The Contract Act, 1872

Proposal/ Offer (Sec 2)

When one signifies to another his willingness to do or 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
When a 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.

Making the proposal- Promisor;

Accepting the proposal- Promisee;

1. Agreement [Sec-2(h)]
An agreement enforceable by law is a contract.

Essential elements of a contract

1. Offer and acceptance,
2. Intention to legal relationship;
3. Lawful consideration;
4. Capacity of Parties;
5. Free Consent;
6. Legality of object;
7. Certainty;
8. Possibility of performance;
9. Written, Registration and legal formalities;
Distinction between a contract and agreement

Contract Agreement
Species of agreement Wider conception
Enforceable by law Agreements are not
All contracts are agreement All agreement is not contract
Legal rights and obligations No legal rights and obligations

2. Communication acceptance and revocation of proposal (Sec-3)

Communication when complete (Sec-4)

 The communication of proposal is complete;

Example: A proposes, by letter, to sell a house to B at certain price. The communication of
the proposal is complete when B receives the letter.

 The communication of acceptance is complete;

Example: B accepts A’s Proposal by a letter sent by post. The communication of the
acceptance is complete as against A, when the letter is posted as against B when B
receives the letter.
 The communication of revocation is complete;
Example: A revoke his proposal by telegram. The revocation is completed as against A,
when the telegram is dispatched.
B’s revocation is complete as against B when the telegram is dispatched, and as against A
when it reaches him.
Methods of revocation of a proposal (Sec 6)
A proposal is revoked;

 By the communication of notice;

 By the lapse of time;
 By the failure of the acceptor to fulfill a condition precedent to acceptance;
 By the death or insanity of the proposer (Comes to the knowledge of the acceptor before
acceptance)
Special offer: Specific person;
General offer: open to all in certain conditions;
Rules regarding an Offer

 May be expressed or may be implied;

 May be made to a definite a person, class of person or to anybody in the world;
 Legal relationship is required;
 Offer must be certain, definite, not vague;
 Mere statement of intention- not offer;
 Must be communicated to the offeree;
 May be conditional;

3. Acceptance
When a person to whom the proposal is made, signifies his assent thereto, the proposal is said
to be accepted.

Acceptance must be absolute (Sec 7)

Absolute, unqualified, be expressed in some usual and reasonable manner.
Acceptance by performing, conditions, or receiving consideration (Sec 8)
Performing the condition of a proposal,
Acceptance of any consideration for a reciprocal promise.
Promise, express, implied (Sec 9)
Promise- Express, in words

Rules regarding an acceptance

 Acceptance must be absolute and unqualified;

 Conditional is no acceptance but a counter offer;
 Seeking clarification regarding an offer is not a counter offer;
 Must be expressed in some usual and reasonable manner;
 Mental acceptance and un communicated assent is not a contract (Must be
communicated)
 Mode of acceptance (Required by the offeree)
 Time of acceptance (Prescribed by the offeror)
 Acceptance is completed when it is communicated;
 Acceptance must be made while the offer is in force;
Mode of acceptance
Orally, in writing or by conduct;
The performance of the condition of a proposal
The acceptance of consideration for a reciprocal promise;