Contracts:

Essentials of a valid offer:

The offer must be capable of creating legal relationship :

The offer must lead to a contract that creates legal relations and legal consequences in case of non-
performance. So a social contract which does not create legal relations will not be a valid offer. Say for
example a dinner invitation extended by A to B is not a valid offer.

If the offer does not intend to give rise to legal consequences, it is not a valid offer in the eyes of law. A
mere statement of intention, hope or desire, won’t make a binding promise, though acted upon by a
party to whom it is made. Where there is no intention to enter into a binding contract, or no legal
consequences are contemplated, an acceptance of a proposal does not create a promise.

Illustrations:

a> A invites B to dinner, and B accepts the invitation. It does not create any legal relations, so there
is no valid offer.
b> But if A intends to sell his watch to B for a price and B accepts to buy the watch, there is a valid
offer or proposal since the parties intend to create legal relationship.

The terms of the offer must be clear, definite and certain and not loose or vague:

The terms of the offer or proposal should be very clear and definite. If the terms are vague or unclear, it
will not amount to a valid offer.

A proposal must define essential terms of performance on both the parties with a reasonable degree of
certainty, so as to be capable to enforcement.

The essential terms include:

Identification of subject-matter

Consideration

Time of performance

Work to be done

Illustrations:

In Taylor V. Portington, Portington promised to buy another horse from Taylor, if the first horse proved
to be lucky. But later refused to buy. This is not a valid offer since the terms of offer is not certain and
vague.
An offer must be distinguished from a mere declaration of intention:

Sometimes there may be preliminary discussion or an invitation by one party to the other to negotiate
terms or simply declaration of intention. Such declaration merely indicates that an offer will be made in
future. Therefore a mere expression of intention, or general willingness to do something or to abstain
from doing certain thing does not amount to a valid offer.

Illustration:

A expresses his willingness to start a business with B. But there is no formal communication of the
proposal to B from A. Hence, the expression of willingness is not a valid offer.

An invitation to offer is not an offer:

An offer must be distinguished from an ‘invitation to receive offer’. The offer or should, express his
willingness to do or abstain from doing something with such finality that the only thing wanted is the
assent of the other party. But where a party proposes certain terms on which he is willing to negotiate,
he is not making an offer but only inviting others to make offer on those terms.

An offer must be communicated to the offer:

An offer, to be effective, must be communicated to the offeree. Without communication of the offer to
the offeree, the offeree would not have knowledge of the proposal and hence there is no scope for any
offer. So, the absence of communication would make an offer not valid.

An offer should not contain such a term, the non-compliance of which, would amount to acceptance:

The offeror cannot say that if the offer does not communicate acceptance by a certain time the offer
would have been deemed to be accepted. The burden of communication of rejection of offer cannot be
imposed on the offeree. If the offeree sends no reply, there is no contract. Lalman Shukla v.
Gauri Dutt. It makes clear that acceptance in ignorance of the proposal
does not amount to acceptance.

Two identical cross:

Where two parties make identical offers to each other, in ignorance of each other’s offer, the offers are
known as cross offers. ‘Cross offers’ do not constitute acceptance of one’s offer by the other and as such
there is no completed agreement.

Offer cannot contain a Negative Condition

The non-compliance of any terms of the offer cannot lead to automatic
acceptance of the offer. Hence it cannot say that if acceptance is not
communicated by a certain time it will be considered as accepted.
Example: A offers to sell his cow to B for 5000/-. If the offer is not
rejected by Monday it will be considered as accepted. This is not a valid
offer.

Offer can be Specific or General

As we saw earlier the offer can be to one or more specific parties. Or

the offer could be to the public in general.

Offer may be Expressed or Implied

The offeror can make an offer through words or even by his conduct.
An offer which is made via words, whether such words are written or
spoken (oral contract) we call it an express contract. And when an offer
is made through the conduct and the actions of the offeror it is an
implied contract.

Offer may be Conditional

While acceptance cannot be conditional, an offer might be conditional.

The offeror can make the offer subject to any terms or conditions he
deems necessary. So A can offer to sell goods to B if he makes half
the payment in advance. Now B can accept these conditions or make a
counteroffer.
Essentials of Valid Acceptance 1. Acceptance must be given by that person only to whom the offer is
made: An acceptance to be valid must be given only by a person to whom offer has been given. In other
words, acceptance must move from the offeree and no one else. 2. Acceptance must be communicated:
Offeree has to communicate his acceptance to offerer. 3. The acceptance must be given within the time
prescribed or within a reasonable time: Sometimes, the time limit is fixed within which an acceptance is
to be given. In such cases, the acceptance must be given within the fixed time limit. In case, no time is
prescribed, the acceptance should be given within a reasonable time. The term ‘reasonable time’
depends upon the facts and circumstances of each case. 4. Acceptance must be Un-Conditional: It is
another important essential element of a valid acceptance. A valid contract arises only if the acceptance
is absolute and unconditional. It means that the acceptance should be in total and without any
condition. 6. Acceptance must be communicated in the method specified by offerer: When an offer is
made for the same, acceptance must be communicated in the method specified by offerer. 7. The
acceptance must be given before the lapse of offer: A valid contract can arise only when the acceptance
is given before the offer has elapsed or withdrawn. An acceptance which is made after the withdrawal of
the offer is invalid, and does not create any legal relationship 8. The acceptance must be communicated:
It is an important and essential element of a valid acceptance.

Acceptance must be given by that person only to whom the offer is made:

An acceptance to be valid must be given only by a person to whom offer has been given. In other words,
acceptance must move from the offeree and no one else.

Let us take the example of the case study of Boulton v. Jones. Boulton
bought Brocklehurst’s business but Brocklehurst did not inform all his
creditors about the same. Jones, a creditor of Brocklehurst placed an
order with him. Boulton accepted and supplied the goods. Jones
refused to pay since he had debts to settle with Brocklehurst. It was
held that since the offer was never made to Boulton, he cannot accept
the offer and there is no contract.
When the proposal is a general offer, then anyone with knowledge of
the offer can accept it.

Acceptance must be communicated:

For a proposal to become a contract, the acceptance of such a proposal

must be communicated to the promisor. The communication must occur
in the prescribed form, or any such form in the normal course of business
if no specific form has been prescribed.

Further, when the offeree accepts the proposal, he must have known that
an offer was made. He cannot communicate acceptance without
knowledge of the offer.

So when A offers to supply B with goods, and B is agreeable to all the

terms. He writes a letter to accept the offer but forgets to post the letter.
So since the acceptance is not communicated, it is not valid.

The acceptance must be given within the time prescribed or within a reasonable time:

Sometimes, the time limit is fixed within which an acceptance is to be given. In such cases, the
acceptance must be given within the fixed time limit. In case, no time is prescribed, the acceptance
should be given within a reasonable time. The term ‘reasonable time’ depends upon the facts and
circumstances of each case.

Acceptance must be Un-Conditional

Acceptance must be unconditional and absolute. There cannot be

conditional acceptance, that would amount to a counteroffer which
nullifies the original offer. Let us see an example. A offers to sell his cycle
to B for 2000/-. B says he accepts if A will sell it for 1500/-. This does
not amount to the offer being accepted, it will count as a counteroffer.

Also, it must be expressed in a prescribed manner. If no such prescribed

manner is described then it must be expressed in the normal and
reasonable manner, i.e. as it would be in the normal course of business.
Implied acceptance can also be given through some conduct, act, etc.

However, the law does not allow silence to be a form of acceptance. So

the offeror cannot say if no answer is received the offer will be deemed
as accepted.
Acceptance must be communicated in the method specified by offerer:

When an offer is made for the same, acceptance must be communicated in the method specified by
offerer.

Acceptance of the offer must be in the prescribed manner that

is demanded by the offeror. If no such manner is prescribed, it must be in
a reasonable manner that would be employed in the normal course of
business.

But if the offeror does not insist on the manner after the offer has been
accepted in another manner, it will be presumed he has consented to such
acceptance.

So A offers to sell his farm to B for ten lakhs. He asks B to communicate

his answer via post. B e-mails A accepting his offer. Now A can ask B to
send the answer through the prescribed manner. But if A fails to do so, it
means he has accepted the acceptance of B and a promise is made.

Implied Acceptance

Section 8 of the Indian Contract Act 1872, provides that acceptance by

conduct or actions of the promisee is acceptable. So if a person
performs certain actions that communicate that he has accepted the
offer, such implied acceptance is permissible. So if A agrees to buy from
B 100 bales of hay for 1000/- and B sends over the goods, his actions
will imply he has accepted the offer.