Proposal or Offer

Proposal or Offer:

  • The term “proposal” of the Indian Contract Act is synonymous to the term “Offer” in English law.
  • Section 2(a)of the Indian Contract Act, 1872 defines proposal as “when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal”.
  • The person making proposal/offer is called the proposer/offeror and the person to which the proposal is made is called propose or offeree.

Essentials Elements of an Offer / A Proposal:

  • There must be two parties.
  • The offer must be communicated to the offeree.
  • The offer must show the willingness of offeror.
  • The offer must be made with a view to obtaining the assent of the offeree.
  • An offer may involve a positive act or abstinence by the offeree.
  • A mere expression of willingness or expression made jokingly or desire does not constitute an offer.
  • Example: A tells B’ that he desires to marry by the end of 2018, it does not constitute an offer of marriage by A’ to B’ because there is no expectation of acceptance from B. If he further adds will you marry me to the previous expression. Then it becomes an offer.

Legal Rules for Valid Offer / Proposal:

Offer must be communicated to the offeree:

  • The offer is completed only when it has been communicated to the offeree. Until the offer is communicated, it cannot be accepted. Thus, an offer accepted without its knowledge does not confer any legal rights on the acceptor.
  • In Lalman Shukla v. Gauri Datt (1913) All LJ 489 case A’s nephew has absconded from his home. He sent his servant to trace his missing
    nephew. When the servant had left, A then announced that anybody who has discovered the missing boy would be given the reward of Rs.500. The servant discovered the missing boy without knowing the reward. When the servant came to know about the reward, he asked for the same from A. A refused to give the reward. The servant brought an action against A in the court of law to recover the same. But the court held that when the servant discovered the boy, he was not aware of the reward. Thus the offer was not communicated to him. Hence he is not liable to get the reward from A.
  • In Powell v. Lee (1908 24 TLR 606) case the plaintiff Powell applied for the post of a headmaster and his application was accepted by the School Board. Before the formal appointment, one of the Board members had informed Powell of the decision which was later rescinded by the Board. Powell sued the School for breach of contract.  The court held that the acceptance was not communicated by someone authorized by the School Board and thus there was no valid contract.
  • In Taylor v. Laird (25 L.J. Ex. 329) case, the plaintiff was employed as the captain of a ship which was owned by the defendant. Whilst in a foreign port during the course of the voyage, he voluntarily gave up his position as a captain and worked as an ordinary crew member during his passage back to Britain. The defendant was not made aware of this change of position. Upon his return, he sought to claim wages from the defendant for his work as a crew member during this journey. The court held that the plaintiff has not communicated his offer to work as a crew to the defendant and hence he had not entered into any contractual agreement with the defendant for the performance of his work as an ordinary crew member.  hence the plaintiff is not entitled to wages for the return journey.

The offer must be certain definite and not vague unambiguous and certain.

  • There must be no confusion about the terms used in an offer. Both offeror and offeree should understand one and the same thing from the offer.
  • Example: A offered to sell to B. ‘a hundred tons of oil’. We can see that the offer is not specifying which type of oil (groundnut or sunflower or sesame, or rice bran, etc.) A want to sell to B. Thus the offer is vague, ambiguous, and uncertain. Hence it is not an offer.

The offer must be capable of creating a legal relation. 

  • An offer in order to give rise to a contract must be intended to create and be capable of creating legal relations. A social relation (moral or matrimonial or religious or friendly) do not create legal relations.
  • ‘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.
  • In (Balfour v. Balfour (1919 2 K.B. 571) case Mr. Balfour is the Defendant and Mrs. Balfour is the Plaintiff. The couple lived in Ceylon (Now Shrilanka) and visited England on a vacation. The plaintiff remained in England for medical treatment. The defendant has agreed to send her a specific amount of money each month until she could return. The defendant failed to honour the promise. Mrs. Balfour sued for restitution of her conjugal rights and for alimony equal to the amount her husband had agreed to send. The lower court entered judgment in favor of the plaintiff and held that the defendant’s promise to send money was enforceable. The court held that Mrs. Balfour’s consent was sufficient consideration to render the contract enforceable and the defendant appealed.  The Higher Court held that the agreement between husband and wife is of social nature and cannot be enforceable by law. Hence Mr. Balfour is not liable for honouring the agreement. By this case law, all social agreements are not enforceable by the law.

Offer may be express and implied.

  • An offer which is expressed by words, written or spoken, is called an express offer. The offer which is expressed by the conduct is called an implied offer.
  • Communication of offer should be complete.
  • Example: A offered to sell his old car to B for Rs.1,00,000. B replied, “I am ready to pay Rs.90.000”. On A’s refusal to sell at this price, B agreed to pay Rs.1,00,0000. Now A is not bound to sell his car to B at Rs. 1,00,000. Initial offer to sell the car for Rs, 1,00,000 was made by A. B rejected the offer by giving a counter-offer to buy the car at Rs. 90,000. A refused this counter-offer. Now again B is giving a new offer to A to buy the car at Rs. 10,000. Thus as offeree, he has right to accept or reject the new offer by B. Note that a counter-offer amounts to a rejection of the original offer.

Mere Intention is not enough:

  • A statement of intention made during a conversation will not constitute an offer, even though acted upon by the party to whom it is made.
  • In Weeks v. Tybaid (1905 Noy. 11) case the defendant announced he would give £100 to a man who would marry his daughter with his consent. The plaintiff married with defendant’s daughter with the consent of plaintiff. After the marriage, the plaintiff asked for the money but the defendant refused to pay the same. The plaintiff sued him in the court of law. The Court held this was a mere puff and in the context not to be taken with seriousness because the words were spoken to entire suitors of his daughter.

An offer must not thrust the burden of acceptance on the offeree.

  • A person cannot say that, if within a certain time, acceptance is not communicated, the offer would be considered as accepted.

The acceptance to offer cannot be presumed from silence.

  • When A makes an offer to the B, and there is no communication from B about the acceptance of the offer, then A cannot assume that the offer has been accepted by B.

Offer must be distinguished from an invitation to offer.

  • When a person expresses something to another person, to invite him to make an offer, it is known as an invitation to offer. The objective of the invitation of the offer is to receive offers from people and negotiate the terms on which the contract will be created. In invitation offer, the persons responding to it are making offers.
  • Menu card of a restaurant is an invitation to put an offer. Price – tags attached to the goods displayed in any showroom or supermarket is also an invitation to offer. If the salesman or the cashier does not accept the price, the interested buyer cannot compel him to sell, if he
    wants to buy it, he must make a proposal. Other examples of invitation to offer are vacancy job advertisements, auction advertisement, and tender advertisement.

The offeror should have the intention to obtain the consent of the offeree.

  • The offeror must give an offer to offeree with intention of getting consent. The statement like “Marry with me or go to hell” is not an offer.

An answer to a question is not an offer.

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