Basic concepts of Contract- Offer, Acceptance & its Revocation

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Basic concepts of Contract – Offer, Acceptance & Revocation.

Indian Contract Act was introduced in 1872. ICA came into existence on 12^th of September, 1872. Basically contract is an agreement which is enforceable by Law. Contracts can be valid, void, voidable or unenforceable in nature. Executory and executed contracts, Expressed contracts, Implied contracts, Unilateral contracts, bilateral contracts are some of the types of contract. So now we have idea that what contract actually is so now let’s learn the basic concepts of contract.

( Also Read: Types of Offer – Indian Contract Act, 1872 )
( Also Read: Essential elements of a Valid Contract – Indian Contract Act,1872 )
( Also Read: FREE CONSENT UNDER INDIAN CONTRACT ACT, 1872 )

PROPOSAL :

As per sec 2(a), when a person signifies 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 proposal. The term “Proposal” of the Indian Contract Act.

ESSENTIALS OF OFFER/PROPOSAL:

1. An offer must be made with an intent to create a legal relationship.

Balfour vs. Balfour: In this English case Mr.B who was posted in Ceylon promised his wife living in England , to pay her monthly as she could not go to Ceylon because of her health issues. When Mr.B failed to honour his promise and she filed a suit against him , court held that she could not enforce the obligation as from the nature of the contract , clearly there wasn’t any intention to give rise to a legal obligation. It was clearly a domestic arrangement.

Similarly, refer following case laws for better Understanding.

Appleson v. Littlewood (1939)
Montreal gas company v. Vasey (1900)

2. An offer must be made with an intent to obtain acceptance.

I am willing to die for my country or I would like to serve you, in both cases the sentence said can’t be considered as proposal as they are not made with a view of obtain the assent of the other party to whom it is addressed.

Example : I am willing to sell this laptop for 10,000 rupees.

3. Mere intention is not enough.

Weeks v. Tybald: A says to B in conversation that he intends to give 100 pounds to anyone who marries his daughter with his consent. B marries A’s daughter. In these circumstances, there will be no contract between A and B because A’s statement was not an offer.

COMMUNICATION OF OFFER:

It can be done by the act or omission of the offerer by which he intend to communicate his thoughts or ideas. (section 3 of Indian Contract Act)
Offers can be communicated in many ways which has the effect of laying before the offeree. Let’s have a quick look on its types. Types of offer:
1. Expressed offers
2. Implied Offers
3. General offer
4. Specific offer
5. Counter offer
6. Cross offer
Communication of offer completes when it comes to the knowledge of a person to whom it is addressed.

ACCEPTANCE

As per Section 2(b) of Indian Contract Act, when the person to whom the proposal is addressed signifies his assent thereto, the proposal is said to be accepted.

Section 8 then lays down the performance of conditions of proposal or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal is an acceptance of “proposal”.

ESSENTIALS OF ACCEPTANCE :

Acceptance must be Absolute and Unconditional.
Acceptance must be communicated to the offerer.
Acceptance must be in prescribed in prescribed manner.
Acceptance must be only in response to the offer.
Acceptance must be conveyed by offeree or his agent.
Acceptance must be communicated before the offer lapses or it is wrecked.
Acceptance cannot be implied from the silence of the party.

COMMUNICATION OF ACCEPTANCE :

Acceptance can be communicated by an act or omission of the acceptor by which he intends to communicate it or by an act which has effect of communicating it.
Communication of acceptance is completely against the proposer, when it is put in course of transit or transmission to him so as to be out of his power of acceptor.
As against acceptor, the communication of acceptance is complete when it comes to the knowledge of proposer.

Acceptance by Post :

When the letter of acceptance is posted by offeree ,the offer is being accepted by acceptor and when it reaches to offerer the acceptance is communicated to him.

Acceptance by telephone :

When the acceptance of offeree is conveyed to offerer via telephonic medium it is termed as acceptance by telephone.

Bhagwandas v. Girdharlal & co.

REVOCATION OF OFFER AND ACCEPTANCE

A proposal may be revoked at any time before communication of acceptance is complete as against the proposer- but can’t be revoked after the acceptance is communicated.

An acceptance can be revoked at any time before the communication of acceptance is complete against the acceptor – but not afterwards.

REVOCATION OF PROPOSAL & ACCEPTANCE

A proposal and acceptance can be revoked in following ways :

By the communication of notice of revocation by the offerer if he wants to revoke or the offeree.
By the Lapse of time prescribed in such proposal for its acceptance.
If no time is prescribed to communicate acceptance the proposal can be revoked by the Expiry of reasonable time.
Death or Insanity of proposer or offeree.
By Non-Fulfilment of conditions mentioned by offerer or acceptor.
By Counter offer.
By Rejection.

ACCEPTANCE AND REVOCATION MADE THROUGH POST :

Sections 4 and 5 of Indian Contract Act deals with the acceptance and revocation of acceptance by post. As regards, acceptance and revocation of acceptance by post, there is a difference in Indian law as compared to that of English Law.

According to English Law, the acceptance of an offer is completed as soon as it is posted and cannot be revoked. However in Indian law the acceptance of proposal is completed when it is received by the proposer.

Thus while making any contract, understanding of basic concepts is very much important and necessary .By understanding and following the basic concepts only, the contract will be valid in nature.

Author: Akshada Sarpande,
MIT School of law, Pune. Student of First Year BBA LL.B