↳ Essentials: Communication, Legal Intent, Clear Terms
→ Acceptance
↳ Definition (Sec. 2b)
↳ Must be absolute and communicated
↳ Cannot be made after lapse or revocation
→ Revocation
↳ Offer: Revocable before acceptance is communicated
↳ Acceptance: Revocable before it reaches offeror
→ Case Laws:
↳ Carlill v. Carbolic Smoke Ball
↳ Lalman Shukla v. Gauri Dutt
↳ Felthouse v. Bindley
↳ Hyde v. Wrench
Situation-Based Questions
Q1: A makes a general offer to pay ₹500 to anyone who finds his lost dog. B, unaware of the offer, finds and returns the dog. Can B claim the reward?
Answer: No, because he had no knowledge of the offer.
Ref: Lalman Shukla v. Gauri Dutt
Q2: A offers to sell a car for ₹5 lakhs. B replies, “I will buy it for ₹4.5 lakhs.” Is there a contract?
Answer: No. This is a counter-offer which terminates the original offer.
Ref: Hyde v. Wrench
Q3: A sends an offer by post. B posts the acceptance. Before A receives it, B revokes his acceptance. Is the revocation valid?
Answer: Yes. Revocation of acceptance is valid if it reaches before or at the same time as the acceptance reaches the offeror.
Ref: Section 5, Indian Contract Act
Frequently Asked Questions (FAQs)
What is the difference between an offer and an invitation to offer?
An offer is a definite proposal which, when accepted, forms a contract. An invitation to offer merely invites others to make offers. For example, an auction or price list is not an offer.
Can silence be treated as acceptance?
No, acceptance must be communicated. Silence does not amount to acceptance.
Ref: Felthouse v. Bindley
Can an offer be revoked after acceptance?
No. Once an offer is accepted and communicated, it cannot be revoked.
Is communication necessary for acceptance?
Yes. Acceptance must be communicated to the offeror unless waived.
Citations
- Indian Contract Act, 1872
- Carlill v. Carbolic Smoke Ball Co., (1893) 1 QB 256
- Lalman Shukla v. Gauri Dutt, (1913) All LJ 489
- Felthouse v. Bindley, (1862) EWHC CP J35
- Hyde v. Wrench, (1840) 3 Beav 334
- Henthorn v. Fraser, (1892) 2 Ch 27
