Fundamentals of Business Laws and Business Communication · Essential Elements of a Contract, Offer and Acceptance

Offer or Proposal and Its Legal Rules

Updated 10 October 2026 · Fact-checked

An offer (proposal) is a person's willingness to do or not do something, shown to another, to get that person's assent. To solve questions, check the legal rules: it must be communicated, certain, meant to create legal relations, and different from a mere invitation to treat.

Understand Offer or Proposal and Its Legal Rules

Every contract starts with an offer. The person making it is the offeror (promisor). The person receiving it is the offeree. Under the Indian Contract Act, 1872, the word used is proposal. It means you show your willingness to do or not do something, so that the other person agrees to it.

An offer can be express (in words, spoken or written) or implied (from conduct). A bus running on its route is an implied offer to carry passengers. An offer can be made to one person or to many. An offer to a specific person can be accepted only by that person. A general offer is made to the public at large. Anyone who fulfils its conditions can accept it. In the well-known Carlill v Carbolic Smoke Ball Co. case, a company offered a reward to anyone who used its smoke ball as directed and still caught influenza. The court held that Mrs Carlill, who performed the conditions, could claim the reward. Performing the condition is acceptance, so no separate notice is needed.

Other kinds of offer you should know: a cross offer (two parties send identical offers to each other, each unaware of the other, which does not make a contract), a counter offer (a changed reply, which rejects the original offer) and a standing (open or continuing) offer (an offer that stays open for acceptance over a period, such as a tender to supply goods as and when needed).

The key rules are these. The offer must be communicated to the offeree, because a person cannot accept what they do not know of. Its terms must be certain, not vague. It must intend to create legal relations, so a social invitation is not an offer. A statement of price or an advertisement is usually only an invitation to treat, which invites others to make an offer. Goods on a shelf, a catalogue, a price list, an auction call for bids and a tender notice are invitations to treat. The customer, bidder or tenderer makes the offer and the other side accepts. In a tender, the bid is the offer. A tender to supply goods as and when required is a standing (open) offer. It remains open for the stated period, and each order placed by the buyer is an acceptance that creates a separate contract. An offer must also not impose a duty to reply: you cannot say that silence will count as acceptance. Finally, an offer is different from a mere statement of intention or an enquiry.

Key formulas to remember

Meaning of proposal: Proposal = willingness to do or not do something + to obtain the assent of another; This is the Section 2(a) idea. The person making it is the offeror (promisor).
Rule of communication: Offer is complete only when it comes to the knowledge of the offeree; Acceptance without knowledge of the offer is not valid.
Offer vs invitation to treat: Offer = final willingness, acceptance forms a contract; Invitation to treat = invitation to others to make offers; Shop displays, catalogues, price lists, auction calls and tender notices are invitations to treat. The bid or tender submitted is the offer. A tender to supply goods as needed is a standing (open) offer: it stays open for the stated period, and each order placed is an acceptance that creates a separate contract.
General offer: General offer: made to the world at large; accepted by performing the conditions; Carlill v Carbolic Smoke Ball Co. is the standard case.
Counter offer: Counter offer = rejection of original offer + new offer; The original offer lapses and cannot be accepted later unless renewed.
Legal relations and certainty: Valid offer = communicated + certain + intended to create legal relations + not a mere invitation; Use this as a checklist.

How to solve Offer or Proposal and Its Legal Rules questions

For any question on offer, work through the same checklist. It stops you from being tricked by the wording of the options.

1Identify who is the offeror and who is the offeree.
2Ask whether the statement shows final willingness to be bound, or only invites others to make offers (price list, catalogue, display, auction).
3Check that the offer was communicated to the offeree before they acted.
4Check that the terms are certain and the intention is legal, not social or domestic.
5Decide if it is specific or general. For a general offer, the person who performs the conditions has accepted.
6Look for a changed reply, which is a counter offer and rejects the original offer.
7Match your result to the option, and pick the one that states the rule exactly.

Quickest way: Four-question offer check

When to use it: Use this when a scenario MCQ describes a shop display, an advertisement, a reward or a reply with changed terms.

Is it a display, catalogue, price list or auction call? Then it is an invitation to treat, not an offer.
Is it a reward or advertisement with clear conditions, addressed to the public? Then it is a general offer, accepted by performing the conditions.
Was the reply different from the offer? Then it is a counter offer.
Did the person know of the offer? If not, there is no valid acceptance.

Common mistakes in Offer or Proposal and Its Legal Rules

Treating goods displayed in a shop window with a price tag as an offer by the shopkeeper.
The price tag looks like a firm promise to sell.
Fix: Remember it is an invitation to treat. The customer makes the offer at the counter and the shopkeeper may accept or refuse.
Thinking a general offer needs the acceptor to send a notice before it becomes a contract.
Students assume acceptance always needs a reply.
Fix: In a general offer, performing the stated conditions is acceptance, as in the Carbolic Smoke Ball case.
Treating a counter offer as acceptance with a small change.
The reply sounds friendly and mostly agrees.
Fix: Any change in terms is a counter offer. It rejects the original offer, which cannot then be accepted.
Believing a cross offer forms a contract.
Both sides want the same thing, so it seems agreed.
Fix: Each offer must be accepted by the other side with knowledge of it. Two identical offers crossing do not form a contract.
Confusing an invitation to treat with an offer for tenders and auctions.
Students forget that a call for bids only invites offers.
Fix: The bid is the offer. The auctioneer or inviter accepts it. Only then is there a contract.
Thinking a social invitation is an offer.
Students focus on the word 'invitation' and the promise.
Fix: Social and domestic promises lack intention to create legal relations, so they are not valid offers.

Worked examples

Example 1

A shopkeeper displays a shirt priced at ₹800 in his window. A customer enters, picks it up and offers ₹800, but the shopkeeper refuses to sell. Can the customer sue? (a) Yes, the display is an offer (b) No, the display is an invitation to treat (c) Yes, because the price was marked (d) No, because the shirt was not packed

Show the solution

Step 1: A shop display with a price is not a final willingness to be bound.
Step 2: It only invites customers to make an offer.
Step 3: The customer offers ₹800 at the counter. This is the offer.
Step 4: The shopkeeper has the right to accept or refuse, and has refused, so no contract exists.
Step 5: Options (a) and (c) wrongly treat the display as an offer. Option (d) gives an irrelevant reason.

Answer: (b) No, the display is an invitation to treat.

Example 2

A company advertises: 'We will pay ₹10,000 to anyone who uses our product for 15 days as directed and still gets a cold.' Ravi uses it as directed and gets a cold. Which statement is correct? (a) Ravi has no claim as he did not notify the company (b) The ad is only an invitation to treat (c) Ravi can claim as the advertisement is a general offer accepted by performance (d) Ravi can claim only if the company knew him

Show the solution

Step 1: The advertisement is addressed to the public and states clear conditions and a reward. This is a general offer.
Step 2: A general offer is accepted by performing the conditions.
Step 3: Ravi used the product as directed and got a cold, so he has accepted the offer.
Step 4: This follows the Carlill v Carbolic Smoke Ball Co. principle.
Step 5: Options (a) and (d) require notice or personal knowledge by the company, which is not needed. Option (b) ignores the clear conditions and the reward.

Answer: (c) Ravi can claim as the advertisement is a general offer accepted by performance.

Exam tips

Scenario MCQs often hide an invitation to treat. Look for words like display, catalogue, price list, auction or tender notice.
For a reward advertisement with clear conditions, think general offer first.
If a reply adds or changes any term, mark it as a counter offer.
Eliminate options that say a contract exists without communication or knowledge of the offer.
There is no negative marking, so always attempt every question.

Practice questions from Essential Elements of a Contract, Offer and Acceptance

Offer or Proposal and Its Legal Rules in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA IntermediateOffer, Acceptance and Revocation of Proposals

Offer or Proposal and Its Legal Rules: frequently asked questions

What is the difference between an offer and an invitation to treat?

An offer shows final willingness to be bound once the other side accepts. An invitation to treat only invites others to make offers. Shop displays, catalogues, auction calls and tender notices are the usual examples.

What is a general offer and which case explains it?

A general offer is made to the public at large. Anyone who performs the stated conditions accepts it. The standard case is Carlill v Carbolic Smoke Ball Co.

Is a counter offer an acceptance?

No. A counter offer changes the terms, so it rejects the original offer. The original offeror can then accept or reject the counter offer.

What are the main kinds of offer?

Offers can be express or implied, specific or general, and may take the form of a standing (open) offer. Related ideas you should know are cross offers and counter offers.