Write a short note on the Proposal and invitation to the proposal.

Question: Write a short note on the Proposal and invitation to the proposal. [UPJS 1997]

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Answer

Section 2(a) of the Indian Contract Act, 1872 defines proposal as it states:

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.

According to section 2(c), the person who makes the proposal is called the promisor or “offeror”, the person to whom it is made is called the proposee or “offeree” and when he accepts it, he is called a “promisee”.

The first part of the definition of “proposal” lays emphasis upon the requirement that the willingness to make a proposal should be “signified”. To signify means to indicate or declare. In the traditional language of the law of contract, it means that the proposal should be communicated to the other party. The process of making a proposal is completed by the act of communicating it to the other party.

To have made a proposal, a person must have:

1. signified to another his willingness to do or to abstain from doing anything; and
2. has done so with a view to obtaining the assent of that other to such act or abstinence.

The offeror, therefore, manifests or makes known his intention of doing or not doing something, and he does so with the purpose of getting the offeree to assent to it.

The proposal must be sufficiently definite to permit the conclusion of the contract by mere acceptance. Since a contract is concluded by the mere acceptance of an offer, the terms of the intended or proposed agreement must be indicated with sufficient definiteness in the offer itself.

A proposal must be distinguished from a mere statement of intention which is not intended to require acceptance. The latter may be merely a statement of intention, or an invitation to make offers or to do business. Such a statement not intended to be binding is an invitation to offer.

The distinction between an offer and invitation to offer depends upon the intention of the person making it, the intention that he would be bound no sooner the offeree signifies his assent to it. It must require nothing more to convert it into a promise except acceptance.

It manifests a final declaration of readiness to undertake an obligation upon certain specified terms and conditions, leaving the offeree the option of acceptance or refusal. So long as one of the parties to the transaction could back out of it at his choice, there can be no binding or concluded contract between the parties, although they have an agreement on the material terms.

The person may expressly provide that he would not be bound by the other person’s assent; or his statement may contain words or expressions which negate the intention; and where this intention is not clear, the court may take into account the words and expression used in the statement, the surrounding circumstances, and also the consequences of holding it to be an offer.

Where a person intends, actually or objectively, as stated above, to be bound without further negotiations by a simple acceptance of his terms, his expression will be an offer or proposal. An offer is distinct from statements short of being an offer made during negotiations, an expression of intention, and an invitation to offer.

For example- A letter written to a supplier to purchase goods in response to a telegram received informing the rates of the goods is an offer and not an acceptance, so as to confer jurisdiction on the court at the place where such letter is posted.

As the distinction between a proposal or offer and an Invitation to the proposal was made in the leading case of Harvey v. Facey [1893], the court observed that:

An offer has to be distinguished from an invitation to receive offers. The latter is an offer to negotiate or may be considered an offer to receive offers whereas an offer is the final expression of willingness by the offeror to be bound by his offer. If a party, without expressing his final willingness, proposes certain terms on which he is willing to negotiate, he is only making an invitation to the other party to make an offer on those terms.

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Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
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8. Law of Contract Mains Questions Series Part-VIII
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