OFFER AND ACCEPTANCE

AN AGREEMENT
BETWEEN TWO
OR MORE
PARTIES THAT
DEFINES THE
RIGHTS AND
DUTIES IN A
TRANSACTION.
IN OUR DAILY
LIFE, WE OFTEN
ENTER INTO A
NUMBER OF
CONTRACTS.
 PROPOSAL OR OFFER

The entire process of entering into a contract begins with

the proposal or an offer made by one party to another.
The proposal must be accepted to enter into an
agreement.

According to the Indian Contract Act 1872, 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.”
Agreement = Offer + Acceptance

contract = Agreement + Enforceability by law

Therefore, we can say that all agreements are not contracts, but
all contracts are agreements.
Now, let us learn about the parties involved
in an offer.

The two parties involved in an offer are

‘offeror’ or ‘promisor’ and the ‘offeree’ or
the ‘proposee’. An ‘offeror’ or a ‘promisor’
refers to the person making the proposal or
offer and an
‘offeree’ or a ‘proposee’ is the person to
whom the proposal or offer is made.
Also, the person who accepts the offer is
called the ‘promisee’ or ‘acceptor’
 AFTER ACCEPTANCE

Example : In a conversation with Motu,

Potu says, “I want to sell my house to you
for Rs 25,00,000.” Here, the sale of house
is an offer or proposal. Potu, who has made
this offer, is the ‘offeror’ or the ‘promisor’.
Motu to whom the offer has been made is
called the ‘offeree’ or the ‘proposee’.
If later Motu accepts the offer, then he
would be called the ‘promisee’ or the
‘acceptor’

the person who accepts the offer is

called the ‘promisee’ or ‘acceptor’
WAYS OF MAKING AN OFFER
An offer or a proposal can be made
by any action that can effectively
communicate it to the offeree. It
means that an offer may be made
either by words (spoken or written)
or by conduct of the person
making it
EXPRESS OFFER: An offer that is
explicitly expressed/made by words spoken
or written is an express offer.

Example: If Rajat writes to Keerat that he

wants to sell his car to him for Rs2,00,000,
it is treated as an express offer
IMPLIED OFFER: An offer that is inferred
from the conduct of the person or the
circumstances of the particular case is an
implied offer.

Example:
In case of a tea vendor selling tea at the
railway station, there is an implied offer by
the tea vendor to serve tea for a certain
price
ESSENTIAL ELEMENTS OF AN OFFER
1. Involvement of two persons:
2. Expression of willingness to do or not to do
3. Objective of obtaining the consent of other party
4. It must be Certain and definite
5. Offer must be capable of creating legal relationship

• In case of Balfour v. Balfour . They were married couple.

Husband promised to his wife to send £30 per month. But
husband failed to do so. Then wife filed the case against him and
it was held that there was no intention to create legal relation.
Thus the agreement was not valid.
CLASSIFICATION OF OFFER As per Indian
Contract Act,
1872, an offer
can be classified
in five broad
categories
 CLASSIFICATION OF OFFER
1. General offer: It refers to an offer that is made to the public in general or world at
large. Thus, it can be accepted by any person fulfilling the terms of the offer. The
contract is made with the person who has knowledge of the offer and thereby, acts
as per the conditions of the offer
2. Specific offer: In contrast to a general offer, a specific offer is the one that is made
to a particular person or group of persons. Thus, it can be accepted only by that
particular person or group of persons to whom the offer has been made
3. Cross offer: It is quite possible that two parties exchange similar offers with each
other in ignorance of each other’s offer. In such a case, the offers are called cross
offers.
4. Counter offer: Sometimes the offeree accepts the offer subject to the condition that
certain modifications and variations are made in the terms of original offer. In this
case, the offeree is said to have made a counter offer. Such a situation leads to
rejection of the original offer.
5. Standing offer/Open offer/Continuing offer: It refers to an offer that is open for
acceptance over a period of time. As its name reflects, it is an offer of continuous
nature that remains open for a limited period of time
CARLIL VS CARBOLIC SMOKE BALL CO.
The famous case of Carlil vs Carbolic Smoke Ball Co. is the best
example for general offer. In this case, Carbolic Smoke Ball Co.
advertised in the newspaper that it would reward anyone who
contracted influenza after using the medicine of the company for a
certain period of time as per the printed directions
Carlil used the medicine as per stated directions and contracted
influenza. So, Carlil sued the company for claiming the reward
money but the company denied the same on the plea that no offer
was made with Carlil and also she had not communicated her
acceptance of the offer, if it was made. The court held that it was a
general offer made by the company, which was accepted by Carlil
by using the medicine as directed. Therefore, the company was
liable to pay the reward money to Carlil.
 MODES OF ENDING OFFER
• By notice of revocation: An offer comes to an end if the offeror
revokes the offer before communication of acceptance is completed
as against him but not after the acceptance has been sent by the
acceptor.
• • By lapse of time: An offer automatically comes to an end if it is not
accepted within the time as prescribed in the offer. In cases where
no specific time has been stated in the offer, the acceptance must be
completed within a reasonable time.
• By death or insanity of the offeror or offeree: In the event of death
or insanity of the offeror, the offer comes to an end if the acceptor
gets to know about the same and does not accepts the offer.
• By non-fulfillment of conditions precedent: If the offer is accepted
without fulfilling the specific conditions of the offer, the offer
automatically comes to an end.
• By counter offer: As learnt in the previous lessons, an offer comes to
an end if the offeree makes a counter offer. Counter offer implies
rejection of the original offer and amounts to making of a fresh offer
• By acceptance in mode other than prescribed or usual mode: As
discussed in the previous lesson, an offer ends if it is not accepted in
the manner specified in the offer or in some reasonable manner, in
case no specific manner is stated
• By rejection of offer by offeree: An offer comes to an end if it is
rejected by the offeree. An offer is said to be rejected if the offeree
expressly states that he rejects the offer or accepts the offer subject
to certain conditions, i.e. gives a qualified acceptance. Since
acceptance cannot be subject to reservations or conditions,
conditional acceptance is no acceptance. Hence, the offer is said to
be rejected.
• By subsequent illegality or destruction of subject matter of the offer:
An offer lapses if the subject of the offer becomes illegal or if the
subject matter is destroyed before the offer is accepted by the
offeree.
 The term ACCEPTANCE
means giving consent to or
agreeing upon an offer. We
already know that acceptance
of an offer is an important
element of the offer. This is
because an
offer is said to be complete or
valid only when it is accepted.

In other words, acceptance is

an expression of assent to the
terms of offer by the offeree.

As per Section 2(B) of the Indian

Contract Act, 1872, “A proposal is said to As an example, consider the case of
be accepted when the person to whom the Parul who offers to sell her house to
proposal is made signifies his assent Mahima for Rs 10,00,000. Mahima
thereto. A proposal when accepted agrees to the same. Here, Mahima’s
becomes a promise.” act is an acceptance of Parul’s offer
ESSENTIAL ELEMENTS OF VALID
ACCEPTANCE
1. Acceptance must be Communicated
2. An acceptance must be absolute and
unqualified
3. Reasonable Time
4. Acceptance should be expressed in some usual
and reasonable manner, unless the proposal
prescribes the manner of acceptance.
5. Acceptance must be made before Revocation of
offer
 Example: Aryan makes an offer
to Karan for the sale of
furniture for Rs 15,000
through a letter that
he posts on 28 February 2014.
The letter reaches Karan on 4
March 2014. Here, the
communication of offer is said
to be complete on the date
when the letter is received by
Karan, i.e.on 4 March 2014.

Section 4 of the Indian Contract Act, 1872, “COMMUNICATION OF AN OFFER is

said to be complete when it comes to the knowledge of the person to whom it is made.”

Thus, the communication of offer is deemed to be complete when the offeree has the
knowledge of the offer and in case an offer is made by post, the communication would
be said to be complete when the letter containing the offer is received by the offeree.
 Communication of
an acceptance:
Similar to
communication of an
offer, acceptance
must also be properly
communicated.
However, the
communication of
acceptance takes
place at different
times
for both the parties,
i.e. as against the
proposer and the
acceptor.
 COMMUNICATION OF ACCEPTANCE

• As against the proposer: The communication is said to be complete from the side
of the proposer such that it then becomes out of power for the acceptor to
withdraw the acceptance.

In other words, acceptance is said to be complete when the letter is put in course of
transit. Also, the proposer would be bound by acceptance even if the letter is lost or
delayed in post, subject to the condition that the letter was properly addressed,
stamped and duly posted.

• As against the acceptor: The communication is complete when acceptance comes

to the knowledge of the proposer. Thus, in case of acceptance made by post, the
acceptor becomes bound by acceptance only when the letter of acceptance is
actually received by the proposer
According to Section 5 of the Indian an acceptance may be revoked at
Contract Act, 1872, a proposal may any time before the communication
be revoked at any time before the of the acceptance is complete as
communication of the acceptance is against the acceptor, but not
complete as against the proposer, but afterwards." In other words, an
not after it. In other words, an offer acceptor may revoke his acceptance
can be revoked by the proposer by a speedier mode of
before the letter of acceptance is duly communication that reaches the
posted by the acceptor or the offeree proposer before the letter of
accepts the offer. acceptance.