First basic element of a contract is a valid offer or proposal, Section 2 (a) defines “proposal” as:- “When one person signifies to another his willingness to do or abstain from doing anything, with a view of obtaining the assent of that other to such act or abstinence, he is said to make a proposal.”
In the view of the above definition, a proposal has two essential elements. Firstly, an expression of offeror’s willingness to do or abstain from doing something and secondly it is made with a view to obtaining the assent of the offeree to the proposed act or abstinence.
The person making the proposal is called the ‘promisor’ and the person accepting the proposal is called the ‘promisee’. [Section 2 (c)]
Following are the legal rules for a valid offer:
- Term ‘signifies’ in Section 2 (a) means that the proposal must be communicated to the other party, (section 3). A valid proposal may be made by words (written or spoken) or by conduct (section 9). i.e., it may be express or implied. For example, a writes to B to purchase 100 tons of a good, at a certain price. B accepts A’s offer by writing a letter. This will be an express offer. But when a person boards a DTC bus an implied contract is formed between him and DTC. Here there is implied promise to pay for benefits enjoyed. Similarly a bid at an auction is an implied offer to buy.
- An offer must be made with an intention to create legal obligation. If it does not create legal obligation then it is not a valid offer as held in the case of Balfour v. Balfour ( 1919) 2 KB 571
- The term of the offer must be certain and not vague. Agreements, the meaning of which are not certain, or capable of being made certain, are void (section 29). A agrees to sell B “100 tons of oil”. There is nothing whatsoever to show what kind of oil was intended. The agreement is void for uncertainty. But if A agrees to sell B all the grain in his granary at Ramnagar, then the agreement is valid.
- Communication of offer- Section 4 of the Act, “The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.” An act in ignorance of an offer does not amount to acceptance of that offer.
- Section 3 of the Act lays down Communication, Acceptance and Revocation of Proposals: The communication of proposals, the acceptance of proposals, and revocation of proposals and acceptances, respectively are deemed to be made by an act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.
- In case of public offer or advertisements offering a reward, ‘performance of the act’ raises an inference of acceptance. (Section 8)
- Offer may be general or specific – Specific offer I made to specific person. While general offer is made to the public or world at large. A specific offer can be accepted only by the person to whom it is made, while in case of general offers, the contract is made only with the person who comes forward and performs the conditions of the proposal.
- Offer and invitation to offer: An offer is different from invitation to receive offer. An ‘offer’ is final expression of willingness by offeror to be bound by his offer. Sometimes a person does not make an offer but invite others to make offers. For example, the display of goods in a shop window is not an offer to sell but simply an invitation to treat (offer). The person who responds to the invitation to offer makes offer which may be accepted or rejected by person inviting the offer.
Section 2(b) in The Indian Contract Act, 1872 defines acceptance as – When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Only after acceptance of the proposal, a contract can arise between two parties. Following are the legal rules for a valid acceptance:-
- Acceptance may be express or implied – According to section 3 and 9, if acceptance is made with words spoken or written, it is a express acceptance, and if acceptance is made otherwise than in words, it is implied,
- Communication must be communicated to offeror himself – A communication to any other person is no communication in the eyes of law.
- Communication must be communicated by the acceptor himself, or from a person who has authority to accept.
- Necessity of communication: In case of specific offer, communication of acceptance must be made by acceptor, and to the offeror himself. But in all cases of general offers, it can be accepted by anyone, who fulfills the condition of offer. Section 8 provides that performance of the conditions of a proposal is an acceptance of proposal.
- When the parties are in presence of each other, contract is concluded, when acceptance is communicated to proposer.
- Acceptance must be absolute and unqualified – Section 7 of the Act provides that ‘In order to convert a proposal into a promise, the acceptance must be absolute and unqualified. An acceptance with variation is no acceptance, but simply a counter proposal. A counter proposal/offer puts an end to the original offer and cannot be revived by subsequent acceptance unless renewed. Any acceptance made subject to final approval is a provisional acceptance, and it does not bind either party until final approval is given.
By – Shradha Arora
( Editor @ Legal Bites)