ACCEPTANCE

Q acceptance to an offer is what a lighted matchstick is to a train of gunpowder. Define acceptance ,

case laws.

Eng law , Indian law .., instantaneous mode of communication

The second building block of a contract , acceptance, is defined in section 2(b) of the Indian contract
act as the assent given to the offeror by the offeree . Once this assent and acceptance has been
granted, the proposal converts into a promise as defined under section 2(c) of the ICA.

Communication of acceptance is also essential however, for general offers,

1. For contract, 2 parties are necessary

2. A process is involved
3. Offer needs to be accepted by the person to whom it is made.
4. Person has a wide definition-fictitious company ., artificial intelligence.
5. On behalf of others- commercial , merchantile ,.. principle
6. Acts of necessaties .. representative capacity – death bed .. time being not being able to give
7. When means the element of time ..procedural nicety ..
8. Offer cannot impose burden ofrefusal Secondly, an offeror cannot impose upon the offeree
the burden of refusal. The offeror cannot say that if no answer is received within a certain
time, the same shall be deemed to have been accepted. "It is not open to an offeror to
stipulate against an unwilling offeree that the latter's silence will be regarded as equivalent
to acceptance. He cannot force him to take a positive course of action under penalty of
being contractually bound if he does not."^

Thus "acceptance" is the assent given to a proposal, and it has the effect of converting the proposal
into promise.^

The only difference that the section makes is in the position of the accep tor. In England when a
letter of acceptance is posted, both the offeror and the acceptor become irrevocably bound. But in
India, the acceptor does not become bound by merely posting his acceptance. He becomes bound
only when his acceptance "comes to the knowledge of the proposer". The gap of time between, the
posting and the,delivery of the acceptance can be utilised by the acceptor for revoking his:
acceptance by a speedier cofnmunicatioh which will overtake the acceptance.^' The peculiarity of
this rule is that after an acceptance is posted and before it comes to the knowledge of the offeror,
only one party, that is, the offeror, is bound. The acceptor still has the right to recede from the
contract by revoking his acceptance. A contract, on the other hand, means an agreement which
binds both the parties to it.'*"

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. Thus "a
 1. When – denotes time .. the acceptance can be given in a stipulated time or in a reasonable
period of time
2. Person can have a huge interpretation
3. To whom the proposal is made – in cases such as agent , in representative capacity the
proposal can be accepted.
4. Signifies his willingness to accept the offer made

Acceptance is the second building block of a contract. In layman terms, willingness

expressed by the offeree to accept an offer constitutes acceptance. As per its statutory
definition given in section 2 (b) of the Indian contract act , when the offeree signifies his
assent to the offer made , an acceptance is made. An accepted proposal gives rise to a
promise. As per its definition, acceptance is made by a person which in legal terms can
include fictional entities like companies as opposed to the literal interpretation of the word.
For instance , in the case of Carlill v carbolic smoke ball company, 1892, the smoke ball
company made out a general offer and was capable to do so as it comes under the
purview of who is considered to be a person in [Link] newer technologies upcoming ,
in future , the purview of the word “person” in law seems to be ever expanding.
Secondly , time is another aspect that is crucial for acceptance. All offers , for
instance ,standing offers ,have a stipulated time in which they must be accepted . The
aspect of reasonable interpretation can be used to see ill when an offer can be accepted
in cases where time has not been [Link] , according to the definition ,
acceptance must be made by the person to whom the proposal has been made .
However, in the commercial world , exceptions to this rule can be seen in the case of
principle-agent relationship where an agent can accept an offer on behalf of the
principle .Acceptance must be signified . from this it can be interpreted that mere mental
acceptance unaccompanied by any external indication will not be sufficient. Bhagwandas
Goverdhandas Kedia v Girdharilal Parshottamdas & Co, AIR 1966 SC 543A mere mental
determination to accept unaccompanied by any external indication will not be sufficient..
Lastly , although acceptance must be signified , in cases of general offer , this rule can
come under an exception . Thus , the concept of acceptance gives a wide scope for
application which can differ from case to case .

INTERPRETATIONS FROM THE RULE OF ACCEPTANCE

Acceptance must be signified or communicated and this can be done by an expressed or overt act or
an omission . Bhagwandas Goverdhandas Kedia v Girdharilal Parshottamdas & Co, AIR 1966 SC 543A
mere mental determination to accept unaccompanied by any external indication will not be
sufficient. Such manifestation may be in the form of express words, written or spo ken or may be
signified through conduct. An illustration of acceptance by conduct is the decision of the House of
Lords in Brogden v Metropolitan Railway Co.^ acceptance must be communicated to the offeror
himself. A communication to any other person is as ineffectual as if no communication has been
made. To take, for example, Felthouse v Bindley}.

ESSENTIALS OF ACCEPTANCE-

Since the definition of acceptance has a lot of scope for interpretation as per daily scenarios and a
lot of ,it becomes crucial to lay down certain essential elements which when present, would give rise
to a valid acceptance Infront of the law.

Acceptance must be absolute ,unconditional and unqualified- The cardinal principle

in the light of section 7 of the Act is that the offer and acceptance
of an offer must be absolute without giving any room of doubt. It
is well settled that the offer and acceptance must be based or
founded on three components—Certainty, commitment and
communication. If any one of three components is lacking either
in the offer or in the acceptance there cannot be a valid contract;
Kilburn Engineering Ltd. v. Oil and Natural Gas Corporation Ltd.,
AIR 2000 Bom 405.
When the acceptor puts in a new condition while accepting, the
contract already signed by the proposer is not complete until the
proposer accepted the condition; Haridwar Singh v. Begum
Sumbrui, AIR 1972 SC 1942.
An acceptance with a variation is no acceptance; it is simply a
counter proposal which must be accepted by the original promisor
before a contract is made; Haji Mohd. Haji Jiva v. E. Spinner,
(1900) 24 Bom 510. Badri Prasad v State of MP Citation: AIR 1970 SC 706

Even if the letter of Feb 1 could be treated as an offer, there was no unconditional acceptance
of the offer, because, there was a reservation by the appellant of his right to claim refund in
his letter dated 5th Feb and hence there was no concluded contract.
In Suraj Besan & Rice Mills vs Food Corporation Of India[7], it was admitted that the plaintiff
quoted for the purchase of 13,576.884 M. Ts of damaged paddy. The defendant, however,
placed an order by telegram dated July 22, 1983, for 6,176.790 [Link]. The acceptance under the
law should be absolute and unconditional. In the present case, it was neither absolute nor
unconditional because the defendant accepted only part of the offer of the plaintiff by placing an
order for 6,176.790 [Link]. therefore, it was held that there was no binding contract between the
plaintiff and the defendant.

It implies that there cannot be further negotiations. Its negotiations are going on between the
parties, an agreement cannot be said to have formed until a consensus has been achieved. The
above sec. clear to that point. The sec also mentions that the acceptance must be expressed in
some usual and reasonable manner unless the proposal prescribes how it is to be accepted. If
there is a condition for the manner in which the offer has to be accepted, the offeree is bound to
fulfill that. However, when no such mode of acceptance or time under which the offer has to be
accepted has been mentioned by the offeror then the offeree can accept it in a usual manner
under a reasonable time.
In a case[8] before the Madras High Court, the defendant wrote to the plaintiff on the 17th of
October 1909 to send 15 or 20 bags of areca nuts "at once". The offeree wrote back that he
would send the goods within 15-20 days. The defendant did not reply to the plaintiff. 25 bags of
nuts were finally sent by the plaintiff on the 1st of December. The defendant refused to take
delivery of them. The plaintiff filed for the breach of contract.
The court held that the acceptance was not absolute and unqualified. It was an order for
immediate supply and the plaintiff understood that time was of the essence of the contract,
because he wrote back to say that he could send the goods only in 15 or 20 days. he made a
counter-proposal which was not accepted by the defendant. Hence, there was no legal contract
in place. If the proposal prescribes the manner and acceptance is not made in that manner the
promisor may require acceptance in the manner prescribed, but if he does not do so, he will be
held to have accepted the acceptance in the manner that it was made.[9]
Illustration 1: A offers to sell his Car for ₹1,00,000 to B in cash. B accepted the offer with a
condition that he will pay half of the amount by UPI. Held there was no contract, as B’s
acceptance was not a mirror image of A’s proposal.
Illustration 2: Vishal offers to sell a table to Lakshya for ₹5,000. Lakshya accepts Vishal’s offer
with a condition that he should sell the chair with the table. The offer lapses since Lakshya puts a
condition to it.
Illustration 3: A farmer offers to sell 20 kg of rice at ₹50/kg to a man. But the man agrees to buy
only 10 kg of wheat. Since the man does not accept the offer made by the farmer without any
changes in its terms, the original offer lapses. The acceptance made by the man is no
acceptance and the framer is under no obligation to sell rice to him.
Partial acceptance
Acceptance should be made in full with respect to the terms of the contract. An offeree can’t just
accept certain terms favorable to him and ignore the others. An agreement will only be formed
when there is acceptance of the whole offer.
In Ramanbhai M. Nilkanth vs Ghashiram Ladliprasad[10], an application was made in a company
for certain shares on the condition that the applicant would be appointed as a cashier in the new
branch of the company. The company made the allocation of shares to the applicant without
fulfilling the condition and demanded the share money from him.
The court held that the petitioner’s application for 100 shares was conditional and there was no
intention on the part of the company to accept the terms of the contract in entirety where he
applied for shares until he was appointed as a cashier by the company. Therefore, there was
only a partial acceptance of the offer.
Inquiry into terms ofproposal A mere inquiry into the terms of a proposal is not the same
thing as a counter-proposal. In a negotiation for the sale of a quantity of iron, the proposal
was "I would now sell for 40s. net cash, open till Monday". The offeree inquired by wire
whether the offeror would accept 40s. for delivery overtwo months or less. The offeror,
treating this as a rejection,sold off the goods. He washeldliable for the breach. Toseek an
explanation of the terms issomething different from introducing new terms." An inquiry
about the technical details of a proposal is not a counter-proposal. On acceptance of the
proposal, the contract will be created on the basis of the terms and con ditions of the original
proposal including arbitration clause.

Sale and agreement to sell.—(1) A contract of sale of goods is a contract whereby the seller
transfers or agrees to transfer the property in goods to the buyer for a price. There may be a
contract of sale between one part-owner and another. (2) A contract of sale may be absolute
or conditional. (3) Where under a contract of sale the property in the goods is transferred
from the seller to the buyer, the contract is called a sale, but where the transfer of the property
in the goods is to take place at a future time or subject to some condition thereafter to be
fulfilled, the contract is called an agreement to sell. (4) An agreement to, sell becomes a sale
when the time elapses or the conditions are fulfilled subject to which the property in the
goods is to be transferred.

2. COMMUNICATION OF ACCEPTANCE IS NECESSARY - Acceptance by external

manifestation or overt act The definition clearly requires that the assent should be signified. It
may be signified or expressed by an act or omission by wrhich the party accepting intends to
communicate his assent or which has the effect of communicating it. [S. 3] A very common
instance of an act amounting to acceptance is the fall of the hammer in the case of an auction
sale. The principle is that there should be some external manifestation [overt act) of
acceptance. A mere mental determination to accept unaccompanied by any external
indication will not be sufficient. In the words of Shah J (afterwards CJ):^ "An agree ment
does not result from a mere state of mind: intent to accept an offer or even a mental resolve to
accept an offer does not give rise to a contract. There must be... some external manifestation
of that intent by speech, writ ing or other act." Such manifestation may be in the form of
express words, written or spo ken or may be signified through conduct. An illustration of
acceptance by conduct is the decision of the House of Lords in Brogden v Metropolitan
Railway Co. Mere mental assent to an offer does not conclude a contract either under the
Indian Contract Act or in English Law. This can be studied from the decision of the
Calcutta High Court in Hindustan Coop Insurance Society v. Shyam Sunder[6] case.
In this case, the proposer of the agreement, on the request of the organizer of the
company agreed to insure his life. The company sent their doctor for his medical
check-up and after which he was found to be first class.
3. Must be in prescribed mode and manner- conjoined interpretation ..
acceptance must be expressed .nature of acceptance is
Conditional offer – must be in prescribed mode and manner modality .
Reciprocal acceptance to the offer and it must be accommodable to the
req of the offer .reasonability as well .. position to understand ..
communication is there .. mere acceptance is not enough .. herbew , hindi
eg .

4. acceptance must be given by the offeree - Another principle involved in acceptance is that it
should be given by the offeree himself and not any third party. An acceptance by an
unauthorized person is not valid. This was given in the case Powell v Lee.[4] An
example of this can be, a person hearing that he got a job by someone in the
company he applied for, but not in the employing committee. This would be just as if
overhearing and not a formal offer for job
•

5. Acceptance must be given within stipulated time

Time is an essence of contract or a factor of contract .reasonable
time or prescribed time
Nature of good is perishable
[Link] to give consent
6. Silence does not amount to acceptance- Shah J. (afterwards CJ) stated:
An agreement does not result from a mere state of mind: intent to accept an offer or
even a mental resolve to accept an order does not give rise to a contract. There
must be some external manifestation of that intent by speech, writing or other act.
[2] A case which held that mere silence is not acceptance is Felthouse v. Bindley
his case also gives out two other propositions. Firstly, the communication of
acceptance must be with the offeror himself or the person he has authorized for the
same. Second, we learn that an offer cannot impose upon the offeree the burden of
refusal. This means that when an offer is proposed, the offeror cannot say that if no
reply came within a given time, then the offer is bound to be accepted. An offeree�s
silence cannot amount to acceptance, once again.

7) No acceptance without proposal

there can be
no
acceptance
without
acceptance proposal
mere silence
must be
is not valid
given by the
acceptance
offeree

Essentials
of must be
must be acceptance given within
unqualified the
and absolute stipulated
time

must be in
it must be prescribed
signified or
communicated mode and
manner

: Carlill v Carbolic Smoke Ball Co Citation: (1893) 1QB 256 Court: England and Wales
Court of Appeal ( Civil Division) Bench: Bowen LJ, Lindley LJ, A.L. Smith LJ Facts: The
Carbolic Smoke Ball Co produced the 'Carbolic Smoke Ball' designed to prevent users
contracting influenza or similar illnesses. The company's advertised (in part) that: “100
pounds reward will be paid by the Carbolic Smoke Ball Company to any person who
contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after
having used the ball three times daily for two weeks according to the printed directions
supplied with each ball. 1,000 pounds is deposited with the Alliance Bank, Regent Street,
showing our sincerity in the matter”. After seeing this advertisement Mrs Carlill bought one
of the balls and used it as directed. She subsequently caught the flu and claimed the reward.
The company refused to pay. Mrs Carlill sued for the reward. Legal Issue: Does one who
makes a unilateral offer for the sale of goods by means of an advertisement impliedly waive
notification of acceptance, if his purpose is to sell as much product as possible? Judgement:
The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert constituted
an offer of a unilateral contract which she had accepted by performing the conditions stated
in the offer. The court rejected all the arguments put forward by the defendants for the
following reasons:
ENGLISH VS INDIAN ACCEPTANCE-

Difference between English andIndian laws The only difference that the section makes is in the
position of the accep tor. In England when a letter of acceptance is posted, both the offeror and the
acceptor become irrevocably bound. But in India, the acceptor does not become bound by merely
posting his acceptance. He becomes bound only when his acceptance "comes to the knowledge of
the proposer". The gap of time between, the posting and the,delivery of the acceptance can be
utilised by the acceptor for revoking his: acceptance by a speedier cofnmunicatioh which will
overtake the acceptance.^' The peculiarity of this rule is that after an acceptance is posted and
before it comes to the knowledge of the offeror, only one party, that is, the offeror, is bound. The
acceptor still has the right to recede from the contract by revoking his acceptance. A contract, t, on
the other hand, means an agreement which binds both the parties to it. 0. This anomaly was pointed
out by the Madras High Court in Kamisetti Subbaih v Katha Venkatasawmi, ILR (1903) 27 Mad 355,
359.

COMMUNICATION AND REVOCATION OF OFFER AND ACCEPTANCE –

Section 4 and 5

The communication of a proposal is complete when it comes to the knowledge of the

person to whom it is made. A proposes, by letter, to sell a house to B at a certain price.
(a) A proposes, by letter, to sell a house to B at a certain price." The communication of
the proposal is complete when B receives the letter.

ILLUSTRATION –

A proposes to B via post to paint and furnish his house for fifty thousand rupees . This
letter was posted on 14th march ,2021 and reached B on 20th march, 2021. In this
illustration, the communication of proposal will be said to be communicated on the day
it reaches the offeree, which is 20th march, 2021.

In the same illustration, had the received letter been read by B on 22nd march ,2021, that
would be the day on which the proposal will be said to be communicated as on said day,
the offer comes to the knowledge of the offeree.
OFFER – TYPES

Genral , invitation and offer

 The Specific Offer

A specific offer refers to an offer made to a specific individual or group of individuals. It
can only be accepted by the individual or group of individuals to whom it is directed.
Special/specific offer: Where an offer is made to a particular and specified
person, it is aspecific offer. Only that person can accept such specific offer, as
it is special and exclusive tohim. [Boulton v. Jones]Specific offer is an offer
that is made to a specific or ascertained person, this type of offer can only be
accepted by the person to whom it is made. This concept was seen briefly in
the case of Boulton v. Jones, wherein the Plaintiff had taken the business of
one Brocklehurst, the defendant used to have business with Brocklehurst and
not knowing about the change in ownership of business, sent him an order for
certain goods. The Defendant came to know about the change only after
receiving an invoice, at which point he had already consumed the goods. The
Defendant refused to pay the price, as he had a set off against the original
owner, for which the plaintiff sued him.

The Judges gave a unanimous judgement holding the defendant not liable.
Pollock CB held that the rule of law is clear, if you intend to contract with A, B
cannot substitute himself as A without your consent and to your
disadvantage. It was also held that whenever a person makes a contract with
a specific personality, a specific party, so to say, for writing a book, for
painting a picture or for any personal service or if there is any set off due
from any party, no one has the authority to come in and maintain that he is
the party contracted with.

General Offer
General offer: It is an offer made to public at large with or without any time
limit. In terms

of Section 8 of the Act, anyone performing the conditions of the offer can be
considered to

have accepted the offer (Carlill v. Carbolic Smoke Ball). Until the general offer
is retracted or

withdrawn, it can be accepted by anyone at any time as it is a continuing

offer.

When an offer is made to the general public, it is called a general offer and can be taken
up by any person who wishes to fulfill the terms of the offer. When an offer is accepted
by the individual to whom it is directed, the offeror and the offeree enter into a contract.
If the offer is accepted by a large number of people, the number of contracts formed will
be equal to the number of individuals who accept the offer. If a reward is offered for
completing a certain task, only the person who completes the task can accept the offer.
GENERAL OFFER:-
When an offer made at large or in public or in general this offer is
known as General Offer. It can be accepted by any individual or
public at large whoever is interested in the offer offered. When a
person accepts the offer given then offeror and offeree enter into
contract. The reward will be given to that person who completed
the task given or fulfilled the given condition.
CASE : CARLILL v. CARBOLIC SMOKE BALLS CO. (1893) [3]
This is the landmark judgment of general offer. In this case it held
by the Court of Appeal that whosoever fulfills the terms and
condition of the offer will be eligible for the reward of the offer.
Carlill V. Carbolic Smoke Ball Co (1893) 1 QB 256
The leading authority on the subject of general offer is Carlill v. Carbolic Smoke Ball
Co. In this case, the defendant company offered by advertisement to pay £100 to
anyone who contracts the increasing epidemic influenza, cold or any other disease
caused after having used the Carbolic ball according to the printed directions. It was
further advertised that £100 is deposited with the Alliance Bank showing its sincerity
in the matter.

In an action by plaintiff to recover the promised reward after having contracted

influenza despite using the ball as per the directions, it was contended that the offer
was not made to anyone in person and the plaintiff had not communicated her
intention to accept. This contention was rejected and it was observed that:
1. Offer made to world at large is entered into contract with that limited persons who
come forward and perform the condition.
2. Communication of acceptance in such cases is not necessary.

Where a general offer is of continuing nature, as in the above case, it will be open for
acceptance to any number of people until it is retracted. But where an offer requires
some information about a missing thing, like the one in illustration of lost dog above,
it is closed as soon as the first information is received.
Rules Relating To Proposal’s Communication
1. Willingness should be signified
As per Section 2(a), the willingness to make a proposal should be signified by the
offeree. A proposal may be communicated in any way whatsoever that has the effect
of manifesting the offeree, the willingness to do or to abstain from doing an act.

In Carlill case, the willingness to enter into a contract was signified by stating that
£100 have been deposited in the Alliance Bank.

2. Mode of Communication
The Act does not provide any specific mode of communication of proposal. So it may
be done in any manner or form as long as same fulfils the requirement of the Act. It
may be made in writing, words (express) or even by the conduct of the parties
(implied).

In Upton Rural District Council v. Powell (1942), the plaintiff had asked the
services of Upton and Upton in response to that request, provided the services and
hence, the services were rendered on an implied promise to pay.

3. Communication when complete

An offer is complete when it comes to the knowledge of the offeree. When an offer
has not been communicated to the person and he does an act in ignorance of the
same, then even though it may be as per the terms of the offer, there is no
acceptance, since there was no knowledge of the offer. This principle was well
accepted in Lalman Shukla v. Gauri Dutt (1918).

Cross Offer
A cross offer is made when two parties make the same offer to one another without
knowing the other party has made an offer, and the terms of both offers are identical. In
this situation, there will not be a contract because it cannot be construed that one
party's offer is accepted by the other party.

Where two persons make identical offers to each other, and both such persons do not
know about each other’s offer, then such offers are known as cross-offer. The
essentials of a cross offer are as follows:

 Same offer to one another: The first pre-requisite of a cross

offer is that two or more persons should make similar offers
with the same details.
 Without knowledge: Such identical offers must be made in
ignorance of the offer made by the other party.
 The terms and conditions: The terms and the object of the
offers must be the same. A set of offers would be considered to
be cross offers only when the terms and conditions as well as
the object of the offers are the same. If not, then such offers
cannot be called a cross offer but a counter offer.
 A cross offer does not mean acceptance of the offer. No binding contract is
created.
 Illustration: A from Delhi by a letter offers to sell his house to B of
Bombay for Rs. 10 lakh. At the same time, B also makes an offer to A to buy
A’s house for Rs. 10 lakh. Both the parties made an exact offer to each other
without knowing about the offer being made by the other. The two letters cross
each other. There is no concluded contract between A and B because both the
parties are made a cross offer.
 Tin v. Hoffman, (1873) 29 LT 271, is a major case law
dealing with the concept of the cross offer. In this case, both
the parties made identical offers to each other for the sale of
800 tons of iron. The price and terms of this offer were similar.
The question arose whether there was a valid contract
between the two. It was held that no contract existed between
the two parties. A valid contract consists of an offer,
acceptance, and communication. This was absent in the
present case. There was no communication or acceptance. It
was further held that two identical crossing offers do not form
a contract as they lack the essentials of a valid contract. It was
held in this case that there was no contract between Mr Tinn and Mr
Hoffman for the iron. The cross offers were made simultaneously and
without knowledge of one another; this was not a contract that would bind
the parties for the iron. There is a difference between a cross offer and a
counter offer. In order to form a valid contract, there must be
communication that consists of an offer and acceptance. There was no
acceptance by post, as had been stated in the offer. The court also said
that while post had been indicated in the offer, another equally fast
method would have been successful, such as a telegram or verbal
message.
 In Bhagwandas Goverdhandas Kedia v M/S Girdharilal
Parshottamdas & Co. and Others (1966 AIR 543), it was
observed by the Hon’ble Supreme Court that “the acceptance
and such an intimation of acceptance of the offer are both
necessary to form a binding contract.” Thus, this case shows
that an offer and acceptance are essential ingredients of a
contract. This thus renders cross offers as invalid. They can
never be contemplated as contracts.
 Why does it not fulfil essential elements?
In order to become valid,the offer must be communicated as per sec
4 of ICA , which renders the offer to only be communicated when it
comes to the knowledge of the person to whom it is being offered .
Thus , from the very conception of the cross offers , they do not
qualify to be valid offers. Acceptance in ignorance of offer is no
acceptance as per lalman shukla vs gauri datta. Thus , there is no
agreement to begin with for the offer to become a contract .

CRITICAL ANALYSIS-

 The principle of ‘cross offers’ is quintessential to the world being governed by

industrialization and incessant contracts daily. The immediate principle shows
the specificity of the contract laws in India. There are only a few cases
involving cross offers when compared to the number of cases involving counter
offers, general offers, and specific offers among others. But, the importance of
the concept of cross offer can never be undermined. It plainly distinguishes
itself from any other kind of offers and thus, aids in a better interpretation of
the contracts. Such a step is necessary as an offer is the first step towards
making a contract. And different offers present different rules.
 An analysis of the legal provisions of the Indian Contract Act, 1872 reveals that
the statute does not explain the concept of the various kinds of offers. But,
since the Indian legal system is based on Common Law, many legal concepts
are evolved based on judicial precedents. More than often, cases from England
are also given precedence as the Indian contract law happens to be derived
from the English common law. The concept of cross offers too is not specified
with the Act, but is a result of the intelligence of the judicial minds, developed
over the years.

Offer, acceptance, and communication are essential to forming a contract. It is the

existence of these valid ingredients that helps to assess whether a contract persists
between two parties or not. An offer is a sign of willingness. On acceptance, it
becomes a promise. Both the offer and acceptance must be communicated. Cross
offers can never lead to a valid contract as they lack all the essential ingredients. A
cross offer is made when both the parties make identical offers to each other
without knowing that the other has made a similar offer. It lacks acceptance and
communication. Thus, it does not form a valid contract. The concept of cross offers is
not explained within the Indian Contract Act but has been developed over the years
through judicial precedents.
Counter offer
Counteroffer
In the event that the offeree is only willing to accept the offer if certain modifications are
made, he or she is offering a counteroffer. A counteroffer is itself an offer, and it is
considered a rejection of the initial offer. It is a new offer that terminates the initial offer,
making it impossible to be revived at a later time.
A counteroffer can be accepted or rejected by the party who offered the initial offer. If
that party accepts the counteroffer, a contract is established.
When the offeree offers a qualified acceptance of the offer subject to
modifications and variations in terms of the original offer, he is said to have
made a counter offer. A counter offer is a rejection of the original offer. An
example of this would be if A offers B a car for 10 Lakhs, B agrees to buy for
8 Lakhs, this amounts to a counter offer and it would mean a rejection of the
original offer. Later on, if B agrees to buy for 10 Lakhs, A may refuse. Sir
Jenkins CJ in Haji Mohd Haji Jiva v. Spinner, held that any departure from
original offer vitiates acceptance. In other words, an acceptance with a
variation is not acceptance, it is simply a counter proposal which must be
accepted by the original offeror, for it to formulate into a contract.

The Bombay High court gave this decision based upon the landmark
judgement of Hyde v. Wrench, in which an offer to sell a farm for 1000
Pounds was rejected by the Plaintiff, who offered 950 for it. Subsequently the
Plaintiff gave an acceptance to the original offer. Holding that the Defendant
was not bound by a contract, the court said that the Plaintiff accepted the
original offer of buying the farm at the price of 1000 pounds, it would have
been a completely valid contract , however he gave a counter proposal to it,
thus rejecting the original offer.

Partial Acceptance
Counter offer also includes within its contours Partial acceptance, meaning
that a party to the contract cannot agree to those conditions of the
agreement that favour him and reject the rest, the acceptance should be of
the complete agreement i.e.- all its parts. In Ramanbhai M. Nilkanth v.
Ghashiram Ladliprasad, the plaintiff made an application for certain shares
in a company with the underlying condition that he would be made the
cashier in its new branch. The Company did not comply with this and hence
the suit. The court held that the Petitioners application for shares was
condition on him being made the cashier and that he would have never
applied for the shares had there been no such condition.

Acceptance of a counter proposal

In Hargopal v. People’s Bank of Northern India LTD, an application for
shares was made on a conditional undertaking by the bank that the applicant
would be made the director of the new branch. The shares were allotted to
him without fulfilling the condition. The applicant did not say anything and
took his dividends, a subsequent suit by him failed as the court held that he
through his conduct had waived the condition. When a counter proposal is
accepted the contract arises in terms of the counter proposal and
not in terms of the original contract.

Standing Offer
An offer is regarded as a standing offer if it is meant to remain open for a certain amount
of time and can be accepted any time before the deadline. When a company needs a
large quantity of products from time to time, it usually invites tenders for the supply of the
products through an advertisement. Such a tender or offer is referred to as an open,
continuing, or standing tender of offer.
When a party accepts the tender or offer made by the offeror, it does not result in the
formation of a legally binding contract until an actual order is placed. It only means that
the offer or tender will remain open for a specified amount of time and can lead to a
binding contract when the required quantity is ordered. As such, a contract only exists
when an order is placed in accordance with the terms and conditions of the offer.
When a standing offer is accepted, it means an order will be placed with the party who
submitted tender whenever the products are required, and a distinct contract will be
made for each order.
An Offer which remains open for acceptance over a period of time is called a
standing offer. Tenders that are invited for supply of goods is a kind of
Standing Offer. In Perclval Ltd. V. London County Council Asylums and
Mental deficiency Committee, the Plaintiff advertised for tenders for
supply of goods. The defendant took the tender in which he had to supply to
the company various special articles for a period of 12 months. In-between
this the Defendant didn’t supply for a particular consignment. The Court held
that the Tender was a standing offer that was to be converted into a series of
contracts by the subsequent acts of the company and that an order

OFFER

The manner in To whom it is made

which it is made

specific
Express or Cross offer Counter standing or
implied offer offer general

When two parties make When the offeree If an offer remains op

Offer can be expressly the same offer to each o introduces certain en for a fixed period of
communicated through written ther without knowing th changes to the time and can be Offers can be made to
or oral [Link] implied offer e other party has made original offer and either specific
is only willing to accepted at any mome individuals(Specific
can be inferred from the circum an offer, and the terms
accept the nt before the deadline, offer) or to the public
stances of the case or the of
modified offer it is considered a stan at large ( general offer)
conduct of the parties . both offers are identical. ding offer.
succeeded in an action for breach of contract.

Express and Implied Offers

When an offer is expressly communicated by the offeror, it is regarded as an express

offer. The communication of an express offer can be written or verbal. An offer that can
be understood by circumstances of case or the conduct of parties is known as an implied
offer.
For example, when a bus transport company operates its bus on a certain route, it is
making an implied offer to transport passengers to a specified location at a certain fare.
Also, a public telephone or weighing machine in a public place offers its service for a
certain amount of money. Such a machine is offering an implied offer.

LEGAL INTENTION

Prerequisite – Indian and eng law

There is no provision in the Indian Contract Act requiring that an offer or its acceptance should be
made with the intention of creating a legal rela tionship. But inEnglish Law it isa settled principle that
"to create a contract there must be a common intention of the parties to enter into legal obli
gations".''^ It was pointed out in an early case that "contracts must not be the sports of an idle hour,
mere matters of pleasantry and badinage, never intended by the parties to have any serious effect
whatsoever".''^ "It is not every loose conversation that is to be turned into a contract, although the
parties may seem to agree."''^ The case of Balfour v Balfout^'^ has become well known as an
illustration of this principle: The defendant and his wife were enjoying leave in England. When the
defendant was due to return to Ceylon, where hewas employed, his wife was advised, byreason
ofher health, to remainin England. The defendant agreed to send her an amount of £30 a month for
the probable expenses of maintenance. He did send the amount for some time, but afterwards
differences arosewhichresulted in theirseparation and the allowance fell into arrears. The wife's
action to recover the arrears was dismissed.
Family and social matters Theintention ofthe parties is naturally to be ascertained from the terms
ofthe agreement and the surrounding circumstances. It is for the court in each case to find out
whether the parties must have intended to enter into legal obligations. "In the case ofarrangements
regulating social relations it follows almost as a matter of course that the parties do not intend
legalcon sequences to follow. In the case ofagreements regulating business relations it equally
follows almost as a matter of course that the parties intend legal consequences to follow.'"'^ This
does not, however, mean that in family or social matters there can not be a legally binding
contract.'"^ All that the law requires is that the par ties must intend legal consequences. McGregor v
McGregor^'^ is an early illustration of a binding engagement between a husband and wife. Here a
husband and wifewithdrewtheir complaints under an agreement by which the husband promised to
pay her an allowance and she was to refrain from pledging his credit, the agreement was held to be
a binding contract. An agreement between relatives to share a house has been held to be binding.''^
The "principle applies to dealings between other relations, such asfather and son and daughter
andmother". These words occur in the judgment of Danckwerts LJ in ]ones v Fadavatton-f'

Objectivity, not subjectivity, test of contractual intention The test of contractual intention is
objective, not subjective. What mat ters is not what the parties had in mind, but what a reasonable
person would think, in the circumstances, their intention to be. Thus, where three ladies, two of
them being mother and daughter and the third a paying guest, together made entries into a
crossword puzzlein the name of the mother, the expenses being met by one or other, without any
rules. The entry was suc cessful and the mother refused to share the prize. But the court held that
she was bound to do so, for any reasonable man looking at their conduct would at once conclude
that they must have intended to share the prize.^^ Following these principles, the SupremeCourt
observed on the facts of a case: Here, one partner has lent a large sum of money to the other to be
uti lised as capital in the partnership venture. The transaction is in the con text of a commercial
venture. The presumption is that legal obhgations are intended. The onus is on the parties asserting
the absence of legal obligations and the test is not subjective, but is an objective one. Where, as
here, the tax implications of large financial obligations are sought to be - put an end to, the burden is
heavy on the assessee to estabhsh that what would otherwise be the incidents of the transaction
were excluded from contemplation by the parties. The court cited the following passage from an
English case:^^ In decidingwhether or not there was any contract in relation to a cer tain transaction,
or whether or not sufficient notice of a certain term was given, the law applies an objective and not
a subjective test.... In the absence of such evidence, how can the court assume, that the master did
not intend to enter into a contract.

he Supreme Court has expressed its reservation about the need of this separate requirement of
"intention to contract" under the Contract Act. Going by the criticism which is already there in the
West, the court found that it was a necessity of those systems where consideration was not a req
uisite of enforceability. Thus it is still an open question whether the require ment of "intention to
contract" is applicable under the Indian Contract Act in the way in which it has been developed in
England/^ But earlier to this, a limited recognition of the applicability of this prin ciple in India could
be inferred from the decision of the Supreme Court in Banwari Lai v Sukhdarshan Dayal.^^ In an
auction sale of plots of land, a loudspeaker was spelling out the terms, etc., of the sale, one of the
statements being that a plot of certain dimensions would be reserved for a Dharamshala (public inn).
Subsequently, that plot was also sold for private purposes. The purchasers sought to restrain this.
Chandrachud J (afterwards CJ) said: Microphones...have not yet acquired notoriety as carriers of
binding rep resentations. Promises held out over loudspeakers are often claptraps of pol itics. In the
instant case, the announcement was, if at all, a puffing up of property put up for sale. In a
subsequentcase^^ on the subject,the Supreme Court noted the general proposition that in addition
to the existence of an agreement and the pres ence of consideration there is also the third
contractual element in the form of intention of the parties to create legal relations, and also noted
that this proposition, though accepted in English Law, has not passed unchallenged. The court then
cited the following passage from Cheshire and Fifoot's Law OF Contract:''^ "...the criticism of it made
by Prof. Williston demands attention, not only as emanating from a distinguished American jurist,
but as illuminating the whole subject. In his opinion, the separate element of intention is foreign to
the common law, imported from the Continent by academic influences in the I9th century and useful
only in systems which lack the test of consideration to enable them to determine the boundaries of
contract."

Intention to create legal relations or

'Animus Contrahendi'- The intention to enter into contracts is a necessary component of

contract law. This means that the parties must have the intent to enter into a legally binding
contract. A statement must be made with the intent that it will be binding upon acceptance to
be considered an offer. Even if supported by consideration, an agreement is not a contract if it
is made with no intention of establishing a contractual relationship. Parties must intend to
enter into a contract with enforceable rights and obligations, and they must intend for legal
ramifications in the event of contract breach.

 The contracting parties must have the obvious mind to enter in a serious contract
 To make a contract enforceable, legal and binding, there must be an intention to create
legal relations.
 In the absence of intention, the parties cannot sue each other.
 The contract may become a mere promise if the intention to create legal relations is
absent.
 The contract may lack the binding effect in the absence of the intention to create legal
relations.
1. exception where husband and wife are separated:
In Merritt V. Merritt, the husband had moved out and the wife
remained in the house. There was still some mortgage left. They met to
decide for the payment of mortgage and the husband said to the wife
that he would pay her 40 pounds a week and she would have to pay off
the mortgage.

The wife made husband to sign a piece of paper in that effect after the
mortgage was paid of the husband did not transfer his share of house
to the wife and he argued that there was no intention to create legal
relationship.
o The principle in Balfour V. Balfour has been applied to an agreement
between mother and daughter in Jones V. Padavatton. Mrs.
Padavatton lived in Washington, DC and her mother lived in Trinidad.

The mother was very keen for her daughter to study Law so she offered
her if she would give up her post in Washington, DC and move to
London to study law. She would provide her with an apartment and pay
for her upkeep. The daughter accepted the offer. After few years they
fell off and the mother wanted her possession back on her apartment.
The daughter refused.

Judgement:
The court held that there is presumption of no intention to create legal
 relationship in this case as the daughter and mother are involved.

Exception where the consequences are serious:

In Parker & Clark, this case involved an uncle and an aunt on one hand
and a niece and her husband on the other hand. The uncle wanted to
have their niece and her husband to come and live with them. As they
were getting older and frail. It was going to be useful for them to have
the niece and her husband around.

In order to entice them the uncle promised to give them the share of
the house that they would then all be living in. The niece and her
husband accepted the offer after taking some fairly far-reaching steps,
namely they had to move out of their own house and sold it. When they
fell off, they were denied the share in the house by uncle and aunty.

Judgement:
The court held that in this case there was an intention to create legal
relationship because the consequences for the niece and the husband
were very serious.

o Agreements between friends

In Coward v Motor Insurance Bureau, Mr. Coward was the passenger on
a motorcycle which was owned and driven by his friend. They had this
arrangement for a long time whereby the friend would give Mr. Coward
a lift to work on the motorcycle and sometimes Mr. Coward would
contribute to the price of petrol.

There was an accident in which Mr. Coward was hurt and the insurance
would only pay out to Mr. Coward if in fact there was a contract for the
carriage for hire. Basically, if his friend took him as a paying passenger.
In order to support his argument Mr. Coward mentioned that he had
paid for petrol.

Judgement:
However, the court held that there was no enforceable contract
between the friend and Mr. Coward because there was no intention to
create legal relationship.

Exception where there is mutuality:

In Simpkins v Pays, there were three people the grandmother,
granddaughter and a lodger living together. They participated in a
competition on the weekly basis which involved cutting some portion of
Sunday newspapers and send it off. They used to do in turn wise once
grandmother did the job and she claimed 750 pounds of winning
money.

Judgement:
The court held that there existed the intention to create legal
relationship so the grandmother had to share that money.

2. Commercial agreements:
 There is presumption that the parties do intend to make a legally binding
contract unless presumed otherwise. It is not necessary in the ordinary run of
commercial agreements for the plaintiff to supply affirmative evidence that
there was such an intention. However, the defendant may rebut the
presumption by reference to the words used and circumstances prevailed.

In Edwards v Skyways, Skyways was the employer and Mr. Edwards the
employee. Mr. Edward was let go because of a case of redundancy. He was
promised �ex gratia� payment by Skyways. He was not paid and Edward
sued Skyways.

Judgement:
The court agreed that it was an enforceable agreement with valid offer and
acceptance and the intention to create legal relationship. As it is of business
and commercial nature.

Banwari Lal v Sukhdarshan DayalThe Supreme Court held that intention to create a legal obligation
was an essential of a valid contract and there was no intention to create a contract in the present
case. Chandrachud J said, “Microphones… have not yet acquired notoriety as carriers of binding
representations. Promises held over loudspeakers are often claptraps of politics. In the instant case,
the announcement was, if at all, a puffing up of property put up for sale.”

CWT v Abdul Hussain Mulla Md Ali Citation: (1988) 3 SCC 562

CONSIDERATION

[Link] of consideration and contract in Eng and Indian law.

[Link] without consideration is void ab initio

DOCTRINE OF PRIVITY, PRIVITY OF CONTRACTS

Consequently, the doctrine means something private or secret about a contract or it means the
privacy of a contract between the parties. The privacy of contract signifies a privacy or secrecy to
terms of the contract. It means that only parties to the contract are bound to comply with the terms
of the contract and third party is not bound to fulfill the contractual obligations. This means that
only parties to a contract are entitled to enjoy benefits of a contract and no third party can claim the
benefits of a contract because he has no concern with the contrac

The doctrine of privity of contract was, for the first time, applied in the case of Jordan v. Jordan8. In
this case the suit of a non-party to a promise did not lie. But, in Levett v. Hawes9 the court overruled
the decision in Jordan v. Jordan and allowed the stranger's suit on a contract.
Tweddle v. Atkinson16 is the case in which the doctrine of privity of contract was finally established
by the Court of Queen's Bench in 1861. In this case in consideration of an intended marriage
between plaintiff and daughter of one W. Guy. By this contract both agreed to pay the plaintiff a
definite sum of money. But, Mr. Guy failed to do so. The plaintiff sued his executors. The suit was
dismissed by the court

The above mentioned judicial decision also makes it clear that the doctrine of privity of contract lays
down two general principles of law of contract. Firstly, it purports to say that a stranger to a contract
cannot sue. Secondly, it states that a stranger to a contract is not bound by the contract.

It is pertinent to mention that a doctrine which had been toiling hard for its existence in the
nineteenth century has finally succeeded in getting the final seal of approval by the House of Lords in
the leading case of Dunlop Pneumatic Tyre Co. Ltd. V. Selfridge & Co. Ltd., 19 in the year 1915

M.C. Chacko v. The State bank of Travancore, 48 is an important case wherein the Supreme Court
approved the doctrine of privity of contract and also defined probable exceptions to it. In this case,
the appellant (defendant) was manager of the High Land Bank Kottayam. The High Land Bank used
to borrow money through overdraft from another bank known as Kottayam Bank. The father of M.C.
Chacko gifted his properties to his family members including M.C. Chacko. The gift deed provided
that the liability, if any, (under guarantee) should be met by M.C. Chacko either from the bank or
from his share in gifted property. The High Land Bank, actually did not repay the dent. The debt was
also time

VOID, VOIDABLE, ILLEGAL CONTRACTS