The concept of offer and acceptance under the contract law

Definition of a Contract

 A contract is an agreement that is enforceable by a court of law or equity

 If one party fails to perform as promised, the other party can use the court system to
enforce the contract and recover damages or other remedy

Parties to a contract

 Offeror – The party who makes an offer to enter into a contract

 Offeree – The party to whom an offer to enter into a contract is made

ESSENTIAL OF A CONTRACT

 Intention to create a legal relationship

 Offer and acceptance

 Consent

 Capacity

 Consideration

 Legality

OFFER AND ACCEPTANCE

 A contract is formed when both an offer and an acceptance are capable of being inferred
from the circumstances.

 An offer is a firm proposition put by one person (the offeror) to another person (the
offeree) coupled with an intention that it shall become binding and it must be firm and
capable of acceptance.

 Acceptance is the unconditional assent by one party to the terms of the offer.

 Offer and acceptance must be voluntary and may be made expressly in writing or orally,
or may be implied from conduct.
Offer & Acceptance

 Offeror – one who makes the offer

 Offeree – the one whom it is made to.

 Terms must be definite and accepted without change by the party to whom it was
intended to be offered.
 Without offer and acceptance the courts would not have an agreement that could
be enforced.

Offer

An Offer is:

An expression of willingness to contract on certain terms, made with the intention that it shall
become binding as soon as it is accepted by the person to whom it is addressed.

Offers require verbal or written acceptance (forming what are known as bilateral contracts),
with the general offers the performance of some act may be valid acceptance (forming a
unilateral contract)

An offer may be:

Express – either verbal or written, or

Implied – from conduct or circumstances. Sometimes, nothing is said at all but an offer is
obvious from the actions.

Requirements of an Offer

 Offer must be communicated to the offeree

 There must be a common intention

 There should be a reference to the legal relations between parties.

 Terms must be complete and defined clearly

  Preliminary negotiations should be done to avoid cross offer.

 Conditions if any must be clearly indicated.

OFFER AND ACCEPTANCE

 When purchasing insurance:

– When individuals complete an application form it acts as an offer to purchase

insurance

– In general insurance, a person usually makes an offer when he proposes for

insurance (submit a completed proposal to insurer), the insurer concerned is
deemed to accept the offer if he agrees to provide the proposed insurance.

– Insurer may not accept the proposal but may offer to provide insurance on a
different term. This situation constitutes to a counter-offer from the insurer.

Bilateral & Unilateral

Bilateral contracts

• A promise by one party in exchanged for a promise by another party

• A one to one contract

Offeror

The person who make the offer

Offeree

The person to whom

the contract was made

Example : Sale of goods contract

• The Buyer promises to pay the price

• The Seller promises to deliver the goods

Unilateral contracts

A promise by one party in exchanged for an action by another party

A one to all contract

1 Offeror

Many Offerees

Example :

X promises a reward to anyone who will find his lost wallet.

X bound himself to the promise, but no one is bound to search for

the lost wallet. But if Y, having seen the offer, recovers the wallet

and returns it, he is entitled to the reward.