What is Offer and Acceptance? Meaning, Define Example ICA 1872

Offer and acceptance are essential elements in the formation of a contract. Today in this article we have shared details about offers and acceptance with examples. And the rules of offer and acceptance according to the law of contract.

► Offer and Acceptance in Indian Contract Act, 1882

If we want to understand the Offer and Acceptance, then first we must look into the concept of contract from the Indian Contract Act, of 1882.

What is a Contract? (Offer and Acceptance)

A contract is an agreement made between two or more parties that the law will enforce, Sec. 2 (h) defines a contract as an agreement enforceable by law.

According to Pollock’s definition Contract is defined as follows;

“Every agreement and promise enforceable at law is a contract.”

Before we understand offer and acceptance we have to know the meaning of agreement and how it is made.

What is an Agreement? (Offer and Acceptance)

An Agreement is defined as every promise and every set of promises, forming consideration for each other. In other words,  

“An Agreement is an accepted proposal. In order to form an agreement, there must be a proposal or offer by one party and its acceptance by the other.

Agreement = Offer + Acceptance

Contract = Agreement + Enforceable by Law

Also Read : 7 Essential Element of Valid Contract

► What are Offer and Acceptance?

According to Section 2, (a) of the Indian Contract Act, 1972, When one person signifies his willingness to do or abstain from doing something with a view to obtaining the assent of another person is called an offer.

Offer Meaning

An Offer refers to a proposal by one party to another party to enter into a legally binding agreement.

  • The purpose of the Offer is to get accepted.
  • The offer becomes an agreement when accepted.
  • The offer gives rise to legal consequences.

Acceptance Meaning

Acceptance refers to the act of assenting by the offeree to an offer. A contract emerges from the acceptance of an offer.

  • Offer when accepted becomes a promise.
  • The person making the offer is known as the offeror, proposer, or promisor.
  • And the person to whom the offer is made is called the offeree or proposee.

► Examples of Offer and Acceptance

Here are some of the examples by which you can understand the difference between offer and acceptance and how it is essential to make the performance of the contract.

◉ Example 1:

If any person is interested in any pair of shoes from the display at a shoe store and makes an offer to the seller to purchase those shoes.

  • In this case, the Buyer is making an offer to the Seller by showing his willingness to purchase the Shoes.
  • And if the Seller accepts the buyer’s offer and sells the shoes. Then here Offer and acceptance has been made.

◉ Example 2:

Person A: I will sell my Royal Enfield bike for Rs. 100,000. Would u purchase it?

Person B: Yes I will purchase it.

  • This is another example of Offer and acceptance. Here A is showing his willingness to sell his bike and making an offer to B.
  • B accepts A’s proposal and makes an agreement to purchase the bike. The legal formality of the transfer of ownership will be done once Person A will receives payment from Person B.

► Type of Offer and their Meaning

  • Express Offer
  • Implied Offer
  • Counter Offer
  • Cross Offer
  • General Offer
  • Tender Offer
  • Specific Offer
  • Standing Offer

Here is a brief description of all types of offers:

Express Offer – Express Offer is an offer presented through words that can be written or oral in nature. For example, Rahul tells Shyam, will you buy my cycle for Rs. 1000? This offer is made by Rahul by expressing words in spoken form, hence known as an express offer.

Implied Offer – It is also known as a Promise offer, express or implied offer. In this offer, a proposal is said to be pre-assumed. A customer enters a restaurant and orders food here he makes an implied offer because it is already understood.

Counter Offer – A counter offer is made When the offer cannot meet all satisfaction of the offeree. Here Offeree may modify and add some new terms and conditions. It is called Counter Offer.

A counter-offer is also known as a refusal of an offer and it is also a new offer issued by the offeree to the offerer. The offer from one party will be of no effect after the other party’s counter-offer. The offeree cannot accept the original offer again unless the original offerer agrees.

Cross Offer – When two persons make a similar offer to each other, without having knowledge of each other’s offer, is known as a cross offer.

They are independent and are considered two separate offers. Such offers do not contract even though both parties intend the same thing. In this case, two parties make identical offers to each other, in ignorance of each other’s offer.

General Offer – General offer refers to an offer that is made to the public in general. This offer can be accepted by anyone and If the offeree fulfills the terms and conditions which is given in the offer then the offer is accepted. Communication of acceptance is not necessary in the case of a general offer.

Tenders – in response to an invitation to offer

A tender offer is widely used in the corporate world and it is a type of takeover bid. by a prospective acquirer to all stockholders of a publicly traded corporation (the target corporation) to tender their stock for sale at a specific price during a specified time, subject to the tendering of a minimum and to induce the shareholders of the target company to sell, the acquirer’s offer price usually includes a premium over the current market price of the target company’s shares, the maximum number of shares.

In the case of a Tender Offer, an existing or prospective investor makes an offer to the shareholders of the target company. A tender offer is to sell all or some of their shares at a specific price before a particular time period. The offer price is typically more than the current stock price.

Specific Offer – Offer made to a definite or particular person, offer must be accepted by that particular person only, not by the other. For Example, A offers to buy a car from B for Rs, 100,000. hence only B can accept it.

Standing Offer – A standing offer is continuous in nature and does not restrict to a single transaction. It applies for some time, with a certain amount to be supplied over a year.

For Example, A, an edible oil merchant, Offers to supply edible oils to a hotel as and when required for the next two years. The offer by B is a standing offer.

Also Read : Types of Contracts

► What is a Lapse of an offer?

An offer may come to an end in any of the various ways as stipulated in the Indian Contract Act. One such way is known as the Lapse of an Offer.

A lapse of an offer occurs when a proposal stands revoked by the lapse of the time prescribed for its acceptance if the communication of acceptance is not made.

◉ Revocation of Offer

  • Revocation of offer means the offer no more exists or the offer ended.
  • The offerer can revoke the offer at any time before the acceptance of the offer.

► What is an Invitation to Offer?

  • An invitation to offer is an act of inviting other parties to make an offer from their side to form a contract.
  • In an invitation to offer, There is no intention to enter into a contract with any specific party.
  • The Seller may enter into a general contract with anybody from the public who makes the best offer to him.

Example of “Invitation to Offer”

The “Amazon Festival Sale of goods” can be confused as an offer when really it is an invitation to offer.

When Products are displayed in a store this constitutes an invitation to customers to make offers to purchase the items. Only when the customer indicates that they will pay for the product at the quoted price deal has an offer been made.

Note:- There are various Legal Terms used in the process of Offer and Acceptance. Few are as follows;

  • Quid-Pro-Quo: means Consideration or something in return.
  • Consenses-ad-idem: means Free Consent.

► What are the Rules of Offer and Acceptance?

There are various rules of Offer and Rules of Acceptance that are mandatory to form a valid Offer and Acceptance.

✔ Rules of an Offer

  • Offer must be communicated.
  • Offer must be certain and definite.
  • Offer must be capable of the legal relation.
  • Offer must be distinguished from an invitation.
  • A statement (quote) of price is not an offer.

✔ Rule of Acceptance

  • It must be absolute and unqualified.
  • It must be communicated to the offerer.
  • It must be as per the prescribed mode.
  • It must be given by the given or reasonable time.
  • It must show an intention to fulfill the purpose.
  • It cannot precede an offer
  • Acceptance must be given by the specific person to whom the offer is made. If the offer is general, then it may be accepted by any person.
  • It must be given before the offer got lapsed.
  • Mental acceptance is no acceptance