3. Offer and Acceptance — Meaning, Definition and Essential Rules
This is the fourth topic post in Unit I — General Principles of Contract. It builds on Essentials of a Valid Contract and comes right before Communication and Revocation of Offer and Acceptance, so read both in order.
The Problem This Topic Solves
Browsing a shop window, replying to a classified ad, haggling over a price — which of these moments is actually a legally significant offer, and which is just talk? The previous topic listed "offer and acceptance" as essential #1 of a valid contract without unpacking it. This topic gives that ingredient its own rules, before the next topic covers exactly when an offer or acceptance legally takes effect.
Definitions — Offer and Acceptance
1. Proposal (Offer) — Section 2(a). "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 is said to make a proposal." Example: A tells B, "I will sell you my bike for ₹20,000." A has made a proposal.
2. Acceptance — Section 2(b). "When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise." Example: B replies, "Yes, I'll buy it." The proposal has now become a promise.
3. Promisor and Promisee — Section 2(c). The person making the proposal is the promisor; the person accepting it is the promisee. (This full defined chain — through consideration, agreement, and contract — was covered in Definition and Nature of Contract; this note zooms into just the first two links.)
Essential Rules of a Valid Offer
1. Must Be Communicated — Section 4. An offer has no legal effect until it actually reaches the person to whom it's made. An offer sitting in your drafts folder binds no one.
2. Must Show Intention to Create Legal Relations. A casual remark — "I'll take you out for dinner sometime" — isn't an offer in the contract-law sense, for the same reason Balfour v. Balfour (covered earlier in this unit) kept domestic promises out of court.
3. Terms Must Be Certain — Section 29. "I'll sell you some of my land" is too vague to be an offer capable of acceptance; the terms must be definite enough that a court could enforce them if accepted.
4. Must Be Distinguished from an Invitation to Offer. A shop window display, a price list, an advertisement, or a response to a price inquiry is usually just an invitation for others to make offers — not an offer itself.
Harvey v. Facey (1893) — Harvey telegraphed Facey: "Will you sell us Bumper Hall Pen? Telegraph lowest cash price." Facey replied: "Lowest price for Bumper Hall Pen £900." Harvey telegraphed back: "We agree to buy for £900." The Privy Council held Facey's telegram was only a statement of price, not an offer to sell — so Harvey's reply was itself an offer that was never accepted, and there was no contract.
Answering "what's your price?" is not the same as saying "yes, I'll sell."
5. May Be Express or Implied. An offer made in words (spoken or written) is express; one made through conduct — like a taxi waiting at a stand with its light on — is implied.
6. May Be Specific or General. A specific offer is made to a particular person and only that person can accept it; a general offer is made to the world at large, and anyone who fulfils its conditions can accept it — this is exactly the "general offer" point covered through Carlill v. Carbolic Smoke Ball Co. in Communication and Revocation of Offer and Acceptance.
7. Silence Cannot Be Imposed as a Mode of Acceptance. An offeror cannot bind the offeree by saying "if I don't hear from you, I'll assume you accept" — the same rule already established through Felthouse v. Bindley in the previous topic.
Essential Rules of a Valid Acceptance
1. Must Be Absolute and Unqualified — Section 7(1). Accepting "yes, but at a lower price" is not acceptance at all — it's a counter-offer, and it kills the original offer outright.
Hyde v. Wrench (1840) — Wrench offered to sell his farm for £1,000. Hyde replied offering £950. Wrench refused. Hyde then tried to accept the original £1,000 offer. Held: Hyde's counter-offer had already destroyed the original offer, so there was nothing left to accept — no contract was formed.
Once you counter-offer, you can't fall back on the original terms unless the other side re-offers them.
2. Must Be Communicated to the Offeror — Sections 3, 4. A mental decision to accept, never conveyed, is not acceptance — this is the flip side of Felthouse v. Bindley's rule on silence.
3. Must Follow the Prescribed Mode — Section 7(2). If the offeror has specified how to accept (e.g., "reply by registered post"), that mode must generally be followed; otherwise, any reasonable and usual mode will do.
4. Must Be Given While the Offer Is Still Open — Section 6. Acceptance given after an offer has lapsed, been revoked, or been rejected is no acceptance — the exact rules for when an offer lapses or is revoked are covered in the next topic.
5. The Acceptor Must Have Knowledge of the Offer. You cannot accept an offer you don't know exists — performing the exact act the offer asked for, by pure coincidence, is not acceptance.
Lalman Shukla v. Gauri Dutt (1913) — the defendant sent his servant to search for his missing nephew. Only after the servant had already left did the defendant announce a reward for finding the boy. The servant found the nephew, brought him home, and only later learned of the reward and claimed it. The Allahabad High Court held he was not entitled to the reward, because acceptance requires knowledge of the offer at the time the act is performed — here he was simply doing his job as a servant, unaware any offer existed.
6. Cannot Precede the Offer. An "acceptance" given before the offer is even made is worthless — there was nothing yet to accept.
Offer vs. Acceptance — At a Glance
| Basis | Offer | Acceptance |
|---|---|---|
| Governing Section | Sec 2(a) | Sec 2(b) |
| Made by | Offeror (promisor) | Offeree (promisee) |
| Can be modified? | Yes, freely, until accepted | No — a modified acceptance is a counter-offer (Hyde v. Wrench) |
| Effect once valid | Creates the power of acceptance | Converts the proposal into a promise (Sec 2(b)) |
A Practical Example
Kiran advertises his motorbike in a Hyderabad classifieds group for ₹45,000. Deepak replies, "I'll take it for ₹40,000." This is not acceptance — following Hyde v. Wrench, it's a counter-offer, and Kiran's original ₹45,000 offer is now dead. Kiran is free to accept ₹40,000, reject it, or counter again; if he replies "Deal, ₹40,000 it is," that fresh exchange — his new offer and Deepak's acceptance of it — is what actually forms the contract.
- Section 2(a) — proposal; Section 2(b) — acceptance/promise
- Section 4 — offer must be communicated to take effect
- Section 7(1) — acceptance must be absolute and unqualified
- Harvey v. Facey — a statement of price is not an offer
- Hyde v. Wrench — a counter-offer destroys the original offer
- Lalman Shukla v. Gauri Dutt — no acceptance without knowledge of the offer
- Felthouse v. Bindley (covered in the next topic) — silence is never acceptance
The "specific vs. general offer" rule has one important exception built in: for a general offer (like Carlill's), the offeree doesn't need to communicate acceptance back to the offeror at all — simply performing the stated condition is enough. That's a deliberate carve-out from the usual "acceptance must be communicated" rule, and it's a favourite examiner trap.
Quick Revision Points
- Offer (2a) → Acceptance (2b) → Promise; but a modified "acceptance" is legally a counter-offer, not acceptance
- Harvey v. Facey — quoting a price ≠ making an offer
- Hyde v. Wrench — counter-offer kills the original offer permanently
- Lalman Shukla v. Gauri Dutt — acceptance needs knowledge of the offer, not just matching conduct
- A specific offer needs a specific acceptor; a general offer can be accepted by anyone who performs its condition
- Communication, timing, and revocation of offer/acceptance are covered next, in Communication and Revocation of Offer and Acceptance
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