An offer or proposal is necessary for the formation of an agreement. Section 2(a) of the contracts Act 1950 states that ’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 the act or abstinence, he is said to make a proposal’. The first limb of Section 2(c) of the Contracts Act 1950 calls the person making the proposal the ‘promissory’. Under the Contracts Act 1950 and English law, a proposal or offer is something which is capable of being converted into an agreement by its acceptance. A proposal must be a definite promise to be bound provided certain specified terms are accepted. The promisor (sometimes also known as ‘offeror’ ) must have declared his readiness to undertake an obligation upon certain terms, leaving the option of its acceptance or refusal to the offeree.
In the Federal Court case of Affin Credit (Malaysia) Sdn. Bhd v Yap Yuen Fui where there was a lack of offer and acceptance, the purported hire-purchase agreement was declared void ab intitio, that is, the agreement was void from the beginning.
The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made- Section 4 (1), contracts Act 1950. This means that an offer or proposal is effective once it is communicated to the offeree by the offeror. The communication of an offer or a proposal is deemed to have been made by any act or omission of the party proposing by which he intends to communicate the proposal or which has the effect of communicating it- Section 3, Contracts Act 1950. A proposal made in words (oral and written) is said to be expressed. If a proposal is made other than in words (e.g. by conduct), it is said to be implied- Section, Contracts Act 1950.
An offer should be contrasted with an option and an advertisement. An option is merely an undertaking to keep the offer open for a certain period of time while an advertisement is an...