λβ theory
The
(\lambda x. M)N = M[N/x]
The theory is then closed under the usual rules that make equality an equivalence relation (reflexivity, symmetry, transitivity) and a congruence (i.e. respecting every constructor - in this case just abstraction and application).
The theory is the main subject of study of Barendregt's seminal book Barendregt 1984.
References
@book{barendregt_1984,
address = {Amsterdam},
title = {Lambda {Calculus}: {Its} {Syntax} and {Semantics}},
isbn = {978-0-444-87508-2},
publisher = {North-Holland},
author = {Barendregt, Henk},
year = {1984}
}