Offer and Acceptance

Offer and Acceptance
10 September 2020

Offer and Acceptance

Contracts play a vital role in our everyday life ranging from employment contracts to insurance policies. In Fact, we enter into contracts even without thinking, for example, while downloading an application or buying a movie ticket. The contract is oral or written agreements between two or more parties. Parties entering into a contract might include individuals, companies, non-profits, or government agencies. The whole procedure of entering into a contract starts with an offer by one party, and acceptance by another party, and an exchange of consideration.

Offer 

The entire procedure of entering into a contract begins with an offer or proposal made by one party to another. The proposal must be accepted to enter into an agreement. As per the Indian Contract Act 1872, the proposal is 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 offer:

The person making the proposal or offer is referred to as the “promiser” or the “offeror”. And the person who accepts an offer is referred to as “promisee” or the “acceptor”.

The offeror must express his willingness to do or abstain from doing an act. Only willingness is not enough. Or just an urge to do something or not to do anything will not be an offer. An offer can either be negative or positive. It can be a promise to do some act, and can also be a promise to abstain from doing any service or act. Both are valid offers.

The element of a valid offer:

  1. There must be two parties: There have to be at least two parties and a person making the proposal and the other person agreeing to it. All the persons are included i.e, Legal persons as well as artificial persons.
  2. Every proposal must be communicated: Communication of the proposal is compulsory. An offer is valid if it is conveyed to the offeree. The communication can either be expressed or implied. It can be communicated by terms such as messenger, word of mouth, telegram, etc. the Indian Contract Act under section 4 says that the communication of a proposal is complete when it comes to the awareness of the person to whom it is made.
  3. It must create Legal Relations: An offer must be such that when accepted it will result in a valid contract. A mere social invitation cannot be referred to as an offer, because if such an invitation is accepted it will not give rise to any lawful relationship.
  4. It must be Certain and definite: The terms of the offer must be certain and clear in order to create a valid contract, it must not be ambiguous.
  5. It may be specific or general: The specific offer is an offer that is accepted by any particular or specific person or by any group to whom it is made. Whereas, The general offers are accepted by any individual.
Acceptance

The Indian Contract Act 1872 defines acceptance in Section 2 (b) as “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.”

An offer can be revoked before it is accepted. As provided in the definition, if the offer is accepted unconditionally by the offeree to whom the request is made, it will amount to acceptance. When the offer is accepted it becomes a promise.

For example: ‘D’ offers to buy E’s house for rupees 50 lacs and ‘E’ accepts such an offer. Now, it has become a promise. When an offer is accepted and it becomes a promise it also becomes irrevocable. No legal obligation is created by an offer.

Types of Acceptance:

  1. Expressed Acceptance: If the acceptance is oral or written, it becomes an Expressed Acceptance. For example: ‘B’ offers to sell his watch to ‘A’ over an email. ‘A’ responded to that email saying he accepts the offer to buy.
  2. Implied Acceptance: If the acceptance is shown by conduct, It thus becomes an Implied
  3. acceptance. For example, The Arts Museum holds an auction to sell a historical book to collect charity funds. In the media, they advertise the same. This says that a Mere Invitation to an Offer as per Indian Contract Act, 1872. The invitees offer for the same. Offer is expressed orally, so the offer to buy is an Express Offer, but by striking the hammer thrice the final call is made by the auctioneer. This is called Implied Acceptance.
  4. Conditional Acceptance: A conditional acceptance also referred to as an eligible acceptance, occurs when an individual to whom an offer has been made tells the offeror that she or he is willing to accept the offer provided that some changes are made to the condition of the offer. This form of acceptance operates as a counter-offer. The original offeror must consider a counter-offer before a contract can be established between the parties.

Legal Rules and Conditions for Acceptance

  1. Acceptance must be absolute and unqualified: The offeree’s approval cannot be conditional. For example, ‘D’ wants to sell her car to ‘E’ for Rs 3 lakh, ‘E’ can’t come back and says that she accepts the offer but will buy the same for Rs. 2 lakh.
  2. Acceptance must be told to the offeror: If the acceptor just accepts the offer in his head and he does not specify the same to the offeror, it can not be termed as an Acceptance, whether in an implied manner or an express manner.
  3. Mere silence is not acceptance: If the offeree fails to respond to an offer made to him, his silence can not be confused with acceptance. But, there is an exception to this rule. It is stated that, within three weeks of the date on which the offer is made, the non-acceptance shall be communicated to the offeror. Otherwise, the silence shall be communicated as acceptance.

Communication of acceptance 

Communication of acceptance is complete when it is put in the course of transmission to him as to be out of the power of the acceptor to withdraw the same and when it comes to the knowledge of the proposer.

Revocation of acceptance

An acceptance may be revoked at any time, but not afterward, before the communication of the acceptance is complete as against the acceptor.