A Contract is an agreement between two or more persons to achieve a particular purpose while specifying the rights and duties between each party. The law governing contracts entered into between persons in India comprises of both Indian law i.e. the Indian Contract Act, 1872 and the general principles of law that are established and accepted in the United Kingdom which are called the English Law or Common Law. A contract emerges from an agreement since it is an agreement which is legally binding in nature whose terms can be enforced and upheld by the courts. Whereas an agreement is wider than a contract since it is a less formal creation of an obligation between parties.

A contract has 4 main essentials that need to be fulfilled without which it won't be recognized as a contract.
These essentials are:

• Offer
• Acceptance
• Consideration
• Legal enforceability

Offer / Proposal

According to Section 2(a) of the 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.

The person making the proposal is called the Promisor / Offeror and the person to whom the proposal is being made is called the Promisee / Offeree. When the person to whom the proposal is being made accepts the proposal then it becomes a promise.

The essentials of a valid offer constitute the following:

1. An offer must be made with an intention to create legal obligations

   The intention to create legal relations is not a necessary ingredient of a contract as per section 10 of the Indian Contract Act, 1872 but this principle is considered to be a necessary ingredient of an offer according to English law. In the Balfour V. Balfour[1] case, Mr. Balfour and his wife who lived in Sri Lanka, had gone on vacation to England where Mrs. Balfour fell seriously ill and was advised not to travel back to Sri Lanka. Mr. Balfour agreed to his wife remaining in England while he returned to Sri Lanka after promising his wife to pay her a monthly sum of 30 Euros. After some time the relation between the couple got strained and Mr. Balfour stopped sending monthly money to his wife. Mrs. Balfour filed a case against her husband but the judge ruled that the courts do not have any dominion over social agreements and that Mr. Balfour made that promise to his wife without any intention to create legal obligations.
    

2. An offer may be express or implied

   Section 3 of the Indian Contract Act says that an express offer is one which is made in words, written or spoken while Section 9 of the Indian Contract Act says that an offer which is made by an act or the conduct of the offeror is called an implied offer. In the Uptron Rural District Council V. Powell[2] case, a fire had broken out on the defendant's farm and he had called Uptron Fire Brigade since he believed that he was entitled to its free service. The fire was put out by the brigade and the brigade claimed payment for its services since the defendant's farm did not lie in the free service zone of the brigade. The court ruled that the defendant wanted and asked for the services of Upton and in response the services were provided by them. Hence, it was held that the services were rendered on an implied promise to pay for them.
    

3. The terms of the offer must be definite and not vague

   All the terms of the contract must be agreed upon at the time of the contract. An agreement to agree in future is not a contract as the terms are not clear. An agreement to take a lease of a house for a certain time at a certain rate when a condition in the lease says the lease will be completed if the house is put through repair and the drawing room is decorated according to the present style is not a valid offer since the term present style is very ambiguous and can mean different things to different people.
    

4. An offer cant prescribe silence as a mode of acceptance

   An offer is considered invalid if the offeror says that if the acceptance of the offer is not communicated by a certain date then the offer would be presumed to be accepted. In Felthouse V. Bindley[3], a person made an offer to his nephew to buy his horse and wrote that if the acceptance of the offer is not communicated by a certain date then the offer would be presumed to be accepted. The nephew did not reply to the offer but he told his auctioneer not to sell that horse but the auctioneer sold that horse by mistake and the uncle sued the auctioneer. The court held that there was no contact between the nephew and his uncle for the sale of the horse.
    

5. A general offer need not be specifically accepted

   A general offer is an offer made to the world at large and can be accepted by anyone and this acceptance need not be communicated to the offeror. In the Carlill V. Carbolic Smoke Ball Co. [4]case, the defendants were in the business of preparing some balls (a medical preparation against influenza) and they had issued an advertisement in a newspaper which read that if anyone contracted influenza after using their some ball then they would be offered a reward of 100 Euro. As a goodwill gesture the defendant deposited 1000 Euros in a bank. Mrs. Carlill, the plaintiff contracted influenza after using the some ball in the manner prescribed on it and she sued the defendants for compensation. The defendants were held liable since it was a general offer and they had breached it as soon as Mrs. Carlill contracted influenza.
    

6. An offer differs from an invitation to offer

   Invitation to offer comes from a Latin phrase 'Invitatio ad offerendum' which is an expression of willingness to negotiate. A person making an invitation to offer does not intend to be bound as soon as it is accepted by the person to whom the statement is addressed. It is an action inviting the other party to make an offer. Whereas an offer includes the fundamental terms of the agreement with the intention that no further negotiations are to take place. Advertisement, exhibition of goods, auction of goods, tender etc. are some of the types of invitation to offer. In Pharmaceutical Society of Great Britain V. Boots Cash Chemists (Southern) Ltd.[5] case, a customer selected a drug from the shelf of a self-service shop and bought it to the cash counter. The question arose whether the action of the customer constituted an offer or was it an acceptance to the offer. The courts ruled that it was an offer to buy and no sale would take place until the buyers offer is accepted at the price offered.
    

7. Offer must be communicated

   For an offer to be valid a key part is that it should be communicated. According to Section 4 of the Indian Contract Act, the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. An offer cannot be accepted unless it has been brought to the knowledge of the person to whom it is made. In Lalman Shukla V. Gauri Dutt[6] case, the nephew of the defendant absconded and the defendants sent his servants to different places to search for the boy. The plaintiff, one of the defendant's servants was sent to Haridwar when the defendant advertised for a reward of Rs. 501 for anyone who finds the boy. The plaintiff traced the boy but he did not know about the reward and thereafter he continued working for the defendant until he was dismissed and then filed a suit claiming the reward. The courts held that the plaintiff was not entitled to the reward since he did not know of the offer.

Communication of offer:

According to Section 4 of the Indian Contract Act, 1872 the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.

The communication of an acceptance of a proposal as against the proposer is complete when it is put in a course of transmission to him so that it is out of the power of the acceptor whereas the communication of an acceptance of a proposal as against the acceptor is complete when it comes to the knowledge of the proposer.

In the Household Fire Insurance Co. V. Grant[7] case, the court ruled that when an offer is properly accepted by means of a letter or any acceptable way of communication, the acceptance is complete and a binding contract comes into force as soon as the letter is posted, even though the letter is lost in the post and never reaches the offeror.

In Entorse Ltd. V. Miles Far East Corporation[8] case, the plaintiff was a company in London that made an offer to the defendant, an American company by telex to sell a certain quantity of meat and the defendants company accepted the offer by telex itself. The question that arose was where the contract come into place and in case of any disputes which court would have jurisdiction over the matter. It was decided that the contract was completed in London since a contract is deemed to be made at the place where the acceptance is received i.e. at the place of the offeror.

Revocation of offer:

According to Section 5 of the Indian Contract Act, 1872 a proposal may be revoked at any time before the communication of acceptance is complete as against the proposer, but not afterwards. This implies that the communication of revocation of offer can be effective only when the revocation reaches the offeree before he posts his acceptance and makes it out of his power.

In Henthorn V. Fraser[9], the appellant was called at the office of a building society in Liverpool to discuss the purchase of certain houses from the society. The society gave him the option to purchase for fourteen days at 750 Euros. The next day, the society posted a letter withdrawing the offer between 12 and 1 pm. The letter of withdrawal did not reach the appellant until after 5pm the same day meanwhile the appellant has posted his letter of acceptance at around 4pm that day. The letter of acceptance was opened by the secretary in the society office the following day since the letter of acceptance had reached after the office had closed for the day. It was held that the contract was valid since the acceptance was out of the control of the appellant at 4pm and she had not received the letter of revocation before that.

A proposal can be revoked in the following situations:

• A proposal can be revoked by communication of notice of revocation by the proposer to the proposee.
• A proposal can be revoked if the time prescribed in the proposal has lapsed or if no time is prescribed in the offer then the proposal will lapse after the passage of a reasonable period of time.
• When the proposer dies or becomes insane and if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.
• A proposal can be revoked if the acceptor fails to fulfill a condition precedent to the acceptance of the proposal.

The types of offers are as follows:

1. General offer
   A general offer is an offer that is made to the public at large and places no restrictions on the type of people accepting the offer. A case of general offer would be the Harbhajan Lal V. Harcharan Lal[10] case, in which the defendants son had run away from his home and the defendant sent out a notice which read that anyone who found his son would be rewarded Rs. 500. The plaintiff found the missing son at a railway station and informed the defendant. The plaintiff had received the reward since the notice sent out by the defendant was a general offer and could be accepted by anyone.
    
2. Specific offer
   A specific offer is an offer that is made to certain specific people and places restrictions on the type of people who can accept the offer. For example X offers to buy car from Y for Rs. 10 lakh. This offer is a specific offer which has been made to a definite person Y and no person other than Y can accept this offer. In the case of Boulton V. Jones[11], the defendant used to have dealings with Brockle Hurst and he sent an order to Hurst for the purchase of certain goods but by the time the offer reached Hurst, he had already sold his business to Boulton. Boulton received the order and send the items to Jones without informing him of the change of hands in the business. When Jones heard of the change in hands of business, he refused to pay Boulton for the items purchased because he said that it was his intention to enter into a contract with Hurst and not Boulton. Hence it was held that since Jones made a specific offer to Hurst he won't be liable to pay Boulton.
    
3. Counter offer
   A counter offer is said to exist when the offeree does not accept the original contract but the offeree is willing to accept the offer after making some changes in the form of additions or deletions from the original contract. In such a situation the original offer gets rejected and it cannot be revived at a later time. In such situations, the offeree becomes the new offeror and the offeror becomes the new offeree. A counteroffer can only be accepted/ rejected by the party who offered the initial offer and only if that party accepts the counteroffer, a contract is established. In the case of Hyde V. Wrench[12], he defendant, offered to sell the farm he owned to the plaintiff for £1,200, but this was declined by Mr. Hyde. The defendant then decided to make another offer to sell the farm to him for £1,000 and he also made it clear that this would be his final offer regarding the property. In response, Mr. Hyde offered £950 for the farm in his letter which was refused by Mr. Wrench. Thereafter Mr. Hyde agreed to buy the farm for £1,000, which was the sum that had previously been offered. However, Mr. Wrench refused to sell his farm because once Mr. Hyde rejected the offer he placed a counter offer which was not accepted by the defendant and hence that counter offer rendered the previous offer invalid.
    
4. Cross offer
   A cross offer is said to exist when two parties make the exact same offer to each other at the exact same time. This type of offer doesn't usually exist in the real world since such an offer is based purely on chance. In this situation, there won't be a contract because it cannot be interpreted that one party's offer is accepted by the other party.
    
5. Standing offer
   An offer can be called 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. It is also called an open or continuing offer. In Ramsgate Victoria Hotel Company V. Montefeire[13] case, on 8th June M offered to take shares in company R and he had received his letter of allotment on 23rd November. M refused to take shares since M was entitled to refuse as the offer was not a standing offer and the period of 5 months was not a reasonable one.

End-Notes:

1. Balfour V. Balfour; 2 K.B. 571 (Court of Appeal 1919)
2. Uptron Rural District Council V. Powell, 1942; 1 All ER 220
3. Felthouse V. Bindley, 142 All ER 1037
4. Carlill V. Carbolic Smoke Ball Co. 1893, 1 Q.B. 256
5. Pharmaceutical Society of Great Britain V. Boots Cash Chemists (Southern) Ltd. 1952, 2 Q.B. 795
6. Lalman Shukla V. Gauri Dutt, 1913; 11 All LJ 489
7. Household Fire Insurance Co. V. Grant 1879, LR 4 Ex. D216
8. Entorse Ltd. V. Miles Far East Corporation 1955, 1 QB 327
9. Henthorn V. Fraser 1892, 2 Ch. 27 CA
10. Harbhajan Lal V. Harcharan Lal, AIR 1925 All 539
11. Boulton V. Jones, 1857; 157 ER 232
12. Hyde V. Wrench, 1840; 49 ER 132
13. Ramsgate Victoria Hotel Company V. Montefeire, 1866; LR 1 Ex 109