In contract law, the formation of a valid agreement hinges on the principles of offer and acceptance. An offer is a proposal by one party to another, intending to create a legal obligation upon acceptance. Acceptance is the unqualified assent to the terms of the offer, resulting in a binding contract. These foundational concepts are enshrined in the Indian Contract Act, 1872, and have been elucidated through various judicial pronouncements.

MEANING AND DEFINITION

• Offer (Proposal): Section 2(a) of the Indian Contract Act, 1872, 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.” In essence, an offer is an expression of readiness to contract on specific terms, made with the intention that it becomes binding upon acceptance by the offeree.

• Acceptance: As per Section 2(b), “when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.” Acceptance transforms the proposal into a promise, thereby creating a contractual obligation.

ESSENTIALS OF A VALID OFFER

1. Intention to Create Legal Relations: The offer must demonstrate an intention to establish a legal relationship. Social or domestic arrangements typically lack this intent and are not enforceable. For instance, in Balfour v. Balfour [1919] 2 KB 571, an agreement between a husband and wife was held not to constitute a contract due to the absence of intent to create legal relations.

2. Definiteness and Certainty: The terms of the offer must be clear and unambiguous. An offer with vague or uncertain terms cannot be enforced. In Scammell and Nephew Ltd. v. Ouston [1941] AC 251, the House of Lords held that an agreement to purchase a vehicle on “hire-purchase terms” was too vague to be enforceable, as the terms were not sufficiently defined.

3. Communication to the Offeree: An offer must be communicated to the offeree to be effective. In Lalman Shukla v. Gauri Dutt [1913] 11 All LJ 489, the Allahabad High Court held that since the plaintiff was unaware of the reward offer when he found the defendant’s nephew, there was no contract, emphasizing the necessity of communication of the offer.

4. Distinction Between Offer and Invitation to Treat: An invitation to treat is merely an invitation to negotiate or make an offer and is not intended to result in a binding contract. For example, advertisements are generally considered invitations to treat, as established in Partridge v. Crittenden [1968] 1 WLR 1204.

TYPES OF OFFERS

• Express Offer: An offer made through explicit words, either spoken or written.

• Implied Offer: An offer inferred from conduct or circumstances.

• Specific Offer: An offer made to a particular person or group, which can only be accepted by them.

• General Offer: An offer made to the public at large, which can be accepted by anyone who fulfills the conditions. In Carlill v. Carbolic Smoke Ball Co. [1893] 1 QB 256, the defendant’s advertisement was held to be a general offer, which the plaintiff accepted by performing the stipulated conditions.

ESSENTIALS OF A VALID ACCEPTANCE

1. Absolute and Unqualified: Acceptance must be unequivocal and correspond exactly with the terms of the offer. A qualified acceptance constitutes a counter-offer, which negates the original offer. In Hyde v. Wrench [1840] 3 Beav 334, the plaintiff’s counter-offer was deemed a rejection of the original offer, precluding the formation of a contract.

2. Communication of Acceptance: Acceptance must be communicated to the offeror to be effective. Mere mental assent is insufficient. In Felthouse v. Bindley [1862] EWHC CP J35, the court held that silence does not amount to acceptance, and there must be clear communication.

3. Mode of Acceptance: If the offeror prescribes a specific mode of acceptance, it must be followed. If no mode is specified, acceptance should be in a reasonable manner. As per Section 7(2) of the Indian Contract Act, 1872, acceptance must be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted.

4. Timing of Acceptance: Acceptance must be made within the time specified in the offer, or if no time is specified, within a reasonable time. Delayed acceptance may be ineffective.

COMMUNICATION OF OFFER AND ACCEPTANCE

• Completion of Communication: Section 4 of the Indian Contract Act, 1872, states that the communication of an offer is complete when it comes to the knowledge of the person to whom it is made, and the communication of acceptance is complete as against the proposer when it is put in a course of transmission to him, and as against the acceptor when it comes to the knowledge of the proposer.

• Revocation of Offer and Acceptance: As per Section 5, a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterward. Similarly, an acceptance may be revoked at any time before the communication of acceptance is complete as against the acceptor, but not afterward.

LEGAL MAXIMS AND DOCTRINES

• Consensus ad Idem: This Latin maxim means “agreement to the same thing.” For a contract to be valid, both parties must agree upon the same thing in the same sense.

• Mirror Image Rule: This principle dictates that acceptance must exactly match the offer without any variations. Any deviation constitutes a counter-offer, which negates the original offer.