Proposal in Business

When one person signifies to another his willingness to do or to abstain from doing anything, with view to obtaining the assent of that other to such act or abstinence he is said to make a proposal.

The first step towards creating a contract is that one person shall signify or make a proposal to the other, with a view to obtaining the assent or acceptance of that another to that act or abstinence. A proposal is then said pt be made. Proposal of the Indian Contract Act is synonymous with the term offer of the English Law.

In order to constitute a contract, a person should offer to do something. This offer must be sufficiently communicated to the person for whom he intends to do something with a view to obtaining his assent to it. The person who makes such an offer or proposal is called Offerer or Proposer. Section 2 ( c ) calls such a person making the proposal the Promisor. The person who accepts the proposal or offers his assent to it is called the Promisee.

The offer made may not be only to obtain the assent to do a particular act but also an assent to abstain from doing a particular act which will also constitute a valid proposal. For example, A promises to pay B Rs 100 a month provided B does not play his tabla every night. A’s proposal or offer to pay Rs 100 is done with a view to obtaining the assent of A not to do something. This is a valid proposal and of it is assented to or accepted by B, it will constitute a contract.

Every contract in order to be valid should begin with proposal. The following essentials must be present to constitute a valid proposal.

Essentials of a Valid Proposal or an offer:

How a valid proposal or offer is made?


1. Beyond expression of willingness, there must be something in the nature of a request.
2. Proposer cannot dictate terms
3. An offer must be intended to create and be capable of creating legal relations. It is necessary that the agreements must have an express or tacit reference to the legal relations between the parties. There must be a common intention of the parties to enter into legal obligations.
4. A mere statement of intention does not constitute a binding promise even though a person to whom it is made acts upon it. For example price lists, catalogue, advertisements, window displays, tenders, invitation by a company to the public to subscribe to its shares, etc are merely statements of intention. They are not regarded as offers but they are an invitation to others to make offers. Every statement that seems to be an offer is not an offer and does not create a legal obligation.
5. The words used must apply it definite persons to create legal relations. The offer must be made to a definite person.
6. The terms of offer must be certain and unambiguous.
7. An offer can be express or implied from the circumstances.
8. An offer must be communicated to an offeree. A person cannot accept an offer unless he knows of the existence
9. An offer may be conditional but the conditions must clearly communicated.
10. the person making it should intend to be bound by it as soon as it is accepted by the other . He should not reserve to himself any further act to be done on his part before he becomes bound by it. If he dies so, then it is an invitation to an offer and not an offer.

Till the offer is accepted there is no contract between the parties and the offer can be withdrawn before it is accepted.