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“A valid contract requires voluntary offer, acceptance and consideration”     

Robert Higgs

Contracts play a significant role in day to day life of an individual and are created between at least two parties either in oral or written form. The parties involved in the contract may include individuals, government agencies, or companies whereas the process of a contract initiates with an offer made by one party which is further accepted by the second party and an exchange of consideration is performed. In the current article, brief information is provided regarding contracts, offers, and acceptance, along with different cases associated with it. 

Offer or Proposal

In order to enter into a contract made between two parties, the first and foremost task is to create a proposal or offer by one party which is further required to be accepted by another party to enter into an agreement. An offeror is the one who makes an offer and the offeree is the one who accepts the proposal. As mentioned in Section 2(a) of the Indian Contract Act, An offer is defined as “When one person will signify to another person his willingness to do or not do something with a view to obtain the assent of such person to such an act or abstinence, he is said to make a proposal or an offer.”

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Essentials of valid Offer

There are different elements or essentials of an offer that are required to be addressed in an efficient manner to ensure the validity of an offer. 

1. Involvement of two parties, the one who is making a proposal and another one who has to accept the proposal. The involved parties could be anyone either legal or artificial person. 
2. Terms of an offer must be definite, clear, and non-ambiguous for creating a valid offer as no contract will be addressed if an offer is unclear or vague.
3. Effective communication of the offer is necessary which means every offer or proposal is required to be conveyed to the offeree using telegram, word of mouth, messenger, and others. According to the Indian Contract Act (Section 4), a communication of a proposal is said to be complete when the person for whom it is made is aware of it.
4. An offer must be specific or general, a specific offer is one that is made especially for a particular person or group of persons whereas a general offer is one that is made for all.
5. A legal relation should be created with an offer which means when an offer is accepted it should result in a valid contract rather than any social contract.

Acceptance

An assent given to an offer or proposal is termed as an acceptance and it holds the power to convert an offer into a promise. Once acceptance is communicated to the offeree, it cannot be withdrawn or revoked. As per Section 2(b) of the Indian Contract Act, 1872, an acceptance is defined as “When the person to whom the proposal is made signifies his assent thereto, the offer is said to be accepted. Thus the proposal when accepted becomes a promise.”

Essentials of valid Acceptance

Following are some of the essentials or elements which are required to be addressed while accepting an offer:

1. An absolute and unconditional acceptance gives rise to a valid contract as a conditional acceptance may lead to a counteroffer which further nullifies the offer made by the offeror. According to the India Contract Act, unqualified and absolute acceptance is the one that leads to a valid contract between the two parties.
2. Appropriate prescribed manner as mentioned by the offeror should be followed by the offeree to provide reasonable results.
3. Acceptance can be given by words written or spoken (express acceptance) as well as by conduct (implied acceptance).
4. Clear communication of acceptance to the offeror is mandatory.

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When an offer is said to be complete?

An offer is said to be complete when it is communicated to the person for whom it is made. For instance, if an individual wants to sell his car at a certain price then this offer should come to the knowledge to whom it is made through an appropriate medium. 

Communication of offer

An offer is addressed to be valid only in case when it is communicated clearly to the offeree and is accepted by them. It results in the creation of legal relations between the two parties as well as eliminates the chance of any misunderstanding among the parties. Communication can be performed by dispatching an offer using common means including telephone, email, word of mouth, and post. 

Revocation of offer

Revocation basically means cancellation or termination of an offer which can be revoked at any time by the offeror before the communication of acceptance by the offeree is dispatched. Moreover, an offeree can revoke the acceptance before it is conveyed to the offeror. There are certain instances where revocation of an offer or proposal may take place which are listed as follows:

• An offer can be rejected or revoked when the offeree fails to fulfill all the necessary requirements or conditions as mentioned by the offeror.
• A revocation may occur when the specified time given by the offeror is completed.
• Death or insanity of the offeror results in the revocation of the proposal.

Case Laws

• Lalman Shukla vs Gauri Dutt Case

This case was dealt with in the Allahabad High Court in which Lalman Shukla (Servant), Gauri Dutt, and her nephew were involved. The current addressed case is based on the Indian Contract Act, of 1872. In this case, Gauri Dutt’s nephew went missing and she sent her servant (Lalman Shukla) to search for him by giving him a railway as well as other expenses. Later, Gauri Dutt announced a reward of Rs. 500 to the one who finds her nephew. After some time, the servant came back home with the nephew and hear about the reward announced by her. Now the question arises “Whether it becomes a contract between the servant and offeror or not?” and “Whether the servant is liable to get the money offered by Gauri Dutt or not?”

According to the Supreme Court of India, an offer exist between the two parties as well as an offer must be communicated appropriately which is to be followed by an acceptance from the offeree. In this case, the offer was given by the offeror but was not accepted by the offeree because of which the servant was not liable to get the reward of Rs. 500 offered by Gauri Dutt.

• Bank of India & Ors vs O.P. Swarnakar

This case was mainly focused on an issue of companies that uses VR (Voluntary Retirement) schemes for reducing employees in which different banks were involved including Allahabad Bank, Punjab National Bank, State Bank of Punjab, and Union Bank of India. This scheme was introduced by the banks after receiving approval from the board of directors. Employees of different nationalities applied for this scheme whereas about 2000 employees withdrew their applications. Although they had withdrawn the offer, the same was accepted by the bank employers during the scheme’s operational period and after the expiration of the period. Under Article 226, writ petitions were filed by the petitioners against several Nationalised banks challenging the validity of VR schemes. This scheme stated that an offer cannot be withdrawn once made by an employee. The Supreme Court held that the VR scheme cannot be said to be bad in law and ordered the High Court to consider the claim of the writ petitioners and pass an appropriate order. 

• Mohori Bibee vs Dharmodas Ghose

This case addresses the validity of an agreement with a minor. In this case, a minor plaintiff (Dharmodas Ghose) mortgaged his property to a money lender, Brahmo Dutt, (defendant) to acquire a loan of Rs. 20,000. The plaintiff was a minor at the time of the mortgage and his mother was his legal guardian. Any contract entered with him would be the concerned party’s own risk whereas the amount of loan was given to him knowing that he was incompetent for the same. Later, the minor filed a lawsuit for the cancellation of the mortgage stating that at the time of the mortgage, he was a minor. The Court then declared that any minor’s agreement or contract is void from the beginning. 

Conclusion

A contract is a mutual obligation or agreement between at least two parties interested in performing a specific job often temporary or of fixed duration. Offer and acceptance are the two essential elements of a contract and should be executed based on one’s free will. An offer made by an offeror should be communicated to the offeree for whom it is made, only then an offer is deemed to be completed. 

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