Offer and Acceptance: Definition, Legal Rules & Essentials
1. Legal Rules of a Valid Offer (Section 2(a))
An offer is the starting point of a contract. For an offer to generate legal consequences, it must satisfy established legal tests:
If an offer is purely social or casual, it does not constitute an offer in law.
An agreement to sell 100 liters of oil without specifying grade or quality is void for uncertainty (Sec 29).
Price quotations, auction notices, display of goods with price tags in a supermarket are mere invitations to negotiate.
An offer cannot be accepted without knowledge of its existence (Lalman Shukla v. Gauri Dutt).
2. Legal Rules of a Valid Acceptance (Section 7)
When the person to whom the proposal is made signifies their assent, the proposal is said to be accepted. Under Section 7:
- Must Be Absolute & Unqualified: Any condition, qualification, or alteration converts the acceptance into a Counter-Offer, extinguishing the original proposal (Hyde v. Wrench).
- Must Be Expressed in Reasonable or Prescribed Manner: If the offeror stipulates acceptance by email, it should ordinarily be communicated by email.
- Mental Acceptance is Not Enough: Silence or mere mental intention does not constitute valid acceptance (Felthouse v. Bindley).
- Must Be Given Within Specified or Reasonable Time: An offer lapses if not accepted within the prescribed period.
3. Communication & Revocation Rules (Section 4 & 5)
Communication of Acceptance is Complete:
- As against the Proposer: As soon as it is put in the course of transmission to him, so as to be out of the power of the acceptor. (Contract is formed as against offeror).
- As against the Acceptor: When it comes to the knowledge of the proposer.
Revocation: An offer may be revoked at any time before the communication of its acceptance is complete as against the proposer. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor.
4. Types of Offer: Specific vs. General Offers
A Specific Offer is made to a definite person or group and can only be accepted by that specific person. A General Offer is made to the public at large and can be accepted by anyone who performs the conditions specified in the advertisement (e.g. reward for finding lost property, Carlill v. Carbolic Smoke Ball Co.).
6. Landmark Legal Precedent: Carlill v. Carbolic Smoke Ball Co. (1893)
Facts: The Carbolic Smoke Ball Company advertised that it would pay Ā£100 reward to anyone who contracted influenza after using its carbolic smoke ball three times daily for two weeks according to printed directions. It deposited Ā£1,000 in Alliance Bank to show sincerity. Mrs. Carlill used the ball as directed but caught influenza and claimed the Ā£100.
Held: The court held that this was a valid General Offer made to the entire world. Performance of the conditions without prior notification of acceptance was sufficient to create a binding contract. Mrs. Carlill was entitled to recover the Ā£100.
7. Solved AKTU Previous Years Questions (PYQs)
Q1: Distinguish between an Offer and an Invitation to Offer.
Answer: An Offer is a final expression of willingness to be bound by contract as soon as the other party accepts. An Invitation to Offer (Treat) is not an offer, but an invitation to others to make offers (e.g. goods displayed in a shop window, a menu card in a restaurant, or an auction tender notice).
Q2: Discuss the legal rules regarding a valid acceptance. When is communication of acceptance complete as against the proposer and the acceptor? Cite leading cases.
Model Answer Structure for Full 10 Marks:
- Definition: State Section 2(b) definition of acceptance. Quote Anson's classic metaphor ("lighted match to a train of gunpowder").
- Rules of Valid Acceptance:
- Absolute and unqualified (Section 7(1)). Counter-offers destroy original proposal (Hyde v. Wrench).
- Usual and reasonable manner unless prescribed (Section 7(2)).
- Mental acceptance invalid; silence cannot be treated as acceptance (Felthouse v. Bindley).
- Acceptance by performance of condition in general offers (Carlill v. Carbolic Smoke Ball).
- Rules of Communication (Section 4): Contrast completion as against proposer (upon posting/dispatch) vs against acceptor (upon receipt).
- Revocation Rules (Section 5): Timelines for revoking acceptance before communication is complete against acceptor.
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