Under S.2 (a) of the Contracts Act 1950, a proposal is said to be made when one person signifies to the other his willingness to do or abstain from doing something, with a view to obtaining the assent of that other to the act or abstinence.
If the proposal is unconditionally accepted, a binding agreement arises. The offer must be clear, and if it is vague, it is not a valid offer. In the case of Gunthing v Lynn, an offer to pay an additional amount if the horse proved 'lucky' is said to be too vague.
It is important to distinguish an offer with an invitation to treat. An invitation to treat by law only amounts to an invitation to others to make offers. It is not capable of being accepted so as to form a valid binding agreement.
A good example of an invitation to treat is the display of goods for sales in the shops.
The case of Pharmaceutical Society of Great Britain v Boots Cash Chemists servers a good example. The fact is there was a display of drugs on the shelves of the pharmacy. The issue was whether such display amounted to an offer when the customers took it and placed it in the wire basket. The court held that it did not amount to an offer, it was a mere invitation to treat. Therefore, it is very important to distinguish between an offer and an invitation to treat.
Only an offer or proposal is legally capable of being accepted thereby giving rise to a binding contract.
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