Communication of offer and acceptance

Edited By Ritika Jonwal | Updated on Jul 02, 2025 05:48 PM IST

Section 2(h) of the Indian Contract Act, of 1872 defines a contract as a legally enforceable agreement. It may be expressed as an oral or written contract. A legal object that binds the parties to the contract must exist for it to be legally enforceable. Among the many kinds of legal contracts are lease agreements, employment contracts, loan agreements, sale agreements, insurance policies, etc. In addition, a contract is deemed legitimate if it satisfies the three primary components: Offer, Acceptance, and Compensation.

This Story also Contains

What is Communication of Offer?
Parameters for a Valid Offer
What is Communication of Acceptance?
Parameters for a Valid Acceptance
Components of a Valid Acceptance
Communication of Offer and Acceptance
Conclusion

Communication of offer and acceptance

What is Communication of Offer?

The Indian Contract Act, of 1872, Section 2(a), describes an offer. When one person expresses to another his desire to act or stop from doing so to get that other person's approval, that action or inaction is referred to as a proposal.
The party proposing or promise for the contract is referred to as the offeror/promisor, and the party accepting the proposal or promise is referred to as the offeree/promisee.

Example: In a letter to B, A offers to mend his roof in exchange for 5,000 rupees. He mails the letter on July 2nd. B receives the mail on July 4. Thus, it is said that the contract would end on July 4.

Types of Communication of Offer

Four categories exist for an offer, these are described below:

Types of Offer
Offer Type	Brief
Expressed offer	A written offer that has been verbally communicated is considered to be an expressed offer.
Implied offer	An implicit offer is made when the offeror/promisor shows by his actions that he is prepared to fulfil the obligation but does not make the offer explicitly in writing or orally.
Specific offer	A specific offer is presented to a particular individual or a specified general audience.
General offer	When an offer is offered to the broader population, it is called a general offer. A universal offer is given to the public, but only the individual or parties that accept the offer establish a legal agreement; the public as a whole does not.

Parameters for a Valid Offer

A legitimate offer and acceptance between the parties are necessary for a contract to be enforceable. The fundamental conditions for a legitimate offer and acceptance in a contract are outlined in the Indian Contract Act, of 1872. Here are the Parameter for a legitimate offer:

Specific and unambiguous conditions: The conditions of the proposal should be unambiguous, specific, and unambiguous. To permit acceptance and the creation of a legally enforceable contract, the offer needs to be specific enough.
Intention to establish legal relations: The offer has to make it clear that the parties want to establish legal relations. The offer will not be accepted if there is no desire to establish legal ties.
An offer needs to be made with the hope of being accepted: The objective behind making the offer must be to get the offeree to accept it.
Offer communication: The offer must be made verbally or in writing by the offeror to the offeree.

Revocation of Offer

Section 5 of the Indian Contract Act specifies the procedures for withdrawing an offer. It states that the offer may be withdrawn at any moment before the proposer or offeror is fully notified of the acceptance.
Revocation of the offer is no longer feasible after the proposer has been informed of the acceptance.

Example: On July 10th, A mailed the letter after accepting the offer. B receives the letter on July 14. However, B, the proposer, received notification of the acceptance on July 10th. Therefore, the offer may only be rescinded before July 10th.

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What is Communication of Acceptance?

The Indian Contract Act of 1872 defines acceptance in Section 2(b). When the individual making the suggestion indicates his or her approval, it is deemed accepted. A proposition becomes a promise as soon as it is accepted.
According to the definition, an offer is considered accepted when the person to whom it is made unconditionally accepts it. Such an offer becomes a promise if it is accepted.

Example: B accepts an offer from A to buy his automobile for two lac rupees. This is now being promised.

Acceptance Mode

There are two things to think about in this transmission of acceptance: how it is accepted and when it is accepted. There are two approaches to acceptance:

Communication of Acceptance by Behaviour: The offeree may also express his acceptance of the offer by acting in a certain way or by acting in a certain way. Let's assume that by boarding the bus, you agree to pay the fare with your behaviour.
Communication of Acceptance by an Act: This might include verbal or written transmission of information. Thus, this will cover correspondence by phone, letter, email, telegraph, etc.

Parameters for a Valid Acceptance

Here are the prerequisites for a legitimate acceptance:

Acceptance communication: The offeror must be informed, either verbally or in writing, of the acceptance.
Acceptance needs to follow the conditions of the offer: Acceptance needs to follow the conditions of the offer. The acceptance will not be accepted if it does not comply with the terms of the offer.
Unqualified and unconditional acceptance: The acceptance needs to be both unqualified and unconditional. Any changes made to the offer's conditions will be viewed as counteroffers and will not be accepted.
Unqualified and unconditional acceptance: The acceptance needs to be both unqualified and unconditional. Any changes made to the offer's conditions will be viewed as counteroffers and will not be accepted.

Components of a Valid Acceptance

The most crucial components for an offeree's or promisee's acceptance to be considered legitimate are as follows:

As per Section 7(1) of the Indian Contract Act, a proposition cannot become a promise until it is accepted unconditionally.
The acceptance cannot be granted in response to threats, excessive pressure, or coercion. The offeree or promisee must freely consent to it being provided.
The intention of the offeree/promisee to engage in a contract must be expressed.
The offeror/promisor must be properly informed of the acceptance. Acceptance can be stated or implied.
If an offer acceptance term is given, the promisee or offeree must accept the offer within that time frame.
Accepting the offer means that there are no changes or requirements to be met. It needs to be welcomed with open arms.
The offer does not necessarily indicate that the offeree or promisee has accepted it if they say nothing at all after receiving it. Regarding the same, appropriate communication is required.

Revocation of Acceptance

According to Section 5, acceptance may also be withdrawn before the completion of the communication regarding the acceptor. There can be no withdrawal of approval beyond that point.

Example: On July 14, the acceptance has been fully communicated against A (the acceptor). Therefore, A may withdraw their acceptance up to that point, but not after. Thus, theoretically, A has the option to withdraw the acceptance between July 10 and July 14.

Communication of Offer and Acceptance

An offer and an acceptance must be made in writing for any contract to be enforceable. An offer cannot be accepted unless it is made known. Consequently, no legal relationship between the parties is compelled by an uncommunicated acceptance.

At what point does the communication end? To prevent misunderstandings between all parties, the offer must be communicated effectively and understood by everyone.

This is not an issue if the parties are speaking face-to-face. Real-time communication ensures that there is no misunderstandings as the offer and acceptance are made immediately.

Conclusion

As a result, an offer or acceptance may be withdrawn before the creation of a contract. Revocation of a proposal is possible before acceptance, and revocation of acceptance is possible before final communication. But to produce contemporary forms of communication, the ICA's requirements need to be changed in light of recent innovations like e-contracts and smart contracts.

Frequently Asked Questions (FAQs)

1. What does "communication of acceptance" mean?

Transmission of Acceptance by Behaviour: The offeree may also express his acceptance of the offer by acting in a certain way or by acting in a certain way. Let's assume that by boarding the bus, you agree to pay the fare with your behaviour.

2. What connection exists between an offer and its acceptance?

An offer is a particular, well-defined proposition made by one party (the offeror) to another (the offeree), with the aim of being accepted; acceptance is the offeree's unequivocal consent to the conditions of the offer.

3. In terms of contract law, what is communication?

It can be communicated verbally, over the phone, in writing, in person, or even by behaviour. However, there need to be some sort of communication taking place. No contract if there is no communication. The Indian Contract Act, Section 4, states that a proposition is fully communicated when it reaches the recipient's awareness.

4. What is the acceptance and offer strategy?

Notifying the other party that you accept an offer is the standard protocol for doing so. Keep in mind that while it can occasionally be challenging to determine which is the offer and which is the acceptance, courts will find a contract as long as the parties agree on the conditions and act accordingly.

5. In the legal field, what does communication mean?

The laws and rules governing private communication channels like texting, emails, and phone calls as well as public communication channels like newspapers, the internet, and cable are all included in the field of communications law.

6. What is the communication of offer and acceptance in contract law?

Communication of offer and acceptance refers to the process by which parties express their intention to enter into a legally binding agreement. The offer is a proposal made by one party (the offeror) to another party (the offeree), and acceptance is the offeree's agreement to the terms of the offer. Both must be communicated effectively for a contract to be formed.

7. How does the postal rule apply to acceptance in contract law?

The postal rule, also known as the mailbox rule, states that acceptance is considered complete when it is posted (mailed), not when it is received by the offeror. This rule applies to acceptances sent by mail or similar means of communication. It's an exception to the general rule that acceptance must be communicated to the offeror to be effective.

8. Can silence constitute acceptance of an offer?

Generally, silence or inaction does not constitute acceptance of an offer. However, there are exceptions: 1) when the offeree has a duty to speak based on previous dealings, 2) when the offeree takes the benefit of offered services with a reasonable opportunity to reject them, or 3) when it's expressly agreed that silence will constitute acceptance.

9. What is the difference between an invitation to treat and an offer?

An invitation to treat is an invitation to make an offer, not an offer itself. Examples include displaying goods in a shop window or advertising an auction. An offer, on the other hand, is a definite promise to be bound on specific terms if accepted. The key difference is that an invitation to treat cannot be accepted to form a contract, while an offer can.

10. How does revocation of an offer work in contract law?

Revocation is the withdrawal of an offer by the offeror before it has been accepted. For revocation to be effective, it must be communicated to the offeree before acceptance. Once the offeree has accepted the offer, it's too late for the offeror to revoke it. In postal communications, revocation must reach the offeree before they post their acceptance.

11. What is the mirror image rule in contract acceptance?

The mirror image rule states that for an acceptance to be valid, it must exactly match the terms of the offer without any variations. If the offeree tries to change the terms or add new ones, this is considered a counter-offer rather than an acceptance, and it rejects the original offer.

12. Can an offer be accepted by conduct?

Yes, an offer can be accepted by conduct, also known as acceptance by performance. This occurs when the offeree performs the act requested by the offeror, thereby demonstrating their agreement to the terms. For example, if someone offers to pay for lawn mowing services, mowing the lawn would constitute acceptance by conduct.

13. How does the timing of acceptance affect contract formation?

The timing of acceptance is crucial because a contract is formed at the moment when acceptance is communicated (with exceptions like the postal rule). If an offer specifies a time limit for acceptance, it automatically lapses after that time. If no time is specified, the offer remains open for a reasonable time, which depends on the circumstances.

14. What is the difference between bilateral and unilateral contracts in terms of offer and acceptance?

In a bilateral contract, both parties exchange promises (e.g., "I promise to sell if you promise to buy"). The offer is accepted by a return promise. In a unilateral contract, only one party makes a promise in exchange for an act by the other party (e.g., "I'll pay $100 if you find my lost dog"). The offer is accepted by performing the requested act.

15. How does the objective test apply to offer and acceptance?

The objective test in contract law looks at how a reasonable person would interpret the parties' words and actions, rather than their subjective intentions. When determining if an offer or acceptance has been made, courts consider how a reasonable person in the position of the recipient would understand the communication.

16. What is the role of certainty in offer and acceptance?

Certainty is essential in offer and acceptance. The terms of the offer must be sufficiently clear and definite for a contract to be formed. If key terms are vague or missing, courts may find that there is no enforceable agreement. However, courts may sometimes imply terms to give business efficacy to an agreement if the parties' intention is clear.

17. What is the effect of a counter-offer on the original offer?

A counter-offer rejects and terminates the original offer. When the offeree proposes different terms or conditions, they are making a new offer, and the original offeror becomes the new offeree. The original offer can no longer be accepted unless it is renewed by the original offeror.

18. What is the significance of the offeror's death on an outstanding offer?

Generally, the death of the offeror automatically terminates an offer if the offeree learns of the death before accepting. However, if the offeree accepts in ignorance of the offeror's death, some jurisdictions may still consider the contract valid, especially if it doesn't involve personal services.

19. How does the concept of "cross-offers" work in contract law?

Cross-offers occur when two parties make identical offers to each other simultaneously, without knowledge of the other's offer. These do not constitute a valid acceptance of either offer. Instead, both parties must explicitly accept one of the offers for a contract to be formed.

20. What is the role of conditions in offer and acceptance?

Conditions are terms that specify circumstances under which the contract will be performed or terminated. They can be conditions precedent (which must occur before the contract becomes binding) or conditions subsequent (which may terminate an existing contractual obligation). Clear communication of conditions is crucial in offer and acceptance.

21. How does the concept of "invitation to negotiate" differ from an offer?

An invitation to negotiate is a preliminary communication indicating a willingness to enter into negotiations, but it doesn't constitute an offer. Unlike an offer, it cannot be accepted to form a binding contract. It's often used in complex commercial transactions where parties need to discuss and refine terms before making or accepting an offer.

22. What is the effect of an offer made to the world at large?

An offer to the world at large, also known as a unilateral offer, is an offer made to an unspecified group of people. It can be accepted by anyone who performs the conditions stated in the offer. Famous examples include reward offers for lost items. The contract is formed when someone performs the requested act, even if the offeror is unaware of the acceptance.

23. How does the concept of "firm offer" or "option contract" relate to offer and acceptance?

A firm offer or option contract is a promise to keep an offer open for a specified time, usually in exchange for consideration. This prevents the offeror from revoking the offer during that period, giving the offeree time to decide whether to accept. Without consideration, a promise to keep an offer open is generally not binding.

24. How does the concept of "meeting of the minds" relate to offer and acceptance?

"Meeting of the minds" refers to the mutual understanding and agreement between parties on the essential terms of a contract. While it suggests a subjective agreement, courts generally apply an objective test, looking at the parties' outward expressions of intent through their words and actions rather than their unexpressed thoughts.

25. What is the effect of mistakes in the communication of offer or acceptance?

Mistakes in communication can affect the validity of a contract. If there's a fundamental misunderstanding about the subject matter or terms (mutual mistake), the contract may be void. Unilateral mistakes generally don't invalidate a contract unless the other party knew or should have known about the mistake.

26. How does the concept of "battle of the forms" apply in online transactions?

In online transactions, the battle of the forms can occur when a buyer's order form and a seller's terms and conditions conflict. Courts may need to determine which terms prevail, often considering factors like which terms were more prominently displayed or when in the transaction process they were presented. Some jurisdictions have specific rules for electronic contracts to address these issues.

27. How does the battle of the forms relate to offer and acceptance?

The battle of the forms occurs when businesses exchange forms with different standard terms during the negotiation process. It raises questions about which terms are part of the final contract. Courts may apply the "last shot" rule (where the last form before performance governs) or try to reconcile the terms based on the parties' conduct and intentions.

28. How do electronic communications affect offer and acceptance?

Electronic communications have introduced new considerations in contract law. Generally, electronic offers and acceptances are treated similarly to traditional methods. The time of contract formation may depend on when the electronic message is sent, received, or accessed, depending on the jurisdiction and the specific circumstances.

29. What is the significance of "time is of the essence" clauses in offer and acceptance?

"Time is of the essence" clauses emphasize that specified time limits in the contract are crucial and must be strictly adhered to. In the context of offer and acceptance, this might mean that an offer automatically expires at a specific time, or that acceptance must be communicated by a certain deadline for the contract to be valid.

30. How does the concept of "conditional acceptance" work in contract law?

A conditional acceptance is an agreement to an offer, but with additional or modified terms. In contract law, this is generally treated as a rejection of the original offer and the making of a counter-offer. The original offeror then has the option to accept or reject this new offer.

31. How does the concept of "incorporation by reference" affect offer and acceptance?

Incorporation by reference allows external documents or terms to become part of the contract without being explicitly stated in the main agreement. For this to be effective, the incorporated terms must be clearly referred to and the other party must have reasonable notice of them. This can affect what is considered part of the offer and what the acceptance covers.

32. What is the significance of "subject to contract" in negotiations?

The phrase "subject to contract" indicates that the parties do not intend to be bound until a formal contract is executed. This allows parties to negotiate freely without fear of inadvertently creating a binding agreement. However, in some circumstances, courts may still find a binding contract if the parties' conduct suggests they intended to be bound despite this phrase.

33. What is the role of "good faith" in offer and acceptance negotiations?

While not all jurisdictions recognize a general duty of good faith in negotiations, many require parties to negotiate in good faith once they've agreed to do so. This can affect how offers and counter-offers are made and responded to. Some jurisdictions may impose liability for negotiating in bad faith, even if no contract is ultimately formed.

34. How does the concept of "battle of the forms" apply to standard form contracts?

The battle of the forms often arises with standard form contracts when businesses exchange forms with conflicting terms. Courts may apply the "last shot" rule (where the last form before performance governs) or try to reconcile the terms. Some jurisdictions have adopted specific rules to address this issue, such as UCC 2-207 in the US.

35. How does the parol evidence rule affect the interpretation of offer and acceptance?

The parol evidence rule generally prevents parties from introducing external evidence to add to, vary, or contradict the terms of a written contract. This means that if the offer and acceptance are recorded in a written agreement, oral discussions or prior written communications that aren't included in the final document may not be considered by the court.

36. What is the role of consideration in offer and acceptance?

Consideration is something of value exchanged between the parties and is necessary for a contract to be legally binding. While offer and acceptance form the agreement, consideration makes it enforceable. Each party must provide something of value (which can be a promise, an act, or forbearance) in exchange for the other's promise or performance.

37. What is the significance of the intention to create legal relations in offer and acceptance?

The intention to create legal relations is a crucial element in contract formation. Even if there's an apparent offer and acceptance, a contract won't be legally binding unless both parties intended to create legal obligations. This is generally presumed in commercial agreements but may be questioned in social or domestic arrangements.

38. What is the significance of "subject to approval" clauses in offer and acceptance?

"Subject to approval" clauses indicate that the agreement is conditional upon obtaining approval from a specified party (e.g., a board of directors). This creates a condition precedent to the formation of a binding contract. If approval is not obtained, the contract does not come into existence, even if there has been an apparent offer and acceptance.

39. What is the role of "consideration" in modifying an existing contract?

When modifying an existing contract, new consideration is generally required for the modification to be legally binding. This means that both parties must receive some new benefit or incur some new detriment for the change to be enforceable. However, some jurisdictions have relaxed this requirement, especially in commercial contexts, allowing modifications made in good faith to be binding without new consideration.

40. How does the concept of "reliance" relate to offer and acceptance?

Reliance comes into play when one party acts in reliance on the other's promise or representation, even if a formal contract hasn't been concluded. In some cases, courts may enforce promises based on detrimental reliance through the doctrine of promissory estoppel, even if all the elements of a traditional offer and acceptance are not present.

41. What is the significance of the "mailbox rule" in international contracts?

The mailbox rule can be particularly significant in international contracts due to potential delays in postal services. However, its application may vary depending on the jurisdictions involved and any applicable international conventions. Many international contracts now specify when acceptance is deemed to occur to avoid uncertainty.

42. How does the concept of "acceptance subject to contract" work?

"Acceptance subject to contract" indicates that the parties intend to be bound only when a formal contract is signed. This phrase creates a condition precedent to the formation of a binding contract. Until the formal contract is executed, either party can withdraw without legal consequences, even if terms have been agreed upon.

43. What is the effect of fraud or misrepresentation on offer and acceptance?

Fraud or misrepresentation can invalidate a contract even if there appears to be a valid offer and acceptance. If one party induces the other to enter into the contract through false statements or concealment of material facts, the affected party may have grounds to rescind the contract or claim damages.

44. How does the concept of "acceptance by silence" apply in ongoing business relationships?

While silence generally doesn't constitute acceptance, in ongoing business relationships, a court might infer acceptance by silence if there's a established course of dealing. For example, if a supplier regularly sends goods and the buyer has consistently paid without formal acceptance, continued silence might be interpreted as acceptance in future transactions.

45. How does the concept of "acceptance by performance" work in unilateral contracts?

In unilateral contracts, where an offer is made for an act rather than a promise, acceptance occurs when the offeree completes the requested performance. Once performance begins, many jurisdictions consider the offer irrevocable for a reasonable time to allow the offeree to complete performance.

46. What is the effect of "mistake" on offer and acceptance?

Mistakes can affect the validity of offer and acceptance. A mutual mistake about a fundamental aspect of the contract may render it void. A unilateral mistake generally doesn't invalidate a contract unless it was about a fundamental term and the other party knew or should have known about the mistake.

47. What is the significance of "termination clauses" in relation to offer and acceptance?

Termination clauses specify conditions under which a party can end the contract. In the context of offer and acceptance, these clauses become part of what the parties are agreeing to. Clear communication of termination rights is crucial, as they can significantly affect the parties' obligations and the overall value of the contract.

48. How does the concept of "acceptance by conduct" apply in implied-in-fact contracts?

Implied-in-fact contracts are formed by the parties' conduct rather than explicit words. Acceptance by conduct is key here - one party's actions in response to the other's implied offer can create a binding contract. Courts look at the circumstances and the parties' behavior to determine if there was an implied offer and acceptance.

49. What is the role of "intention to be legally bound" in offer and acceptance?

The intention to be legally bound is a crucial element in contract formation. Even if there's an apparent offer and acceptance, a contract won't be formed unless both parties intended to create legal relations. This is generally presumed in commercial contexts but may be questioned in social or domestic arrangements.

50. How does the concept of "offer and acceptance" apply in auction sales?

In traditional auctions, the auctioneer's call for bids is usually considered an invitation to treat, not an offer. Each bid is an offer, and the fall of the hammer constitutes acceptance of the highest bid. However, online auctions may be treated differently depending on the jurisdiction and the specific terms of the auction platform.

51. What is the significance of "acceptance by silence" in insurance contract renewals?

In insurance contexts, some jurisdictions allow for "acceptance by silence" in policy renewals. If an insurer sends a renewal notice and the insured doesn't respond but continues to pay premiums, this may be considered acceptance of the renewed policy terms. However, this can vary by jurisdiction and specific circumstances.