PROPOSAL OR OFFER

Dr. SHOBHNA JEET

ASSOCIATE PROFESSOR
SCHOOL OF LEGAL STUDIES
Proposal or offer

 The entire process of entering into a contract begins with

the proposal or an offer made by one party to another. The
proposal must be accepted to enter into an agreement.
 According to the Indian Contract Act 1872, proposal is
defined in Section 2(a) 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
such person to such an act or abstinence, he is said to
make a proposal or an offer.”
Features of a valid offer

 The person making the offer/proposal is referred to as the

“promiser” or the “offeror”. And the person who accepts an
offer is referred to as “promisee” or the “acceptor”.
 The offeror must express his willingness to do or abstain from
doing an act. Only willingness is not adequate. Or just an urge
to do something or not to do anything will not be an offer.
 An offer can either be positive or negative. It can be a promise
to do some act, and can also be a promise to abstain from
doing any act/service. Both are valid offers.
There must be two parties
 There have to be at least two parties a person making
the proposal and the other person agreeing to it. All the
persons are included i.e, Legal persons as well as
artificial persons.
Every proposal must be communicated

 Communication of the proposal is mandatory. An offer is valid if it

is conveyed to the offeree. The communication can either be
express or implied. It can be communicated by terms such as word
of mouth, messenger, telegram, etc. Section 4 of the Indian Contract
Act says that the communication of a proposal is complete when it
comes to the awareness of the person to whom it is made.
 Example
 ‘A’ proposes, to sell a car to ‘B’ at a certain price. Once ‘B’
receives the letter, the proposal communication is complete.
It must create Legal Relations

 An offer must be such that when accepted it will result in a

valid contract. A mere social invitation cannot be regarded as
an offer, because if such an invitation is accepted it will not
give rise to any legal relationship.
 Example
 ‘A’ invited ‘B’ to dinner and ‘B’ accepted the invitation. It is a
mere social invitation. And ‘A’ will not be liable if he fails to
provide dinner to B.
It must be certain and definite

 The terms of the offer must be certain and clear in

order to create a valid contract, it must not be
ambiguous.
It may be specific or general

 The specific offer is an offer that is accepted by any

specific or particular person or by any group to whom
it is made. Whereas, The general offers are accepted by
any person.
Classification of offer

 Some types of offers can be based on the design, timing, purpose,

etc. Let us look at the offer’s classification.

 Express Offer
 An offer may be made by express words, spoken or written. This is
known as Express offer.
 Example
 When ‘A’ says to ‘B’, “will you purchase my car for Rs 2,00,000”?
 Implied Offer
 An offer may be derived from the actions or circumstances of
the parties.
 This is known as Implied offer.
 Example
 There is an implied offer by the transport company to carry
passengers for a certain fare when a transport company
operates a bus on a particular route.
General Offer

 A general offer is not made by any specified party. It is one that is

made by the public at large. Any member of the public can,
therefore, accept the offer and have the right to the
rewards/consideration.
 Example
 ‘A’ advertises in the newspaper that whosoever finds his missing son
would be rewarded with 2 lakh. ‘B’ reads it and after finding the
boy, he calls ‘A’ to inform about his missing son. Now ‘A’ is entitled
to pay 2 lakh to ‘B’ for his reward.
 Specific Offer
 It is the offer made to a specific person or group of persons
and can be accepted by the same, not anyone else.
 Example
 ‘A’ offers to sell his house to ‘B’. Thus, a specific offer is
made to a specific person, and only ‘B’ can accept the offer.
Difference between General Offer and Specific Offer

General Offer Specific Offer

General Offer is made to the A specific Offer is made to
whole world at large. some specific person.
A specific offer can be
A general offer can be
accepted by only a specific
considered by any person.
person.
 Cross offer
 Two parties make a cross-offer under certain circumstances. It
means that both make the same offer at the exact time to each
other. However, in either case, the cross-offer will not amount to
accepting the offer.
 Example
 ‘A’ and ‘B’ both send letters to each other offering to sell and buy
B’s house at the same time. This is the cross offer made where one
party needs to accept the offer of another.
 Counter-offer
 A counter-offer is an answer given to an initial offer. A
counter-offer means that the original offer has been
refused and replaced by another. The counteroffer
offers three choices to the original offerer; accept,
refuse, or make another offer.
Lapses and revocation of an offer

 An offer lapses after a defined or reasonable time.

 An offer lapse by not being accepted in the specified mode
 An offer lapses by rejection.
 An offer lapses by the offeror or the offeror’s death or insanity
until acceptance.
 An offer lapses by revocation before acceptance.
 An offer lapses by subsequent illegality or destruction of the
subject matter.
When communication is complete

 Communication of offer (section 4)

 The communication of the offer is complete when it comes to
the knowledge of the person to whom it is made.
 Time of revocation of an offer
 Revocation of the offer (Section 4)
 A proposal can be revoked at any time before the
communication of its acceptance is complete as against the
proposer but not afterward.
Revocation of the offer by the offeror
 The offeror can withdraw his offer before it is accepted “the bidder
can withdraw (revoke) his offer at an auction sale before being
accepted by any auctioneer using any of the customary methods.
 Example
 ‘A’ agreed to sell the property to ‘B’ by a written document which
stated “this offer to be left over until Friday 9 AM”. on Thursday
‘A’ made a contract to sell the property to ‘C’. ‘B’ heard of this
from ‘X’ and on Friday 7 AM he delivered to ‘A’ acceptance of his
offer. Held ‘B’ could not accept A’s offer after he knew it had been
revoked by the sale of the property to C.
Acceptance
 The Indian Contract Act 1872 defines acceptance in Section 2 (b) as “When the
person to whom the proposal is made signifies his assent thereto, the offer is
said to be accepted. Thus the proposal when accepted becomes a promise.” An
offer can be revoked before it is accepted.
 As specified in the definition, if the offer is accepted unconditionally by the
offeree to whom the request is made, it will amount to acceptance. When the
offer is accepted it becomes a promise.
 Example
 ‘A’ offer to buy B’s house for rupees 40 lacs and ‘B’ accepts such an offer.
Now, it has become a promise.
 When an offer is accepted and it becomes promise it also becomes irrevocable.
No legal obligation created by an offer.
Types of Acceptance

 Expressed Acceptance
 If the acceptance is written or oral, it becomes an
Expressed Acceptance.
 Example
 ‘A’ offers to sell his phone to ‘B’ over an email. ‘B’
respond to that email saying he accepts the offer to
buy.
Implied Acceptance

 If the acceptance is shown by conduct, It thus becomes an Implied

acceptance.
 Example
 The Arts Museum holds an auction to sell a historical book to collect
charity funds. In the media, they advertise the same. This says that a
Mere Invitation to an Offer as per Indian Contract Act, 1872.
 The invitees offer for the same. Offer is expressed orally, so the offer
to buy is an Express Offer, but by striking the hammer thrice the
final call is made by the auctioneer. This is called Implied
Acceptance.
Conditional Acceptance

 A conditional acceptance also referred to as an eligible

acceptance, occurs when a person to whom an offer has
been made tells the offeror that he or she is willing to
accept the offer provided that certain changes are made
to the condition of the offer. This form of acceptance
operates as a counter-offer. The original offeror must
consider a counter-offer before a contract can be
established between the parties.
Legal Rules and Conditions for Acceptance

 Acceptance must be absolute and unqualified

 The offeree’s approval cannot be conditional.For
example, ‘A’ wants to sell her car to ‘B’ for Rs 2 lakh,
‘B’ can’t come back and says that she accepts the offer
but will buy the same for Rs. 1 lakh.
 Acceptance must be told to the offeror
 If the acceptor just accepts the offer in his head and he
does not mention the same to the offeror, it can not be
called an Acceptance, whether in an express manner or
an implied manner.
Acceptance must be recommended in the following mode

 Acceptance is sometimes required in a

prescribed/specified communication mode.
 In a reasonable amount of time, the acceptance is given
 It’s very rare that an offer is always to get acceptance at
any time and at all times. Therefore, the offer defines a
time limit. If it does not, it should not be acknowledged
forever.
Mere silence is not acceptance

 If the offeree fails to respond to an offer made to him, his

silence can not be confused with acceptance. But, there is an
exception to this rule. It is stated that, within 3 weeks of the
date on which the offer is made, the non-acceptance shall be
communicated to the offeror. Otherwise, the silence shall be
communicated as acceptance.
When communication is complete?

 Communication of acceptance (Section 4)

 Communication of acceptance is complete when it is put in
the course of transmission to him as to be out of the power of
the acceptor to withdraw the same and when it comes to the
knowledge of the proposer.
 Time of revocation of acceptance
 An acceptance may be revoked at any time, but not afterward,
before the communication of the acceptance is complete as
against the acceptor.
Conclusion

 Examination of offer and acceptance is a standard contract law method used to

assess whether a two-party arrangement exists. An offer is a sign of their
willingness to agree on certain terms from one person to another. If there is an
express or implied agreement, a contract will then be formed. A contract is said
to come into being when the acceptance of an offer has been told to the offeror
by the offeree.
 The communication of the offer shall be complete when it comes to the
knowledge of the person to whom the offer is made and the communication of
the acceptance shall be complete when the acceptance is put in a course of
transmission to the offeror. Therefore, offer and acceptance are the essential
elements of a contract and in either case, it should be done on the basis of one’s
free will and with the intention of concluding a legally binding agreement.