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THE INDIAN CONTRACT ACT, 1872 CHAPTER 1- NATURE OF CONTRACT The law of contract is that branch of law which

determines the circumstances in which promise made by the parties to a contract shall be legally binding on them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some rights and duties upon the contracting parties. Indian Contract Act deals with the enforcement of these rights and duties upon the parties. Indian Contract Act, 1872 came into effect from 1st September, 1872. It extends to the whole of India except the state of Jammu and Kashmir. The Act may be divided into two parts. The first part (Sections 1 to 75) deals with the general principles of the law of contracts which apply to all types of contracts irrespective of their nature. The second part deals with special types of contracts namely Indemnity and Guarantee, Bailment and Pledge, Agency etc.

Explanations: Agreement According to Section 2(e) an agreement is defined as every promise and every set of promises forming the consideration for each other. 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. PROMISE [SECTION 2(b)]: When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise. Therefore it can be said that an agreement is an accepted proposal. In an agreement there is a promise from both the sides. For example, A promises to deliver his radio to B and in return B promises to pay a sum of Rs. 500 to A, there is said to be an agreement between A and B.
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Agreement =

Offer +

Acceptance

Agreement

Consensus ad idem To constitute a valid contract, there must be meeting of minds i.e. consensus-adidem. The parties should agree to the same thing in the same sense and at the same time. Ex Where 'A' who owns 2 cars x and y wishes to sell car 'x' for Rs. 30,000. 'B', an acquaintance of 'A' does not know that' A' owns car 'x' also. He thinks that' A' owns only car 'y' and is offering to sell the same for the stated price. He gives his acceptance to buy the same. There is no contract because the contracting parties have not agreed on the same thing at the same time, 'A' offering to sell his car 'x' and 'B' agreeing to buy car or'. There is no consensus-ad-idem.

LAW OF CONTRACT CREATES jus in personam The term jus in personam means a right against or in respect of a specific person. Thus, law of contract creates jus in personam and not jus in rem. A jus in rem means a right against or a thing. An agreement is regarded as a contract when it is enforceable by law. In other words, an agreement that the law will enforce is a contract. The conditions of enforceability are stated in Section 10. According to this section all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Promise = Proposal + Acceptance

What is a Contract? Section 2 (h) defines a contract as an agreement enforceable by law. Thus to make a contract there must be: 1. An agreement 2. The agreement shall be enforceable by law.

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3. Made between atleast two parties Promisor Promisees

4. By which rights are acquired by one, & 5. Obligations are created on the part of another 6. And on failure, the other party has a remedy. 7. Note: Both the parties are promisors and promises as well. AGREEMENT & ENFORCEABILITY Hence, every promise and every set of promises forming consideration for each other and enforceable by law is a contract. All agreements are not enforceable by law and therefore, all agreements are not contracts. Law of contracts is neither the whole law of agreements nor the whole law of obligations. According to Section 10, "All agreements are contracts, if they are made by the free consent of the parties, competent to contract, for a lawful consideration with a lawful object, and not hereby expressly to be void." Essential Elements of a Valid Contract are: 1) Proper offer and proper acceptance: There must be an agreement based on a lawful offer made by person to another and lawful acceptance of that offer made by the latter. Sections 3 to 9 of the contract act, 1872 lay down the rules for making valid acceptance. 2) Lawful consideration: An agreement to form a valid contract should be supported by consideration. Consideration means something in return (quid pro quo). It can be cash, kind, an act or abstinence. It can be past, present or future. However, consideration should be real and lawful. When A promises to do something A must get something in return this something is known as consideration (Affirmative Act / Abstinence / Promise) It must move at the desire of the promisor
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It may move from promisee or any other person It may be act, abstinence, forbearance or promise It may be past, present, future Need not be adequate It must be real and not illusory It must not be something which the promisor is not already bound to do It must not be illegal / immoral Stranger to the Contract Contract without Consideration (Exceptions)

Love & Affection [Sec 25 (1)] -- A registered agreement between near relatives based on natural love & affection is enforceable. Compensation for Voluntary Services [25 (2)] Promise to pay a time barred debt [25 (3)] Completed gift [Expl. 1 to Sec. 25] Agency [Sec. 185] Charitable subscription

3) Intention To Create Legal Relationships: (Balfour v/s Balfour) a) In order that an offer, after acceptance, can result in a valid contract it is necessary that the offer should be made with an intention to create legal relationship. Promise in the case of social engagements is generally without an intention to create legal relationship; such an agreement cannot be considered to be a contract. Thus an agreement to go for a walk, to go to movie, to play some game, or entertain another person with a dinner, cannot be enforced in a court of law. Sometimes the party may expressly mention that it is not a formal or legal agreement, whereas in some other cases such an intention could be presumed from their agreement. b) The test to know the intention of the parties is objective and not subjective. Merely because the promisor contends that there was no intention to create obligation would not exempt him from liability. c) In Rose and Frank Co. Vs. Crompton & Brothers Ltd. The agreement between the parties provided; This arrangement is not entered into . as a formal or legal jurisdiction in the Law Courts. that it (the agreement) will be carried through by parties with mutual loyalty and friendly co-operation. One of the parties made a breach of this agreement. In an action by the other party to enforce the agreement, it was held that since the agreement had provided that it was not a formal or legal agreement the same was not enforceable. d) In the case of Meritt Vs. Meritt, (1970) The husband and wife were the joint owners of a building which was subject to a mortgage to a building society. The
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husband left the matrimonial home to live with another woman. At that time, at the insistence of the wife, the husband signed a note saying that the wife will pay all outstanding amounts in respect of the house and in return I will agree to transfer the property into your sole ownership. It was held that in this case it was clear that the parties intended to create legal relationship and, therefore, the husband was bound by the contract. e) A famous English contract law case that held that there is a rebuttable presumption against an intention to create a legally enforceable agreement when the agreement is domestic in nature. Case: Mr. Balfour had agreed to give his wife 30 a month as maintenance for while he was off living in Ceylon. Once he had left, they separated and Mr. Balfour stopped payments. Mrs. Balfour brought an action to enforce the payments. At the Court of Appeal, the Court held that there was no enforceable agreement as there was not enough evidence to suggest that they were intending to be legally bound by the promise. 4) Competent to contract or capacity: In order to make a valid contract the parties to it must be competent to be contracted. According to section 11 of the Contract Act, a person is considered to be competent to contract if he satisfies the following criterion:

The person has reached the age of maturity. The person is of sound mind. The person is not disqualified from contracting by any law. Hence, the following are not competent to enter into a contract: A. Minors: According to Section 3 of the Indian Majority Act, 1875, a minor is a person who has not completed 18 years of age. However, in the following two cases, a minor attains majority after 21 years of age: a) Where a guardian of minors person or property has been appointed under the Guardians and Wards Act, 1890, or b) Where the superintendence of minors property is assumed by a Court of Wards. Position of Minors Contracts:

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a) A minors agreement cannot be ratified by the minor on attaining majority. b) A contract with a minor is void ab-initio. c) A minor cannot be asked to refund any benefit received under a void agreement. d) A minor is not estopped to plead minority even where he falsely represents himself to be of full age. e) A minor cannot be a partner in a partnership firm. He may, however, be admitted to the benefits of an already existing partnership. f) A minor can, however, be a promisee or beneficiary. g) A minors estate is liable to a person who supplies necessaries of life to a minor. h) Minors parents/guardians are not liable to a minors creditor for the breach of contract by a minor. i) A minor can act as agent. j) Mohori Bibi v/s Dharmodas Ghose (1903) A minor, entered into a contract for borrowing a sum of Rs. 20,000 out of which the lender paid the minor a sum of Rs. 8,000. The minor executed mortgage of property in favour of the lender. Subsequently, the minor sued for setting aside the mortgage. B. Lunatics: A lunatic is a person who is mentally deranged due to some mental strain or other personal experience. However, he has some intervals of sound mind. He is not liable for contracts entered into while he is of unsound mind. However, as regards contracts entered into during lucid intervals, he is bound. His position in this regard is identical with minor i.e. in general the contract is void but the same exceptions as discussed above (under minors contracts) are relevant. C. Idiots: An idiot is a person who is permanently of unsound mind. He does not have lucid intervals. He is incapable of entering into a contract and, therefore, a contract with an idiot is void. However, like a minor, his properties, if any, shall be liable for recoveries on account of necessaries of life supplied. Also he can be a beneficiary. D. Drunken or Intoxicated Persons: A person who is drunk, intoxicated or delirious from fever so as to be incapable of understanding the nature and effect of an agreement or to form
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a rational judgment as to its effect on his interests cannot enter into valid contracts whilst such drunkenness or delirium lasts. E. Persons disqualified from contracting by any other law: It refers to statutory disqualifications on certain persons in respect of their capacities to contract: a) b) c) d) e) Alien Enemies: Foreign Sovereigns and ambassadors Insolvents Convicts Corporations (only through its agents/employees)

5) Free Consent: To constitute a valid contract there must be free and genuine consent of the parties to the contract. It should not be obtained by misrepresentation, fraud, coercion, undue influence or mistake. Consent is said to be free when it is not caused by
Causes affecting contract 1. Coercion 2. 3. 4. 5. Undue influence Fraud Misrepresentation Mistake (i) of fact (a) Bilateral (b) Unilateral (ii) of Fact Consequences Contract voidable Contract voidable Contract voidable Contract voidable Void Generally not invalid Void

Ex (i) A railway company refuses to deliver certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was illegally excessive. The directors of a Tramway Co. issued a prospectus stating that they had the right to run tramcars with steam power instead of with horses as before. In fact, the Act incorporating the company provided that such power might be used with the sanction of the Board of Trade. But, the Board of Trade refused to give permission and the company had to be wound up. P, a shareholder sued the directors for damages for fraud. The House of Lords held that the directors were
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not liable in fraud because they honestly believed what they said in the prospectus to be true. Coercion: Consent is said to be caused by coercion when it is obtained by pressure exerted by either committing or threatening to commit an act forbidden by the Indian Penal Code or unlawfully detaining or threatening to detain any property. Undue influence: A contract is said to be induced by "undue influence" where the relation subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. Fraud: Means and includes the following acts done with the intention to deceive or to induce a person to enter into a contract. (a) the suggestion that a fact is true when it is not true and the person making the suggestion does not believe it to be true (b) active concealment of a fact by a person who has knowledge or belief of the fact, (c) promise made without the intention of performing it. Misrepresentation: When a person positively asserts that a fact is true when his information does not warrant it to be so, though he believes it to be true, it is misrepresentation. A breach of duty which brings an advantage to the person committing it by misleading the other to his prejudice is also a misrepresentation. Mistake: Where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. An erroneous opinion as the value of the thing, which forms the subject matter of the agreement, is not deemed as mistake as to a matter of fact. Unilateral mistake, i.e. the mistake in the mind of only one party does not affect the validity of the contract 6) Lawful Object and Agreement: The object of the agreement must not be illegal or unlawful. The consideration and the object of an agreement are unlawful in the following cases: 1. If it is forbidden by law 2. If it is of such a nature that if permitted, it would defeat the provisions of any law. 3. If it is fraudulent. An agreement with a view to defraud other is void. 4. If it involves or implies injury to the person or property of another. If the object of an agreement is to injure the person or property of another it is void.
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5. If the Court regards it as immoral or opposed to public policy. An agreement, whose object or consideration is immoral or is opposed to the public policy, is void. Ex- A partnership entered into for the purpose of doing business in arrack (local alcoholic drink) on a licence granted only to one of the partners, is void ab-initio whether the partnership was entered into before the licence was granted or afterwards as it involved a transfer of licence, which is forbidden and penalised by the Akbari Act and the rules thereunder [Velu Payaychi v. Siva Sooriam, 7) Agreement not declared void or illegal: Agreements which have been expressly declared void or illegal by law are not enforceable at law; hence does not constitute a valid contract. 8) Certainty, Possibility Of Performance: The terms of agreement must be certain and not vague. If it is not possible to ascertain the meaning of the agreement, it is not enforceable at law. Also, agreements to do impossible acts cannot be enforced 9) Legal Formalities: A contract may be oral or in writing. If, however, the law requires for a particular contract, it should comply with all the legal formalities as to writing, registration and attestation. Types of Contracts On the basis of Validity: 1. Valid contract: An agreement which has all the essential elements of a contract is called a valid contract. A valid contract can be enforced by law. 2. Void contract [Section 2(j)]: A void contract is a contract which ceases to be enforceable by law. A contract when originally entered into may be valid and binding on the parties. It may subsequently become void. There are many judgments which have stated that where any crime has been converted into a "Source of Profit" or if any act to be done under any contract is opposed to "Public Policy" under any contract -than that contract itself cannot be enforced under the lawNewar Marble Industries Pvt. Ltd. Vs. Rajasthan State Electricity Board, Jaipur, 1993 Cr. L.J. [Criminal Law Journal] Year-1191 at Page No. 1197, 1198 [Raj.][Rajasthan High Court]Understanding of The Indian Contract Act, 1872 (Exclusively for CMS Students) Page 9

Agreement of which object or consideration was opposed to public policy, unlawful and void- -What better and what more can be an admission of the fact that the consideration or object of the compounding agreement was abstention by the board from criminally prosecuting the petitioner-Company from offence under Section 39 of the act and that the Board has converted the crime into a source of profit or benefit to itself. This consideration or object is clearly opposed to public policy and hence the compounding agreement is unlawful and void under Section 23 of the Act. It is unenforceable as against the Petitioner-Company 3. Voidable contract [Section 2(i)]: An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of other or others, is a voidable contract. If the essential element of free consent is missing in a contract, the law confers right on the aggrieved party either to reject the contract or to accept it. However, the contract continues to be good and enforceable unless it is repudiated by the aggrieved party. 4. Illegal contract: A contract is illegal if it is forbidden by law; or is of such nature that, if permitted, would defeat the provisions of any law or is fraudulent; or involves or implies injury to a person or property of another, or court regards it as immoral or opposed to public policy. These agreements are punishable by law. These are void-abinitio. All illegal agreements are void agreements but all void agreements are not illegal. 5. Unenforceable contract: Where a contract is good in substance but because of some technical defect cannot be enforced by law is called unenforceable contract. These contracts are neither void nor voidable. On the basis of Formation: 1. Express contract: Where the terms of the contract are expressly agreed upon in words (written or spoken) at the time of formation, the contract is said to be express contract. 2. Implied contract: An implied contract is one which is inferred from the acts or conduct of the parties or from the circumstances of the cases. Where a proposal or acceptance is made otherwise than in words, promise is said to be implied. 3. Tacit contract-Tacit contracts are implied contract in itself. E.g.-Taking ticket in the bus, during journey. 4. Quasi contract: A quasi contract is created by law. Thus, quasi contracts are strictly not contracts as there is no intention of parties to enter into a contract. It is legal obligation which is imposed on a party who is required to perform it. A quasi contract is based on
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the principle that a person shall not be allowed to enrich himself at the expense of another.

On the basis of Performance: 1. Executed contract: An executed contract is one in which both the parties have performed their respective obligation. 2. Executory contract: An executory contract is one where one or both the parties to the contract have still to perform their obligations in future. Thus, a contract which is partially performed or wholly unperformed is termed as executory contract. 3. Unilateral contract: A unilateral contract is one in which only one party has to perform his obligation at the time of the formation of the contract, the other party having fulfilled his obligation at the time of the contract or before the contract comes into existence. 4. Bilateral contract: A bilateral contract is one in which the obligation on both the parties to the contract is outstanding at the time of the formation of the contract. Bilateral contracts are also known as contracts with executory consideration. Offer PROPOSAL/OFFER [SECTION 2(a)]: A person is said to make a proposal when he signifies to another his willingness to do or to abstain from doing anything with a view to obtaining assent of that other to such act or abstinence PROPOSAL = WILLINGNESS TO DO OR ABSTAIN FROM DOING (+) WILLINGNESS TO OBTAIN ASSENT OF THE OTHER PARTY TO SUCH ACT OR ABSTINENCE Thus, for a valid offer, the party making it must express his willingness to do or not to do something. But mere expression of willingness does not constitute an offer. An offer should be made to obtain the assent of the other. The offer should be communicated to the offeree and it should not contain a term the non compliance of which would amount to acceptance. Offer may be express or implied. Must give rise to legal consequences & be capable of creating legal relationship.
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Terms must be certain & not vague. May be specific or general. Must not be an invitation to offer. Can be made subject to any terms & conditions. Must be communicated to offeree. Invitation to offer, cross offers & counter offers. Communication of special terms Prescribed mode of acceptance. Classification of Offers 1. General Offer: (Which is made to public in general) When the same is not made to any particular person but to the public at large it is known as general offer. For instance, an offer to give reward to anybody who finds a lost dog is a general offer. This general agreement will be deemed to be accepted by anyone who actually finds the lost dog. The person, who accepts this offer, generally by performing the condition of the proposal, can bind the person making the offer. According to Section 8, Performance of the conditions of a proposal .. is an acceptance of the proposal. Thus although a general offer is made to the public at large, the contract is concluded only with that person who acts upon the terms of the offer. The case of Carlil Vs. Carbonic Smoke Ball Co. (1893) is an illustration of a contract arising out of a general offer. The facts of the case are: The defendants advertised their product Carbonic Smoke Ball, a preventive remedy against influenza. In the advertisement they offered to pay a sum of 100 pounds as reward to any one who contracted influenza, colds or any disease caused by taking cold, after having used the Smoke Ball three times a day for two weeks, in accordance with the printed directions. They also announced that a sum of 1000 pounds had been deposited with the Alliance Bank to show sincerity in the matter. The plaintiff ( Mrs. Carlil ) relying on the advertisement purchased a Smoke Ball
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from a chemist, used the same in accordance with the directions of the defendants, but still caught influenza. She sued the defendants to claim the reward of 100 pounds advertised by them. It was held that this being a general offer addressed to all the world had ripened into a contract with the plaintiff by her act of performance of the required conditions and thus accepting the offer. She was therefore, entitled to claim the reward. 2. Special Offer: (Which is made to a definite person) When the offer is made to a specific or an ascertained person it is known as a specific offer 3. Cross Offer: (Exchange of identical offer in ignorance of each other) When the offers made by two persons to each other containing similar terms of bargain cross each other in post they are known as cross offers. For example, on 1st January A offers to sell his radio set to B for Rs. 500/- through a letter sent by post. On the same date B also writes to A making an offer to purchase As radio set for Rs. 500 /When A or B send their letters they do not know about the offer which is being made by the other side. In these cross offers, even though both the parties intend the same bargain, there arises no contract. A contract could arise only if either A or B, after having the knowledge of the offer, had accepted the same. In (Tinn Vs. Hoffmann 1873), A wrote to B indicating his willingness to sell 800 tons of iron at 69 s. per ton. On the same day B also wrote to A offering to buy 800 tons of iron at the same rate of 69 s. per ton. The two letters crossed each other in post. B brought an action against A for the supply of iron contending that a valid contract had been created between the two parties. It was held that in this case there were only two cross offers and the offer of neither of the parties having been accepted by the other, there was no contract which could be enforced 4. Counter Offer: Modification and Variation of Original offer. 5. Standing, Open or Continuing Offer: (Which is open for a specific period of time)

An offer which is allowed to remain open for acceptance over a period of time is known as a standing, open or a continuing offer. For
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example, an offer to supply 1,000 bags of wheat from 1st January to 31st December, in accordance with the orders which may be placed from time to time to time, is a standing offer. As and when the orders are placed that amounts to acceptance of the offer to that extent. In the above stated illustration if an order for the supply of 100 bags of wheat is placed on 15th January, there is acceptance of the offer to that extent and the offeror becomes bound to supply those 100 bags of wheat. So far as the remaining quantity is concerned this offer can be revoked just like any other offer. Tender for supply of goods is a kind of standing offer. An advertisement inviting tenders is merely invitation for quotations. When the tender is approved it becomes a standing offer. In Bengal Coal Co. Vs. Homie Wadia & Co.,the defendants (Bengal Coal Co.) agreed to supply coal to the plaintiff (Homie Wadia & Co.) up to a certain quantity at an agreed price for a period of 12 months, as may be required by the plaintiffs from time to time. The plaintiffs placed orders for the supply of coal and the same were complied with. Before the expiry of 12 months, the defendants withdrew their offer to supply further coal, and refused to comply with the orders to supply further coal, and refused to comply with the orders placed thereafter. They were sued for breach of contract. There was simply a continuing offer to supply coal. They were bound to supply coal only as regards orders which had already been placed, but were free to revoke their offer for supply of coal thereafter.

The offer must be distinguished from an invitation to offer. Invitation to offer An invitation to offer is only a circulation of an offer; it is an attempt to induce offers and precedes a definite offer. Acceptance of an invitation to an offer does not result contract and only an offer emerges in the process of negotiation. A statement made by a person who does not intend to bound by it but, intends to further act, is an invitation to offer. A proposal or an offer has to be distinguished from an invitation to treat. Sometimes a person may not offer to sell his goods, but may make some statements or give some information with a view to invite others to make offers on that basis. For example, a bookseller sends a catalogue of books indicating prices of various books to many persons. This catalogue is not an offer to sell those books at
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prices indicated against those books. This is an Invitation to treat. If any person is interested in purchasing those books mentioned in the catalogue he may make an offer. Similarly, inviting persons to an auction where goods, which are to be auctioned, are displayed is not an offer for the sale of goods. The intending buyers, who make the bid, make an offer. Such an offer, when accepted, by the fall of hammer or in some other customary way, will result in a contract. Acceptance: According to Section 2(b), "When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted." Rules: 1. Acceptance must be absolute and unqualified. 2. Communicated to offeror. (. Carlill v. Carbolic Smoke Ball Co) 3. An offer can only be accepted by the offeree, that is, the person to whom the offer is made. 4. An offeree is not bound if another person accepts the offer on his behalf without his authorization. 5. Acceptance must be in the mode prescribed. 6. It may be implied from the construction of the contract that the offeror has dispensed with the requirement of communication of acceptance 7. If the offer specifies a method of acceptance (such as by post or fax), you must accept it using a method that is no less effective than the method specified. 8. Silence cannot be construed as acceptance. Felthouse v. Bindley 9. Acceptance must be given within a reasonable time before the offer lapses. 10. Acceptance by the way of conduct. 11. Offeree and Offerer must consent TERMINATION OR LAPSE OF AN OFFER An offer is made with a view to obtain assent thereto. As soon as the offer is accepted it becomes a contract. But before it is accepted, it may lapse, or may be revoked. Also, the offeree may reject the offer. In these cases, the offer will come to an end. 1) The offer lapses after stipulated or reasonable time 2) An offer lapses by the death or insanity of the offeror or the offeree before acceptance. 3) An offer terminates when rejected by the offeree. 4) An offer terminates when revoked by the offeror before acceptance.
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5) An offer terminates by not being accepted in the mode prescribed, or if no mode is prescribed, in some usual and reasonable manner. 6) A conditional offer terminates when the condition is not accepted by the offeree. 7) Counter Offer TERMINATION OF AN OFFER 1) An offer lapses after stipulated or reasonable time. 2) An offer lapses by the death or insanity of the offeror or the offeree before acceptance. 2. An offer lapses on rejection. 3) An offer terminates when revoked. 4) It terminates by counter-offer. 5) It terminates by not being accepted in the mode prescribed or in usual and reasonable manner. 6) A conditional offer terminates when condition is not accepted. COMMUNICATION OF OFFER, ACCEPTANCE AND REVOCATION (i) (ii) As mentioned earlier that in order to be a valid offer and acceptance. The offer must be communicated to the offeree, and The acceptance must be communicated to the offeror.

The communication of acceptance is complete: (i) As against the proposer, when it is put into a course of transmission to him, so as to be out of the power of the acceptor; (ii) As against the acceptor, when it comes to the knowledge of the proposer.

Ex- A proposes, by letter, to sell a house to B at a certain price. B accepts A's proposal by a letter sent by post. The communication of acceptance is complete: (i) as against A, when the letter is posted by B; (ii) as against B, when the letter is received by A. The communication of a revocation (of an offer or an acceptance) is complete: (1) As against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it. (2) As against the person to whom it is made when it comes to his knowledge. Ex- A revokes his proposal by telegram. The revocation is complete as against A, when the telegram is dispatched. It is complete as against B, when B receives it.
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Revocation of proposal and acceptance: A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

Ex- A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

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