Aligarh Muslim University

Faculty of Law

1st GCT Assignment

Subject: Law of Contract-I

Topic : Offer/Proposal
Submitted By-
Anas Ali
Roll No.- 19BALLB050
Enrl No. - GK1043
Semester- II

Submitted To-
Dr. Gaurav
 Synopsis
➢ Introduction
➢ Contract
➢ Proposal or Offer
➢ Difference between Offer and an Invitation
to Offer

➢ Classification of Offer
○ General Offer
○ SpecificOffer
○ CrossOffer
○ Counter Offer
○ Standing Offer
○ Express and Implied Offer

➢ Essentials of a Valid Offer

○ Offer must create Legal Relations
○ Offer must be Clear, not Vague
○ Offer must be communicated to the Offeree
○ Offer may be Conditional
○ Offer cannot contain a Negative Condition
○ Offer can be Specific or Genearal
○ Offer may be Expressed or Impleid

➢ Conclusion
 IIntroduction
The term ‘offer’ is derived from the Latin word ‘offerre’ which means ‘present’ or ‘provide’.
A proposal is an expression of will or intention to do or not to do something with a view to
get something. It is one of the essential elements ofor processfor themaking of an agreement.
It is the very basis of the Contract. It is the starting point in the formation of a contract. It
becomes a promise when it is accepted. The word ‘proposal of the Indian Contract Act, is
used in the same sense as the word ‘offer’ is used in English Law.

The word ‘proposal’ has been defined as an expression of willingness to contract made with
an intention (actual or apparent) that it is to become binding on the person making it as it is
accepted by the person to whom it is addressed. 1

Contract
1 Avtar Singh, Contract and Specific Relief, (Eastern Book Company, Lucknow, 12th Edn., 2017)
Contracts play an important role in our everyday life ranging from insurance policies to
employment contracts. In Fact, we enter into contracts even without thinking, for example,
while buying a movie ticket or downloading an app. The contract is oral or written
agreements between two or more parties. Parties entering into a contract might include
individual people, companies, non-profits or government agencies. The whole process of
entering into a contract starts with an offer by one party, an acceptance by another party, and
an exchange of consideration (something of value).2

Proposal or Offer
The whole process of entering into a contract starts with a proposal or an offer made by one
party to another. To enter into an agreement such a proposal must be accepted.
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.”

● The person making the offer/proposal is known as the “promisor” or the “offeror”.
And the person who may accept such an offer will be the “promisee” or the
“acceptor”.
● The offeror will have to express his willingness to do or abstain from doing an act.
Only willingness is not enough. Or simply a desire to do/not do something will not
constitute an offer.
● An offer can be positive or negative. It can be a promise to do some act, and can also
be a promise to abstain (not do) some act/service. Both are valid offer3

Difference between offer and an invitation

to Offer
An offer is defined in section 2 (a) of the Indian Contract Act, 1872. Conversely, an
invitation to offer is not defined in the Indian Contract Act, 1872.
2 Definition and essentials of Offer, available at https://blog.ipleaders.in/definition-essentials-offer-
acceptance/ (Visited on May 8, 2020)
3 Proposal or Offer, available at https://www.toppr.com/guides/business-laws/indian-contract-act-
1872-part-i/proposal-or-offer/ (Visited on May 8, 2020)
The major difference between the two is that the purpose of an offer is to enter into a contract
whereas the purpose of an invitation to offer is to receive an offer in order to enter into a
contract.

Illustration- A sees an article marked Rs 50 in B’s shop. He tells B he will buy it and offers
him Rs 50.B says that he doesn’t wish to sell that article.

In this case, there is no contract at all and the price tag is not an offer but an invitation to
offer. It is on the discretion of the shopkeeper if he wants to sell his article or not.

Therefore an offer is the final willingness of the party to create legal relations. An invitation
to offer is not the final willingness but the interest of the party to invite the public to offer
him.4

Case Laws:

(1)In Balfour vs. Balfour (1919)

Mr. Balflour was a civil engineer and worked for the government as the Director of Irrigation
in Ceylon(now Sri Lanka).In 1915 both of them came back to England when Mr. Balflour
was on leave but due to an illness(arthritis) of Mrs. Balfour, she was unable to come back to
Ceylon with her husband. The husband promised to pay 30 euros per month to his wife until
she rejoined him in Ceylon. The husband failed to pay her the said amount hence the wife
sued him for the amount. The court held that the husband was not liable as there was no
intention to create a legal relationship.

(2)In Jones v Padavatton(1969)

Mrs. Violet Laglee Jones agreed with her daughter Mrs. Ruby Padavatton that if she would
give up her job in the USA and study for the bar exam in England, the mother would pay her
an allowance of 200$ per month. In 1964 the mother bought a house and varied the
agreement by giving the daughter a part of the house to stay and a part to rent so as to cover
her expenses and her maintenance. In 1967 the parties had an argument and as a
consequence, the mother brought an action for the possession of the house. The mother based
her claim on the allegation that the agreement was not made with the intention of creating a

4 Supra note 2
legal relationship. It was held that there was no intention to create a legal relationship
and gave possession to the mother.

Classification of Offer
There can be many types of offers based on their nature, timing, intention, etc. Let us take a
look at the classifications of offers.

General Offer
A general offer is one that is made to the public at large. It is not made any specified parties.
So any member of the public can accept the offer and be entitled to the
rewards/consideration. Say for example you put out a reward for solving a puzzle. So if any
member of the public can accept the offer and be entitled to the reward if he finishes the act
(solves the puzzle.)

Specific Offer
A specific offer, on the other hand, is only made to specific parties, and so only they can
accept the said offer or proposal. They are also sometimes known as special offers. Like for
example, A offers to sell his horse to B for Rs 5000/-. Then only B can accept such an offer
because it is specific to him.

Cross Offer
In certain circumstances, two parties can make a cross offer. This means both make an
identical offer to each other at the exact same time. However, such a cross offer will not
amount to acceptance of the offer in either case.

For example, both A and B send letters to each other offering to sell and buy A’s horse for Rs
5000/-. This is a cross offer, but it will be considered as acceptable for either of them.

Counter Offer
There may be times when a promise will only accept parts of an offer, and change certain
terms of the offer. This will be a qualified acceptance. He will want changes or modifications
in the terms of the original offer. This is known as a counteroffer. A counteroffer amounts to
a rejection of the original offer.5

Standing Offer
An offer is regarded as a standing offer if it is meant to remain open for a certain amount of
time and can be accepted any time before the deadline. When a company needs a large
quantity of products from time to time, it usually invites tenders for the supply of the
products through an advertisement. Such a tender or offer is referred to as an open,
continuing, or standing tender of offer.
When a party accepts the tender or offer made by the offeror, it does not result in the
formation of a legally binding contract until an actual order is placed. It only means that the
offer or tender will remain open for a specified amount of time and can lead to a binding
contract when the required quantity is ordered. As such, a contract only exists when an order
is placed in accordance with the terms and conditions of the offer.

5 Supra note 3
When a standing offer is accepted, it means an order will be placed with the party who
submitted the tender whenever the products are required, and a distinct contract will be made
for each order.6

Express and Implied Offers

When an offer is expressly communicated by the offeror, it is regarded as an express offer.
The communication of an express offer can be written or verbal. An offer that can be
understood by circumstances of case or the conduct of parties is known as an implied offer.
For example, when a bus transport company operates its bus on a certain route, it is making
an implied offer to transport passengers to a specified location at a certain fare. Also, a public
telephone or weighing machine in a public place offers its service for a certain amount of
money. Such a machine is offering an implied offer.
If you need more information about the different types of offer in contract, you can post your
legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers
to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale
Law and average 14 years of legal experience, including work with or on behalf of companies
like Google, Menlo Ventures, and Airbnb.7

Essentials of a Valid Offer

Here are some of the few essentials that make the offer valid.

1] Offer must create Legal Relations

The offer must lead to a contract that creates legal relations and legal consequences in case of
non-performance. So a social contract which does not create legal relations will not be a valid
offer. Say for example a dinner invitation extended by A to B is not a valid offer.
A valid offer must intend to create legal relations. It must not be causal statement. If the offer
is not intended to create legal relationships, it is not an offer in the eyes of the law. Example:
A invites B to dinnerpartyand B accepts the invitation.B does not turn up at the dinner
party.A cannot sueB for breach of Contract as there was no intention to create legal
obligation. In Farina V. Fickus, (1900) 1Ch 331, a father-in-law casually wrote to his son in-
law that his daughter might have a share in his little savings after him. Son in-law claimed a

6 Types of Offer, available at https://www.upcounsel.com/types-of-offer-in-contract (Visited on May 8,

2020)
7 Ibid
share in the property of his father in-law on the strength of the letter. It was held that it was
only a casual statement in writing which was not meant to create legal relation.

2] Offer must be Clear, not Vague

The terms of the offer or proposal should be very clear and definite. If the terms are vague or
unclear, it will not amount to a valid offer. Take for example the following offer – A offers to
sell B fruits worth Rs 5000/-. This is not a valid offer since what kinds of fruits or their
specific quantities are not mentioned.

3] Offer must be Communicated to the Offeree

For a proposal to be completed it must be clearly communicated to the offeree. No offeree
can accept the proposal without knowledge of the offer. The famous case study regarding this
is Lalman Shukla v. Gauri Dutt. It makes clear that acceptance in ignorance of the proposal
does not amount to acceptance.

4] Offer may be Conditional

While acceptance cannot be conditional, an offer might be conditional. The offeror can make
the offer subject to any terms or conditions he deems necessary. So A can offer to sell goods
to B if he makes half the payment in advance. Now B can accept these conditions or make a
counteroffer.

5] Offer cannot contain a Negative Condition

The non-compliance of any terms of the offer cannot lead to automatic acceptance of the
offer. Hence it cannot say that if acceptance is not communicated by a certain time it will be
considered as accepted. Example: A offers to sell his cow to B for 5000/-. If the offer is not
rejected by Monday it will be considered as accepted. This is not a valid offer.

6] Offer can be Specific or General

As we saw earlier the offer can be to one or more specific parties. Or the offer could be to the
public in general.

7] Offer may be Expressed or Implied

The offeror can make an offer through words or even by his conduct. An offer which is made
via words, whether such words are written or spoken (oral contract) we call it an express
contract. And when an offer is made through the conduct and the actions of the offeror it is an
implied contract.
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.

Bibliography

● Avtar Singh, Law of Contract

● R.K.Bangia, Indian Contract Act
● https://blog.ipleaders.in/definition-essentials-offer-
acceptanc
● https://www.toppr.com/guides/business-
laws/indian-contract-act-1872-part
● https://www.upcounsel.com/types-of-offer-in-
contract