Offer and Acceptance - Meaning and Rules Relating to Offer and Acceptance, Indian Contract Act 1872

Offer and Acceptance - Meaning & Rules
Rules Relating to offer and Acceptance
Indian Contract Act 1872 Notes 

Offer and Rules relating to offer

Meaning of offer

The term ‘proposal’ is otherwise called as ‘offer’. An offer is a proposal by one person, whereby he expresses his willingness to enter into a contractual obligation in return for promise, act or forbearance. Section 2(a) of the Act defines ‘proposal’ or offer 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. The person making the proposal is called as ‘offeror’ or proposer’ and the person the proposal is made is called as ‘Offeree’.

Rules as to Offer:

1. Intention to create legal relationship: The Offeror while making the offer must do it with the intention to create legal relations. Offeror must be conscious that a contract will arise, if the Offeree accepts the same.

2. Certain or Unambiguous: The terms of the Offer to be valid must be certain, clear and unambiguous. For e.g. An offers to sell B, ten tons of oil. A is a dealer of various oil. Here the offer is ambiguous as the offer does not specify the type of oil. However, if A was a dealer only in Parachute Coconut oil then the offer is unambiguous.

3. Offer must be distinguished from:

(i) A declaration of intention: A declaration by a person that he intends to do something gives right of action to another. Such a declaration only means that an offer will be made or invited in future and not that an offer is made now.

(ii) An invitation to make an offer or do business: Display of goods by a shopkeeper in his window, with prices marked on them, is not an offer but merely an invitation to the public to make an offer to buy the goods at the marked prices. A buyer, in case the prices of the goods are marked, cannot force the seller to sell the goods at those prices. He can, at the most, ask the seller to sell the goods to him, in which case he is making an offer to the seller and it is up to the seller to accept the offer or not. Likewise, quotations, menu card, catalogues, prospectus issued by a company for subscribing to shares are all example of an invitation to make an offer.

4. Offer must be to a definite person: The words of an Offer must apply to definite persons or class of persons to create a legal relationship.

5. Offer must be communicated: An offer, to be complete, must be communicated to the person to whom it is made. Unless an offer is communicated, there can be no acceptance of it. 

6. Offer must be made with a view to obtaining the assent: The offer to do or not to do something must be made with a view to obtaining the assent of the other party addressed and not merely with a view to disclosing the intention of making an offer.

7. Special Terms to be made clear in the Offer: The offer may be conditional but the conditions or special terms must be clearly communicated in the offer. Whenever an offer has special terms attached to it, these special terms and conditions must be effectively communicated to the Offeree to bind him.

8. Offer should not contain a term, the non-compliance of which may be assumed to amount to acceptance: A person cannot say that if acceptance is not communicated within a certain time, the offer would be considered as accepted.

Acceptance and Rules relating to acceptance

Meaning of Acceptance

Section 2(b) defines acceptance as “When a 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.” Acceptance is an expression by the Offeree of his willingness to be bound by the terms of the offer.

Acceptance may be express or implied. It is express when it is communicated by words spoken or written or by doing some required act. It is implied when it is to be gathered from the surrounding circumstances or the conduct of the parties.  For e.g. At an auction sale, S is the highest bidder. The auctioneer accepts the offer by striking the hammer on the table. This is an implied acceptance.

Rules as to Acceptance

1. It must be absolute and unqualified: An Acceptance, in order to be binding, must be absolute and unqualified of all the terms of the offer, whether material or immaterial, major or minor.

2. It must be communicated to the Offeror: The acceptance must be communicated in some acceptable form to the person making offer to conclude a contract. A mere mental determination or communication to some third party does not constitute communication.

3. It must be expressed according to the mode prescribed or usual and reasonable mode: If the acceptance is not according to the mode prescribed, the offeror may, within a reasonable time after the acceptance is communicated to him insist that his proposal shall be accepted in the prescribed mode. However, if no mode is prescribed the acceptance may be in a usual or reasonable mode.

4. It must be given within a reasonable time: If no time is specified the acceptance must be within a reasonable time. The reasonability of the time shall depend on the ordinary course of trade and business. However, if a time limit is prescribed acceptance must be within the specified time.

5. It cannot precede an offer: Acceptance always follows an offer. Without the knowledge of offer there is no acceptance.

6. Mere silence is not acceptance: The acceptance of an offer cannot be implied from the silence of the Offeree or his failure to answer.

7. It must show an intention on the part of the acceptor to fulfill the terms of the promise: The acceptor of the offer must be ready and prepared to be bound by the conditions of the offer and to fulfill the offer. If no such intention is present, the acceptance is not valid.