Role of Offer & Acceptance in Contract Drafting

December 5, 2009

What is an “Offer” under Indian Contract Act?

Section 2 (a) of Indian Contract Act has the word ‘Proposal’ instead of ‘Offer’, which is widely in use worldwide. Not only the literal meaning of these two words are interchangeable, their effect and intent are also same.

Section 2 (a) of the Indian Contract Act, 1872 reads:

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.

Thus, we can summarise the elements of ‘Offer’ as follows:

To make an Offer there must be a person making the offer. Section 2 (c) of the Indian Contract Act defines this person as a ‘Promisor’, who is also known as ‘Offeror’ in other countries.
This Promisor must signify… in other words, must communicate. The mode of communication is also a very important point, which students must give special attention to, as the mode determines the exact time of making of the ‘offer’ and the obligation of the Promisor in respect of the ‘Offer’.
And what the Promisor must signify is, “Promisor’s willingness to do or abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence”. The willingness of the Promisor is an important principle, which a good lawyer must attend to. If a contrary intention of the Promisor can be shown, the initiation of the contract making becomes null. Some other principles of Indian Contract Act find their basis in the willingness of the Promisor. These we will discuss in detail at a later stage.

Moreover, the willingness of the Promisor ‘to do or to abstain from doing some act’ has a purpose, which is, obtaining the assent of that other to such act or abstinence. Readers should note that if the purpose is not fulfilled, the definition of “Offer” or “Proposal” remains incomplete.

Question for Readers

Has anyone come across a real world example, where the above purpose is not fulfilled but the agreement is concluded?

What is an acceptance under the Indian Contract Act?

Section 2(b) of the Indian Contract Act, 1872 reads:

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.

The elements of an acceptance can be summarised as follows:

There must be another person two whom a Proposal (read ‘Offer’) has been made. Section 2(c) of the Indian Contract Act, defines this person as a “Promisee”.
This person must have signified his assent. It is also implied here that the assent must be signified to the Proposer only and not to any other person.
Only then the Proposal is considered as accepted.
And the resultant of an accepted ‘Proposal’ is called as “Promise”.

Effect on Contract Drafting

Thus we can conclude safely that while drafting a contract, the offer and acceptance provides following information to the drafter:

Name and other identifiable information about the parties
The time when the ‘Offer’ and the ‘Acceptance’ were signified.
The nature of acts and omissions that the Proposer and the Promisee have agreed to, i.e. the purpose and subject matter of the contract.
These details can be gathered from any written or oral communications between the parties.

I will advise the readers of this blog that these are my personal observation and need not be accurate, up to date, or complete. The above observations are not intended to be legal advice and are for the purpose of providing general information to the readers.

Sources: 1. Bare Act, Indian Contract Act, 1872.