Offer and Acceptance, Essential elements

Offer and acceptance are generally recognised as essential requirements for the formation of a contract, and analysis of their operation is a traditional approach in contract law. The offer and acceptance formula, developed in the 19th century, identifies a moment of formation when the parties are of one mind. This classical approach to contract formation has been modified by developments in the law of estoppel, misleading conduct, misrepresentation, unjust enrichment, and power of acceptance.

Offer

Treitel defines an offer as “an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed”, the “offeree”. An offer is a statement of the terms on which the offeror is willing to be bound. It is the present contractual intent to be bound by a contract with definite and certain terms communicated to the offeree.

The expression of an offer may take different forms and which form is acceptable varies by jurisdiction. Offers may be presented in a letter, newspaper advertisement, fax, email verbally or even conduct, as long as it communicates the basis on which the offeror is prepared to contract.

Features of a Valid offer

The person making the offer/proposal 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 adequate. Or just an urge to do something or not to do anything will not be an offer.
• An offer can either be positive or negative. It can be a promise to do some act, and can also be a promise to abstain from doing any act/service. Both are valid offers.

The element of a valid offer

There must be two parties

There have to be at least two parties 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.

Every proposal must be communicated

Communication of the proposal is mandatory. An offer is valid if it is conveyed to the offeree. The communication can either be express or implied. It can be communicated by terms such as word of mouth, messenger, telegram, etc. Section 4 of the Indian Contract Act says that the communication of a proposal is complete when it comes to the awareness of the person to whom it is made.

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 regarded as an offer, because if such an invitation is accepted it will not give rise to any legal relationship.

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.

It may be specific or general

 The specific offer is an offer that is accepted by any specific or particular person or by any group to whom it is made. Whereas, The general offers are accepted by any person.

Classification of offer

Some types of offers can be based on the design, timing, purpose, etc. Let us look at the offer’s classification.

Express Offer

An offer may be made by express words, spoken or written. This is known as Express offer.

Implied Offer 

An offer may be derived from the actions or circumstances of the parties.

This is known as Implied offer.

General Offer

A general offer is not made by any specified party. It is one that is made by the public at large. Any member of the public can, therefore, accept the offer and have the right to the rewards/consideration.

Specific Offer

It is the offer made to a specific person or group of persons and can be accepted by the same, not anyone else.

Lapses and revocation of an offer

• An offer lapses after a defined or reasonable time.
• An offer lapse by not being accepted in the specified mode
• An offer lapses by rejection.
• An offer lapses by the offeror or the offeror’s death or insanity until acceptance.
• An offer lapses by revocation before acceptance.
• An offer lapses by subsequent illegality or destruction of the subject matter.

Acceptance

A promise or act on the part of an offeree indicating a willingness to be bound by the terms and conditions contained in an offer. Also, the acknowledgment of the drawee that binds the drawee to the terms of a draft.

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 specified 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.

Types of Acceptance

Expressed Acceptance

If the acceptance is written or oral, it becomes an Expressed Acceptance.

Implied Acceptance

If the acceptance is shown by conduct, it thus becomes an Implied acceptance.

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.

Conditional Acceptance

A conditional acceptance also referred to as an eligible acceptance, occurs when a person to whom an offer has been made tells the offeror that he or she is willing to accept the offer provided that certain 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

Acceptance must be absolute and unqualified

The offeree’s approval cannot be conditional.

Acceptance must be told to the offeror

If the acceptor just accepts the offer in his head and he does not mention the same to the offeror, it cannot be called an Acceptance, whether in an express manner or an implied manner.

Acceptance must be recommended in the following mode

Acceptance is sometimes required in a prescribed/specified communication mode.

In a reasonable amount of time, the acceptance is given

It’s very rare that an offer is always to get acceptance at any time and at all times. Therefore, the offer defines a time limit. If it does not, it should not be acknowledged forever.

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 3 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.