Difference Between Offer and Acceptance: Importance, Conditions & More

Offer and acceptance are two major issues in contract law. But, what is an offer and what is acceptance? and what is the difference between offer and acceptance? An essential contract commences once an offer is given, and that very offer accepted by some other party under certain conditions. Thus, the two integral constitutive elements of offer and acceptance, therefore, constitute a mutual consensus required by law for practicing contracts. Understanding an offer and acceptance holds great importance for all businesses, lawyers, and individuals entering into contractual arrangements.

Are you interested in pursuing a career in Law? The Legal School in collaboration with IndusLaw has created a unique program for a Certification in Mergers & Acquisitions, Private Equity and Venture Capital Laws for fresh law graduates as well as professionals looking to advance in their careers! Enquire now for details!

What Is An Offer?

An offer, as defined by contract law, is a clear statement of intent by one party—the offeror—to enter into a contract with another party offeree. The offer must contain the terms and conditions on which the offeror is willing to be bound if the offer is accepted by the offeree. An essential element of an offer is its definiteness—the terms must be unequivocal to the offeree so that he is certain what he is accepting.

For example, if a company proposes to supply another party with 100 units of a commodity for a certain sum, the proposal should mention the number to be supplied, price, and other crucial terms, such as delivery or pay dates.

Offeror: The person proposing the offer.

Offeree: The person to whom the proposal is directed.

What Is Acceptance?

Acceptance is the unconditional assent to all the terms of the offer. It occurs when the offeree accepts the proposal tendered by the offeror without modification. Acceptance needs to be definite, unequivocal, and communicated to the offeror. That is to say, to become a binding contract, acceptance must be a replica of the offer. This requirement is commonly referred to as the "mirror image" rule in contract law.

For instance, if a buyer and seller agree on a certain commodity to be bought at a given price and time amounting to 100 units, then that would form a valid contract. However, if the offer is attempted to be changed, such as asking for the price or the number of units to be modified, then it cannot be considered acceptance but a counter-offer.

Acceptance: The offeree accepts the terms of the offer without alteration.

Counter-offer: A response to an offer that changes the terms, thereby rejecting the original offer and presenting new terms for acceptance.

Want to know how to become a corporate lawyer in India? Check out these corporate law courses.

Differences between Offer and Acceptance

Offer and acceptance are two distinct steps in creating a contract. An offer is a term that one proposes, and acceptance occurs when the terms proposed are accepted and no changes are made.

1. Initiation: 

Offer: The contract starts with an offer. The initiating party is called the offeror, and he outlines the terms under which the offering party agrees to be bound.

Acceptance: Acceptance comes after the offer. It refers to the acceptance by the offeree of the offer and their assent to the terms of that offer.

2. Communication:

Offer: An offer must reach the offeree in order to be valid. For the offeree to accept the offer, it must be communicated.

Acceptance: The acceptance itself must be communicated to the offeror, either through words, writing, or even the conduct of accepting the offer by starting the performance under it.

3. Alteration of Terms:

Offer: It is the offer that elaborates the terms of the proposed contract. An offeror cannot introduce new terms after making an offer unless the offeree accepts it.

Acceptance: Acceptance should be unconditional acceptance of the offer. Any alteration of terms in acceptance is treated as a counter-offer and not as an acceptance.

4. Revocation:

Offer: An offer may be withdrawn by the offeror at any time before acceptance, provided the withdrawal is communicated to the offeree.

Acceptance: After acceptance has been communicated, the offeror cannot withdraw his offer and the contract is binding.

5. Legally binding: 

Offer: The intent of an offer is not legally binding to accept until it is accepted. It only proposes the terms under which a contract might be formed.

Acceptance: Acceptance forms a contract if other contractual conditions to form a contract are met, such as capacity, legality, and consideration.

CriteriaOfferAcceptanceDefinitionA proposal by one party to enter into a contract.Agreement by the other party to the terms of the offer.InitiationThe offer initiates the potential contract.Acceptance finalizes and creates a binding contract.Party InvolvedMade by the offeror to the offeree.Made by the offeree in response to the offer.TermsSpecifies the terms of the agreement.Agrees to the exact terms of the offer without modifications.CommunicationThis must be communicated to the offeree.Must be communicated to the offeror to be valid.RevocationCan be revoked before acceptance.Once communicated, the contract becomes binding.Legal ObligationDoes not create a legal obligation until accepted.Creates a legal obligation once accepted.Modification of TermsModifying the offer creates a new offer.Cannot modify terms; if modified, it becomes a counter-offer.

Importance of Offer and Acceptance in Business Law

The difference between offer and acceptance in business law is very important because businesses often make contracts for sales, services, partnerships, and employment. Misunderstanding the terms of a contract may lead to disputes, financial losses, or even actions at law. Therefore, businesses need to clearly understand the following:

Offer clarity: Assurance that offers are clear and contain all the essential terms.

Proper acceptance: Ascertaining that any acceptance is word-for-word in sync with the terms of the offer to prevent the creation of a counter-offer in any case.

In commercial transactions, terms of the offer should be clearly stated and acceptance conveyed in time to prevent any form of miscommunication or delays in the execution of the contract. Contracts are the basis of every business activity, and any mistake about the offer and acceptance will jeopardize deals or bring about unwarranted litigation.

Conditions for a Valid Offer

For such an offer to be valid, it must have the clear intention of the offeror; it must be definite; and communication should be with the offeree. Definite terms must be present, and there must be unilateral termination of its openness until accepted or revoked.

Terms must be precise and certain. The offer must be made in precise terms with no vagueness.

Communication: The offeree must receive the offer before accepting it.

Intention: The offeror must intend the offer to vest legal rights should it be accepted.

Read to find out the role of NCLT in Company Law.

Conditions for a Valid Acceptance

A valid acceptance must be unconditional, clear, and be achieved within a prescribed or reasonable timeframe. Acceptance should be identical to the offer, that is, without variations or qualifications.

Acceptance must be unconditional. The acceptance should mirror the offer precisely without alteration or addition.

Communication to the offeror: Acceptance must be communicated clearly to the offeror.

Within time: If the acceptance subject requires a timeline within which the offer has to be accepted, then the offeree must respond within that time.

Proper Medium: The offeror may specify with which acceptance should be communicated, for example, in writing or by email. 

Examples of Offer and Acceptance

Business Contract: A company agreeing to sell 500 units of machinery at an ascertained price for sale. The buyer agrees and sends confirmation of acceptance by e-mail. This is acceptance, and the contract is formed.

Real Estate: A seller puts his house on sale at $300,000. A buyer agrees to buy it at this price. Acceptance by the buyer makes the offer legally binding.

Employment: A job is offered by a company to the selected candidate with a specific amount of salary and benefits. The candidate accepts these terms by agreeing to the offer as a type of employment contract.

Role of Counter-Offer

A counter offer arises when the offeree, instead of accepting the offer exactly as it is, changes some terms of that offer. That's a counteroffer when a seller offers to sell a product for $100 and a buyer says he will buy it for $90. Hence, the original offer is considered rejected, and negotiation begins again.

Also, know the difference between lawyer and advocate in India.

Conclusion

Understanding the distinction between offer and acceptance forms any contract. The offer is the starting point of a potential contractual venture. Only such acceptance, which is without qualifications and identical to the offer, gives rise to the reciprocal obligation that constitutes a contract. Thus, if one appreciates this, he would avoid the pitfalls of law, and such contracts shall be enforceable.

Differences Between Offer and Acceptance FAQs

1. What is the difference between an offer and acceptance of business law?

Essentially, what differs between the two is their functions: an offer is actually a proposal for bringing about a contract, while acceptance is the act that would concretise said agreement.

2. Can a withdrawn, accepted offer be revoked?

Generally, no. Once accepted, the contract takes precedence, and in most juristic approaches, the offeror cannot revoke his or her acceptance.

3. What happens to the offeree when he or she modifies the terms of the offer?

Modification of the terms of the offer constitutes a counter-offer, which in effect rejects the original offer.

4. Is acceptance effective if it is not accepted?

No, an acceptance must be communicated to the offeror to establish a contract obligation, except about acceptance by conduct.

5. Can an offer contain a limit of time for acceptance?

Yes, the offeror can subject the offer to a time limitation, and if the offeree accepts after that time has run, the offer is no longer operative.