1. Meaning of Offer

The first step in creating a contract is the making of an offer. Under Section 2(a) of the Indian Contract Act, 1872, an offer means when one person shows his willingness to do something or not to do something, in order to get the approval of another person.

In simple terms, an offer is a proposal made with the intention of entering into a legal agreement once the other party accepts it.

Illustration: If A says to B, “I will sell you my bike for ₹50,000,” this statement amounts to an offer.

2. Features of a Valid Offer

• The terms of the offer must be definite and certain, not vague.
• The offer must be communicated to the person to whom it is made.
• It should be made with a serious intention to create legal obligations, not as a joke or casual remark.
• The offer must be capable of creating legal relations once accepted.

3. Meaning of Acceptance

Acceptance is the response given by the person to whom the offer is made, showing agreement to the terms of the offer. According to Section 2(b), when the person to whom the proposal is made gives his assent, the proposal becomes a promise.

In short, acceptance is what converts an offer into a binding contract.

Illustration: If B replies, “Yes, I will buy your bike for ₹50,000,” B’s statement is an acceptance.

4. Features of a Valid Acceptance

• Absolute and unconditional: The acceptance must match the terms of the offer exactly. Any change or condition makes it a counter-offer, not acceptance.
• Proper communication: Acceptance must be conveyed to the person who made the offer. Mere silence is not enough.
• Mode of acceptance: If the offer specifies a method (for example, in writing), the acceptance must follow that method.
• Within time: Acceptance should be given within the time limit fixed by the offer, or within a reasonable time.
• Before withdrawal of offer: An acceptance made after the offer has been revoked is not valid.

5. Rules about Communication

• Offer: The communication of an offer is complete only when it reaches the offeree.
• Acceptance:
  • As against the offeror → complete when the acceptance is sent (posted/dispatched).

As against the acceptor → complete when the acceptance actually reaches the offeror.

6. Important Judicial Decisions

• Carlill v. Carbolic Smoke Ball Co. (1893): An advertisement promising reward on using a product was held to be a valid offer, and compliance with conditions was treated as acceptance.
• Lalman Shukla v. Gauri Dutt (1913): A person cannot claim a reward if he was unaware of the offer while performing the act, as there is no valid acceptance without knowledge of the offer.