Definition and Essentials of Offer and Acceptance
Contracts play an important role in our everyday life ranging from insurance policies to employment contracts. In Fact, we enter into contracts even without thinking for example while buying a movie ticket or downloading an app. Contracts are oral or written agreements between two or more parties. Parties entering into a contract might include individual people, companies, non-profits or government agencies. The whole process of entering into a contract starts with an offer by one party, an acceptance by another party, and an exchange of consideration (something of value). Let us take a look at the definition of an offer and the essentials of a valid offer.
Definition of an offer
According to Section 2(A) of the Indian Contracts Act, 1872,
When a person expresses his willingness to another person to do or to abstain from doing something and also obtain the consent of such expression, it is called an offer.
The person who makes an offer is called “Offerer” or “ Promiser” and the person to whom the offer is made is called the “Offeree” or “Promisee”.
There are mainly three essential elements of a valid offer:
Communication or expression of the willingness by the offerer to enter into a contract or abstain from doing so is essential for a valid offer. Mere desire or willingness to do or not to do something is not enough and will not constitute for an offer.
In Lalman Shukla vs Gauri Dutt(1913) it was held that mere knowledge of an offer does not imply acceptance by the offeree.
Knowledge of the Intention of the parties is very essential as without this the courts will not be able to decide what the parties want to do. Therefore the terms of the offer must be clear and definite and not vague and loose.
Example-Ram offers Shyam to sell fruits worth Rs 600/-. This is not a valid offer since what kinds of fruits or their specific quantities are not mentioned.
It is essential for a valid proposal that it must be made with the intention of creating a legal relationship otherwise it will only be an invitation. A social invitation may not create a social relationship. An offer must lead to a contract which creates legal obligations and legal consequences in the case of non-performance of the contract.
Example- A lunch invitation extended by A to B is not a valid offer.
The written offer can be made by letters, telegrams, E-mail, advertisements, etc. The oral offer can be made either in person or over the telephone.
The offer may be communicated by making positive acts or signs to the offeree. However, the silence of a party does not amount to an offer.
Example– When you board a taxi, you are accepting to pay the taxi fare via your conduct.