Proposal: What an Offer Is, and What Only Looks Like One
Chapter Six
Syllabus topic 1.2, "OFFER, ACCEPTANCE AND ITS COMMUNICATION"
Pages 24 to 28 of 462
In one line
An offer is a statement that you are ready to be bound if the other person says yes, and a great many statements that look like offers are only invitations to make one.
In the words a student can write in an exam: section 2(a) of the Indian Contract Act 1872 provides 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 to such act or abstinence, he is said to make a proposal. The Act uses "proposal"; "offer" is the English term and the two are used interchangeably. The essential feature is the last limb: the statement must be made in order to obtain the other party's assent, so that assent alone completes the bargain.
Why the law needs the distinction
Commerce is full of statements about price and availability. A shop displays goods with price tags. A newspaper carries an advertisement. A company invites tenders. A builder circulates a brochure. If every one of those were an offer, the maker would be bound the moment anybody said yes, and a shop with one item in stock would be in breach to the hundredth customer through the door.
So the law separates two things: a statement inviting the other side to make an offer, and an offer itself. The first is called an invitation to treat or invitation to offer. It creates no power of acceptance at all. The person who responds to an invitation to treat is the one making the offer, and the person who issued the invitation is the one who accepts or refuses. That reversal decides many problems.
The provision itself
"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."
Section 3 tells you how signifying is done:
"The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it."
Section 9 completes the picture:
"In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied."
Broken down: the four requirements of a valid proposal
- Signified to another person. The willingness must be made known. An unexpressed intention, a note in a diary, a decision not yet communicated, is not a proposal. Section 3 says the signifying may be by any act or omission intended to communicate it, or which has the effect of communicating it, so conduct counts.
- Willingness to do or to abstain from doing anything. Both directions are covered. A promise not to sue, not to compete or not to build is as much a proposal as a promise to sell.
- Made with a view to obtaining the assent of the other. This is the operative limb and the one that separates offers from everything that resembles them. Ask: did the maker intend to be bound if the other simply said yes?
- Certain in its terms. This does not appear in section 2(a) but follows from section 29, which makes agreements void for uncertainty. A proposal whose terms cannot be made certain cannot become a contract.
Proposal: What an Offer Is, and What Only Looks Like One
To these the courts add a fifth, which is not in the Act in terms but which the whole structure assumes: an intention to create legal relations. A social or domestic arrangement is not treated as a proposal at all, which is why an invitation to dinner is not actionable. In India the point is usually reached through section 10's requirement of an agreement and through the absence of consideration, rather than as a separate doctrine, but the result is the same.
Kinds of offer
Express and implied. Section 9. An express proposal is made in words, spoken or written. An implied proposal is made by conduct: a bus running a route holds itself out as ready to carry, a boatman putting out his hand offers to ferry.
Specific and general. A specific offer is made to a definite person and can be accepted only by that person. A general offer is made to the world, and is accepted by anyone who comes forward and performs the condition. It is not an absurdity to say a contract can be made with the world at large: as section 8 provides, performance of the conditions of a proposal is itself an acceptance, so the contract is made with whoever performs. A reward advertised for the return of a lost dog is the standard example.
Cross offers. Two people post identical offers to each other, neither knowing of the other's. There is no contract, because neither statement was made with a view to obtaining assent to the other's proposal, and neither is an acceptance of anything.
Counter offer. A reply that varies the terms is not an acceptance but a new proposal, and it destroys the original offer, which cannot then be accepted. See [Acceptance Must Be Absolute and Unqualified].
Proposal: What an Offer Is, and What Only Looks Like One
Standing or open offer. An offer to supply goods as and when required over a period. Each order placed is an acceptance of that much, and the offer may generally be revoked as to the future.
Offer against invitation to treat: the four standard situations
| Situation | Usual analysis | Who makes the offer |
|---|---|---|
| Goods displayed in a shop with a price tag | invitation to treat | the customer, at the counter |
| Advertisement of goods for sale | invitation to treat | the person who responds |
| Advertisement of a reward, or a general offer with a condition | an offer | the advertiser |
| Auction: the auctioneer's request for bids | invitation to treat | the bidder; the fall of the hammer is acceptance |
| Tender notice inviting tenders | invitation to treat | the person who submits the tender |
| A quotation of the lowest price in answer to an enquiry | ordinarily a statement of price, not an offer | neither, until a proposal is made |
The last row is worth its own sentence, because it is a favourite. If A telegraphs "will you sell me your property, telegraph lowest cash price" and B replies "lowest cash price ninety hundred pounds", B has answered the second question only. He has stated a price. He has not signified willingness with a view to obtaining assent, so there is no proposal for A to accept.
Tenders deserve a note because they recur in Indian problem questions. A notice inviting tenders is an invitation. Each tender submitted is an offer. The acceptance is the award of the contract. It follows that a tenderer may ordinarily withdraw before acceptance, and that the person inviting tenders is not bound to accept the lowest.
A worked example
A furniture showroom displays a dining set with a tag reading "Rs 40,000". Ashok points at it and says "I will take it at that price". The manager says the tag is a misprint and the price is 60,000.
- The display with a price tag is an invitation to treat. The showroom has not signified willingness with a view to obtaining Ashok's assent; it has invited him to make an offer.
- Ashok's statement at the counter is the proposal, section 2(a).
- The manager's refusal means there is no acceptance, so no promise under section 2(b), so no agreement and no contract. Ashok cannot compel a sale at 40,000.
Now change the facts. The showroom publishes a notice: "The first ten customers who present this coupon on Sunday will be sold a dining set at Rs 40,000." Ashok presents the coupon on Sunday and is the third customer.
- This notice is not an invitation but a general offer: it signifies willingness on stated terms with a view to obtaining assent, and it fixes the number so it is certain.
- Ashok's presenting the coupon is performance of the conditions of the proposal, which is an acceptance under section 8, without any separate communication.
- There is a contract, and the showroom is bound.
Proposal: What an Offer Is, and What Only Looks Like One
What it does NOT mean
"An advertisement can never be an offer." It can. The question is always whether the maker signified willingness with a view to obtaining assent. An advertisement of goods at a price is ordinarily an invitation; an advertisement promising a reward on stated conditions is ordinarily an offer, because it is intended to be acted on without further negotiation.
"An offer must be made to a particular person." It need not. A general offer to the world is good, and it is accepted by performance under section 8.
"An offer must be in writing or in words." Section 9 says otherwise. A proposal made otherwise than in words is implied and is equally a proposal.
"Once made, an offer stands until accepted." It does not. Section 6 lists four ways it is revoked, including the lapse of the time prescribed or of a reasonable time. See [Revocation of Proposals and Acceptances].
Quick revision
- Section 2(a): signifies willingness, to do or abstain, with a view to obtaining the assent of the other.
- Section 3: communication by any act or omission intended to communicate, or which has the effect of communicating.
- Section 9: express if in words, implied if otherwise.
- Requirements: signified, willingness either way, made to obtain assent, certain, and made in a context of legal relations.
- Kinds: express, implied, specific, general, standing; cross offers make no contract; a counter offer destroys the original.
- Invitation to treat: shop display, advertisement of goods, auctioneer's call for bids, tender notice, a bare quotation of price.
- Reward advertisements and conditional general offers are offers, accepted by performance under section 8.
Test yourself
1. Define a proposal and identify the words that matter most. Section 2(a): signifying to another a willingness to do or abstain from doing anything, with a view to obtaining the assent of that other. The italicised limb is what separates an offer from an invitation to treat.
2. A shop displays a shirt at Rs 500 and refuses to sell at that price. Any remedy in contract? No. The display is an invitation to treat; the customer's request to buy is the offer, and the shop is free to refuse. There is no acceptance and so no contract.
3. What is a cross offer, and does it make a contract? Two identical offers posted to each other in ignorance of the other. There is no contract, because neither is an acceptance of the other.
Proposal: What an Offer Is, and What Only Looks Like One
4. Can an offer be made to the whole world? Yes. A general offer is accepted by anyone who performs the stated conditions, and section 8 makes performance of the conditions an acceptance.
5. A invites tenders; B submits the lowest. Must A accept it? No. The notice inviting tenders is an invitation to treat and B's tender is the offer. A is not bound to accept any tender, and B may ordinarily withdraw before acceptance.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.