WHAT IS PROPOSAL?

Proposal

The word “proposal” used in Indian Contract Act is synonymous with the term “offer” used
in English law. According to the Indian Contract Act 1872, proposal is defined in Section 2
(a) as “when one person will signify to another person his willingness to do or to abstain
from doing something with a view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal or an offer.

The first part of definition explains that the proposal must be signified or communicated to
the other person .The second part explains that the proposal must be made with an
intention to get the acceptance of other party.

The person making the “proposal” or “offer” is called the “promisor” or “offeror” ,the person
to whom the proposal is made is called is the offeree,

TYPES OF PROPOSAL

Express offer- When the offeror expressly communicate the offer ,the offer is said to be an
express communication of the offer may be made by spoken word ; written word

Implied offer- When the offer is not communicated expressly it is called as implied from the
conduct of the parties or the circumstances of the case.

Specific offer- it means an offer made in to a particular person or a group of person. It can
be accepted only by that person to whom it is made .Communication of acceptance is
necessary in case of specific offer.

General offer- It means on offer which is made to the public in general. General offer
cam be accepted by anyone .if offeree fulfills the terms and conditions, which is given in
offer then offer is said to be accepted by him .Communication of acceptance is not
necessary in case of general offer.

Cross offer- when two parties exchange identical offers in ignorance at the time of each
other’s offer the offer’s are called cross offer. Two cross offer does not conclude a
contract.
Counter offer- when the offeree give qualified acceptance of the offer subject to
modified and variation in the terms of original offer it is said to be counter offer. In the
words an offer made by the offeree in return of the original offer is called as a counter
offer. Counter offer amounts to rejection of the original offer. Legal effect of counter
offer-

1. Rejection of original offer

2. The original offer is lapsed.

3. A counter offer result in a new offer

Cross offer-Occur when two parties send each other offers to one another at the same
time. These offers are exactly or substantially the same .This does not result in a
contract.

Standing Offer

When an offer is allowed to remain open for acceptance over a period of time, it is
called standing, open or continuing offer. Tender for supply of goods is a kind of
standing offer. Standing offer is an agreement between the supplier and the buyer
where supplier agrees to provide the desired goods and services to the supplier as and
when asked at a predetermined price. Standing offer is not a contract .It is only valid for
a set period after which it needs to be renewed.

Standing offers are mostly used when the buyer is ordering the goods very frequently
and wants to get the goods delivered when actually required. It can be used when the
buyer anticipates the future demand of these goods but is unable to identify the exact
demand and hence a standing offer is made. It helps saving the time and cost so that
the buyer can have the goods as when required at a price already set.

For example, an offer to supply 1,000 bags of wheat from 1 st January to 31st December,
in accordance with the orders which may be placed from time to time, is a standing offer
.As and when the orders are placed that amounts to acceptance of the proposal to that
extent . In above stated illustration if an order for the supply of 100 bags of wheat s
placed on 15th January, there is acceptance of the offer to that extent and the offeror
becomes bound to supply those 100 bags of wheat .So far as the remaining is
concerned, this offer can be revoked like any other offer.
Acceptance of a tender for the supply of goods is a kind of standing offer .An
advertisement inviting tenders is merely an invitation for quotation .When the tender is
approved, it becomes an standing offer and results in a binding contact .such an offer
may be revoked or withdrawn before binding contract .Such an offer may be revoked or
withdrawn before the order has been placed. Even though the offer is originally made
open till a particular time, it may be revoked earlier than that, because, the offeror is not
bound to keep the offer subsisting and he may revoke it at any time before its
acceptance.

CASE LAWS

Bengal Coal Co. v Homee Wadia & co.

 (1899) ILR 24 Bom 9

In this case the defendant (Bengal Coal Co.) agreed to supply coal to the plaintiffs
(Homee Wadia & Co.) up to a certain quantity at an agreed price for a period of 12
months, as may be required by the plaintiffs from time to time .The plaintiff placed
orders for the supply of some coal and the same were complied with. Before the expiry
of the said period of 12 months, the defendants withdrew their offer to supply further
coal, and refused to comply with the orders placed thereafter. They were sued for the
breach of contract. It was held that there was no contract between the plaintiff and the
defendant and, therefore, there could be no liability for the breach of contract. There
was simply a continuing offer to supply coal .They were bound to supply coal only as
regards which had already been placed ,but were free to revoke their offer for the
supply of coal thereafter.

Tolhurst v Associated Portland Cement Manufacturers

 (1903), A. C. 414

FACTS: Tolhurst, owner of chalk quarries, entered into a contract for supply of chalk to
an Imperial Co. (herein after Co.) for 50 years which was to take its supplies only from
Tolhurst. It was agreed that Co. would buy from him at least 750 tons of chalk and so
much more as required for whole of its manufacturing purposes at specified
rate, payment to be made in cash. Imperial Co. when became liquidated, assigned the
contract to Associated Co., thereafter giving due notice to Tolhurst. He then brought an
action claiming that he was not bound by the contract with Associated Co. in
substitution with Imperial Co.
Court of Appeal: The contract was non-assignable and parties to contract were
Imperial Co. and Tolhurst only: Tolhurst, while entering into contract, reposed
confidence in creditworthiness and competence of Imperial Co. This ‘credit’ was
material to the formation of contract. Hence, the contract was with Imperial Co. only.

ISSUES:

1) Whether the impugned contract was assignable, and hence, binding on Tolhurst ?

2) Whether there is any need for Imperial Co. to join the suit as assignor?

HELD

1) Only rights and benefits under a contract, and not the liabilities, are assignable
unless the contract is personal in its nature or the rights are made incapable of
assignment either by law or by parties within the contract. Therefore, while determining
whether parties implicitly intended to do away with any such assignment, nature of
contract and surrounding circumstances (like length of duration of contract, persons
engaged in it, etc.) are to be taken into account.

Firstly, there was nothing personal about the contract for sale of chalk from quarries and
respective use by manufacturers. Neither there was any element of personal skill or
personal confidence involved. Secondly, the contract was to last for at least 50 years.
In these circumstances, it was the plain intention of the parties that the rights and
benefits under the contract could be assigned.

2) As a general rule assignor needs to be made a party to the suit by the assignee,
while enforcing rights/ benefits under the assignment. But when assignor is mere name,
as Imperial Co. in present case, without any executive or board of directors, then such
rule can be dispensed with.

UNION OF INDIA VS.MADDALA THATHIAH (1963) INSC 141(9May

DAYAL, RAGHUBAR DAYAL, RAGHUBAR SUBBARAO, K.

The General Manager of that railway, invited tenders for the supply of jaggery to the
railway grain shops.
Paragraph 2 of the tender set out the quantity required and the described dates of
delivery. This note was: "This Administration reserves the right to cancel the contract at
any stage during the tenure of the contract without calling up the outstanding on the
unexpired portion of the contract."
“Under Para 8 the successful tenderer was required to pay security deposit towards
proper fulfillment of the contracts.
Paragraph 9 stated that a formal order for supply would be placed after the security
deposit referred to in paragraph 8 was made .The respondent submitted his tender for
the supply of 14000 maunds as mentioned in the tender, and by the letter dated
January 29, 1948, the deputy general manager accepted the tender stating that the
official order would be placed on the respondent on receipt of the remittance of security.
In his letter dated February 16, 1948, the Deputy General Manager reiterated the
acceptance of the tender subject to the respondent's acceptance of the terms and
conditions printed on the reverse of that letter, under which 3500 maunds each were to
be delivered on March 1, 1,775 March 22, April 5, and April 21,1948 respectively . At
the end of the terms and conditions was a note that the administration reserved the right
to cancel the contract at any stage during the tenure of the contract without calling up
the out standings on the unexpired portion of the contract.

By his letter dated March 8, 1948, the Deputy General Manager informed the
respondent that the balance quantity of jaggery outstanding on date against the order
dated February 16, 1948, be treated as cancelled and the contract closed.

In the suit instituted by the respondent for the recovery of damages resulting from the
breach of contract, the appellant relied ,by way of defence ,on the stipulation in the
contract that the appellant was at livery to terminate the contract at any stage .

Held, that, on the true construction of the contract ,the condition mentioned in the note 2
of the tender or in the letter dated February 16,1948 referred to a right in the appellant
to cancel the agreement for such supply of jaggery about which no formal order had
been passed by the deputy general manager with the respondent and did not apply to
such supplies of jaggery about which a formal order had been placed specifying definite
amount of jaggery to be supplied and the definite date or definite short period for its
actual delivery. Once the order was placed for such supply on such dates, that order
amounted to a binding contract making it incumbent on the respondent to supply
jaggery in accordance with the terms of the order and also making it incumbent on the
Deputy General Manager to accept the jaggery delivered in pursuance of that order.
RAJENDER KUMAR VERMA V.SATE OF MP

The respondents (sate of MP) invited tenders for the sale of Tendu Patta (leaves). The
petitioner (Rajendra Kumar Verma) submitted his tender and also deposited some
security .The tender was to be opened on 9 th April, 1969. Before that date the petitioner
made an application withdrawing his tender and requested that on the stipulated date
the tender be not opened. In spite of the petitioner’s application his tender was opened,
and that being the only tender the same was also accepted. The petitioner refused to
execute the agreement to purchase the leaves. The government sold the leaves to
somebody about Rs 25,000. One of the contentions of the respondent was that there
was a clause in the tender notice, the tender or any could be withdrawn, and therefore
in the present case since the offer has been withdrawn, no contract had arisen between
the parties, and the petitioner could not be made liable. The Madhya Pradesh High
Court observed:

“A person who makes an offer is entitled to withdraw his offer or tender before its
acceptance is intimate to him. The government by merely providing such a clause in
tender notice could not take away that legal right of the petitioner. The fact that the
petitioner had applied for withdrawal of the tender is not denied. It is, therefore, quite
clear that when the tenders opened, there could be no offer by the petitioner and,
therefore, there could be no contract impliedly or explicitly between the parties.”

SURAJ BESAN AND RICE MILL V. FOOD CORPORATION OF INDIA

In this case it was held that a person could withdraw or modify his offer or tender before
the communication of the acceptance was complete as against him. It was also
observed that the government by merely providing a clause to the contrary in the tender
notice could not take away the legal right of a person to revoke the offer. If the last date
for accepting tenders is subsequently declared as a holiday, the date automatically gets
extended to the next working day. Where tender notice had specially contemplated that
after loading technical bid attested copies of documents loading were to be submitted
by bidders before the date of opening of technical bid. As per tender format, attestation
means one by competent authorities and it would not include self attestation. Rejection
of his tender was held proper as petitioner had not filed attested documents as required.

Respondent a bidder had alleged that he was obstructed by certain persons when he
visited office concerned for submitting tender papers. Authorities had conducted inquiry
and found that allegations made by him were correct. Therefore, authorities had
permitted respondent to submit his tender papers after 2 days as intervening two days
being holidays.
Respondent had purchased tender within date mentioned in the notice inviting tender.
Petitioner had failed to establish that for violation of time schedule mentioned in NIT he
had suffered any actual prejudice. Work order issued in favor of respondent was held
not liable to be inferred with.

KRISHNAVENI CONSTRUCTIONS V. THE X.E.N., PANCHAYAT RAJ DARSI

It was held that an offer containing a promise to keep the offer open for a certain period
could be withdrawn unless such a promise supported by consideration. The condition
that a tender cannot be withdrawn before it was accepted is invalid.

NEW GOLDEN BUS SERVICE, BATHINDA, V. STATE OF PUNJAB

The notice inviting tender had no stipulation regarding contract period. Award of
contract to respondent who was lowest bidder, for three year, could not be said to be
illegal. Mere omission of specifying period of contract in NIT would not render entire
tender process vitiated on account of vagueness .Further; NIT providing that vehicle
should not be more than 6 months old. As manufacturing of specified vehicles has been
stopped during relevant time, hence , permitting respondent to substitute said vehicle
with another vehicle having almost same price and category was held not to be arbitrary
. An acceptance with a variation or a condition was not an acceptance. But was merely
a counter proposal .In order to convert a proposal. In order to convert a proposal into a
promise, the acceptance must be absolute and unqualified.

Madho Ram v/s Secretary Of State for India

[1] In this case the plaintiff, Madho Ram, contractor, Lahore Cantonment, instituted a
suit to recover Rs. 37,500 from the defendant, the Secretary of State for India in
Council, by way of damages for breach of contract, entered into by the Supply and
Transport Corps with the sanction of the General Officer Commanding the Lahore
Divisional Area, for the supply of "oils of sorts other than kerosine," deliverable at
Lahore Cantonment, Ferozepore, Multan, Jullindur, and Amritsar, for the year April 1,
1917, to March 31, 1918.

[2] The plaintiff having put in a tender for this year in the prescribed form, the written
sanction of the G.O.C. was obtained "for the period at the rates quoted" in the schedule
to the tender after a "comparative statement" had been submitted to him, which no
doubt showed the rates accepted in the preceding year or years.

[3] The sanction having been duly recorded in the schedule to the tender,
Dickinson v Dodds (1875) 2 Ch D 463

Facts

The defendant, Mr Dodds, wrote to the complainant, Mr Dickinson, with an offer to sell
his house to him for £800. He promised that he would keep this offer open to him until
Friday. However, on the Thursday Mr Dodds accepted an offer from a third party and
sold his house to them. It was claimed that Mr Dickinson was going to accept this offer,
but had not said anything to Mr Dodds because he understood that he had until Friday.
Mr Dodds communicated that the offer had been withdrawn through a friend to the
complainant. After hearing this, Mr Dickinson went to find the defendant, explaining his
acceptance of the offer. The complainant brought an action for specific performance
and breach of contract against the defendant.

Issues:

The issue in this case was whether the defendant’s promise to keep the offer open until
Friday morning was a binding contract between the parties and if he was allowed to
revoke this offer and sell to a third party.

Held

The court held that the statement made by Mr Dodds was nothing more than a promise;
there was no binding contract formed. He had communicated an offer for buying his
house to the complainant and this offer can be revoked any time before there is
acceptance. There was no deposit to change this situation. Thus, as there was no
obligation to keep the offer open, there could be no ‘meeting of the minds’ between the
parties. In addition, the court stated that a communication by a friend or other party that
an offer had been withdrawn was valid and would be treated as if it came from the
person themselves.
 PSDS OF
CONTRACT
TOPIC

STANDING
PROPOSAL
SUBMITTED TO SUBMITTED BY

MR.SARVESH REEYA PRAKASH, 1-D