OFFER AND ACCEPTANCE

[Sections 39 of the Indian Contract Act, 1872]

The words proposal and offer are synonymous and are used
interchangeably. Section 2(a) of the Indian Contract Act defines a proposal as
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.
The first part of the definition explains that the offer must be signified or
communicated to the other person. The second part explains that the proposals
must be made with an intention to get the acceptance of the other party.
The person making the proposal or offer is called the promisor or
offeror, the person to whom the offer is made is called the offeree, and the
person accepting the offer is called the promisee or acceptor.
ESSENTIAL REQUIREMENTS OF A VALID OFFER
1. Must be capable of being accepted and constitute legal relationship
If the offer does not intend to give rise to legal consequences, it is not a
valid offer in the eye of the law. A mere social invitation is not offer as no
intention of legal relationship is created.
2. The offer must be Certain: The offer must be certain, clear, specific and
definite. The offer must not be based on a condition, which is uncertain or
incapable of performance.
3. Offer must be distinguish from an invitation to offer. Mere declaration
of intention or announcement or advertisement does not constitute offer. E.g.
advertisement of auction sale is not an offer.
Display of goods in showcase, quotations, catalogues, advertisements
are invitation to offer and not offer itself the potential customers to make
the offer which will then be accepted - the seller may or may not accept the
offer.
Pharmaceutical Society of Great Britain Vs. Boots Cash Chemists
Goods sold under self service system customer chooses the desired goods
makes payment to cashier display of goods only an invitation to offer
actual offer made by the customer when he offers to make the payment
acceptance by cashier constitutes a contract.
Newspaper advertisements are not offers an exception is a general
offer of reward to public anyone can accept the general offer by fulfilling the
condition - constitutes a contract. E.g. an advertisement to pay a reward for
finding missing son general offer to any one performs the required act
-acceptor must have knowledge of the offer - constitutes valid contract.

4. Offer must be communicated to the person to whom it is made: An

offer is effective only when it is communicated to the offeree. Until the offer is
made known to the offeree, there can be no acceptance and no contract.
Mere act of acceptance without knowledge of the offer does not constitute
acceptance. This applies to both specific and general offers.
Fitch Vs. Snedaker S offered reward for lost dog F ignorant of offer
of S finds the dog Held, F not entitled to reward.
Lalman Vs. Gauri Dutt - G sends servant L to trace lost nephew later
announces reward to finder L finds the nephew Held, ignorant of offer
hence, no acceptance - L not entitled to reward.
5. Offer must be made with a view to obtaining the assent of the
offeree.
6. An offer should not contain a term of non compliance which may
amount to acceptance: Thus an offeror cannot say that if acceptance is not
communicated up to a certain date, the offer would be presumed to have
been accepted. If the offeree does not reply, there is no contract, because no
obligation to reply can be imposed on him, on the grounds of justice.
E.g. A writes to B offering his horse for Rs.500, adding if you do not
reply, I shall assume you have accepted the offer in case of Bs silence, no
specific acceptance no contract.
7. Special terms to an offer must be communicated: The special terms of
the offer must be communicated at the time of proposal and it cannot be
inserted in contract later on unilaterally must be decipherable
(understandable) in reasonable manner.
Rajpur Transport Company Vs. Ghanshyam R accepted goods for
transportation without any condition later issued circular limiting its liability
for damage or loss in transit Held, special condition communicated after the
contract has been entered into client not bound by them.
8. An offer may be specific or general. An offer is said to be specific
when it is made to a definite person or persons. Such an offer can be
accepted only by the person or persons to whom it is made. A general offer,
on the other hand, is one which is made to the world at large or public in
general and may be accepted by any person who fulfils the requisite
conditions. [Carlill vs Carbolic Smoke Ball Co.]
9. An offer may be express or implied. An offer may be made either in
words or by conduct. An offer which is expressed in words, spoken or written,
is called an express offer and the one which is inferred from the conduct of a
person or the circumstances of the case is called an implied offer.
10.
Two identical cross-offers do not make a contract. When two
parties make identical offers to each other, in ignorance of each others offer,
the offers are cross-offers. Cross-offers do not constitute acceptance of
ones offer by the other and as such there is no completed agreement.

LAPSE AND REVOCATION OF OFFER

Section 6 deals with various modes of lapse of an offer. It states that an offer
lapses in the following circumstances.
1) An offer lapses after a stipulated or reasonable time. An offer lapses if
acceptance is not communicated within the time prescribed in the offer, or if
no time is prescribed, within a reasonable time [Sec. 6 (2)1. Reasonable time
depends upon the circumstances of each case.
2) An offer lapses by not being accepted in the mode prescribed, or if no
mode is prescribed, in some usual and reasonable manner. But, according to
Section 7, if the offeree does not accept the offer according to the mode
prescribed, the offer does not lapse automatically. It is for the offeror to insist
that his proposal be accepted only in the prescribed manner, and if he fails to
do so he is deemed to have accepted the acceptance.
3) An offer lapses by rejection. An offer lapses if it has been rejected by the
offeree. The rejection may be express, i.e., by words spoken or written, or
implied. Implied rejection is one: (a) where either the offeree makes a counter
offer or (b) where the offeree gives a conditional acceptance.
4) An offer lapses by the death or insanity of the offeror or the offeree
before acceptance. If the offeror dies or becomes insane before
acceptance, the offer lapses provided that the fact of his death or insanity
comes to the knowledge of the acceptor before acceptance [Sec. 6(4)1. An
acceptance in ignorance of the death or insanity of the offeror is a valid
acceptance, and gives rise to a contract. Thus the fact of death or insanity of
the offeror would not put an end to the offer until it comes to the notice of the
acceptor before acceptance.
5) An offer lapses by revocation. An offer is revoked when it is retracted by
the offeror. An offer may be revoked, at any time before acceptance, by the
communication of notice of revocation by the offeror to the other party [Sec.
6 (1)].
6) Revocation by non-fulfillment of a condition precedent to
acceptance. An offer stands revoked if the offeree fails to fulfill a condition
precedent to acceptance [Sec. 6(3)].
7) An offer lapses by subsequent illegality or destruction of subject
matter. An offer lapses if it becomes illegal after it is made, and before it is
accepted. An offer may lapse if the substance, which is the subject matter of
the offer, is destroyed or substantially impaired before acceptance.
TYPES OF OFFER
Express offer When the offeror expressly communicate the offer, the offer is said
to be an express offer. The express communication of the offer may be made by
Spoken word; Written word.

Implied offer When the offer is not communicated expressly it is called as

implied offer. An offer may be implied from the conduct of the parties or the
circumstances of the case.
Specific offer It means an offer made in to a particular person or a group of
person. It can be accepted only by that person to whom it is made.
Communication of acceptance is necessary in case of specific offer.
General offer It means on offer which is made to the public in general. General
offer can be accepted by anyone. If offeree fulfills the terms and conditions, which is
given in offer then offer is said to be accepted by him. Communication of
acceptance is not necessary in case of general offer.
One lady, Mrs.Carlill, purchased and used the medicine according to the
printed directions of the company but suffered from influenza, She filed a suit to
recover the reward of Rs.100. The court held that there was a contract as she had
accepted a general offer by using the medicine in the prescribed manner and as
such is entitled to recover the reward from the company.
[Carlill v. Carbolic Smoke Ball Co. 1893]
Cross offer When two parties exchange identical offers in ignorance at the time
of each others offer the offers are called cross offer. Two cross offer does not
conclude a contract.
Two offer are said to be cross offer if
1. They are made by the same parties to one another
2. Each offer made in ignorance of the offer made by the
3. The terms and conditions contained in both the offers are same.
Counter offer When the offeree give qualified acceptance of the offer subject to
modified and variations in the terms of original offer it is said to be counter offer. In
other words an offer made by the offeree in return of the original offer is called as a
counter offer. Counter offer amounts to rejection of the original offer. Legal effect of
counter offer:1. Rejection of original offer
2. The original offer is lapsed
3. A counter offer result in a new offer.
Example: A offered to sell his pen to B for Rs.1,000. B replied, I am ready to
pay Rs.950. On As refusal to sell at this price, B agreed to pay Rs.1,000. Held,
there was not contract as the acceptance to buy it for Rs.950 was a counter offer,
i.e. rejection of the offer of A. Subsequent acceptance to pay Rs.1,000 is a fresh
offer from B to which A was not bound to give his acceptance .
Standing, open and continuous offer An offer is allowed to remain open for
acceptance over a period of time is known as standing, open or continuous offer.
Tender for supply of goods is a kind of standing offer.

Example: When we ask the newspaper vendor to supply the newspaper daily.
In such case, we do not repeat our offer daily and the newspaper vendor supplies
the newspaper to us daily. The offers of such types are called Standing Offer.