Difference Between Offer and Proposal

In Indian contract law, the terms “offer” and “proposal” are often used interchangeably. However, a deeper understanding of the Indian Contract Act, 1872, reveals subtle yet significant differences. Grasping these differences is vital for students, legal professionals, businesspeople, and anyone involved in contract negotiations.

This article provides a thorough analysis of what an offer and a proposal mean, their legal implications, and why distinguishing them is important in the world of contracts.

What is a Proposal?

The Indian Contract Act, 1872, under Section 2(a), uses the term “proposal” and gives it a specific legal definition:

“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 simple words, a proposal is a clear communication by one person (the proposer) expressing their readiness to do something or not do something, with the intention of getting the other person’s agreement.

What is an Offer?

While the Indian Contract Act uses “proposal” in its text, the term “offer” is more commonly used in legal practice, especially in judgments and business language. For practical purposes, under Indian law, “offer” and “proposal” refer to the same basic concept. However, the context and usage may slightly differ.

An offer is a clear and definite expression by one party (the offeror) of their willingness to enter into a contract on specific terms, with the intention that it becomes binding as soon as the other party (the offeree) accepts it.

Proposal and Offer: Are They the Same?

According to the Indian Contract Act, the terms “offer” and “proposal” are essentially the same. In Section 2(a), the Act uses “proposal,” but in practice and in common law countries, “offer” is the more frequently used term. However, the understanding is the same – both mean a statement by one party, made with the intention that it shall become binding on acceptance by the other party.

Conclusion

In Indian contract law, “offer” and “proposal” are almost synonymous, with both terms pointing towards a party’s willingness to enter into a contract upon acceptance. However, in practical business and legal language, a proposal may be broader and non-binding, while an offer is a clear expression intended to create legal relations. The real difference lies in intention, clarity, and communication.