Proposal or offer

Introduction

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.
 The element of a valid offer

Here are some essentials which make the offer valid

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.
 Lalman Shukla v. Gauri Dutt 

In this case, the defendant’s nephew went missing and the

petitioner, who was a servant under the defendants was sent out in
his search to Hardwar. After sending the petitioner, the defendant
carried out an offer to the general public offering Rs. 501 to
whomsoever finds the missing boy. The Plaintiff found the boy and
helped return him back to his home. He had been paid the money
he spent in going to search for the boy, i.e., his travel expenses.
When he returned, he continued working for the defendants for
about six months. After six months, he sued the defendants for
paying him the prize money that was offered earlier. It was held that
the petitioner was not entitled to the prize money, as he was only
obliged by the duty he had as the defendant’s servant to find the
missing boy, and the reward was announced after he had already
been sent.
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.
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.
Carlill v. Carbolic Smoke Balls Company 
Can offers be open to the public in general? Can a general offer lead
to a contract?
In this case, a company carried out advertisements about their
product, carbolic smoke balls, that claimed that any person who
took the smoke balls in the prescribed manner (i.e., three times
daily for two weeks) will not catch influenza. In case someone does,
the company promised to pay 100£ to them immediately. To show
their sincerity regarding this offer, the company deposited a sum of
1000£ in a public bank. Now, the plaintiff, Carlill bought the smoke
balls and used them as prescribed in the advertisement, but still
ended up catching the flu. She filed a suit for the recovery of 100£ as
promised in the advertisement. The company denied the payment
saying there existed no contract between them and the plaintiff. It
was held that a contract came into existence between the plaintiff
and the company as soon as the plaintiff bought the smoke balls and
used them as prescribed
 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.

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.
Hyde v. Wrench 
This is a leading case eliciting the concept of offers and counter-
offers.
In this case, Wrench, the defendant offered to sell his farm to the
petitioner, Hyde for £1000. The petitioner declined the offer. The
defendant again reinstated his offer for selling the farm at £1000 to
the petitioner’s agent stating that it is the final offer from their side.
The petitioner, through a letter, offered to buy the farm for £950.
The defendant refused to sell the farm at that price. The petitioner,
several days later, offered to buy the farm at the initial price of £1000.
The defendant did not send any agreement to that and refused to
sell the farm, because of which the petitioner sued for breach of
contract. It was held that no contract came to arise between the
parties as the price was not agreed upon. Rather, offers and counter-
offers were exchanged.
Invitation to treat
A contract is formed where there is an offer, acceptance,
consideration and an intention to create a legal relation. An
invitation to treat, on the other hand, is merely an invitation to
submit an offer. Offer indicates a willingness to enter into a contract
whereas an invitation to treat lacks an intention to create legal
obligations. Invitations to treat is an invitation to bargain and it
arises in pre-contractual negotiations, advertisements and store
displays and an invitation to bid in the public procurement process.

Before making a definite offer, parties may make a statement of

intention, in the course of negotiation on the terms of the contract,
which it is not intended to require acceptance. If one person invites
the other to express his willingness to do or not to do something, it
would be an invitation to treat since for an offer the final expression
of willingness to undertake a definite obligation, upon certain
stipulated terms and obligation, by the other party’s notification of
acceptance is required.
Difference between offer and invitation to treat

The difference between an offer and an invitation to treat is very

basic and is primarily rooted in the ‘intent’ of the parties. While an
offer allows the other party to enter into a contract directly (which is
a legally binding agreement) as soon as it is accepted, an invitation
to treat is primarily an invitation to the other party to negotiate and
makes an offer to the seller himself.

When we go to a bookstore, the display of books in the shop is an

invitation to treat the general public by the bookseller. Anyone
passing through the shop can come to buy one of their books or can
buy later. Here, no one is legally obliged to perform any action.
Similarly, most forms of advertisements are not offers, but
invitations to make offers.
Illustrations
A has listed the price of the car ‘gama’ at ₹ 80,000. B visited his shop
to buy the car at ₹ 80,000 but A refused to sell the car at any price
below ₹ 1 lakh. B wants to sue A for not selling the car the printed
price. A is not liable to sell the car at the listed price as it is only the
invitation to treat and not the offer. Price-marked goods on display
on the shelves or on windows or shops are normally considered
invitations to treat and are not offers.

Harris vs. Nickerson

Facts of the case: – the defendant advertised a sale by auction. The
plaintiff traveled to the advertised place of auction and found that
the defendant had cancelled the auctioned sale. He bought an action
against the defendant to recover the expenses of the travel.
Judgment of the case: – In this case, the court held that he was
entitled to recover his travelling expenses from the defendant as
there was no contract between the two parties, which could make
the defendant liable.