Proposal or Offer
Introduction
A proposal or offer is the first step in forming a contract. Every contract begins when one party expresses willingness to do something and seeks the agreement of another party. The Indian Contract Act, 1872 explains what a proposal is and how it becomes a promise when accepted.
Understanding proposals is important because no contract can exist without a valid offer and acceptance.
Meaning / Definition
Definition under Section 2(a)
Section 2(a) of the Indian Contract Act, 1872 states:
When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent (approval) of that other to such act or abstinence, he is said to make a proposal.
In simple terms:
- One person expresses willingness to do something or not do something.
- The expression is made to obtain the agreement of another person.
If the statement is made without the intention of obtaining the other person's agreement, it is not a proposal.
Elements of a Valid Proposal
A valid proposal must contain the following elements:
- Expression of willingness to do or abstain from doing something.
- Intention to obtain assent (agreement) from another person.
Parties to a Proposal
Different terms are used for the parties involved in an offer:
| Term | Meaning |
|---|---|
| Proposer / Offeror / Promisor | Person who makes the proposal |
| Proposee / Offeree / Promisee | Person to whom the proposal is made |
Communication of Offer
For an offer to be valid, it must be communicated to the person to whom it is made.
The word “signifies” in Section 2(a) means to communicate or make known.
A person cannot accept an offer unless he knows about it.
Completion of Communication (Section 4)
Section 4 of the Indian Contract Act, 1872 states:
The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
Therefore:
- An offer becomes complete when the offeree becomes aware of it.
- Acting without knowledge of an offer does not amount to acceptance.
Modes or Types of Offers
1. Express Offer
An express offer is made clearly through words, either:
- Spoken words, or
- Written communication.
Example
A tells B:
"I will sell my bike to you for ₹30,000."
This is an express offer.
2. Implied Offer
An implied offer is communicated through conduct (actions) or surrounding circumstances rather than words.
Example situations include:
- A person bidding at an auction
- Boarding a public transport vehicle where payment is expected
In these situations, the offer is understood from behaviour.
3. Specific Offer
A specific offer is made to a particular person or group of persons.
Only the person to whom the offer is made can accept it.
Example:
A offers to sell his car only to B.
Only B can accept the offer.
4. General Offer
A general offer is made to the public at large (to anyone).
Any person who performs the conditions of the offer can accept it.
Example:
A advertises that anyone who finds his missing son will receive ₹2,00,000 as reward.
Any person who finds the child and informs A can claim the reward.
Intention to Create Legal Relations
For an offer to result in a contract, it must be made with intention to create legal relations (intention to create legal obligation enforceable by law).
Two general rules apply:
| Situation | Presumption |
|---|---|
| Social or domestic agreements | No intention to create legal relations |
| Business or commercial agreements | Intention to create legal relations presumed |
Examples of non-binding social agreements:
- Agreement to go to a movie
- Agreement to go for a walk
- Agreement to play a game
Such agreements cannot normally be enforced in court.
Important Case Law
Lalman Shukla v. Gauri Dutt
Facts
- The defendant's servant went to search for the defendant's missing nephew.
- During his absence, the defendant issued handbills announcing a reward of ₹501.
- The servant found the boy but did not know about the reward at that time.
Judgment
The court held that the servant was not entitled to the reward.
Principle
Acceptance requires knowledge of the offer.
Carlill v. Carbolic Smoke Ball Co.
Facts
The company advertised that £100 would be paid to anyone who used the smoke ball as directed and still contracted influenza.
Mrs. Carlill used the product according to instructions but still became ill.
Judgment
The court held that the advertisement was a general offer to the public, and Mrs. Carlill accepted the offer by performing the conditions.
Principle
A general offer can be accepted by performing the required conditions.
Balfour v. Balfour
Facts
A husband promised to send money to his wife while she stayed in England.
Later, he stopped sending money and the wife sued.
Judgment
The court held that there was no intention to create legal relations, as the agreement was domestic in nature.
Jones v. Padavatton
Facts
A mother promised to support her daughter financially if she moved to England and studied law.
Later disputes arose.
Judgment
The court held that the agreement was a family arrangement and lacked intention to create legal relations.
Distinction / Comparison
Offer vs Invitation to Offer
| Basis | Offer | Invitation to Offer |
|---|---|---|
| Meaning | Final willingness to enter into a contract | Invitation asking others to make offers |
| Legal effect | Can be accepted to form a contract | Cannot be accepted directly |
| Example | Offering to sell a bike for ₹30,000 | Displaying goods in a shop window |
| Intention | Intention to create legal obligation | Only intention to invite offers |
Practical Example
Example of Invitation to Offer
When goods are displayed in a shop window, it is not an offer.
It is an invitation to offer, meaning customers may make an offer to buy.
The shopkeeper may accept or reject the offer.
Case Illustration: Harris v. Nickerson
Facts
The defendant advertised an auction sale.
The plaintiff travelled to attend the auction, but the auction was cancelled.
The plaintiff sued for travel expenses.
Judgment
The court held that advertisement of an auction is only an invitation to offer, not a contract.
Therefore, the plaintiff could not recover the expenses.
Summary
- A proposal (offer) is defined under Section 2(a) of the Indian Contract Act, 1872.
- A proposal exists when one person expresses willingness to do or not do something to obtain another person's agreement.
- A valid offer must be communicated to the offeree.
- Communication of an offer is complete when it comes to the knowledge of the offeree (Section 4).
- Offers may be express or implied, and specific or general.
- A valid contract requires intention to create legal relations.
- Acting without knowledge of the offer does not amount to acceptance.
- An invitation to offer only invites others to make offers and does not create a contract by itself.