Proposal under Indian Contract Act
1. Definition of Proposal (Section 2(a))
A proposal is defined under Section 2(a) of the Indian Contract Act as:
“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.”
In simpler terms, a proposal is an offer made by one person (the offeror) to do or not do something, with the expectation that the other party (offeree) will accept or reject the offer.
2. Essential Elements of a Proposal
To constitute a valid proposal, the following essential elements must be present:
Intention to Create Legal Relations: The offeror must have the intention to create a legal relationship. Offers made in casual or social circumstances, such as agreeing to meet someone, are not proposals under the Act.
Clear and Definite Terms: The proposal must be clear, certain, and unambiguous. Vague or indefinite terms do not create a valid offer.
Communication of Proposal: A proposal must be communicated to the other party (offeree), and the offeree must be aware of the offer in order to accept or reject it.
Willingness to Enter into a Contract: The offeror’s willingness to do or refrain from doing something must be evident in the offer.
3. Kinds of Proposal
General Proposal: A general offer is made to the public at large and can be accepted by anyone. For example, if someone offers a reward to anyone who finds and returns their lost property, it is a general proposal.
Specific Proposal: A specific offer is made to a particular person or a group of persons, and can only be accepted by the person or group to whom it is made.
4. Revocation of Proposal (Section 5)
Under Section 5, a proposal can be revoked by the offeror anytime before the acceptance is communicated to him. The revocation must be communicated to the offeree. Once the offer has been accepted, it becomes a contract, and the offeror cannot revoke it.
Time Limit for Revocation: A proposal can be revoked anytime before acceptance, but not after it has been accepted.
Methods of Revocation: A proposal can be revoked by the offeror through:
Direct communication to the offeree.
By a counterproposal or a new offer.
By the lapse of time, i.e., if the offer specifies a time limit for acceptance and the time expires without the offer being accepted.
5. Difference Between Proposal and Invitation to Treat
It’s important to note the difference between a proposal (offer) and an invitation to treat:
Proposal (Offer): A proposal, when accepted, forms a contract.
Invitation to Treat: This is merely an invitation for others to make offers. Examples include advertisements, price tags, or a display of goods in a shop. It is not an offer, and no contract is formed simply by the invitation. The shopkeeper is free to accept or reject an offer made by a customer.
6. Termination of Proposal
A proposal is terminated under the following circumstances:
By Acceptance: The proposal becomes a contract when accepted.
By Rejection: If the offeree rejects the proposal, it ceases to exist.
By Counteroffer: A counteroffer made by the offeree amounts to the rejection of the original proposal and is a new proposal.
By Lapse of Time: If the proposal specifies a time for acceptance, it lapses when that time expires.
By Death or Insanity of the Offeror: If the offeror dies or becomes insane before acceptance, the proposal is terminated.
By Revocation: As discussed earlier, the offeror can revoke the offer anytime before acceptance.
7. Case Law on Proposals
Carlill v. Carbolic Smoke Ball Co. (1893): The case dealt with an offer made to the public (a general offer). The Court held that the advertisement was a valid offer, and when the conditions were fulfilled (the use of the smoke ball), a contract was formed.
Harvey v. Facey (1893): In this case, a statement by the seller that he was willing to sell the property at a certain price was found not to be an offer, but an invitation to treat.
8. Impact of a Proposal (Offer)
Once a proposal is accepted by the offeree, it forms a contract. Until acceptance occurs, the proposal remains an offer, and the offeror can revoke or alter the terms of the proposal.
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