Offer and Acceptance in Indian Contract Law: Key Principles & Explanation with Examples -

Last Updated on: 7th April 2025, 12:21 pm

Offer and Acceptance under Indian Contract Act

Process Flow Diagram – Offer, Acceptance, Communication & Revocation Flow- dVidya.com

What is an Offer in Indian Contract Act?

Offer is a final proposal by one person to another, without any intention of further negotiations. The offer may be to do something, or not to do something (called negative Offer). In legal eyes. not to do something, is also a doing. For example, I say, I won’t sue you. This is an offer.

The offer or Proposal, may be expressed different forms, such as a letter, newspaper, fax, email and even conduct, as long as it communicates the basis on which the offeror is prepared to contract.

The offer made by the offerer, when accepted by the other party to whom the offer is made, completes the agreement (promise)

For example, X says to Y, I want to sell my Maruti Car to you at Rs 1 Lac on immediate cash payment. This is an Offer made by X to Y.

Offer is a proposal made by one party to another, to enter into an agreement. Agreement is also referred as Promise.

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Parties to Offer : There are at least 2 parties involved in an offer

Offeror : The person making the offer (known as Offeror or Proposer)
Offeree : The person to whom offer is made (called the Offeree or Proposee)

When the Offeree accepts the offer, he is called acceptor or Promisee.

Multiple Offer / Offeree : There may be more than one offerer (called Joint Offerers), or more than one offeree (called Joint offeree).

Ex. P offers to X, Y & Z, in a gathering, to sell his maruti car at Rs 1,00,000. Here there is one offerer (P) and multiple offerees, X, Y & Z.

Ex. X, Y & Z, each had 100 pcs of CDs of an old film. They all came together to P, who is reputed trader of CDs, offering P to sell their CDs. P agrees to buy all of their CDs from all of them. Here there are multiple offerers (X, Y & Z) to sell CDs and only one Offeree (P) to buy CDs

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Key Characteristics of Offer under Indian Contract Act

Readiness & Intention
Willingness to Perform
Communication to Offeree
Specific Clear Terms of Offer

Key Characteristics of Offer under Indian Contract Act

A valid offer must have following essential Characteristics

Readiness & Intention to enter into a contract: The Party making the offer must have Intention to enter into a contract .

Ex. A says to B, I will sell the car to you at Rs. 2 Lac. It is a valid offer.

In this offer, A is ready and willing to enter into a contract. The offer is intended to get acceptance of B.

Ex. A says to B, I am thinking of selling the car to you at Rs. 2 Lac. It is not a valid offer from A.

In this offer, there is no readiness or intention on part of A to enter into a contract.

In commercial agreements, intention to create legal obligation is presumed.

Willingness to perform: It must indicate the willingness of the person to do (as proposed in the Offer). In this offer, A will sell his Car to B, on getting acceptance by B.
Communication to Offeree : An offer must be communicated to the offeree, otherwise the Offer is not complete and hence not valid. Any act done in ignorance of offer, does not constitute a contract.

Ex. A writes a letter to B about his offer to him, but keeps the letter in drawer. The offer is not valid as it is not communicated to the Offeree.

Let us suppose, A writes a letter to B about his offer to him, but keeps the letter in drawer. C, who knows B, accidentally reads the letter. The offer is not valid as it is not communicated by A (the Offerer) to B, (the offeree).

It will not be a valid offer by A to B, even if B somehow comes to know about the offer through some other ways.

In this case, keeping the letter in drawer does not indicate clear intention of A to make the offer to B. He might have thought of making the offer, but did not fix up his mind, and kept it in drawer. It becomes valid offer, when A (or his authorized representative), gives (or sends) the letter to B.

Ex. X declares reward to find his lost son. Y finds his son without knowing of the reward. Y cannot claim the reward as the offer was not communicated to him.

This is a case of General Offer (we will explain General Offer afterwards). In this case, the offer is communicated only to those persons, who have heard of the offer of X. Those, who have not heard about the X’s offer of reward, there is no valid offer by X to them.

Specific Clear Terms of Offer: An offer must be specific, clearly defined and not ambiguous.

Ex. X says to Y, I will buy you the book at Rs 100, when I am able to find it in the bookstore. This is not a valid offer as the terms of the offer are not specific and clear.

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Offer that are not valid in Indian Contract Act

In some cases, it may look like that a Party has made a valid offer, but actually the offer is not valid as it does not fulfill the essential requirements of a valid offer.

Invalid Offers under Indian Contract Act

Invalid Offers : For example, following instances, though appearing like an Offer, are not valid Offer

Mere Declaration of intention: Mere declaration of intention is not an offer.

Ex. A says to B, I am thinking of selling the car at Rs. 2 Lac. It is a not a valid offer. It does not show the final willingness or the readiness of the offerer, to enter into a contract

Mere Invitation: Invitation to do business is not an offer.

Ex. Display of goods in shop window is not an offer on the part of shopkeeper. Seller of the goods is not bound to sell the item displayed. Similarly, a quotation, or a price list sent to a prospective buyer does not constitute an offer on the part of seller. These are treated as invitation to make an offer by the intending offeror (explained later).

Ex. Price Lists sent to prospective buyer do not constitute Offer on part of seller.

Negative terms of compliance: Offer cannot contain terms of non compliance as acceptance. It cannot place burden on part of the Offeree.

Ex. A wrote to B, ‘I offer to sell 100 Tons of Coal at Rs.12000/Ton. If I do not hear from you within 7 days, I will treat that you have accepted the offer’. This cannot be treated as Valid Offer.

Classification of Offer under Indian Contract Act

Offer may be broadly classified (श्रेणीविभाग) in following ways:

Classification of Offer as per Mode (प्रणाली) :

Express Offer: Expressly stated & communicated by both the Parties. When the offeror expressly states & communicates the offer,

Ex. ‘I want to sell my Maruti car at Rs.1 lac’, is an express offer.

Implied Offer: Not expressly communicated by both the Parties. When the offer is not expressly communicated, but is implied by the conduct of one or both the Parties. It is also sometimes referred as Tacit (Tacit means silent) offer.

Ex. A carrier running public bus service to carry passenger. This is an implied offer for carrying intending passenger, on fixed route, at specific fare.

Classification of Offer as per Type of Offer (प्रकृति):

Specific Offer: Made to a specific offeree. When an offeror makes the offer to a specific offeree only. A specific offer can be accepted by the specific person only whom the offer is made to.

Ex. A says to B, ‘I offer to sell my Maruti car to you at Rs.1 lac’, is a specific offer.

General Offer: Made to world at large. : When the offer is made to world at large, without specifying any particular offeree, it is known as General Offer. A general offer can be accepted by any person eligible to accept the offer, only after the person comes to the knowledge of the offer and accepts the conditions of the offer.

Ex. A advertises, ‘I offer to sell my Maruti car at Rs.1 lac’, is a general offer.

Open Offer : Standing Offer, or Continuing Offer. Sometimes a specific or general offer, called Open Offer (or Standing Offer, or Continuing Offer), in which an offer is not made each time (it is kept open). For example, in the crop season, the buyer may give an open offer to supply agricultural goods (like paddy, wheat) at prevailing market price (or specified price). Such offer may be for specific Party (only for a specified party) or General (any party may supply).

Classification as Per Nature of Offer ( प्रकार)

Cross Offer : Exchange of similar offer. When two parties make similar offer on ignorance of each other’s offer. In this case, the agreement is not complete because there is no acceptance of each one’s offer, as each is ignorant of other’s offer.

In a cross offer, a contract comes into existence when any of the parties accepts the offer of the other.

Ex. A offers to sell his car to B at Rs 20,000. Without knowing A’s offer, B offers to buy A’s Car at Rs 20,000. This is Cross Offer as it is similar and between same parties. As soon as any party accepts either of the offer, a contract emerges on the basis of the Offer that is accepted, and The other offer which is not accepted lapses.

A Cross Offer happens when both the parties make similar offer to each other, without knowing each other’s offer

Counter Offer : Offeree makes conditional acceptance. A contract is complete when the offeree accepts the offeror’s offer unconditionally. But when the offeree agrees to accept an offer subject to some conditions, offeree’s conditional acceptance constitutes a Counter Offer (not an acceptance). In such case, the original offer of the offeror gets invalidated and ceases to exist. The Offeree’s Counter Offer becomes a new offer. If the counter offer is accepted by the original offerer, it becomes an agreement. Now the counter offeror becomes the offeror and the original offeror becomes the acceptor.

Ex. A offers to B to sell his Maruti car at Rs.1 Lac. B, on receiving the offer, tells A that he agrees to buy the Car, if A gets the car painted Red (i.e B makes a Counter Offer). As soon as B makes the counter offer, A’s offer gets lapsed and is not more valid. No contract can come into existence on A’s offer. If A agrees to B’s counter offer (to buy painted car), a contract emerges on the basis of the new counter offer of B (to buy paint Car) and acceptance of A (to sell painted car). Now, B becomes the offeror (to Buy painted Car) and A becomes the Acceptor (to sell Painted Car) of the Contract to sell Painted Car.

In counter offer, the original offer lapses. The counter offer becomes a new offer with revised terms. Now the other party (who made the original offer), may accept the revised counter offer. The revised counter offer now becomes the Offer, which, on acceptance by the other Party, forms an agreement. As soon as the Counter offer is made, the original offer dies. It cannot be revived any more, and no acceptance or agreement can be done any more, on that original offer.

So, in this case, the offer by A to sell Marui Car to B lapses. B’s counter offer to buy Red Painted Maruti car emerges as a valid offer. When A accepts the new counter offer of B to sell red painted car, the agreement to buy red painted maruti car by B, from A, is formed.

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Distinction between Cross Offer and Counter Offer

Cross Offer	Counter Offer
Ignorant of other’s Offer: Each party is ignorant of other’s offer.	Is in knowledge of other party’s offer: The party making counter offer is in knowledge of other party’s offer and revises the original offer.
Both party’s offer is similar	It is different from the other party’s offer:
The offers remain in existence: The offer remains in existence for acceptance by the other party.	Original offer dies: The original offer dies as soon as the counter offer is made.
No new offer: No new offer is created.	New offer :Counter offer amounts to a new offer:
Any party’s Offer may be accepted: Both the parties are on equal footing, any party may accept the other’s offer.	Only the counter offer can be accepted: Only the counter offer remains alive, which can be accepted by the other party.

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Distinction between Specific Offer and General Offer

Basis	Specific Offer	General Offer
Offeree	Made to a specific person: Specific Offer is made to a specific person, (or a group of persons).	Made to public at large: General Offer is made to the public at large.
Identity of Offeree	Offeree known to the Offerer: Offeree should be known to the Offerer at the time of making the offer.	Offeree may be unknown to the Offerer: Any person who fulfills the conditions of offer. It is not necessary for Offeree to be known to the Offerer at the time of making offer.
Acceptance	Specific Acceptance : It can be accepted only by the offeree whom the offer is made to.	Deemed acceptance: A stranger, by complying with conditions of offer, is deemed to have accepted the offer.
Example	K offers to sell his Chevrolet Car to B at Rs 3 Lacs. Only B can accept or reject it. K may refuse to sell any other person other than B.	K says in gathering of prospective Car buyers, that he will sell Chevrolet Car to any customer at Rs.3 lakhs. Any one can accept the offer and buy the car.

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What is Invitation to Offer under Indian Contract Act

In case of General offer, sometimes an invitation is made to public at large to make offer. Such an offer, to invite offer, is called an invitation to offer and is not an offer itself.

Key Characteristics of Invitation to offer

An invitation to offeris different from an offer : An offer is the final expression of willingness by the offeror,to be accepted by other Party. When the party does not express his final willingness, but only indicates, he does not make an offer, but only invites. Only the other party can make the offer on the invitation. Thus invitation to offer is different from offer.
Invitee to respond to the invitation to make offer: When the invitee responds to the invitation of the inviter and makes his offer, it becomes an offer by the invitee. The inviter to offer is not bound to accept the offer.

Ex. A picks up the goods from a self-service shop and goes to the cash counter to pay for the Item. The salesman, coming to know that it is the last piece on the shelf, refuses to sell. Held, the shop is not bound to sell the Item. The display of products by shopkeeper is invitation to offer to buy. A’s act amounts to an offer to buy the item at the tag price. It is open to the shopkeeper to sell or not to sell the Items on the shelf.

Common Examples of Invitation to offer

Prospectus issued by Company: Issue of Prospectus by Company, inviting public to subscribe. Company issues a prospectus for issue of shares. General public, having read the prospectus, make application of shares (that becomes Offer). Company may accept it and make allotment of shares.

Now, if the Prospectus had been considered as an offer by company, the application for shares sent by applicant in response to the prospectus would tantamount to acceptance of the offer. In that case, the company could not have refused to allot shares as acceptance to the company’s offer has been given by the applicant. But, in practice, the applicant cannot take action on the Company if the company does not allot/ issue shares. Because, the fact is that Prospectus is just an invitation to buy shares, asking the public to make offer for purchase of their shares. The prospectus, by itself, is not an offer. The share application sent by the applicant, in fact, becomes an offer to purchase the shares of the company. It is upto the company to allot shares (i.e., accept the offer) or to refuse their application (reject the offer). Allotment of shares applied for by the application (offer) becomes an acceptance. On allotment, a contract is formed. After allotment (i.e after acceptance) the parties have to perform their respective obligation. On any breach by any party, the aggrieved party can take legal recourse. On non payment of balance allotment money, the company forfeits the shares. On the other hand, on non issue of shares, the applicant may sue the company.

Display of goods by shopkeeper: Display of goods by shopkeeper in display window or on selves is just an invitation to offer. When the customer picks up a goods and goes to the counter to buy the goods and pay, it becomes an offer. The shopkeeper may accept the offer and sell the goods, or may reject the offer (may decline to sell the goods).

The shopkeeper may say that the Item is placed only for display (advertisement and public information), the Item is not yet for sale. Or, he may say that this is display piece and cannot be sold until fresh stock comes.

Price chart displayed by shopkeeper: Price chart displayed in a Hotel front office or Menu Card in a Restaurant, are not offer, but invitation to offer. Customer makes the offer to book room or serve the ordered food.

A customer when intends to book a hotel room or orders in a Restaurant, makes the offer. The Hotel manager, or the Restaurant, may refuse to book (refusal of offer) the room (Rom not available), or to serve the food (item not ready), or may agree to book the room or serve the Item (acceptance of offer).

Product Brochures published by Seller: Brochures showing the products specifications and prices are not offer, but invitation to offer. Brochures are also invitation to offer. In response to the brochures, the intending customer may make his offer to purchase. The seller may accept the offer and sell the goods. The seller may also refuse to sell the goods and the intending buyer cannot take any action.
Employment Advertisement published by prospective Employer: Employment advertisement specifying qualifications and pay scales are invitation to offer and not offer.
Advertisement of Concert or Auction: An advertisement for concert or an auction is invitation to offer (the bidders bid are the offer. The auctioneer may accept it or refuse to sell
Offer of Special Discount by seller: Special Discount offers are invitation to offer. The buyer offer to buy on discount. The shopkeeper may refuse it telling that the offer is closed.

The above examples are invitation to offer but do not constitute valid not offer.

Often the line of difference between Offer and Invitation to offer is thin and blurred. An offer may be revocated (rejected) before acceptance. In an invitation to offer, the offer is not yet made. So, the person inviting the offer may (revoke) the offer. In that case, even the offer does not emerge.

An offer should be specific. In invitation to offer (like catalogue, advertisements, etc), the things may be broadly categorised or indicated, but not specific. Against the invitation of offer, the offeror selects and makes a specific offer, which may then be accepted by offeree.

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Is Tender published Considered as valid Offer under Indian Contract Act

Tender is a general statement of invitation of proposal by the Tenderer, from the intending supplier. So, Tender is an invitation to offer.

Quotation submitted in response to Tender : When anyone submits his Quotation in response to the Tender, the quotation of the intending supplier becomes his offer. Thereafter, when the Tenderer (the company which issues the Tender) issues a Purchase Order, accepting the supplier’s offer, it becomes an acceptance of the offer, and a contract emerges.

Classification of Tender

Tender published may be broadly classified as follows

Specific Tender
Standing Tender

Specific Tender : An offer to supply a definite quantity of goods and services. When the Offeree accepts any tender, it results in a contract.

Ex. X Ltd. Company invites tenders for the supply of 110 bottles of oil. A Ltd., B Ltd. and C Ltd. company submit there tenders. C ltd. company’s tender is accepted. The contract is formed between X Ltd. and C Ltd. as soon as the tender is accepted.

Standing Tender : In such Tender, the offer is made to supply goods periodically or as per requirements of the Offeree. A separate acceptance is not made each time for supply of goods.

Ex. X Ltd Co invites Tender to supply goods at specified Price & Terms of Sale. The gods are to be supplied in installments as per requirements of X. B’s Tender is accepted. X gives a purchase order with standing instruction to supply goods as per their requirements. In such case, no separate acceptance is necessary at each time of supply of goods.

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Distinction between an Offer and Invitation to Offer

Offer	Invitation to Offer
1. Readiness to enter into an contract: In an Offer, the person gives a proposal showing the readiness to enter into an contract.	1. Invitation to make an offer: In Invitation to Offer, the person invites the public at large to make an offer. Invitation to Offer is a pre-stage to Offer.
2. To enter into a contract: An offer is made to enter into a contract through acceptance of the offer.	2. To receive offers: Invitation to Offer is made to receive offers.
3. Results in acceptance : The offer, if acted upon it becomes an acceptance, resulting to a contract.	3. Results in Offer: An invitation to offer, if acted upon, becomes an offer.
Offer general orin specific: Offer is made to individual either in general or specific.	Offer in general: Invitation of offer is made in general (e.g. public notice).

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Rules of Valid Communication of Offer under Indian Contract Act

Valid Communication reaching to the Offeree : In legal terms, an offer comes into existence only when its communication is complete, i.e it reaches the person whom it is made to. Until the offeree has knowledge of the offer made to him, he cannot accept such offer, since the offer is not complete.

Ex : A declares a prize to anyone who finds his lost son. B, without learning about the A’s offer, finds A’s son and hands it over to B. B cannot claim the prize as the offer of A has not been communicated to B.

09.01 Completion of communication of offer

Completion of communication of offer in case of Specific Offer
On the part of the offerer: The communication of Offer is complete when the process of communication starts beyond his control (e.g. when he posts a letter of offer or send an e-mail).

Ex. A posts a letter containing an offer to B on 1^st Nov, which reaches B on 3^rdNov. On part of A (the offerer), the communication is complete on 1^st Nov, when the letter is posted.

On the part of the offeree: The communication of Offer is complete when he receives the communication of offer (e.g. when he receives a letter of offer).

Ex. A posts a letter containing an offer to B on 1^st Nov, which reaches B on 3^rdNov. On part of B (the offeree), the communication is complete when the letter reaches him (i.e on 3^rd Nov).

Completion of communication of offer in case of General offer

Acceptance of General offer need not be communicated. It may be accepted by any person, who has knowledge of the offer; and fulfils the terms and conditions of the offer.

Ex. X declares reward of Rs 10000 to anyone who finds his lost son. This is general offer. The person having heard of the offer of X and intending to find X’s son, need not communicate to X first. Anyone, who, having heard of X’s offer of the reward, finds his son, is entitled to get the reward from X.

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Rules of Revocation of Offer under Indian Contract Act

Revocation means ‘taking back’, ‘withdrawal’, etc.

Rules of Revocation of Offer : An Offer may be revoked :

Any time before acceptance: An offer may be revoked by the offerer (or by the duly authorized by offerer) at any time before acceptance, but not after that.

Ex. A sends an offer to B by post on 1^st Nov. B writes a confirmatory letter on 5^th. A may revoke the offer before 5^th.

Ex. A sends a letter of offer on 1st , which reaches B on 5th. B sends the acceptance on 7th, which reaches A on 10th. The offer may be revoked by A before 7th (before acceptance of B).

Revocation of Offer within Specified time Period: Where the offeror informs the offeree that the offer shall remain open for a certain period, the revocation of the offer shall be valid, even before the expiry of such period. However, revocation is effective only if it is made before the offer is accepted. In case of contracts by post, an offer can be revoked at anytime before the communication of acceptance is complete against the offeror, i.e., before the letter of acceptance is duly posted by the offeree.

Ex. A sends a letter to B proposing to sell his house within 7 days. A can revoke the offer at any time before expiry of 7 Days.

Rules of Communication of Revocation of Offer

Revocation to be valid, must be communicated. The offerer revocating the offer must communicate revocation of the offer to the offeree. Communication of revocation of Offer is complete, when:

As against offeror– When the communication of revocation is put in course of transmission, as to be out of his control.
As against offeree –When the communication of revocation comes to the knowledge of offeree.

On revocation, the offer ceases to exist and cannot be accepted any more.

Ex. A posts a letter revoking his offer to B on 1^st Nov, which reaches B on 3^rdNov. On part of A (the offerer), the communication of offer is complete when he posts the letter (i.e on 1^st Nov). On part of B, the offer is complete when the letter reaches B (i.e on 3^rd Nov).

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Rules of Cessation of Offer under Indian Contract Act

Cessation of Offer means termination of Offer. The Offer comes to an end.

Cessation of Offer Scenarios

Cessation of Offer Scenarios : An offer comes to an end in the following cases:

Rejection : When the offeree rejects the offer .The offeree may expressly reject the offer or the rejection may be implied from the act or conduct. Once the offer is rejected, the offer ceases to exist and cannot be accepted later on.

Ex. X makes an offer to Y. Y rejects it and communicates to X. The offer of X comes to an end. It cannot be accepted by Y later on.

Revocation: By communicating the revocation before the offer reaches the offeree.
Ex. X makes an offer to Y. X revokes it before acceptance by Y. The offer of X comes to an end. It cannot be accepted by Y later on.
Lapse of time : In case of time bound offer, the offer must be accepted within the time specified in the offer. After expiry of the specified time, the offer lapses. However, if no time is specified in the offer, the acceptance must be given within reasonable time. After expiry of the reasonable time, the offer lapses.
Non-fulfilment of condition: By non fulfilment of a condition precedent to acceptance (called pre-conditioned), or the offer is not accepted in the prescribed or in proper manner.

Ex. A gives an offer to B, to be accepted through a letter sent by Registered post. B sent acceptance by e-mail. The offer lapses due to non acceptance in the mode prescribed. If no specific mode is prescribed, acceptance given in usual mode is valid acceptance.

Counter offer: When a counter offer is made, the original offer lapses.
Cross Offer : Out of the two similar offer given by each other, the offer that was not accepted by the other Party comes to an end.
Death or insanity of offerer: By death or insanity of offerer, the offer ceases. However, if the acceptor accepts the offer without the knowledge of death or insanity of the offerer, the acceptance is valid and a contract emerges (and the legal representative becomes responsible to execute the contract). However, if the offer was for personal service requiring personal skill, offer lapses (offer dies with the person).

However, in case of death or insanity of the offeree, the offer lapses.

Ex. X offers to sell a car Y. If X dies or becomes insane before acceptance by Y,

If Y had known the fact of demise of X at the acceptance, the offer lapses. If Y did not know about insanity or death of X, the offer was valid and hence the acceptance of Y was also valid, and a contract emerges. The legal heir of X will be responsible for performance of the contract.

Supervening Impossibility : If, after making of an offer, the subject matter of the offer is destroyed or the performance becomes impossible or unlawful, the offer lapses.

Ex. X contracts to sell 100 tons of rice on arrival of a ship from Taiwan. The ship sinks. The contract terminates when the ship sinks.

Change in law or circumstances : The offer lapses due to change in law, or basic circumstances.

Ex. X agrees to sell plastic bags of 10 microns. Later on, the government bans manufacturing or trade of Plastic Bags of 10 microns. The Contract terminates.

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Rules of valid Acceptance of Offer under Indian Contract Act

Acceptance is the act of assenting to the offer. Immediately on acceptance of the offer, the offer becomes promise (agreement).

Ex. A offers to B to sell his maruti car at Rs 1 Lac. B accepts A’s offer to buy the car. It becomes acceptance on part of B of the offer of X. On acceptance, a contract emerges.

Classification of valid Acceptance of Offer under Indian Contract Act

Valid Acceptance of Offer

Acceptance may be classified in following ways (s.9):

Express Acceptance: Acceptor expressly communicates the acceptance. When the acceptor expressly communicates the acceptance to the offerer, it becomes an express acceptance, and an express contract emerges.

Ex. A says to B, ‘I accept to buy your Maruti car as per your terms of offer’. This is an Express Acceptance.

Implied Acceptance: Acceptance is implied by conduct of the offeree. When the Acceptor does not expressly communicate the acceptance, but the acceptance is implied by the act or conduct of the offeree.

Ex. In an auction, the auctioneer accepts the bid (offer) by fall of hammer (implied acceptance)

Ex. A launderer had given to his customer a receipt for clothes received for washing. Special conditions for this were printed on the reverse of receipt. The special conditions were duly communicated to the customer who had impliedly accepted the same.

Rules of valid Acceptance of Offer under Indian Contract Act

Specific Offer: Acceptance by offeree only. A specific offer can be accepted only by such person to whom it is made. So, an offer made to a particular person can be accepted only by such person, and an offer made to a group of persons can be accepted only by any person falling under such group.
General Offer: Fulfilment of terms and condition. In case of a general offer, it is not required for offerer to first inform the offer. Mere fulfilment of terms and condition of the offer is sufficient. A general offer may be accepted by any person, who has knowledge of the offer and fulfils the terms and conditions of the offer.

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Essential Conditions of valid Acceptance of Offer under Indian Contract Act

The following conditions must be fulfilled for valid acceptance

Absolute & unqualified: Acceptance must be absolute & unqualified to the terms of offer. New conditions or qualifications must not be introduced to the offer during acceptance (it amounts to counter offer and not acceptance). (s.7)
Ex. A offers to B to sell his Maruti car at Rs.1 Lac. B replies that he accepts the offer if A gets the Car painted Red. B’s reply does not amount to Acceptance of A’s offer (this becomes counter offer)
Communicated to the offeror: Acceptance must be communicated by the offeree to the offeror (or his authorized representative). Normally the communication of acceptance is express, but sometimes it may be implied from the acts or conducts.
Communicated in the specified way: Acceptance must be communicated in the specified way (or in the normal way). If acceptance is not given in specified manner, the offeree may reject the acceptance and communicate the rejection of acceptance within reasonable time. However, if such rejection of acceptance is not communicated within reasonable time, it shall be treated as accepted.

Ex. A makes an offer to B. The offer states that the acceptance must be communicated to A in writing within 7 days of receipt of offer. B, on 7^th day, just informs his acceptance over telephone. A may refuse to accept the telephonic communication as valid acceptance and must communicate the rejection within reasonable time, otherwise the acceptance will be treated as valid.

Within specified or reasonable time: Acceptance must be given within specified time (or within reasonable time, if no time is specified), otherwise, the offerer may treat the offer as lapsed.

Ex. A makes an offer to B. The offer states that the offer is valid for 7 days only. B accepts the offer after 15 days. A may refuse to treat it as valid acceptance, as it was not received within specified time treating the offer as lapsed.

The following Scenarios render acceptance as invalid

Future Agreement: Future Agreement is not an acceptance. An agreement to enter into an agreement upon terms to be fixed in a future date does not amount to any contract.

Ex. A film producer offers to an actor to fix his remuneration at a later date depending on fixing of the location of the shooting. Hence there was no binding contract between the parties.

Mental acceptance: Mere mental acceptance is not acceptance.

Ex. A offered to B, a company, to supply coal. B’s purchase officer asked the clerk to send the Purchase order to A. B’s clerk just kept in his own mind but did not send the purchase order. Meanwhile, the price of coal increased considerably. B’s purchase officer demanded A to supply the coal as per the offer. Held, A may avoid the offer because there was no acceptance on B’s part.

Silence: Silence cannot be implied as acceptance.

Ex. A wrote to B, ‘I offer to sell 100 Tons of Coal at Rs 12000/Ton. If I do not hear from you within 7 days, I will treat that you have accepted the offer’. B did not reply. A cannot assume B’s silence as acceptance

Multi part Offers : If an offer contains multiple parts (several offers bundled into one), all the parts must be accepted in toto (as acceptance must be absolute & unconditional). Non acceptance of any part amounts to non-acceptance of the entire offer.

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Rules of completion of Communication of Acceptance of Offer under Indian Contract Act

Communication of acceptance is complete :

As against offerer – When the communication of acceptance is put in course of transmission.
As against acceptor – When the communication of acceptance comes to the knowledge of offerer.

Ex. B accepts A’s offer by a letter posted on 1^st which reaches A on 3^rd. On the part of B, the acceptance is complete on 1^st, the day when he drops the letter. On part of A, the acceptance is complete on 3^rd, when he receives the letter.

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Tacit or Silent Acceptance of Offer under Indian Contract Act

As a general rule, the offer cannot thrust the burden on the offeree. So, an offer containing a term that silence on the part of offeree shall amount to acceptance of the offer, is not valid.

Ex. X says, if I do not hear from you within 7 days, I shall treat the offer is accepted. Such a condition is not valid and the offer does not become binding if the offeree does not reply within 7 days.

When Silence amounts to acceptance of Offer under Indian Contract Act

However, silence may amount to acceptance in certain cases as follows:

Offeree voluntarily agrees: Where the offeree voluntarily agrees with the Offerer that non-refusal by offeree within a specified time shall amount to acceptance, such a clause is valid. Therefore, in such a case, silence of offeree may amount to acceptance.

Ex. The offeree says to Offerer, “If you do not hear anything from me in the next 7 days, consider your offer as accepted.” If the offeree fails to reject the offer within 7 days, his silence shall amount to acceptance.

Implied offer is made: Where an implied offer is made, but the offeree remains silent, thereby resulting in performance by the Offerer, the silence of offeree shall amount to implied acceptance.
Custom or usage of trade: Where there is a custom or usage of trade which specifies that silence shall amount to acceptance, such a custom or usage of trade shall be binding on the parties.

Rules of Tacit or Silent Acceptance of Offer

Mere mental (Tacit) acceptance is no acceptance. If the acceptance is not communicated, it is meaningless. Where the offeree is mentally prepared to accept the offer, but fails to communicate his acceptance, it is not regarded as a valid acceptance.

No valid acceptance takes place, when :

offeree prepares his mind to accept the offer but forgets to give his consent. or
offeree prepares a letter of his consent, but fails to dispatch the letter of consent.

Rules of Applicability of Special terms and conditions of Offer under Indian Contract Act

Special Terms that form part of the Contract, are binding on the parties. Hence, a person is deemed to have accepted the Special Conditions or Terms in a Contract, if they are communicated to him in some responsible manner, e.g. conditions on the reverse of a train ticket, air ticket, bill issued by service providers, etc. In such case, persons entering into contracts on special terms are deemed to have impliedly accepted those terms.

Rules of Acceptance of Special Terms of Offer under Indian Contract Act

Tacit Acceptance: Acceptance of document (e.g. ticket or receipt) without protest tantamount to a tacit acceptance of conditions.
Notice of conditions:

Reasonable notice: The party delivering the document should have given reasonable notice of the special terms/conditions. Words like See Back for Conditions, Please Turn Over, subject to Terms and Conditions contained in Annexure, are indicative of a reasonable notice to the Acceptor. It shall be binding even though the Acceptor did not read the same or could not understand it.
Proper communication of notice: If the notice is not properly communicated, the offer is not binding in following situations:
If the document is printed and delivered in such condition that it does not give reasonable notice on its face that it contains certain special conditions.
When the conditions are contained in a document that is delivered after the contract is complete.
If conditions limiting or defining his rights are not brought to his notice.

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Rules of Revocation of Acceptance of Offer under Indian Contract Act

Acceptance cannot be recalled: Acceptance produces something which cannot be recalled. Offer is like a lighted match while acceptance is train of gunpowder. The man who led the train may remove it before the match is ignited. An offer by itself does not create legal relationship, but as soon as it is accepted, legal relationship is established and it cannot be revoked.

Acceptance given may be revoked before communication of acceptance: An acceptance given may be revoked (taken back) by the acceptor at any time before the communication of acceptance is complete, but not after that. This means that revocation of acceptance is binding on the offerer only if the communication of revocation is received by the offerer earlier than the receipt of communication of acceptance (s.5).
Acceptance and revocation communicated by letter: If the acceptance and revocation is communicated by letter (correctly addressed & adequately stamped) sent through post, following rules will apply:

If the acceptance is received by the offerer before the revocation of acceptance, the contract will be binding between the parties.
If the revocation is received by the offerer before the acceptance, no contract will be binding between the parties.
If both the acceptance & revocation reaches the offerer at the same time, the respective rule among the above two will apply depending on which letter he reads first.
As soon as the Acceptance letter is despatched by the acceptor, the offeror is bound by the acceptance and cannot revoke the contract.
Even if the letter is lost in transit, acceptance is still valid if the Acceptor has properly addressed it to the Offeror, affixed adequate postage stamps, and posted at letter box of Post Office.
Acceptor is deemed to have done everything when he posts his acceptance to the Offeror. He cannot be held responsible for events over which he has no control (e.g. for loss of the letter of communication in transit).

Rules of Completion of Communication of Revocation under Indian Contract Act

Communication of revocation is complete :

As against the person who makes it : When revocation is put in a course of transmission so as to be out of the power of the person who makes it.
As against the person to whom it is made :When revocation comes to the knowledge of the person to whom it is made.

Rules of Revocation of Offer under Indian Contract Act

From the above rules and the examples explained, we may conclude as follows:

The Offer can be revoked by the Offerer, before acceptance by the offeree. Even if the acceptance of offer has not reached the offerer, the offerer cannot revoke the offer, after acceptance by the promisee. As soon as the promise accepts the offer, the contract emerges instantly at the time of acceptance, and becomes binding
The Acceptance can be revoked by the promisee (the offeree becomes promisee after acceptance), before it reaches the offerer.
As soon as the offer is accepted, the contract becomes binding, irrespective of the fact whether the promisor has received it or not. If the acceptance reaches late to the promisor, the promise gets some more time to revoke the acceptance.
If the revocation of acceptance reaches the promisor earlier than the acceptance, the acceptance is not complete and no contract emerges.
If the letter of acceptance and revocation reaches same time, whichever letter is read first, will be valid and will decide the validity of acceptance or revocation

Acceptance & Revocation of Offer – Practical Examples

Ex. A sends a letter of offer to sell his car to B, on 10th. The offer letter of A reached B on 13th. B sent letter of acceptance to A on 17th. The letter of acceptance of B reached A on 19th.

The offer of A is complete on 13th, when the offer reaches B, the offeree.
The offer can be revoked by A, before posting of letter of acceptance by B, i.e, within 17th.
If offer is not revoked by 17th, the contract arises on 17th. A is bound by his offer on 17th.
B can revoke his acceptance till it reaches A, i.e on 19th.
If the letter of acceptance is lost in transit, A still becomes bound on 17th. However, B can revoke the acceptance till the letter reaches to A (so A gets more time to revoke).
If the letter of acceptance and revocation reaches A at same time. In such case, whichever letter is opened first by A (Acceptance or Revocation), will be valid and will decide the validity of acceptance or revocation

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Rules of Telephonic Communication of Offer and Acceptance

Contract over telephone is treated like face to face contract and are valid. In such case, offer & acceptance are instantly communicated (no time lag like letters sent by post). In such case, the question of revocation of offer normally does not arise, as the communication is instantaneous. Offer once accepted, cannot be revoked.

However, due to technical disturbance in telephone line, if the offer or the acceptance, as the case may be, is not clearly heard by the party in other side, it is treated as non-communication.

Rules of Digital Communication of Offer and Acceptance

In case of digital communication (by e-mail / fax etc), the contract is valid. However, both the parties should ensure that the communications have been received by the other party

Communication by email : A communication becomes complete when it “reaches” the other party. In case of e-mail, determining the meaning of “reaching” a person can be controversial, due to various underlying intricate technical factors

A message is said to have “reached” the addressee by any means when it is addressed to his place of business or to his mailing address. However, e-mail has to be understood in a functional, rather than a physical way.

An e-mail message could be on any server in the world and still have reached the addressee’s place of business as long as he would have been able to retrieve it. Consequently, for an e-mail to “reach” the addressee, it is enough for the e-mail sender to send it entering the proper e-mail address. It is not important if the addressee has actually read it, or even could not read it due to technical problems, if it is within the addressee’s “sphere of influence”

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Offer and Acceptance under Contract Act- Key Takeaways

Offer and acceptance are the foundational principles of contract formation under the Indian Contract Act, 1872.
An offer must be clear, communicated, and legally enforceable, while an acceptance must be unconditional and communicated properly.
Offer or acceptance may revoked under certain legal conditions.

Offer and Acceptance under Contract Act- Frequently Asked Questions (FAQs)

1. What is an offer under the Indian Contract Act, 1872?

An offer (or proposal) is a declaration by one party expressing willingness to enter into a contract on specific terms, subject to the acceptance of the other party.

2. What are the essential conditions for a valid acceptance?

A valid acceptance must be absolute, unconditional, communicated properly, and made within a reasonable time.

3. Can an offer be revoked after acceptance?

When an offer is validly accepted, it results in a binding contract and cannot be revoked. However, an offer can be revoked before acceptance.

4. What happens if acceptance is not communicated properly?

Acceptance of offer, not properly communicated, may be considered invalid, and will not result in a legally enforceable contract.

Offer and Acceptance in Indian Contract Law: Key Principles & Explanation with Examples