FACULTY OF LAW
UNIVERSITY OF DELHI
LAW OF CONTRACT PROJECT ON:
THE ROLE OF OFFER AND ACCEPTANCE IN
CONTRACT: AN ANALYSIS
Submitted by:
Submitted to:
Shambhavi Suman
Ms. Sukanya Singha
Roll no-20231003
Asst. Professor of Law
BALLB(Honours)
Faculty of Law, DU
Semester-1
pg. 1
ACKNOWLEDGEMENT
I would like to express my deep and sincere gratitude to all individuals and organizations for
their valuable support and assistance in completion of this project.
First and foremost, I would like to express my appreciation to my professor, Ms. Sukanya
Singha for her support, guidance, and encouragement throughout the entire project. Her
instructions, feedback, criticism has helped me in improving the quality of this project.
In addition, I would also like to acknowledge the support of ILC’s chairman Prof (Dr).
Pushpa Kumar Lakshmanan for providing the resources and facilities necessary to carry out
this research.
Last but not the least I would like to extend my heartful gratitude to almighty, for his showers
of blessings throughout my research and its successful completion.
OBJECTIVE
This project aims to understand the concept of offer and acceptance and its role and
importance in contract. It aims to explain different types of offer and acceptance, essential
elements of valid offer and acceptance and revocation of offer and acceptance.
pg. 2
TABLE OF CONTENTS
Table of cases 4
Introduction 5
Brief introduction of
Indian contract act ,1872
Essential elements of a
contract
Offer
Essential elements of 6
valid offer
7,8
Classifications of offer
Acceptance 9
Essential elements of
acceptance
Types of acceptance 10
TOPIC
PAGE NO.
Revocation of offer and 10,11
b
acceptance
pg. 3
TABLE OF CASES
1. LALMAN SHUKLA V. GAURI DUTT
2. HARIDAS RANCHORDAS V. MERCENTILE BOOK OF INDIA LIMITED
3. CARLILL V. CARBOLIC SMOKE BALL CO
4. BALFOUR V BALFOUR,1919
5. TINN V HOFFMAN AND CO
6. HAJI MOHAMMED HAJI JIVA V SPINER
7. PERCLVAL LTD. V. LONDON COUNTY COUNCIL ASYLUMS AND MENTAL
DEFICIENCY COMMITTEE
8. RAMSGATE VICTORIA HOTEL V. MONTEFIORE
pg. 4
INTRODUCTION
The law relating to contract is governed by the Indian contract act, 1872.The act came into
force on the first day of September,1872. The preamble to the act says that it is an act, “to
define and amend certain parts of the law relating to contract”. It extends to whole of India
including Jammu and Kashmir after abrogating article 370 in August 2019. The Indian
Contract Act, of 18721, outlines the procedures for negotiating and carrying out contracts.
Therefore, for a contract to be legally binding, it must comply with the act’s requirements.
Some of the essential elements of a valid contract2 are:
1.Lawful consideration3: Section 25 of the Indian contract act talks about consideration.
Consideration has been defined as something which is of some value in the eyes of the law.
The definition of consideration in section 2(d) requires, in the first place, that the act or
abstinence, which is to be a consideration for the promise ,should be done at the promisor;
secondly, that it should be done by promise or any other person and, lastly, that the act or
abstinence may have been already executed or is in the process of being done or may be still
executory, that is to say, it is promised to be done.
2.Capacity to contract4: In section 11, every person
b is competent to contract who is of the age
of majority according to law and who is of sound mind and is not disqualified from
contracting by any law to which he is subject. The age of majority is generally eighteen,
except when a guardian of a minor’s person or property has been appointed by the court. If
the person is not competent, the contract is void-ab-initio. If the guardians enter into a
contract to benefit the minor, then the contract is valid.
3.Free consent5: According to section 10 of the contract act, a contract is valid if it was
entered into by free consent of parties. Section 14 states that consent is said to be free when it
is not caused by coercion, undue influence, fraud, misrepresentation, or mistake. If consent is
1
The Indian Contract Act, 1872, § 65.
2
What is Offer in Contract Law? Outcomes, Elements, Types | upGrad blog, UpGrad blog
(June 26, 2023),
3
Lawful objects and considerations under Section 23 of Indian Contract Act 1872 – An
analysis, (Feb. 17, 2014), http://docs.manupatra.in/newsline/articles/Upload/01CAB3F7-
FEF2-47EF-8D1B-AE4A3EB4C2D8.pdf.
4
Kelvin says:, Capacity to Contract: Attaining Majority, Soundness of Mind etc., (July 20,
2018), https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-ii/
capacity-to-contract/.
5
India Code: Section Details, https://www.indiacode.nic.in/show-data?
actid=AC_CEN_3_20_00035_187209_1523268996428§ionId=38617§ionno=14&orderno=
14.
pg. 5
vitiated by any of these factors, the contract may be voidable at the options of the aggrieved
party.
4.Legality of object6: The formation of a valid contract is that parties must contract for a
lawful object. Accordingly, section 23 defines unlawful consideration. Unlawful
consideration and object are one which is either, forbidden by law, or is of such a nature, that
if permitted, then it would defeat the provisions of law, purpose of the contract is fraudulent
or involves or implies giving injury or damage to someone or to someone’s property, or the
court considers it as immoral or against public policy.
OFFER
The process of entering into a contract begins with the offer made by one party to another.
The offer must be accepted to enter into an agreement. The proposal is the starting point of a
contract. Section2(a)7 defines offer as follows: -
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, he said to make a proposal. b
The person who offers the proposal is known as the promisor or offeror. The person who is
being proposed is referred to as the promisee or offeree. The proposal turns into a promise
when the person to whom it is being made accepts it. A proposal or offer is the initial point
of an agreement.
Communication of proposal: The definition of “proposal” lays emphasis upon the
requirement that the willingness to make a proposal should be “signified”. The process of
making a proposal is completed by the act of communicating it to the other. Section 3
recognizes the modes of communication. Proposal may be communicated in any way which
has the effect of laying before the offeree the willingness to do or abstain. It may be by
mouth, or by writing, or even by conduct. Offers can take various forms, and they are
classified based on different criterion.
6
Legality of Object in Contracts, (June 16, 2023), https://lawbhoomi.com/legality-of-
object-in-contracts/.
7
RK BANGIA, PROPOSAL OR OFFER,7-8(7 ed. Allahabad law agency 2017)
pg. 6
Some essential elements8 of offer are: -
1. The offer must be communicated 9 – Communication or expression of the willingness
by the offerer to enter into a contract or abstain from doing something is essential for
valid contract. Lack of clarity will result in the voidance of the offer made. Therefore,
mere willingness to do or to not do something is not enough to constitute an offer.
E.g.: In the case of Lalman Shukla v. Gauri Dutt10, the plaintiff, Lalman Shukla,
appealed against the defendant, Gauri Dutt, claiming a reward for finding Gauri dutt’s
missing nephew. However, the court dismissed the appeal, stating that for a valid
contract to exist, there must be both knowledge and consent to the offer and that the
mere knowledge of an offer does not mean acceptance by the offeree.
2. Terms of the offer must be definite and clear – the terms must be definite and clear and
b
not vague or loose otherwise the contract isn’t created. Unclear or indefinite contract
is void. E.g.: In the case of Haridas Ranchordas v. Mercantile Bank of India Limited 11,
the trial judge based on a very careful consideration found that there was not the
slightest doubt that the defendants knew that the Bank was charging compound,
interest and agreed to that interest being charged in that way with monthly rests and
made the decree upon the claim against the defendants.
3. Must create a legal relationship – it is essential that a valid offer is made with the
intention of creating legal relationship otherwise it only an invitation as the offer is
made for the execution of contract between two or more parties. It is to be noted that
social contract without establishment of legal relations will not constitute a valid offer.
E.g.: Sheila’s lunch invitation extended to dolly is not a valid offer. In the case of
Balfour v. Balfour, the court emphasized that not all agreements between parties result
in contracts as their meaning might not confirm to legal standards. This is particularly
relevant in domestic agreements, those among family members. In similar instance, the
8
Www.Indiafilings.Com, https://www.indiafilings.com/learn/essentials-of-a-valid-offer/.
9
Rk Bangia, contract 1 15 (7th ed. 2017).
10
Lalman Shukla v. Gauri Prasad, AIR 1913 SC 11 ALJ 489
11
Haridas Ranchordas v. mercantile bank of India limited, AIR 1919
pg. 7
absence of an intention to bear legal consequences often prevents formation of
contract.
Offers are classified12 based on timing, purpose, design, etc. as follows:
1. Express offer: An express offer13 is a type of offer in contract law that is explicitly and
clearly communicated through words, either spoken or written. In other words, the terms of
offer are stated clearly leaving very little room for ambiguity. Express offers are contrasted
with implied offers, where the offer is inferred from conduct, circumstances, or relationship
between the parties rather than being explicitly stated.
E.g.: A offers to sell a car for 2lakh to B. (creates potential contract)
2. Implied offer: An implied offer also known as an implicit offer, is a type of offer in
contract law that is not explicitly stated through words, either spoken or written. Instead, the
offer is inferred from the conduct, circumstances, or relationship between the parties
involved. While the terms are not explicitly communicated, the actions or circumstances
suggest a clear intent to create a legal obligation. Implied offers are as legally binding as
b
express offers, and acceptance of the offer can create a valid contract. However, terms of an
implied offer may require an examination of the specific facts and circumstances.
E.g.: A leaves car with price tag at B’s shop. (potential contract if accepted)
3. General offer: A general offer is an offer that is open to anyone, effectively made to the
public in general. The concept of general offer was established in the landmark case of
Carlill v. Smoke Ball14 co case, the company argued that their offer was not intended to create
legally binding agreement but was merely a marketing ploy to boost sales. They contended
that an offer must be made to specific person and since this offer was not directed at any
specific individual, they were not obligated to pay Mrs. Carlill. A general offer can be
accepted by multiple people until it is revoked. However, in cases where offer is obtaining
information about a missing item, it is typically closed as soon as the first person provides the
required information.
12
Rk Bangia, contract-1 17,18,19 (7th ed. 2017).
13
The Indian contract act ,7
14
https://www.casebriefs.com/blog/law/contracts/contracts-keyed-to-calamari/the-
agreement-process/carlill-v-carbolic-smoke-ball-co-2/
pg. 8
E.g.: A offers a reward for finding a lost dog in a poster. (potential contract when accepted)
4. Specific offer: A specific offer is a type of offer that is directed towards a identified
individual. This offer can be accepted only by the person for whom it was intended. This
concept is illustrated in Boulton v. Jones. It was also established that in cases where a
contract is made with a specific individual for personal services, such as writing a book,
creating a painting, or any service unique to that person, or if there is a set-off owed by any
party, no one else has the authority to assert that they are the contracted party. In short,
specific person couldn’t be transferred to someone else without consent.
E.g.: A offers to sell a car to B for a specific price.
5. Cross offer: cross offer occurs when two parties independently and unknowingly make
identical offers to each other. However, cross offers are not valid offers and they cannot lead
to formation of contract. The basic essentials of cross offer are that both offer, and offeree
make same offer with same object. And offer must be made in ignorance of each other
independently and without prior knowledge. One of the cases that illustrates this concept is
Tinn v. Hoffman15. The court ruled that as offers were made simultaneously and
independently with ignorance and consequently the offer was not binding and no contract
b
was formed. In the case of cross offers, there is no acceptance instead simultaneous offers
made independently by both parties and thus, they do not result in the formation of a contract.
E.g.: A offers to sell a car to B while B offers to buy it. (it is not a contract rather mutual
rejection)
6. Counter offer: A counter offer occurs when the offeree responds to the original offer that
includes few modifications or variations compared to original offer. Counter offer is rejection
of the original offer. This principle is illustrated in the case of Haji Mohd Haji Jiva v.
Spinner16, this case restated that when an acceptance contains variations or modifications, it is
not a valid acceptance rather a counter offer. The original offeror must agree to this counter
proposal for it to form a contract.
E.g.: A offers to sell a car for Rs 5lakhs; B offers Rs 2 lakhs (rejects the original offer)
15
Tinn v Hoffman and Co 1873, (Nov. 6, 2023), https://www.lawteacher.net/cases/tinn-v-
hoffman.php.
16
Haji Mahomed Haji Jiva V. Spinner, https://indiankanoon.org/.
pg. 9
7. Standing offer: Standing offer remains open for acceptance over specified period of time.
During this period potential offerees can accept the offer. This is pertinent in the case of
Perclval Ltd. v. London County Council Asylums and Mental Deficiency Committee 17, the
court held that the tender made by the defendant was standing offer, meant to be converted
into a series of contracts. This case exemplifies how standing offers work and how they can
lead to contractual obligations when accepted by subsequent orders or actions.
E.g.: A invites tenders for a year long supply contract. (accepted orders form contracts)
ACCEPTANCE
An offer, when accepted becomes a promise. It is only after the acceptance of the proposal
that a contract between the two parties can arise. According to section 2(b) acceptance 18 is
defined as:
When the person to whom the proposal is meet, signifies his assent thereto, the proposal
is said to be accepted. A proposal, when accepted, becomes a promise.
Communication of acceptance could be by acceptance
b by external manifestation or by action
or acceptance by conduct.
Some of the essentials of a valid acceptance19 are:
1.Acceptance should be communicated: It states that the offeree must signify his assent or
communicate the acceptance. The communication of acceptance is deemed to be made by any
act or omission of the party accepting, by which he intends to communicate such acceptance.
When parties are face to face, communication could be oral. When parties are at a distant,
communication could be made either by post, telegram, message, phone or any such
reasonable method. Sometimes conduct of a person can also indicate his willingness to accept
the offer. But conduct would only amount to acceptance if it is clear that the offeree did it
with the intention of accepting the offer. For a valid contract, the acceptance must be
communicated to the offeror.
17
Vivek Kumar Verma, Perclval Ltd. v. London County Council Asylums and Mental
Deficiency Committee – Indian Case Law, (Feb. 9, 2013),
https://indiancaselaw.in/perclval-ltd-v-london-county-council-asylums-and-mental-
deficiency-committee/.
18
Rk Bangia contract-1 25,27 (7th ed. 2017).
19
Rk Bangia, contract-1 27 28 29 30 (7th ed. 2017).
pg. 10
2. Acceptance should be absolute and unqualified: It means that it should be qualified and
come from free choice and will. The expression of acceptance should be explicit or implied
and if any condition is made in the proposal, then it should be contended.
3. Acceptance should be expressed in usual/prescribed manner: It means that if the manner of
acceptance is prescribed by the offeror, the acceptance has to be in that prescribed manner
otherwise in some other reasonable or usual way.
4. Acceptance should be made while the offer is still subsisting: It means that once the offer
has been withdrawn or has lapsed, there is nothing which can be accepted. Therefore, it is
important that offer is accepted while it is still subsisting and alive. Once the offer has lapsed,
attempt to accept it would not give rise to any legal obligation.
Acceptance are classified20 as follows:
1.Expressed acceptance: It refers to clear and unambiguous communication by the offeree
indicating their agreement to the terms of the offer. It is direct and explicit in nature and is
usually communicated through words, either spoken or written.
E.g.: A offers to sell his phone to B over an email. B responds to that email saying he accepts
b
the offer to buy.
2. Implied acceptance: It is a form of acceptance where acceptance is inferred from the
actions, behavior, or conduct of the offeree rather than from explicit verbal or written
communication.
E.g.: When someone receives a job offer and starts working in the said company. Their
actions indicate that they accept the offer, even if they don’t explicitly say so.
3. Conditional acceptance: It occurs when offeree agrees to accept the offer, but after certain
conditions. The acceptance is contingent on occurrence of specified events or fulfillment of
certain requirements.
E.g.: A person agrees to sign the rental agreement for the house only if the owner fixes the
leakage issue of the kitchen. That’s an example of conditional acceptance.
20
Acceptance, Occurs, Implied, Conditional, and Offer
https://law.jrank.org/pages/3949/Acceptance-Types-Acceptance.html.
pg. 11
REVOCATION OF OFFER AND ACCEPTANCE
REVOCATION OF OFFER:
Revocation of an offer means withdrawing or cancelling an offer before it is accepted. It is
dealt in section 5 of the Indian contract act,1872. An offer can be revoked at any time before
the communication. After an offer has been accepted it changes into a contract and then it
cannot be revoked. According to section 5:
“An offer may be revoked at any time, before the communication of its
acceptance is complete as against the proposer, but not afterwards.”
The revocation must be communicated to the offeree in a reasonable manner and before the
acceptance is complete.
Modes21 of revocation of an offer :
1. By notice of revocation – An offer changes into a contract after it is accepted. A
proposal may be revoked by the communication. The notice of revocation has to be
communicated by the offeror. In Dickinson v Dodds22, the court held that statement
b there was no binding contract formed. In
made by Mr Dodds was just a promise and
addition the court established that a promise to keep a specific offer is open only till a
specific time period.
2. By lapse of time – A offer is revoked by the lapse of the time prescribed in such
proposal for its acceptance, or, if no time is prescribed, by the lapse of a reasonable
time, without communication of the acceptance. In Ramsgate Victoria Hotel co v.
Montefiore23, the court held that Ramsgate Victoria hotel’s action for specific
performance was unsuccessful. The offer that was made in June was no longer valid
to form a contract. A reasonable period of time had passed and hence offer had
lapsed.
21
Rk Bangia, contract-1 47 (7th ed. 2017).
22
Dickinson v/s Dodds (1876, 2 Ch D 463): Case Analysis,
https://www.legalserviceindia.com/legal/article-5021-dickinson-v-s-dodds-1876-2-ch-d-
463-case-analysis.html.
23
Ramsgate Victoria Hotel v Montefiore, 1866 (Nov. 6, 2023),
https://www.lawteacher.net/cases/ramsgate-hotel-v-montefiore.php.
pg. 12
3. By failure to fulfil a condition precedent – An offer can be revoked if it is subject to
condition precedent, and the condition precedent does not occur. E.g.: if an offer is
made on the condition that the offeree obtains a license, and offeree fails to obtain the
license, the offer is revoked.
4. Revocation by death or insanity of the offeror – An offer is automatically revoked if
the offeror dies or becomes insane before the offer is accepted. Revocation of offer
must be communicated to the offeree before acceptance. Although, offer can be
revoked if it has been accepted by the offeree and the parties have entered into a
contract.
REVOCATION OF ACCEPTANCE24:
In English law, acceptance is irrevocable as when there is consensus ad idem then there is no
question of revoking it after some time or change of minds. Therefore, English law does not
give the acceptor the option of revoking the acceptance. Whereas Indian law is contrary to the
English law and it gives the option to the acceptor to revoke his acceptance any time before
b
the communication of acceptance reaches the offeror. But it is necessary that the knowledge
of revocation of acceptance is posted before the offeror gets to know about the acceptance
from the acceptor.
Modes of revocation25 of an offer:
1.By notice of revocation26: revocation of acceptance can be informed to the offeror
through notice. But the notice of revocation of acceptance must be made before acceptance of
the offer reaches the offeror.
2.By lapse of the time prescribed: there is a time limit set by the offeror during the proposal
and the acceptor must send his reply for such proposal within reasonable time. And if the
acceptor fails to do so then the acceptance is by default revoked and the offeror is free to
make any other proposal to any other person.
24
Rk Bangia, contract-1 58 (7th ed. 2017).
25
Rk Bangia, contract-1 55,56,57,58 (7th ed. 2017).
26
Modes of revocation of offer Under Indian contract act, 1872, (Oct. 12, 2021),
https://legalbonanza.com/study-notes/modes-of-revocation-of-offer-under-indian-
contract-act-1872/cid5459342.htm.
pg. 13
3. By non-fulfillment of conditions prescribed by the proposer: if the offerer during offer
states any condition which will mark the acceptance of offer by the acceptor, then acceptor
must fulfill them. If the acceptor doesn’t fulfill such a condition that can lead to revocation of
acceptance.
4. Death of insanity of the offerer: according to Indian law, the acceptance lapses only
when the acceptor gets to know about the death of offeror. If the acceptor is unaware of the
fact about the offeror’s death and sends his acceptance to the offeror, then such acceptance is
valid. But if the acceptor is aware about the death of the offeror and still sends his acceptance
then such acceptance is revoked and such acceptance stands invalid.
CONCLUSION
The purpose of this research paper was to understand the role of offer and acceptance in
contract. The paper focuses mainly on offer and acceptance and its different aspects and the
important role it plays information of a contract. In conclusion, a valid contract requires
several essential elements, and all these elements are crucial for formation and enforceability
of agreements. The process of entering into a contract starts with an offer which is
communicated with definite and clear terms and intend to create a legal relationship. Offers
can take various forms, including express, implied, general, specific, cross, counter and
b
standing offers each with its own characteristics and implications. The acceptance of an offer
is essential for formation of contract and it should be communicated while the offer is still
subsisting. The paper concludes with discussing about revocation of an offer through notice,
lapse of time, failure in fulfilling a condition precedent or death or insanity of the offeror.
Whereas, revocation of acceptance is allowed under Indian law before communication of
acceptance is complete, and it can be done through notice, lapse of time, non-fulfillment of
conditions, or death or insanity of the offeror.
pg. 14
