Proposal or Offer

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The formation of a contract is initiated when a proposal or offer is made by one party to the other. Once the proposal or offer made is accepted by the other party, both parties are said to have entered into an agreement. Let us understand the meaning of a proposal in detail and the essentials of an offer.

Section 2(a) of the  Indian Contract Act 1872, defines Proposal as “when one person will signify to another person his willingness to do or not do something (abstain) with a view to obtain the assent of the other person to such an act or abstinence, he is said to make a proposal or an offer.”

A proposal is the same as an offer.

Essentials of a Valid Proposal and Offer

  • Parties Involved

There must be a minimum of two people for a proposal to be made. The person(s) making the offer is called the ‘offerer’ or the ‘promisor’ and the person(s) to whom the offer is made is called the ‘offeree’ or the ‘acceptor’. 

  • Communication of the Offer

The offer proposal must be explicitly communicated to the offeree. Mere intentions of making an offer or the desire to do something is not sufficient. The offeree cannot accept the offer unless it is communicated to him. A person doing or abstaining from doing something without any knowledge of the offer does not constitute acceptance.

Case Law: Lalman Shukla vs Gauri Dutt

In this case, when Gauri Dutt’s nephew went missing, he sent his servant Lalman Shukla to look for the nephew. Gauri Dutt announced a reward for anyone who finds his nephew but Lalman Shukla was not aware of this offer. When Lalman Shukla returned with the nephew he brought the case in the court of law for claiming the reward. The court decided that when the servant went looking for the nephew and found him, he was not aware of the offer of the reward. Since the offer had not been communicated to him he was not entitled to claim the reward.

  • To Do or Abstain from Doing

The offeror must communicate to the offeree his willingness to do or abstain from doing an act that constitutes the offer. 

  • Create Legal Relations

An offer and proposal must create legal relations between the parties. A social obligation like an invitation for a party is not a valid offer. 

  • Obtaining Assent

The proposal or offer must be made with the intention of obtaining the assent of the offeree to the offer. 

Example - A tells B that he will marry her after a year. This will not be considered as an offer as A is not seeking acceptance from B. He is simply informing B about his wish or desire and this will not be an offer until he asks B for her answer. If A asks B to marry her then it will be considered an offer.

  • The Offer Must Not Be Vague

The offer made must be clear, definite, and unambiguous. It must clearly convey to the offeree what is being expected from him through the offer. There should not be any confusion about the terms of the offer made. 

Example- A makes an offer to B to sell 100 kgs of vegetables for a sum of 5000 rupees. This offer is not clear as A has not mentioned the type of vegetables he wants to sell to B.

  • An Offer and Proposal Can Be Conditional

While an acceptance cannot be conditional, an offer may contain certain conditions. It is up to the offeree to accept the offer with those conditions. If the offeree adds some of his conditions to the offer, it is not called an acceptance of the offer but a counteroffer.

  • The Burden of Acceptance Cannot Be on the Offeree

The offer must not contain a negative condition that if the acceptance is not communicated within a specified time, the offer will be considered accepted. 

  • Offer Proposal Can Be Explicit or Implied

The offer can be explicitly communicated either through specific words, in a written format, verbally, or it can be implied through the conduct of the offeror. 

FAQ (Frequently Asked Questions)

1. What is the Difference Between an Offer and an Invitation to Offer?

When a person invites another person to make an offer, it is known as an invitation to offer.  The intention behind an invitation to offer is to receive offers from parties and then negotiate the terms before accepting the offer. In an invitation to offer, the person responding to the invitation makes the offer. Some examples of invitation  to offer are:

  • The menu card of a restaurant

  • Price tags on goods in a shop

  • Job vacancy advertisements

  • Auction advertisements

2. What Are the Different Kinds of Offers?

Offers can be classified on the basis of time, nature, intention, etc. 

  • General offer- when an offer is made to the general public and not to a particular person, it is called a general offer. Such an offer can be accepted by any member of the public.

  • Specific Offer- When an offer is made to a particular person, it is called a specific offer. It can only be accepted by the specific parties to whom the offer has been made. 

  • Cross offer- When two parties make an identical offer to each other at the same time, it is called a cross offer. A cross offer is not an acceptance of the offer.

Example- A and B make an offer at the same time to each other, where A offers to sell his house, and B offers to buy A’s house for two lakh rupees. 

  • Counter Offer- When the offeree conveys that he will accept the offer if certain changes are made to the offer, it is not an acceptance of the offer but is called a counteroffer.