OFFER OR PROPOSAL

 OFFER OR PROPOSAL

Definition of Offer or Proposal

When a person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the ascent of that other to such act or abstinence he is said to make a proposal. -Section 2 (a) of Indian Contract act.

Proposal and offer both are used in the same sense and there is no difference in their meanings. 

(i). The person who makes the proposal is called proposer offeror or promisor.

(ii). The person to whom offer is made is called offer or promisee.

Note: - There will be no agreement, if the proposal is made without the intention of creating legal rights and obligations.

Following are the legal rules or essentials of a valid offer:

1. It may be express or implied:

An offer may be made either by words or by conduct. An offer, which is made by words spoken or written, is called an express offer. The offer, which is made by the conduct of a person, is called an implied offer.

Example:1. M says to N that he will sell his motorcycle to him for Rs.40,000. It is an express offer.

2. A railway coolie carries the luggage of B without being asked to do so B allows him to do so. It is an implied offer.

3. The new Khan Transport Company runs buses on different routes to carry passengers at the scheduled fares. This is an implied offer by the company.

2. It must create legal relation:

The offer must be made in order to create legal relations otherwise, there will be no agreement. If an offer does into give rise to legal obligations between the parties it is not a valid offer in the eye of law.

Example:1. A invites B to dinner B accept the invitation. It does not create any legal relations, so there is no agreement.

2. A offers to sell his watch to B for Rs.200 and B agrees. There is an agreement because here the parties intend to create legal relations.

3. Three friends joined to enter a newspaper competition and agreed to share any winnings. It was held the intended to create legal relations and their agreement was therefore a contract.

3. It must be definite & clear:

An offer must be definite and clear, if the terms of an offer are not definite and clear, it cannot be called a valid offer. If such offer is accepted it cannot create a binding contract.

Example:A has two motorcycles. He offers B to sell one motorcycle for Rs.27,000. It is not a valid offer because it is not clear that which motor cycle A wanted to sell.

4. It is different from invitation to offer:

An offer is different from an invitation to offer. It is also called invitation to treat or invitation to receive offer. An invitation to offer looks like offer but legally it is not offer.

In the case of an invitation to offer, the person sending out the invitation does not make an offer but only invites the other party to make an offer. His object is to inform that he is willing to deal with anybody who after getting such information is willing to open negotiations with him. Such invitations for offers are not offers according to law and so cannot become agreement by acceptance.

Example:1. Quotations, Catalogues of prices, display of goods with prices issue of prospectus by companies are examples of invitation to offer.

2. Display of goods in an auction sale is not an offer rather it is an invitation to offer. The offer will come from the buyer in the form of bids.

5. It may be specific or general:

When an offer is made to a specified person or group of persons, it is called specific offer. Such an offer can be accepted only by the person or persons to whom it is made. A general offer, on the other hand, is one, which is made to public in general and it may be accepted by any person who fulfils the conditions mentioned in it. Both specified and general offers are valid.

Example:1. M makes an offer to N to sell his bicycle for Rs.800, it is a specific offer. In this case, only N can accept it.

2. A announces in a newspaper a reward of Rs.1,000 for anyone who will return his lost radio. It is general offer.

6. It must be communicated to the offeree:

An offer is effective only when it is communicated to the offeree. If an offer is not communicated to the offeree it cannot be accepted. Thus an offer, which is not communicated, is not a valid offer. It applies to both specific and general offers.

Example:A without knowing that a reward has been offered for the arrest of a particular criminal, catches the criminal and informs the police. A cannot recover the reward as he was not aware of it.

7. It should not contain negative condition:

An offer should not contain a condition the non-compliance of which may be assumed as acceptance. An offeror cannot say that if acceptance is not communicated up to a certain date, the offer would be presumed to have been accepted. If the offeree does not reply, there is no contract, because no obligation to reply can be imposed on him, on the ground of justice no agreement because such condition cannot be imposed on the offeree. It is only a one sided offer.

Example:A wrote to B offering to sell his book for Rs.500 adding that if he didn’t reply with in 5 days, the offeree would be presumed to have been accepted. There is no agreement b/c such condition can’t be imposed on the offeree. It is only a one sided offer.

8. It may be subject to any terms & conditions:

An offeror may attach any terms and conditions to the offer he makes. He may even prescribe the mode of acceptance. There is no contract, unless all the terms of the offer are accepted in the mode prescribed by the offeror. It must be noted that if the offeror asks for sending the acceptance by telegram and the offeree sends the acceptance by letter, and the offeror may reject such acceptance.

Example:A asks B to send the reply of his offer by telegram but B sends reply by letter, A may reject such acceptance because it is opposed to the prescribed mode of communication.

9. It must not contain cross offers:

When two parties make similar offers to each other, in ignorance of each other’s such offers are called cross-offers. The acceptance of cross-offers does not result in complete agreement.

Example:On 23rd December 2007, A wrote B to sell him 100 ton of iron at Rs.10,000 per ton. On the same day, B wrote to A to buy 100 tons of iron at Rs.10,000 per ton. There is no contract between A & B because the offers wee similar and made in ignorance of the other and so there is no acceptance of each other’s offer.