Contracts are such an important part of every one’s life that one may be getting into at least one contract in a day. Transactions as simple buying a pen from a shop involve a contract between the shopkeeper and the customer. The starting point of a contract is usually a proposal.

Proposal

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When a person signifies to another his willingness to do something or abstain from doing anything thing, with the view of obtaining assent of the other party to such ac or abstinence. He said to make a proposal.    (Section 2(a) of Indian Contract Act 1872) . When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise (Section 2(b) of Indian Contract Act 1872).

It is to be noted that only willingness signified with the intent of it being agreed to by another party shall constitute a proposal. No general statements or statements that don’t give a say to the other party to accept or deny will be a proposal. For example, ‘I am willing to sell my book to you for Rs. 3000’ is a proposal. But ‘I wish to win a prize’ is not. This is because, in the second statement, there is no scope for acceptance or denial of the person to whom the statement is made is present.

An offer is term synonymous to proposal in English law.

Important points

1) Legal relations – For an offer, to lead to a contract, it is pertinent that there is intention to create a legal obligation. Promises made to anyone without an intention to bring about a legal obligation shall not be a proposal or offer. 

2) General statements – A general statement made during the course of conversation shall not be an offer. For example, If A while conversing with B says that A wants to get his house painted and is willing to spend Rs 10,000 for it, this shall not constitute an offer as  it was a general statement and not directed specifically to B asking him to paint his house. So, if B simply goes and paints A’s house without informing him, A is not legally bound to pay him the amount as his there was no offer made specifically to B by A.    

3) Communication of offer- Communication of an offer is necessary for offer to complete. Offeree must be communicated of the offer and based on that offer should the offeree act in order to make the offeror legally bound. For example: S puts up a notice outside his house stating that whoever finds his dog shall be awarded Rs. 1000. P, not aware of this notice, finds S’s dog and hands it back to it. In this case, S is not liable to pay P the amount as the offer was communicated to him.  

Counter offer

It is perhaps common that an offer is replied with a counter offer. For example, A signifies his willingness to sell his table to Mr. Z for Rs 7000. Mr. Z signifies that he is willing to pay Rs. 6000. At this instance, this is a new offer made by Mr. Z. This is known as counter offer. Counter offer in a way switches the positions of the initial offeror and offeree giving the choice of acceptance or denial to the latter.  

Invitation to offer

Every statement that seems to be an offer may not necessarily so. The most commonly confused example is that of prices quoted in the price tags. So, a dress from a shop, with price quoted as Rs 100 is not an offer. If a customer is willing to purchase it and approaches the shopkeeper, such a customer is the offeror and the shop keeper is the offeree. The shop keeper has the choice of accepting or not accepting the offer. This is because the dress displayed along with the price is merely an invitation to offer.

Auction sales

In an auction sale, the offer comes from the bidder. It is upon the auctioneer to accept or reject it. The announcement or the notice of auction is merely invitation to offer.