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Meaning of offer or proposal
The Indian Contract Act uses the word proposal. In ordinary contract law writing, proposal and offer are used in the same sense.
Section 2(a) states that a person makes a proposal when that person signifies willingness to do something, or to abstain from doing something, with a view to obtaining the assent of another person. The person making it is the proposer or offeror. The person to whom it is made is the offeree.
Would a reasonable recipient understand that a simple assent will conclude the bargain, or is some further approval or negotiation still expected?
A statement of intention, request for information or invitation to negotiate is not an offer merely because it concerns a possible transaction. The statement must show a present readiness to be bound on sufficiently certain terms.
Essentials of a valid offer
Final intention
The language and context must show present willingness to be bound, not a future plan, estimate or opening position.
Purpose of obtaining assent
The proposal must invite assent. A mere statement of fact or supply of information does not do this.
Definite terms
The subject matter, parties and essential terms must be clear enough for a court to identify the promised obligation.
Communication
The proposal must come to the offeree's knowledge. A person cannot assent to an offer that the person does not know exists.
Capable of acceptance
Acceptance must be able to create a promise without a fresh round of approval from the proposer.
Lawful and possible terms
Even a clearly worded proposal cannot produce an enforceable contract if its object is unlawful or its terms are inherently impossible.
An offer may contain conditions, including a prescribed mode or deadline for acceptance. Those conditions must be communicated before or at the time the contract is formed. A hidden condition cannot ordinarily control the offeree's assent.
Types of offer
| Type | Meaning | Example |
|---|---|---|
| Specific offer | Made to a named person or defined group. | A offers to sell a laptop to B for a stated price. |
| General offer | Made to the public and accepted by a person who knows of it and performs its condition. | A public reward for returning identified documents. |
| Standing offer | Remains open for orders over a period. Each order may create a separate contract. | A supplier's accepted tender to provide stationery when ordered. |
| Express offer | Made through spoken or written words, including an electronic message. | An email offering specified goods at a fixed price. |
| Implied offer | Inferred from conduct and surrounding circumstances. | A transport service inviting passengers to travel on stated fares. |
| Counter-offer | A reply that changes the proposed terms and puts forward a new offer. | B replies, "I will buy, but only at a lower price." |
Identical offers crossing in transit are called cross offers. They do not by themselves create a contract because neither communication is an acceptance of the other.
Communication of an offer
Section 3 recognises communication through an act or omission intended to communicate the proposal or having the effect of communicating it. Section 4 gives the timing rule: communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
Dispatch alone is therefore insufficient. A letter, email or message must reach the offeree in a form that conveys the proposal. If an email enters the correct inbox but an attachment containing all material terms is unreadable, the facts may not establish effective communication of those terms.
Performance counts only when the person knew of the reward offer while performing the required act. Later discovery cannot convert an earlier act into acceptance.
A general offer need not be addressed separately to every possible acceptor. Publication may communicate it to the public, but the particular claimant must still prove knowledge and performance of the stated condition.
Revocation and lapse of an offer
Under Section 5, a proposal may be revoked before acceptance is complete as against the proposer, but not afterwards. The timing rule in Section 4 must therefore be applied whenever acceptance is sent by post or another non-instantaneous method.
Section 6 identifies four statutory modes:
- notice of revocation communicated by the proposer;
- expiry of the prescribed time, or a reasonable time if none is prescribed;
- failure to fulfil a condition precedent to acceptance; and
- death or insanity of the proposer, if the acceptor learns of it before acceptance.
Rejection also ends an offer. A counter-offer ordinarily rejects the original offer and substitutes a new proposal. A mere inquiry, however, may leave the original offer open. The wording of the reply decides which rule applies.
Offer and invitation to offer
An offer gives the recipient the final power to create a promise by acceptance. An invitation to offer only invites the recipient to submit an offer, which the inviter may accept or reject.
| Situation | Usual legal character | Reason |
|---|---|---|
| Goods displayed in a shop | Invitation to offer | The customer offers to buy at the checkout, subject to the seller's acceptance. |
| Online product listing | Usually invitation to offer | Stock, price errors and the website's stated order process may require later acceptance. |
| Notice inviting tenders | Usually invitation to offer | Each tender is an offer for the inviting authority to evaluate. |
| Definite public reward | May be a general offer | Performance of the stated condition can complete acceptance. |
These are starting presumptions, not mechanical labels. The complete words, conduct, commercial setting and stated process must be read together.
Worked problems
Price information
A asks B for the lowest price of a plot. B replies, "Rs 40 lakh." Without language showing willingness to sell, this is likely information, not an offer. A's reply cannot by itself conclude the sale.
Unknown reward
C returns D's lost bag without seeing D's reward notice. C cannot later accept retrospectively because the act was not performed with knowledge of the offer.
Conditional reply
E offers a phone to F for Rs 30,000. F replies, "Agreed for Rs 27,000." This is a counter-offer, not acceptance of E's proposal.
Standing tender
G's tender to supply paper for six months is accepted. The tender normally operates as a standing offer, and each purchase order creates a contract for the ordered quantity.
Landmark cases on offer
Carlill v Carbolic Smoke Ball Co.
[1892] EWCA Civ 1; [1893] 1 QB 256
Facts: An advertisement promised a reward to a person who used the smoke ball as directed and still contracted influenza. Money deposited with a bank showed seriousness.
Rule: A definite advertisement may be a general offer. Performance of its condition may constitute acceptance without a separate notice of acceptance.
Read judgmentLalman Shukla v Gauri Datt
(1913) 11 ALJ 489
Facts:A servant found his employer's missing nephew without knowing that a reward had been announced while he was away.
Rule: Knowledge of the offer is necessary. An act done without such knowledge cannot be treated as acceptance of the reward offer.
Harvey v Facey
[1893] AC 552
Facts: A reply stated the lowest price of property but did not answer whether the owner would sell it.
Rule: A statement of price may supply information without amounting to an offer capable of immediate acceptance.
Read judgmentBhagwandas Goverdhandas Kedia v Girdharilal Parshottamdas
AIR 1966 SC 543
Rule: For instantaneous communication such as telephone, the contract is formed where acceptance is received by the offeror. The decision helps analyse live calls and similar immediate exchanges.
Read Supreme Court judgmentExam answer structure
- State the definition in Section 2(a).
- Identify the exact words or conduct alleged to be the offer.
- Test final intention, certainty, communication and capacity for acceptance.
- Classify the offer where the classification affects the result.
- Apply Sections 4 to 6 if communication, time or revocation is disputed.
- Use the closest case and give a direct conclusion.
Frequently asked questions
What is an offer under the Indian Contract Act, 1872?
Under Section 2(a), a proposal is made when one person signifies willingness to do or abstain from doing something with a view to obtaining the assent of another person.
Is every advertisement an offer?
No. Most advertisements invite customers to make offers. An advertisement may itself be an offer when its terms are definite and show an intention to be bound upon performance, as in Carlill v Carbolic Smoke Ball Co.
Can a person accept a reward offer without knowing about it?
No. The claimant must know of the offer when performing the required act. Lalman Shukla v Gauri Datt is the standard Indian authority for this rule.
When can an offer be revoked?
Section 5 permits revocation before acceptance is complete as against the proposer. Sections 4 and 6 must be applied to determine the exact time and mode of revocation.