The first essential of a valid contract is an agreement i.e., offer and acceptance. The agreement result from an exchange of promises by the parties involved. An agreement arises when one party, the offer or, makes an offer and the other party to whom the offer is made i.e. the offeree accepts it. In every case, there must be both an offer and an acceptance. If either is lacking there is no agreement. In order to make a contract there must be a lawful offer by one party and lawful acceptance of the offer by the other party.
Offer/Proposal:
The words proposal and offer are synonymous and are used interchangeably. Section 2(a) defines a proposal as “when one person signifies to another his willingness to do or to abstain from doing any thing, with a view to obtaining the assent of that other to such act or abstinence he is said to make a proposal.”
This definition of an offer consists of two parts:
1. There must be an expression of the willingness by one to another to do or to abstain from doing something.
2. The expression of willingness must be made to obtain the assent of the other person to such act or abstinence.
The offer must be made with the intention of creating legal relations; otherwise, there will be no agreement.
Example:
1. A offer to sell his watch to B for Rs.100 A is making an offer to B.
2. A says to B I am willing to sell my car for Rs.3 Lac Are you interested to buy it. “A makes an offer to B.
Offeror:
The person making the offer is called the offeror or promisor or proposer.
Offree:
The person to whom the offer is made is called the offeree or proposer.
Promisor:
The person accepting the offer is called the promisor or acceptor.
Acceptance:
Section 2(b) defines acceptance as follows:
Thus acceptance is the assent given to a proposal and it has the effect of converting of the proposal into promise. Without the acceptance of the proposal no agreement can come into existence.
Example:
A offer to sell his house to B for Rs.5 Lac B accepts the offer to purchase the house for Rs.5 Lac. This is an acceptance.