Proposal or Offer: Meaning, Legal Rules and Revocation

An essential piece of legislation, which was passed in 1872, is known as the Indian Contract Act. It is responsible for regulating the creation and execution of contracts in India. The notions of proposals & offers, that serve as the basis for the formation of legally binding agreements are at the core of this legal system. We are going to dig into the complexities of proposals as well as offers following the Indian Contract Act. We will investigate their meanings, the essence of these terms, and the legal ramifications that they have. The words ‘proposal’ and ‘offer’ are synonymous with each other and are used interchangeably.

Geeky Takeaways:

• A Contract is initiated when an offer is made by one party to another.
• To enter into an agreement, such an offer must be accepted.
• The person who is making the offer is known as the “offeror” or the “promisor”.
• Likewise, the person accepting such an offer is known as the “promisee” or the “acceptor”.

What is Proposal or Offer?

Section 2 (a) of the Indian Contract Act, 1872 defines a ‘Proposal’ as “when one person signifies his willingness to another 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”.

In simple words, a Proposal is defined as a statement of one person’s desire to engage in a contract with another person, with the knowledge that the other person’s acceptance of the proposal would form a binding agreement.

Legal Rules Regarding a Valid Offer

1. Expressed and Implied Offer: The term “express” refers to offers that are conveyed via words or actions, whereas the term “implied” refers to offers that are implied from the behaviour or circumstances of the individuals involved.

2. Certainity: There must be clarity, certainty, and the ability to create a legally enforceable agreement in order for an offer to be considered appropriate. The offer can be considered invalid if the terms are unclear or confusing.

3. Communication of Offer: When it comes to the awareness of the person to whom the offer is made, an offer is regarded to be full. This is stated in section 4, which contains the communication of an offer. The offeror is responsible for ensuring that the offer is delivered to the offeree through a legitimate form of communication.

4. Invitation: Advertisements, displays of products, and announcements of auctions are often seen as invitations to treat rather than offers. This is because invitations to treat are more informal than offers. They provide an invitation to clients to make offers, and the seller chooses whether or not to accept those offers.

5. Intention of the Offeror to Be Bound [Section 2(b)]: In order for an offer to be considered legitimate, the offeror must have the intention of establishing legal ties. It is common for social or domestic agreements to lack this aim, and as a result, they are not legally enforceable.

6. Communication of Revocation (Section 5): The offeree must be informed of the revocation of an offer before it can take effect. The offeree must be aware of the revocation before it may take effect.

7. Two Identical Cross Offers do not make a Contract: Cross offers are when two parties make identical offers to each other. Such offers do not constitute acceptance of one’s offer by the other and as a result, there is no completed agreement.

Lapse and Revocation of an Offer

In the event that the interested party does not submit an acceptance within a reasonable amount of time, the offer will expire. An offer lapses or an offer becomes invalid (i.e., comes to an end) in the following circumstances:

1. Lapse of Time: In the event that the offer provides a time restriction for acceptance, the offer will expire if it is not accepted within the specified period that has been specified. Hence, an offer lapses if the communication has not been given within a specified period of time.

2. Failure of a Condition: If the offer is contingent upon the fulfilment of a certain condition, and that condition is not met, the offer may be considered null and void instead. This results in the revocation of an offer.

3. Death or Insanity: The offer is null and invalid in the event that either the person making an offer or the person receiving an offer passes away or goes lunatic prior to acceptance.

4. Offer Lapses by Revocation: The act of withdrawing or cancelling an offer by the person who made the offer prior to the offer being accepted is referred to as revocation. Unless the offer is irreversible, the person who made the offer retains the authorization to withdraw the offer at any point prior to its acceptance.

5. Revocation by Communication: Revocation must be communicated in order to be effective. The revocation will take effect once it is conveyed to the person who was offered the position. It is possible that a legitimate contract will not be established if the offeree accepts the offer during the time that they are not informed of the revocation. It is possible for the offeror to notify the terms of revocation either directly or via a trustworthy third party.

Conclusion

It is essential for everybody who is engaged in contractual agreements to have a thorough understanding of the complexities in proposals and offers in accordance with the Indian Contract Act, 1872. By adhering to the legal principles that are described in the Act, it is possible to guarantee that contracts are made in a way that is fair, transparent, and enforceable. This helps to build a solid legal foundation enabling commercial transactions in India.

Frequently Asked Questions (FAQs)

1. What exactly is meant by the term “Proposal” as per the Indian Contract Act, 1872?

Answer:

Section 2 (a) of the Indian Contract Act, 1872 defines ‘Proposal’ as “when one person signifies his willingness to another to do or to abstain from doing anything, with a view to obtaining the assent of that other to such an act or abstinence, he is said to make a proposal”.

2. Is it possible to make an offer without explicitly stating it, or is it always necessary to do so in writing?

Answer:

Offers may be made in several different ways. They can be expressed verbally or via actions, or they can be inferred from the actions or circumstances of the individuals involved.

3. As per the provisions of the Indian Contract Act, are advertising deemed to be offers?

Answer:

No, advertising is not regarded to be an invitation as per the provisions of the act. They provide an invitation to clients to make offers, and the seller chooses whether or not to accept those offers.

4. What factors affect the period for acceptance, and is it possible for an offer to expire?

Answer:

If an offer is not accepted within the period stated or, if no time is specified within a reasonable amount of time, then the offer is said to have expired. A time range for acceptance might be specified by the person who made the offer.

5. When it comes to making proposals, is it possible that electronic communication, such as emails, might be regarded as valid?

Answer:

The provisions of Indian Contract Act does acknowledge the use of technology in commercial relationships by recognizing electronic communication as a legal way of making offers.

6. Can a condition be placed on an offer?

Answer:

Offers can be conditional, which means that they are dependent on the occurrence or non-occurrence of a certain event for their fulfillment. When the requirement is satisfied, only then does the offer become legally binding.