Introduction

The first thing for creating a contract is a valid proposal or offer. The term offer has been used in the English law and the term proposal has been used in Indian Law.

• Section 2(a) of the Indian Contract Act, 1872 (ICA) defines proposal.

Section 2(a) of ICA

• This section states that 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 person to such act or abstinence, he is said to make a proposal.
• The person making the proposal is called the Promisor and the person accepting the proposal is called the Promisee.

Essential Conditions of a Valid Proposal

• There must be at least two parties, one making the proposal and the other agreeing to it.
• Expression of willingness to do or abstain from doing to obtain other’s assent.
  • A proposal has the following ingredients:
    • One person signifies to another.
    • His willingness to do or abstain from doing anything.
    • With a view to obtaining the assent of that other.
  • A casual inquiry is not a proposal.
• Intention to Contract
  • 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.
• Express or Implied Contract
  • Section 9 of ICA provides that a valid proposal may be made by words (express offer) or by conduct (implied offer).
• Certainty of Offer
  • The terms of the offer must be certain and not vague.
• Communication of Offer
  • The proposal must be communicated to the other party.
  • If the proposal has not yet been communicated, even if somebody acts according to the terms of the proposal, he cannot be deemed to be the acceptor of that proposal.
  • Communication is necessary whether the offer is general or specific.

Kinds of Proposals

• General Proposal – This proposal is made to the public or world at large but the contract is made only with that person who comes forward and performs the conditions of the proposal.
• Specific Proposal – This proposal is made to a specific or an ascertained person.
• Cross Proposal– When two parties make identical proposals to each other, in ignorance of each other’s proposal, the proposals are considered as Cross Proposals. In such cases there is no complete agreement.
• Counter Proposal – This proposal is an answer given to an initial offer. A counter proposal means that the original offer has been refused and replaced by another. It provides three choices that is to accept, refuse, or make another offer.

Invitation to Proposal/Offer

• Where a party, without expressing his final willingness, proposes certain terms on which he is willing to negotiate, he does not make a proposal but merely invites the other party to make a proposal on those terms.

Case Laws

• In the case of Pharmaceutical Products of India Ltd. v. Gwalior Chemical Works Ltd. (1960), it was held that a price list is an invitation to offer and not an offer or proposal. The court held that a contract is only formed when an offer is made by one party and accepted by the other.
• In the case of Fisher v. Bell (1961), it was held that a display of goods in a shop window or on a shelf is generally an invitation to offer and not an offer. The customer’s offer to purchase the goods at a certain price would constitute a proposal, and the shop owner’s acceptance of the proposal would form a binding contract.
• In the case of Balfour v Balfour (1919), the English Court of Appeal held that a social or domestic agreement, made without any intention to create a legal relationship, does not give rise to a binding contract.
• In the case of Lalman Shukla v. Gauri Dutt (1913), it was held that in order to constitute a contract, there must be acceptance of a proposal and there can be no acceptance unless there is knowledge of the proposal