Offer & Acceptance — Rules, Communication & Revocation — KSLU Contract I Notes

Offer / Proposal

Everything starts with somebody making the first move. But is a price tag on a shirt an offer to sell — or just a shop inviting you to offer to buy? Get that wrong and you will misjudge who can back out and when. The whole law of offer is about telling a real first move apart from mere shop-window talk.

The first move in a bargain

An offer (proposal) is defined in s.2(a): one person signifies to another his willingness to do or to abstain from doing something, with a view to obtaining that other’s assent. The person making it is the offeror; the one it is made to, the offeree.

A. Rules of a valid offer.

It must be made with intent to create legal relations (not social).
Its terms must be certain, not vague (s.29).
It must be communicated to the offeree — you cannot accept an offer you do not know of (Lalman Shukla v Gauri Dutt (1913)).
It may be general (to the world, like a reward) or specific (to a definite person); a general offer is accepted by whoever performs its condition (Carlill (1893)).
An offer must be distinguished from a mere statement of intention or an invitation to offer.

B. Offer vs invitation to offer.

An invitation to offer is only an invitation to others to make offers; the shopkeeper or advertiser can still say no. Classic examples: goods displayed with price tags, catalogues and advertisements, auction notices, and a company’s prospectus. In Harvey v Facey (1893), a quote of the lowest price ("₹900") was held to be information, not an offer to sell. This matters because an offer can be accepted into a contract, whereas an invitation only draws out an offer that the inviter may still reject.

C. Tenders and standing offers.

A tender is generally an invitation to offer; the traders who respond make the offers, and acceptance of a tender creates the contract. A standing (open) tender — e.g. “supply coal as and when required for a year” — is a continuing offer, accepted afresh each time an order is placed.

D. Lapse and revocation of an offer — Section 6.

An offer does not last forever. It comes to an end by: (1) notice of revocation by the offeror before acceptance; (2) lapse of time (fixed, or a reasonable time); (3) failure of a condition attached to it; (4) death or insanity of the offeror, if the offeree knows of it; and (5) rejection or a counter-offer by the offeree (Hyde v Wrench (1840)).

⚠️ DON’T CONFUSE — offer vs invitation to offer.

A display / advertisement / auction notice / price list is an invitation to offer — the customer makes the offer by choosing to buy, which the seller may still accept or refuse. Only a genuine “I will sell you X for ₹Y” is an offer. When a problem turns on who made the offer and whether the seller could refuse, this is the distinction being tested.

🧩 WORKED EXAMPLE — the self-service store.

Facts. In a self-service store a customer picks an item off the shelf, takes it to the counter, and the cashier refuses to sell. The customer claims a completed contract.

Rule. Goods displayed with a price are an invitation to offer; the customer’s presenting them at the counter is the offer, which the shop may accept or decline (Pharmaceutical Society v Boots (1953)).

Apply. No offer was made by the shop; the sale is complete only when the cashier accepts the customer’s offer.

Conclusion. No contract; the customer has no right to compel the sale.

Section 2(a), Indian Contract Act, 1872: “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.”

In Simple Terms: an offer is a clear “I’m willing to do this if you say yes” — aimed at getting the other person’s agreement.

flowchart TD
    O["Offer / proposal (s.2a)"]
    O --> G["General (to the world) — Carlill"]
    O --> S["Specific (to a person)"]
    O --> I["Distinguish: invitation to offer (displays, ads, auctions) — Harvey v Facey"]
    O --> L["Ends by (s.6): revocation, lapse of time, failed condition, death/insanity, rejection/counter-offer"]

Case Laws

Harvey v Facey (1893) — a statement of the lowest price is only information, not an offer capable of acceptance.
[C-2] Lalman Shukla v Gauri Dutt (1913) — a servant who found the missing boy without knowing of the reward could not claim it; there is no acceptance without knowledge of the offer.
[C-1] Carlill v Carbolic Smoke Ball Co. (1893) — a general offer is accepted by performing its condition, and prior communication of acceptance may be dispensed with.

Acceptance & Communication

You post a letter accepting an offer. A minute later you change your mind and send a faster telegram to cancel. Which one wins — and when exactly did the contract come alive? The rules on communication and revocation answer that to the minute, which is why the examiner loves turning them into a “letter and telegram” problem.

Saying “yes”, and when it counts

Acceptance (s.2(b)) is the assent of the offeree to the proposal; once given, the proposal becomes a promise.

A. Rules of a valid acceptance.

It must be absolute and unqualified (s.7(1)) — a conditional or changed acceptance is a counter-offer, which kills the original offer (Hyde v Wrench).
It must be communicated to the offeror; mental acceptance is not enough.
It must be in the prescribed or a reasonable manner (s.7(2)).
It must be given while the offer is alive and by the person to whom the offer was made.
Acceptance of a general offer may be by conduct (performing the condition — Carlill (1893)).

B. Communication — when is it complete (Section 4)?

This is the heart of the topic:

Communication of a proposal is complete when it comes to the knowledge of the offeree.
Communication of an acceptance is complete — as against the proposer, when it is put in the course of transmission to him (so it is out of the acceptor’s power); and as against the acceptor, when it comes to the knowledge of the proposer.
Communication of a revocation is complete — as against the person making it, when it is put into transmission; as against the person to whom made, when it comes to his knowledge.

C. The postal rule vs instantaneous communication.

The s.4 rule (proposer bound on posting, acceptor bound on receipt) is the postal rule, and it applies to non-instantaneous modes like post and telegram. But where communication is instantaneous — telephone, telex, and by analogy real-time email — there is no such gap: the contract is complete only where and when the acceptance is actually received (heard) by the proposer. So an acceptance spoken on the telephone but not heard because the line failed is no acceptance at all, and no contract arises until the offeror actually hears it (Bhagwandas Kedia v Girdharilal Parshottamdas, 1966). This also fixes the place of the contract as the place where the acceptance is heard.

D. Revocation — the timing (Section 5).

A proposal may be revoked any time before the communication of its acceptance is complete as against the proposer, but not afterwards. An acceptance may be revoked any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. This is what lets a faster revocation overtake a slower posted acceptance (in the post/telegram cases where the rule operates).

🧩 WORKED EXAMPLE — post then phone.

Facts. A posts a proposal to B on the 1st; B posts his acceptance on the 4th; A posts a revocation of the offer on the 3rd, which reaches B on the 5th.

Rule. A proposal may be revoked only before the acceptance is put in transmission (ss.4–5). A’s revocation is complete against B only when it reaches B (the 5th); B’s acceptance bound A when posted (the 4th).

Apply. By the time the revocation reached B, acceptance was already in transmission — the offer could no longer be revoked.

Conclusion. A valid contract arose on the 4th; the revocation is too late.

Section 4, Indian Contract Act, 1872: “The communication of an acceptance is complete — as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer.”

In Simple Terms: the moment you post your “yes”, the offeror is bound; but you are not bound until your “yes” actually reaches him — the small gap in between is where revocation problems live.

flowchart TD
    A["Acceptance (s.2b)"]
    A --> R1["Must be absolute & unqualified (s.7) — else counter-offer"]
    A --> R2["Must be communicated in a proper mode"]
    A --> R3["While offer is alive, by the right person"]
    A --> C["Communication complete (s.4): acceptance binds proposer when POSTED, binds acceptor when RECEIVED"]
    C --> REV["Revocation (s.5): possible only before acceptance is complete against that party"]

Case Laws

Hyde v Wrench (1840) — a counter-offer rejects and destroys the original offer, which cannot later be accepted.
[C-2] Lalman Shukla v Gauri Dutt (1913) — acceptance requires knowledge of the offer.
Bhagwandas Kedia v Girdharilal Parshottamdas (1966) — for instantaneous communication (telephone), the contract is complete only where and when the acceptance is actually heard by the offeror, not on a postal-rule basis.

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