According to the Indian Contract Act, 1872, a contract is an agreement which is enforceable by law. So, contract = an agreement + it’s enforceability by law. The very formation of a contract can be express or implied. Offer and Acceptance are two basic requirements for forming a contract.
Express and Implied Offer
According to Section 2(a), an offer is defined as –
“When one party 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 an act or abstinence, he is said to make a proposal”
This is the very first step of forming a contract. The term ‘proposal’ in Indian Law is synonymous with the term ‘offer’ used in English law. The definition clearly states that there must be an intention to obtain the view of the other party, otherwise it cannot be termed as a valid offer. For example, A wants to sell his Television to B for Rs/-10000 and if B wishes to purchase the same, it amounts to a proposal by A for the sale of the television. This intention of obtaining the assent of the other party can be either implied or express. The Act lays down how the communication of a proposal can be made. Section 3 says – “The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.”Hence, the definition clearly states that an offer may be communicated by the offeror by any act or omission by which the offeror –
1. Intends to communicate such offer;
2. Which has the effect of communicating the offer.
Therefore, an offer can be made by words spoken, or by writing or conduct in a manner, which carries the effect of communicating the offer to the offeree. An express offer is made by some positive act by the offeror or it may also be implied from the conduct of the offeror. Section 9 further validates the aforementioned statements. It runs as – “In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.”
Examples of an implied offer
A bid at an auction is an implied offer. Or, when a bus company runs buses on a particular route inviting passengers over the route at scheduled fares. The offer of the company is an implied offer.
Acceptance can also be implied or express
When an offer is accepted it results in an agreement. Without acceptance of the offer a contract between two parties cannot arise. Here is the definition of acceptance according to the Indian Contract Act, 1872 – “When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.”
Once the offer is made and accepted both the parties become bound by the agreement and not before that. When the proposal or acceptance is made in any other way than words then the promise is deemed to be implied. Acceptance must carry the effect of communication even if it is implied. Acceptance can also be made in words either written or spoken. The most important thing, in either case, is that acceptance must be communicated to the offeror either by the offeree or by some duly authorized agent on his behalf. Also, the performance of the conditions of the proposal is the acceptance of the proposal. Under certain circumstances, offeree’s silence, along with his conduct also amounts to acceptance. This is known as ‘agreement sub silentio.’
Example of an implied acceptance
When a bus company runs buses on a particular route inviting passengers over the route at scheduled fares. The offer of the company is an implied offer and passengers agreeing to pay the fare is implied acceptance.
The term ‘express contract’ hasn’t been defined in the Indian Contract Act. But the term ‘express contract’ connotes agreements in which the terms are explicitly stated by the parties either orally or in writing. These are actually the normal contracts we come across in day to day life. In this type of contract use of ‘words’ is mandatory. Example – Lease Agreement.
Similar to express contracts, the term ‘implied contract’ is not defined under the Indian Contract Act. As the term itself suggests, an implied contract is a contract which is inferred by the conduct and behaviour of the parties to the contract. There is no usage of words either written or spoken. Such a contract comes into force after assuming the intention of the parties to the contract. An example of an implied contract would be a quasi-contract. Quasi-contracts are “certain relations resembling those created by contract.” It is based on the maxim of equity that no person should enjoy unjust benefit at the cost of the other irrespective of the fact if there is any contract or not. No party has an intention to enter into a contract yet a contractual obligation arises. Quasi-contracts are mentioned under Section 68-72 of the Indian Contract Act. There are 5 types as follows –
1. Claim for necessaries supplied to a person incompetent to contract.
2. Reimbursement of money paid, due by another.
3. Obligation of person enjoying benefit of non-gratuitous act.
4. Responsibility of finder of goods.
5. Liability of a person getting benefit under mistake or coercion.
The Indian Contract Act recognizes both express and implied contracts though they are not defined under the Act. Express contracts assume more importance because the terms are clearly stated, and are used in most business and other official work however, implied contracts too are very common.