The proposal under Indian Contract Act

According to Section 2(a) of the Indian Contract Act, 1872, “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”.
Examples
1. A company (A) offers to sell its products to another company (B) for a certain price. The offer is
made in writing and sent via email to company B. This offer is a proposal, and if company B
accepts the offer, it becomes a binding contract.
2. A person (A) offers to sell their car to another person (B) for a certain amount. The offer is made
orally during a conversation between the two parties. This offer is also a proposal, and if person
B accepts the offer, it becomes a binding contract.
3. A construction company (A) submits a proposal to a government agency (B) for building a new
bridge. The proposal includes the details of the project, such as the cost, timeline, and
specifications. This proposal is an offer to enter into a contract with the government agency (B),
and if the agency accepts the proposal, it becomes a binding contract.

Essentials of a valid offer

a. An offer must be one to give rise to legal consequences.-To constitute an offer, offeror
must intend to create legal obligation.
Where such intention is lacking, the agreement is not a contract. Also, where an agreement
specifically mentions that it shall not be subject to legal jurisdiction, there is no contract between
the parties.
Social invitations are examples of offers made without the intention of creating legal obligations.
For example: if A invites B to picnic and fails to come or if A invites B for a movie show but
forgets to come at the stipulated date or time, in such cases, B cannot claim compensation for
expense and inconvenience as there was no intention to create a legal obligation. Thus, an
agreement to go for a walk, or an invite for a dinner, cannot be enforced in a court of law.
Balfour v. Balfour (1919) KB
In this case, a husband promised to pay 30 pounds to his wife every month. On his failure to pay
the same, the wife sued him for the recovery of amount. The court held that she could not
recover as the agreement did not create any legal relationship and there was never a contract
between them.
Offers made in jest or excitement cannot be construed as offers as they lack contractual intention.
Weeks v. Tybold (1604) , the defendant in the course of a casual conversation said that he
would give 100 pounds to anyone marrying his daughter with his consent. Subsequently, he was
sued for the amount , to which the court observed that such general words spoken to excite the
suitors could not be taken as seriously intended.

b. The terms of the offer must be definite or capable of being made definite.-A proposal
must be definite and specific in its terms, and it should be communicated to the other
party with the intention of obtaining their acceptance. Once the other party accepts the
proposal, it becomes a promise, and the terms of the contract bind the parties. However,
if the terms of an offer are uncertain, it cannot be accepted.
 In Taylor v. Portington, 1855, A agreed to take B’s house on rent for three years at the rent
of £85 per annum provided the house was put into through repair and the drawing rooms
were decorated to present style. Here the expression ‘present style’ was held to be ‘vague’
as ‘present style’ may mean one thing to A and another to B. the Court observed that
when the terms of an offer are uncertain and vague, the agreement is void.
c. An offer must be distinguished from an invitation to treat( offer)

What is an invitation to offer?

An invitation to offer is a preliminary communication that invites or encourages someone to
make an offer or proposal, rather than being an actual offer itself. It is an invitation to negotiate
or make an offer, which may or may not result in the formation of a contract.
In simple terms, an invitation to offer is an invitation to commence negotiations or discussions,
and it does not create a legal obligation to accept any resulting offer.
Examples of an invitation to offer include advertisements, price lists, catalogues, and displays of
goods in a shop window or online store. These do not constitute a binding offer, but rather an
invitation to customers to make an offer to purchase.
For example, a shop owner displaying goods in their store window is an invitation to customers
to make an offer to purchase those goods. 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.
Landmark cases dealing with invitations to treat/offer
Pharmaceutical Products of India Ltd. v. Gwalior Chemical Works Ltd. (1960)
In this case, the court held that a price list is an invitation to treat 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.
Fisher v. Bell (1961)
This case established the principle that a display of goods in a shop window or on a shelf is
generally an invitation to treat 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 this case, the defendant shopkeeper displayed in his shop window a
flick knife accompanied by a price ticket displayed just behind it. He was charged with offering
for sale a flick knife, contrary to s. 1 (1) of the Restriction of Offensive Weapons Act 1959.
The issue was whether the display of the knife constituted an offer for sale (in which case the
defendant was guilty) or an invitation to treat (in which case he was not).

Harvela Investments Ltd. v. Royal Trust Co. of Canada (1986)

This case established the principle of the “invitation to tender,” which is a process by which a
party invites potential contractors to submit bids for a project. The court held that an invitation to
tender is not an offer, but rather an invitation to submit offers.
Harvey v Facey (1893)
In this case, the plaintiff (Harvey) telegraphed the defendant-owner (Facey) asking if he would
sell certain property known as Bumper hall Pen and, if so, at what price. The defendant replied
with a telegraph that simply stated the lowest price (900 pounds)that he would accept for the
property. The plaintiff then claimed that the defendant had made an offer to sell the property at
that price, which he had accepted by his subsequent telegraphs.
 The court, however, held that the defendant’s telegraph was not an offer to sell the property, but
rather a mere statement of the lowest price he would accept. The court held that the defendant
had not made any offer, and therefore there was no contract between the parties.
The court further explained that an invitation to treat is not an offer, but rather an invitation to
commence negotiations or discussions. The court held that the defendant’s telegraph was an
invitation to treat, and not an offer to sell the property.
Pharmaceutical Society of Great Britain v. Boots Cash Chemists Ltd. (1952) QB

Mere exposure of goods with a price-tag for sale by a shopkeeper indicates to the public that he
is willing to treat but does not amount to an offer to sell. The Contract will arise only when the
offer is made by the customer and accepted by the shopkeeper. No customer can force the
shopkeeper to sell the goods at the price mentioned in the tag.

d. Communication of offer is necessary -Every offer must be communicated to the

offeree. An offer when accepted results in a contract. An offer can be accepted only after
it comes to the knowledge of the offeree. Sec. 4 states, “The communication of proposal
is complete…..” Lalman Shukla v. Gauri Dutt.(1913) The case examines the existence
of a contract in a situation where there is no acceptance of the offer made by the offeror.
The legal position is that an offer alone does not lead to the creation of legal rights.
Legal rights come into existence only after the offer has been communicated and
accepted by the offeree. In this case, the plaintiff had no knowledge about the offer and
didn’t give any acceptance to the offer. There was no contract between the parties and the
plaintiff was held not entitled to get the reward.

Difference between a Contract and a Tort

Law of Torts and Contract Law are two distinct branches of civil law that deal with
different types of legal issues. Contract Law is concerned with the rights and
obligations arising from agreements between parties whereas Tort Law deals with
civil wrongs that cause harm to individuals voluntarily or involuntarily. Some of
the key differences between Tort Law and Contract Law:
1. Nature of the Relationship: Contract Law involves a consensual relationship
between parties, where one party promises to perform a certain obligation in
exchange for something from the other party. On the other hand, a Tort deals with
non consensual relationship where a party’s actions or omissions result in harm to
another person.

2. Basis of Liability: In Contract Law, the parties are liable for the breach of the
terms of the agreement. In other words, duty is based on the privity of contract and
 each party owes duty only towards the other contracting party. For example: A and
B enter into a contract. A’s duty is towards B and B only. Similarly, B’s duty under
the contract lies only towards A and no other person. This explains that a stranger
to contract cannot sue. On the other hand, in Tort Law, the liability is based on the
breach of a legal duty fixed by law towards others. Duties imposed by law of Torts
are not towards any specific individual or individuals but they are towards the
world at large. For example, I have a duty not to defame or assault anyone.
Although, even in a tort only that person will be entitled to sue who suffers damage
by the breach of the duty. For, instance, anyone who is defamed by me is entitled
to bring an action against me for the tort of defamation.
3. Motive: In a contract, motive for a breach of contract is often taken into
consideration, whereas in a tort, motive for breach of duty is immaterial.

4. Nature of right: A breach of Contract is an infringement of a right in personam,

i.e., a right available only to a definite person, the other contracting party. In a tort,
there is a violation of right in rem i.e., a right vested in some determinate person
and available against the whole world. For example: I have a right to peaceful
possession of my property, no one is allowed to trespass it. I am entitled to sue
anyone who trespasses on my property.

5. Damages: In Contract Law, the damages are generally ‘liquidated’, i.e. where the
sum payable by way of damages is predetermined. It is limited to the losses
suffered as a direct result of the breach of the agreement. In an action for Tort,
damages are always ‘unliquidated’, that is , when the amount payable is not
predetermined by the parties and the court is at liberty to exercise its discretion as
it thinks just as per the facts and circumstances of each case. Here, the damages
can include compensation for various types of losses, such as physical and
emotional harm, damage to property, loss of income, and more.
6. Standard of Care: In Contract Law, the standard of care is usually defined by the
terms of the agreement. In Tort Law, the standard of care is usually based on what
a reasonable person would do in similar circumstances.
7. Remedies: In Contract Law, the remedies are usually limited to specific
performance of the agreement, damages, or termination of the agreement. In Tort
Law, the remedies can include compensation for the harm caused, injunctions to
prevent further harm, and more.

Cross offers

What are cross offers?

Where two persons make identical offers to each other, and both such
persons do not know about each other’s offer, then such offers are
known as cross-offer. The essentials of a cross offer are as follows:

 Same offer to one another: The first pre-requisite of a

cross offer is that two or more persons should make
similar offers with the same details.
 Without knowledge: Such identical offers must be
made in ignorance of the offer made by the other party.
 The terms and conditions: The terms and the object of
the offers must be the same. A set of offers would be
considered to be cross offers only when the terms and
conditions as well as the object of the offers are the
same. If not, then such offers cannot be called a cross
offer but a counter offer.
Thus, When the offers made by two persons to each other containing similar
terms of bargain cross each other in post, they are known as cross offers. A cross
offer does not mean acceptance of the offer. No binding contract is
created.

For example: A offers to sell his horse for Rs. 20,000 through a letter sent by post to
B. On the same date, B also writes to A making an offer to purchase A’s horse for
Rs. 20,000. When A or B send their letters, neither knew about the offer being made
 by the other party. In these cross offers, even though both the parties intended the
same bargain, there is no contract between A and B. A contract could arise only if
either A or B having knowledge of the offer had accepted the same.

Illustration: A from Delhi by a letter offers to sell his house to B of Bombay for Rs.
10 lakh. At the same time, B also makes an offer to A to buy A’s house for Rs. 10
lakh. Both the parties made an exact offer to each other without knowing about the
offer being made by the other. The two letters cross each other. There is no
concluded contract between A and B because both the parties had only made a cross
offer.

Tinn V. Hoffmann
A wrote to B expressing his willingness to sell 800 tons of iron at 69 sterling per ton. On the
same day, B also wrote to A offering to buy 800 tons of iron at the same rate of 69 sterling per
ton. The two letters crossed each other in post. B brought an action against A for the supply of
iron contending that a valid contract had been created against the two parties. The court held
that in this case there were only cross offers and since the offer of neither of the parties had been
accepted by the other, there was no valid contract between the parties.

An offer is a sign of willingness. On acceptance, it becomes a promise. Both the offer and
acceptance must be communicated. Cross offers can never lead to a valid contract as they lack all the
essential ingredients. A cross offer is made when both the parties make identical offers to each other
without knowing that the other has made a similar offer. It lacks acceptance and communication.
Thus, it does not form a valid contract. The concept of cross offers is not explained within the Indian
Contract Act but has been developed over the years through judicial precedents.

 Specific and General Offers

When an offer is made not to a certain person but to the public at large, it is known
as General offer. An offer need not always be made to an ascertained person but it is
necessary that an ascertained person should accept it.
For instance, an offer to give reward to anyone who finds a lost jewel or a pet, is a
general offer. The finder can successfully claim the reward. But the position will be
different if the finder has no knowledge of the reward. Unless the person performing
those conditions has got the knowledge of the offer, there is no question of his act
amounting to acceptance. Lalman Shukla V. Gauri Dutt (1913) All, it was held that the
servant was not entitled to claim the reward because it came to his knowledge after he
had discovered the boy which he was obliged to do as a servant.
 Acceptance of general offer: Section 8: Performance of the conditions of a proposal …
is an acceptance of the proposal.
 Contract is complete: The general offer though is made to the public at large, the
contract is concluded only with that person who acts upon the terms of the offer.
Carlill V. Carbolic Smoke Ball Company( 1893) Q.B. , Where an offer is made to the
whole world, acceptance of the offer and performance of the condition will be sufficient
for making it an enforceable contract. It was held that the advertisement being a general
offer made to the whole world had ripened into a contract with the plaintiff (Mrs. Carlill)
by her act of performance of the required conditions and thus accepting the offer. She
was entitled to claim the reward.

 Standing, Open or Continuing Offer

An offer which is allowed to remain open for acceptance over a period of time is known
as a standing, open or a continuing offer.
For example, an offer to supply 2000 bags of cement in accordance with the orders which
may be placed from time to time within a year or six months, is a standing offer. As and
when the orders are placed that amounts to acceptance of the offer to that extent resulting
in a binding contract.