Law of Contracts (Offer, Acceptance, Consideration)

Syllabus Unit: Legal Reasoning

Why it matters

Chapter overview

The Indian Contract Act, 1872 supplies the framework CLAT tests through fact patterns: was there a valid offer or merely an invitation to treat, did consideration move, was consent free, and what happens when the deal falls apart. This unit walks through contract formation (offer, acceptance, consideration), who can contract and how consent can be vitiated, and finally how contracts end and what remedies follow a breach.

Common Law Admission Test Syllabus Legal Reasoning 25% weightage

Live Animation1 / 4

1Offer MadeClear intent to be bound

2CommunicatedReaches the offeree

3AcceptanceAbsolute & unqualified

4Contract FormedBinding promise

1Offer, Acceptance & Invitation to Treat

A contract begins with a valid offer met by an unqualified acceptance — but not everything that looks like an offer legally is one.

Learning Objectives

Define 'proposal' under Section 2(a) of the Indian Contract Act, 1872 and distinguish it from an invitation to treat.
Explain why displayed goods, advertisements, and auction announcements are usually invitations to treat, not offers.
State the rules of valid acceptance: absolute, unqualified, and communicated (Section 7).
Apply Carlill v Carbolic Smoke Ball Co. to identify a valid unilateral offer to the world at large.

Key Terms

Offer (Proposal)Section 2(a): when one person signifies to another their willingness to do or abstain from doing something, to obtain the other's assent.

Invitation to TreatAn indication of willingness to negotiate or receive offers (e.g., shop displays, advertisements, tenders) — not itself capable of being 'accepted' into a contract.

AcceptanceSection 2(b): when the offeree signifies assent to the proposal, converting it into a promise; must be absolute and unqualified.

Communication of AcceptanceSection 4: acceptance is complete against the proposer when it is put in a course of transmission beyond the acceptor's control.

Every contract begins with a **proposal (offer)** under Section 2(a) of the Indian Contract Act, 1872 — a clear signal of willingness to be bound on stated terms if the other party agrees. Getting this stage wrong is the single most common CLAT trap.

Offer vs invitation to treat

A shop's price-tagged display is an invitation to treat — the customer makes the offer at the till, which the shopkeeper may accept or refuse (Pharmaceutical Society of GB v Boots Cash Chemists).
Newspaper advertisements are usually invitations to treat, unless they show clear intent to be bound with definite terms — Carlill v Carbolic Smoke Ball Co. (1893) is the classic exception, a genuine unilateral offer to the world.
A tender/auction announcement invites bids (offers); the auctioneer's fall of the hammer is the acceptance.
Harvey v Facey (1893): a mere statement of price in response to an inquiry is not an offer capable of acceptance.

Exam TipCLAT loves this exact distinction — always ask: does the statement show a clear, present intent to be bound the moment the other party agrees, or is it just an invitation to start negotiating?

Rules of valid acceptance

Must be absolute and unqualified — a 'conditional acceptance' or one that varies terms is actually a counter-offer (which destroys the original offer): Hyde v Wrench (1840).
Must be communicated — silence cannot amount to acceptance: Felthouse v Bindley (1862).
For a unilateral offer (like Carlill), performance of the condition itself is the acceptance — no separate communication needed.

Offer (Section 2(a)) + Unqualified Acceptance (Section 2(b)) → Promise → Agreement