OFFER AND ACCEPTANCE

All contracts are made by the process of a lawful offer by one party and the lawful
acceptance of the offer by the other party.

Example: If ‘X’ says to ‘Y’ “will you buy my house for Rs. 5,00,000”? It is an offer. If ‘Y’ says
“Yes”, the offer is accepted and a contract is formed.

An ‘offer’ involves the making of a proposal.

The term proposal is defined under Sec 2(a) in the Contract Act as follows: “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”.
A proposal is also called an offer. The promisor or the person making the offer is called the
offeror. The person to whom the offer is made is called the offeree.

Promise and Acceptance: Sec.2(b) of the Act defines promise as “when the 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. Promisor and promise are defined under Sec
2(c). “The person making the proposal is called the ‘promisor’ and the person accepting the
proposal is called the ‘promisee’” – Sec. 2(c).

A proposal or acceptance may be made in any of the following manners:

 By express words spoken,

 In writing.
 By conduct.

Examples:

a) When A says to B: “will you buy this building for Rs.20 lakhs”? It is an express oral
offer.
b) When A writes to B stating the above offer, then it is an express written offer.
c) When a transport company runs a bus on a particular route, it is termed as an implied
offer or an offer by conduct.

RULES REGARDING VALID OFFER

1. An offer may be express or may be implied from the circumstances: In so far as the
proposal or acceptance of any promise is made in words, the promise is said to be express.
In so far as such proposal or acceptance is made otherwise in words, the promise is said to
be implied (Sec. 9).

2. An offer may be made to a definite person; to some definite class of persons or to the
world at large: An offer made to a definite persons or a definite class of person is called a
specific offer. An offer sent to all persons (the world of public at large) is called a General
offer or Public offer.

Examples:

Specific offer: ‘X’ offers to sell his motor cycle to ‘Y’ for INR10,000/-. This is a specific
proposal. This proposal is specifically given to ‘Y’. Only ‘Y’ can accept this proposal.

General offer: Carlill Vs Carbolic Smoke Ball & Co (1893) The patent medicine company
advertises that it would give a reward of USD100 to anyone who contacted influenza after
using the medicine namely smoke ball of the company for a certain period according to the
specifications. Mrs. Carlill purchased the smoke ball and contacted influenza in spite of using
it as per the specifications. She claimed the reward of USD100. The claim was refused by the
company on the ground that the offer was not made to her and that in any case she had not
communicated her acceptance of the offer. She filed a suit for the recovery of the reward. It
was held that she could recover the reward as she had accepted the general offer made by
the company after complying with the terms of the offer.

3. Offer must be capable of creating legal relationship: The offer must be one which is
capable of creating a legal relationship. An invitation to a birthday party or an invitation to
play cards will not crate legal relationship. Therefore an offer for such social events will not
constitute a contract.

Balfour Vs Balfour (1919): A husband promised to send money to his wife, so long as she
remained away from him. It was held that if the husband fails to pay, the wife could not sue
for the amount on the ground that the promise made by the husband was never intended to
give rise to legal consequences.

4. The terms of the offer must be definite and certain: The terms of the offer must be definite,
unambiguous and certain and not loose and vague. To constitute a valid contract, it is
essential that the proposal must be so certain, that the rights and obligations of the parties
arising out of the contract can be exactly fixed. If the terms of an offer are uncertain, its
acceptance cannot create any contractual relationship. According to Sec. 29 of the Act,
agreements, the meaning of which is not certain or capable of being made certain are void.

Example: ‘X’ says to ‘Y’ “I will give you some money if you marry ‘Z’”. This is not an offer
which can be accepted because the amount of money to be paid is not certain.

5. A mere statement of intention is not an offer: Every expression of willingness to enter into
a contract may not amount to an offer in the legal sense. It may be only a first and preliminary
step in the formation of a contract. Thus it becomes necessary to distinguish between the
offer on the one hand and

(i) a mere declaration of intention

(ii) an invitation to make an offer, and
(iii) auction sale

A distinction is usually made between an ‘offer’ and “a statement of intention”.

Example: Price lists and catalogues and enquiries from customers are merely statements of
intention. They are not regarded as offers but as invitation to others to make offers.

Harvey Vs Facey: Harvey telegraphed to Facey asking to inform him whether he would sell
Bumper Hall pen and if so at what price. Facey informed Harvey that the lowest price was
$900 but did not say that he was willing to sell at that price. Harvey telegraphed that he would
buy at that price. Facey gave no reply to the telegram. Held, there was no contract because
Facey did not say that he was willing to sell or not. Mere mentioning of price is not an offer.

Similarly, in an auction sale, articles displayed in auction sale are displayed with an intention
that the bidders present during the auction sale may bid for them. i.e. may make an offer for
them. In an auction sale, a bid is an offer. It can therefore, be taken back at any time before
acceptance is made by the auctioneer is effected by the fall of the hammer.

6. An offer must be communicated to the offeree: A person cannot accept an offer unless he
knows of the existence of the offer.

Example: ‘P’ offers a reward to anyone who finds his lost dog. ‘Q’ on finding the dog brings it
to ‘P’ without having heard of the offer. Held he was not entitled to the reward.

Lalman Vs Gauri Dutt: ‘G’ sent his servant ‘L’ in search of his missing nephew, subsequently
‘G’ announced a reward for information concerning the boy. ‘L’ brought back the missing boy,
without having the knowledge of the reward. Held, there was no contract between L and G
and the reward cannot be claimed.

7. An offer may have certain conditions: A proposer is at liberty to make an offer subject to
certain conditions. It is immaterial if the terms are hard or ridiculous. Conditions attached to
the offer must clearly be communicated to the offeree. The offeree must fulfil all the
conditions mentioned in the offer.

8. Offer must not thrust the burden of acceptance: Offer should not contain the term “the non-
compliance of which may be assumed to amount to acceptance”.

Example: An offeror cannot say that if he fails to hear from the other party within a week he
would consider the offer as being accepted. Similarly, if ‘A’ writes to ‘B’. “I will sell you my
house for Rs.5 lakhs. If you do not reply. I shall assume that you have accepted the same.
There is no contract even if ‘B’ does not reply.

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