Offer/Proposal

• Section 2(a):  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;

Ø The Person making the proposal or offer is called the ‘offeror’

Ø For a valid offer, the party making it must express his willingness ‘to do’ or ‘not to
do’ something:

Ø An offer can be positive or negative:

Ø The willingness must be expressed with a view to obtain the assent:

Ø The Offer can be Express offer or an Implied offer

Types of Offer

• General Offer: It is an offer made to public at large and hence anyone can accept and
do the desired act. 

Ø Carlill vs. Carbolic Smoke Ball & Co. [1 QB 256 (CA)]

Brief Fact Summary. The Plaintiff, believing Defendant’s advertisement that its

product would prevent influenza, bought a Carbolic Smoke Ball and used it as
directed from November 20, 1891 until January 17, 1892, when she caught the flu. 
Plaintiff brought suit to recover the 100£, which the Court found her entitled to
recover.  Defendant appealed.
Synopsis of Rule of Law. This case considers whether an advertising gimmick (i.e.
the promise to pay 100£ to anyone contracting influenza while using the Carbolic
Smoke Ball) can be considered an express contractual promise to pay.
Facts. The Defendant, the Carbolic Smoke Ball Company of London (Defendant),
placed an advertisement in several newspapers on November 13, 1891, stating that its
product, “The Carbolic Smoke Ball”, when used three times daily, for two weeks,
would prevent colds and influenza.  The makers of the smoke ball additionally offered
a 100£ reward to anyone who caught influenza using their product, guaranteeing this
reward by stating in their advertisement that they had deposited 1000£ in the bank as
 a show of their sincerity.  The Plaintiff, Lilli Carlill (Plaintiff), bought a smoke ball
and used it as directed.  Several weeks after she began using the smoke ball, Plaintiff
caught the flu.
Issue. Lindley, L.J., on behalf of the Court of Appeals, notes that the main issue at
hand is whether the language in Defendant’s advertisement, regarding the 100£
reward was meant to be an express promise or, rather, a sales puff, which had no
meaning whatsoever.
Held.     Defendant’s Appeal was dismissed, Plaintiff was entitled to recover 100£.
The Court acknowledges that in the case of vague advertisements, language regarding
payment of a reward is generally a puff, which carries no enforceability.  In this case,
however, Defendant noted the deposit of £1000 in their advertisement, as a show of
their sincerity.  Because Defendant did this, the Court found their offer to reward to
be a promise, backed by their own sincerity.
Concurrence. In the concurrences of Bowen L.J. and A.L. Smith, L.J., the notion of
contractual consideration also becomes an issue of relevance.  Both of these Judges
note that while the Defendant could argue lack of consideration, Plaintiff, in buying
the Carbolic Smoke Ball and using it as directed, provided adequate consideration
through the inconvenience she experienced by using the product.
Discussion. This case stands for the proposition that while sales puffery in
advertisements is generally not intended to create a contract with potential product
buyers, in this case it did because the Defendant elevated their language to the level of
a promise, by relying on their own sincerity.

Ø Special/Specific Offer: When the offer is made to a specific or an ascertained person,

it is known as a specific offer. Specific offer can be accepted only by that specified
person to whom the offer has been made.

Ø Boulton v. Jones (1857)

Facts
The defendants were habitual customers of Brocklehurst. They sent a written order for goods
directed to Brocklehurst. Unbeknownst to the defendants, the claimants had just bought
Brocklehurst’s business. The claimants executed the defendant’s order without telling them
that Brocklehurst was no longer supplying the goods. The defendant refused to pay the price,
so the claimants sued. The defendant alleged that the contract was void for mistake.

Issue(s)
1. Did the defence of mistake apply in these circumstances?

Decision
The Court held in the defendants’ favour. The defendant intended to contract with
Brocklehurst, not the claimant. As such, there was no contract between the parties.

This Case is Authority For…

This case evidences the proposition that, where parties contract at a distance or in writing,
they are taken to intend to contract with a particular named individual. If the claimant is not
that individual, they cannot sue the defendant.

Ø Cross Offer: When two parties exchange identical offers in ignorance at the time of

each other’s offer, the offers are called cross offers. There is no binding contract in
case because offer made by a person cannot be construed as acceptance of the
another’s offer.

Types of Offer

• Counter –Offer: When the offeree offers to qualified acceptance of the offer subject to

modifications and variations in the terms of original offer, he is said to have made a
counter-offer. Counter-Offer amounts to rejection of the original offer.

• Standing Offer: An offer which is allowed to remain open for acceptance over a

period of time is known as standing offer or continuing offer. Tenders that are invited
for supply of goods is a kind of standing offer.

Ø Bangal Coal Co. Ltd. Vs. Homee Wadia & Co. [(1899) L Bom. 97

Ø Union of India Vs. Madala Thathiah [(1964) 3, S.C.R. 774]

Ø Perclval Ltd. London County Council Asylums and Mental

Deficiency Committee  (1918) 87 L.JKB 677
Ø In Bengal Coal Co. Ltd. Vs. Homee Wadia & Co. [(1899)] ILR 24 Bom. 97][3] is
the leading case on this subject. In this case the defendants entered into a contract to
supply coal as and when required for a period of twelve months at an agreed rate. The
plaintiff placed certain orders, and the defendants supplied the coal but before 12
months have lapsed, the defendants withdraw their offer. The plaintiff then sued the
defendants for breach of contract. Dismissing the suit, the Court held that there was
no contract at all therefore, there is no question of breach of contract. The Court point
out that it was only standing offer and contract comes into existence when acceptance
is made by placing an order, before this step either party can withdraw, but once order
is placed, they cannot revoked.

Ø In Union of India Vs. Maddala Thathiah [(1964) SCR (3) 774][4] the Supreme
Court of India held that the standing offer may be revoked at any time, provided that
it has not accepted in the legal sense, and acceptance in legal sense is completed as a
requisition or a definite quality of goods is made. Each requisition by offeree is an
individual act of acceptance which creates a separate contract.

Ø The same principles were again confirmed in R.V. Demers ,[5] In this case a printer
agreed with Govt. to print and bind. Govt. records for Govt. at an agreed rate. But in
the same year the said agreement was cancelled by the Govt. When the printer filed
the suit against Govt. it was rejected on the same grounds as are discussed in the
above case.

Ø In PercLval Ltd. V. London County Council Asylums and Mental Deficiency

Committee ,[6] the Plaintiff advertised for tenders for supply of good. The defendant
took the tender in which he had to supply to the company various special articles for a
period of 12 months. In – between this the defendant didn’t supply for a particular
consignment. The Court held that the Tender was a standing offer that was to be
converted into a series of contracts by the subsequent acts of the company and that an
order prevented pro tanto the possibility of revocation, hence the company succeeded
in an action for breach of contract.

Ø In Great Northern Railway V. Witam Case ,[7] the railway company invited tenders
for the supply of certain iron articles over a period of 12 months. Witam’s tender was
accepted. After supplying for some time, Witam refused to execute the order placed
 during the currency of the tender. Court held that Witam could not refuse within the
terms of tender.

Essential Elements for a valid Offer

• It must be capable of creating legal relationship

• It must be certain, definite and not vague

• It must be communicated to the offeree

Ø Lalman v. Gauri  Dutt  (1913) 11 ALL LJ 489

Ø Defendant nephew (Gauri Dutt’s Nephew) absconded from the house. He sent his
servant to search for the boy. When the servant left the house, this person offered to
pay 500 to anyone who discovering the boy. The servant came to know about this
offer, only when he had already traced the missing child. When he got to know about
it, he claimed for it which was refused, the plaintiff moved to the court. Benerjee
judge said, “In my opinion, a suit like the present can be founded in a contract. In
order to constitute a contract, there must be an acceptance of an offer. And there can
be no acceptance unless there is knowledge of the offer.”

Ø It must be made with a view to obtaining the assent of the other party

Ø It may be conditional

Difference between Offer and an Invitation to Offer

• In case of ‘invitation to offer’ the person making the invitation does not make an offer
rather invites the other party to make an offer. His objective is to send out the
invitation that he is willing to deal with any person who, on the basis of such
invitation, is ready to enter into contract with him subject to final terms
and conditions.

• Harvey v. Facie [1893] AC 552

FACTS OF THE CASE:

 1. Appellants, Mr. Harvey, who was running a partnership company in Jamaica, wanted to
purchase a property owned by Mr. Facey, who was also negotiating with the Mayor and
Council of the Kingdom of Kingston City for the same property.
2. On October 6th, 1893 appellant sent a telegram regarding the purchase of property to Mr.
Facey who was traveling on the train on that day as he did not want that the property was
sold to Kingston City.
3. Telegram said “Will you sell us Bumper Hall Pen? Telegraph lowest cash price-
answer paid.” Replying to the question Mr. Facey said “Lowest price for Bumper
Hall Pen£900.” Furthermore, Mr. Harvey Replied “We agree to buy Bumper Hall
Pen for the sum of nine hundred pounds asked by you. Please send us your title
deed in order that we may get early possession.”
4. Mr. Facey refuses to sell the property resulting in Mr. Harvey sued him, claiming that the
contract existed between him and stated that the telegram was an offer and that he has
accepted it.
5. The Petition was dismissed on the first trial by Justice Curran on the ground that “The
agreement as alleged by the Appellant did not denote a concluded contract” but won
the claim in the appellate court which quashed the trial court judgement declaring that the
binding agreement had been proved. Upon taking leave from the appellate court, he
appeals to the Queen of Council (i.e. The Privy Council).

ISSUES FRAMED:

1. Was there an  explicit offer from Mr. Facey to Mr. Harvey for the sale of the said
property for the  consideration  of £900 and is it capable of acceptance?
2. Was there a valid contract or not?

JUDGEMENT:

The Privy Council held that no agreement has ever existed between the parties. The first
conversation is only a request for information, not an offer that could be accepted. Therefore, the
telegram sent by Mr. Facey was not credible. It was concluded that the telegram sent by Mr.
Facey is only a piece of information. At no point in time, Mr. Facey made an offer that could be
accepted.

CONCLUSION:

A valid contract requires a proposal and an acceptance to it and to make contract binding
acceptance of the proposal must be notified to the proposer because a legally enforceable
agreement required sureness to hold. This case clearly explains the differentiation between
invitation to offer and offer and it also throws a light explaining the nature of the offer as it plays
a very important role.

• Pharmaceutical Society of Great Britain v. Boots Cash Chemicals Ltd [1953] 1

QB 401 Court of Appeal

• This case was there when self service shopping has evolved. In Britain, there was this
law, Pharmacy and Poison Act, 1953. Especially, a section was there i.e 18(1), which
 stated that In Britain, certain drugs could only be sold under the supervision of
registered Pharmacy. Boot Cash is a very huge pharmacy. They converted one of their
branches as a self service stores. The customers were entering the store, they used to
place the drugs in the cart that they wish to buy and used to take them to the billing
point, where the cashier stated the price and receipt payment. The transaction at the
cash desk was supervised by a pharmacist who was authorized to prevent removal of
any drug from the premises. A pharmaceutical society brought a case against boots
cash, alleging that Boot Cash is violating the Act, especially Section 18(1). The
society argued that the display of Drugs on the shelves was an offer, which the
customer accepted by placing the drugs in the cart. And thus, the sale was completed
at that point of time. Therefore, it was unsupervised and it is violation of the law.
• The court of appeal held that Pharmacy and Poison Act had not been infringed and the
self service system did not amount to an offer, but rather an invitation to the customer
to offer. As per the court, in case of Self Service system, the offer was made by the
customer at the cash desk and this is where the sale takes place. The sale was
therefore, supervised.
• Soumbavel Judge said, “Is a Contract to be regarded as being competed when the
article is put into receptacle. Or this is regarded to be more organized way of doing
which is already being done in many kinds of shop. And the book seller is perhaps the
best example. Namely, enabling customers to have free access to what is in the shop.
To look at different articles and ultimately having got the ones which they wished to
buy. To come up to the assistant saying, ‘I want this.’ The assistant 999 times out of
1000 says that this is alright. And the money passes and transaction is completed.”
Display of goods, Auction, Tender, Advertisements in newspapers or anywhere or
catalogue or Price List, these invitations are merely invitation to treat.

• Invitation to Offer             Offer               Acceptance

ACCEPTANCE

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.

• Analysis of the Definition:

Ø It is the second step in the formation of contract

Ø First, offer is made

Ø When offeror makes the offer ie when the person to whom the proposal is made…..

Ø When the offeree signifies his consent to the offer made to him, we say that
proposal is said to be accepted.

Ø When a proposal is accepted, it becomes a promise.

The acceptance of an offer may take many forms but in essence it amounts to an unqualified
and unconditional assent, communicated by the offeree to the offeror to all the terms of the
offer made with the intention of accepting. 

• Communication of Acceptance – Section 2(b) and Section 3 of the ICA

• Communication to offeror himself. (Felthouse v. Bindley (1863))

• Felthouse v. Bindley
Facts of Felthouse v Bindley
The complainant, Paul Felthouse, had a conversation with his nephew, John
Felthouse, about buying his horse. After their discussion, the uncle replied by letter
stating that if he didn’t hear anymore from his nephew concerning the horse, he would
consider acceptance of the order done and he would own the horse. His nephew did
 not reply to this letter and was busy at auctions. The defendant, Mr Bindley, ran the
auctions and the nephew advised him not to sell the horse. However, by accident he
ended up selling the horse to someone else.
Issues in Felthouse v Bindley
Paul Felthouse sued Mr Bindley in the tort of conversion, with it necessary to show
that the horse was his property, in order to prove there was a valid contract. Mr
Bindley argued there was no valid contract for the horse, since the nephew had not
communicated his acceptance of the complainant’s offer. The issue in this case was
whether silence or a failure to reject an offer amount to acceptance.
Decision / Outcome of Felthouse v Bindley
It was held that there was no contract for the horse between the complainant and his
nephew. There had not been an acceptance of the offer; silence did not amount to
acceptance and an obligation cannot be imposed by another. Any acceptance of an
offer must be communicated clearly. Although the nephew had intended to sell the
horse to the complainant and showed this interest, there was no contract of sale. Thus,
the nephew’s failure to respond to the complainant did not amount to an acceptance of
his offer.
2nd proposition of Judgement in Felthouse v. Bindley: Offeror cannot impose
burden of refusal. It means that offeror cannot say that “If no answer is received
within a certain time, the same shall be deemed to have been accepted.” It is not open
to the offeror to stipulate against an unwilling offeree that the latter silence will be
regarded as equivalent to acceptance. He cannot to force him to take a positive course
of action under penalty of being contractually bound if he does not.

• Communication by acceptor himself. (Powell v. Lee (1908)

• Facts:
Mr. Powell [hereinafter referred to as the “plaintiff”] applied an application to the
school for the position of headmaster. The School Board accepted his application and
thereby decided to appoint him.
However, before such decision of appointment was conveyed to him by the
authorized authority, one of the members of the board acting in his individual capacity
informed the plaintiff of the board’s decision. Later, due to some reason, the board
 changed their mind and decided to withdraw their decision by appointing someone
else.
Aggrieved by this, the plaintiff on the grounds of breach of contract filed a suit
against the school.
• Issue:
Whether, the school was liable for breach of contract.
• Observations:
According to the Kings Bench Division, the question which needs to be considered is
whether a person acting in his unauthorized capacity communicates the acceptance of
an offer. The Hon’ble Judge of the country court stated, for an acceptance to be valid
it is necessary that it is communicated. Moreover, the acceptance of such
communication should be carried out by the offeree himself in his authorized capacity
or by someone appointed by him.
In the above case, it was observed that the said member of the board was not in the
capacity to accept the offer nor was he appointed by the board to communicate the
acceptance. So, the question of breach of contract never arises as the acceptance was
never communicated by the school board acting in their authorized capacity. 
• Judgement:
Therefore, the Court held that as the acceptance of application was not communicated
by an authorized authority (i.e. school board), there was no contract between the
plaintiff and the school board and, the concept of breach of contract did not arise.
• Conclusion:
As observed from this case, for a contract to be valid it is essential that the acceptance
must be communicated by an offeree acting in his authorized capacity or any other
person duly authorized on his behalf. If any unauthorized person communicates the
offer for acceptance then in such case the contract shall deem to be invalid.

• When communication not necessary.

Mode of Communication: Section 7 of the ICA

• Acceptance must be absolute.—In order to convert a proposal into a promise, the

acceptance must— 
(1) be absolute and unqualified;

(2) be expressed in some usual and reasonable manner, unless the proposal prescribes the
manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be
accepted, and the acceptance is not made in such manner, the proposer may, within a
reasonable time after the acceptance is communicated to him, insist that his proposal shall be
accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the
acceptance.

Effect of departure from prescribed manner 

• Section 7 of the Indian Contract Act requires that acceptance should be made in the
manner prescribed in the proposal. But a departure from that manner does not of itself
invalidate the acceptance.

• A duty is cast on the offeror to reject such acceptance within reasonable time and if he

fails to do so, the contract is clinched on him, and he becomes bound by
the acceptance. 

• Where no mode of acceptance is prescribed, acceptance must "be expressed in some

usual and reasonable manner." Mail is, of course a very reasonable manner in such
cases. In England the rule is that where an offer is received through post,
acceptance may also be communicated by post. BUT in India in view of the language
of Section 7, post may be used as a mode of communication in all cases where it
is reasonable, except when the offer requires a particular form of communication.

Postal Communication 

• When the parties are at a distance and are contracting through post or by messengers,
the question arises when is the contract concluded?

• Does the contract arise when the acceptance is posted or when it is received?

• When we talk the ICA, we have used post as a standard mode of communication. We
have been using non-instant modes of communication. The law is against the offeror.
• Eg. X is in Bombay and Y is in Bangalore. X made an offer to Y via poster and wrote
that please signify your acceptance via the same mode. X dispatched the letter to Y on
2nd sept and it reached Y on 4th sept. So, the communication of proposal is complete
 on 4th Sept. The moment when Y dispatched the letter from the post office, it becomes
contractually obligatory and the contract comes into existence.

• Case Laws: Adams v. Lindsell, (1818)

• Adam v. Lindsell, 1818

Facts – The entire projectory started on 2 sept, 1817. When the defender sent the
letter, offering to sell quantity of wool to the plaintiff. The letter said, “Receiving your
answer in course of post.” This letter reached the letter on plaintiff on September 5.
On the same evening of sept 5, the plaintiff wrote an answer, agreeing to buy the
wool. The defendant received the letter on sept 9, which is 4 days later. The defendant
waited for the acceptance till sept 8, and sold the wool to some other party. So, he got
sued by Lindsell.
The complete contract arose on the date when the letter of acceptance was posted on
the due course. As far as the observation of the course is concerned.

• Household Fire and Accident and Accidet Insurance Co. V. Grant (1879)

• Facts – The acceptance of grant’s offer to buy shares in the claimant’s company was
posted to him but he never received it. When the company as wound up, grant refused
to pay for the shares. The court of appeal held that the contract was concluded on
posting and grant had therefore, become a shareholder.
• Judge’s Say –
If the post being treated as an agent and as soon as the letter of acceptance is
delivered, the contract is accepted. It is absolutely binding as the agent has himself
gave the acceptance to the offeror in his hands.

• Communication when complete: "the communication of a proposal is complete

when it comes to the knowledge of the person to whom it is made.

• The communication of a revocation is complete – 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 as against
Section 4 of ICA: Postal Rule

• Communication when complete.—

• "The communication of a proposal is complete when it comes to the knowledge of the

person to whom it is made. 

• The communication of an acceptance is complete,— as against the proposer, when it

is put in a course of transmission to him, so as to be out of the power of the acceptor;
as against the acceptor, when it comes to the knowledge of the proposer. 

• The communication of a revocation is complete,— 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; as against the person to whom it is
made, when it comes to his knowledge."

Case Laws: Section 4 of ICA

• Entores Ltd. V. Miles Far East Corporation, (1955) 2 QB 327- Respect to direct
communication.

Facts

The complainants, Entores, were a company that was based in London. They had sent an
offer to purchase 100 tons of copper cathodes to the defendants, Miles Far East Corp. Their
company was based in Amsterdam and this offer was communicated by Telex, a form of
instantaneous communication. The Dutch company sent an acceptance of this offer by Telex
to the complainants. When the contract was not fulfilled, the complainants tried to sue the
defendants for damages.

Issues

In order to decide whether the action for damages should arise in English or Dutch law, the
court had to decide the moment of acceptance of the contract. If it was when the contract
acceptance was sent, damages would be dealt with under Dutch law. If acceptance was when
it was received, then it would be under English law.
Decision/Outcome

The court held that the contract and damages were to be decided by English law. It was stated
that the postal rule did not apply for instantaneous communications. Since Telex was a form
of instant messaging, the normal postal rule of acceptance would not apply and instead,
acceptance would be when the message by Telex was received. Thus, the contract was
created in London. This general principle on acceptance was held to apply to all forms of
instantaneous communication methods. Acceptance via these forms of communication had to
be clear before any contract is created.

DENNING LJ observed as follows: "Let me first consider a case where two people make a
contract by word of mouth in  the presence of one another. Suppose, for instance, that I shout
an offer to a man across a river or a courtyard but I do not hear his reply because it is
drowned by an aircraft flying overhead. There is no contract at that moment. If he wishes to
make  a contract, he must wait till the aircraft is gone and then shout back his acceptance so
that I can hear what he says... Now take a case where two people make a contract by
telephone. Suppose, for instance, that I make an offer to a man by telephone and, in the
middle of his reply the line goes dead so that I do not hear his words of acceptance. There is 
no contract at that moment.- Rule : The contract is only complete when the acceptance is
received by the offeror; and the contract is made where the acceptance is received.

• Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas and Co. AIR 1966

SC 543- Postal Rule- The contract is made at the place where the letter of acceptance
is posted. 

FACTS

 On 22nd July 1959, Bhagwandas Goverdhandas Kedia Oil Mills (defendant-appellant)

agreed to supply cottonseed cakes to M/s. Girdharilal Parshottamdas and Co. (plaintiff-
respondent) of Ahmedabad over a telephone.
 The respondents brought an action against the appellant in the City Civil Court
of Ahmedabad as the appellant failed to supply seed cakes as per the agreement.
 The appellant contended that the respondents’ offer to purchase
was accepted at Khamgaon and the delivery and payment of the goods were also agreed
 to be made in Khamgaon and the City Civil Court of Ahmedabad had no jurisdiction to
try the suit.
 The City Civil Court of Ahmedabad held that it had jurisdiction as the acceptance of the
offer was initiated in Ahmedabad and was intimidated to the offeree at Ahmedabad and
that the contract was formed in Ahmedabad.
 The appellants filed an application in the High Court of Gujarat, which was rejected.
Then, the appellants with special leave appealed to Supreme Court.
 Whether the contract was formed at the place of acceptance, or
where the acceptance was received?
 DECISION
 The Honorable Supreme Court held that the Trial Court was correct, and the decision was
rightfully made under its jurisdiction where the communication of acceptance is
heard by the offeror through the telephone. Therefore, the appeal made was
dismissed.
 CONCLUSION
 This case widened the scope of communication of offer and acceptance. The court
decided to question the place of origin of the cause of action in a suit where the
breach was made. It clarified the rules regarding communication of offer, acceptance,
and revocation when made over a telephone. It said the rule applied when acceptance
is made through the post is not applicable when made through telephone. In cases of
agreement over the telephone, the situation is like a conversation happening in front of
each other. Therefore, acceptance of the offer is made at the offeror’s place when the
communication is instantaneous, i.e., through telephone.

Analysis of the Definition- Postal Rule of Communication

• Section 4: (1) The communication of a proposal is complete when it comes to the

knowledge of the person to whom it is made:
• Ex: Mr. A proposes, by letter, to sell a house to Mr. B for Rs. 10 lacs. The proposal is
complete when Mr. B receives the letter.
• Ex: Mr. A proposes, by letter dated August 15, 2021 to sell his house to Mr. B for Rs. 10
lacs. Mr. B received the letter on August 20, 2021. The communication of a proposal is
 complete when it comes to the knowledge of the person to whom it is made. So in this
example when Mr. B has received the letter. Ie on August 20, 2021.
• Ex: Mr. A proposes by a letter dated January 10, 2015 to sell his car to Mr. B for Rs. 2
lacs. Mr. B received the letter on January 12, 2015. When can you say the
communication of proposal is complete? 

Communication of Revocation – when complete?

• Section 4: The communication of a revocation is complete,- 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;

• as against the person to whom it is made, when it comes to his knowledge.

•  We will divide the definition into 2 parts:

• Communication of Revocation when Complete

As against the person who makes - 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

As against the person who makes the revocation - When it comes to his knowledge

Revocation of Proposals and Acceptances

• Ex: Mr. A writes a letter on June 05, 2020 to Mr. B making an offer to sell his house
for Rs. 25 lacs. He posts the letter on June 07 2020. The letter reached Mr. B on June
10, 2020. Mr. B vide letter dated June 12, 2020 accepted the offer and the letter of
acceptance reached Mr. A on June 15, 2020. Meanwhile Mr. A then revoked his offer
vide letter dated June 09 2020 and the said revocation letter was received by Mr. B on
June 14, 2020. 

• Here. Mr. A can revoke his offer anytime before June 12, 2020 ie before the letter of

Acceptance is posted by Mr. B and not afterwards. If he posts the letter after June 12,
2020, it will not be a valid revocation on part of Mr. A. 

• Mr. B can revoke his acceptance anytime before June 15, 2020 ie before the letter of

acceptance reaches Mr. A and not afterwards. If he posts the letter after June
15, 2020 it will not be a valid revocation on part of Mr. B.
 • Section 5: A proposal may be revoked at any time before the communication of its
acceptance is complete as against the proposer, but not afterwards. 

• An acceptance may be revoked at any time before the communication of the

acceptance is complete as against the acceptor, but not afterwards.

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

• Mr. B may revoke his acceptance at any time before or at the moment when the letter
communicating it reaches Mr. A, but not afterwards.

Absolute and Unqualified- Section 7 of ICA 

Counter Proposals – Hyde v. Wrench (1840)

The key principle of this case that a counter offer puts an end to the original offer and it
cannot be revived by subsequent acceptance. Once you negotiate, the original offer becomes
invalid.

Facts of Hyde v Wrench

The defendant, Mr Wrench, offered to sell the farm he owned to the complainant, Mr Hyde.
He offered to sell the property for £1,200, but this was declined by Mr Hyde. The defendant
decided to write to the complainant with another offer; this time to sell the farm to him for
£1,000. He made it clear that this would be his final offer regarding the property. In response,
Mr Hyde offered £950 for the farm in his letter. This was refused by Mr Wrench and he
confirmed this with the complainant. Mr Hyde then agreed to buy the farm for £1,000, which
was the sum that had previously been offered.  However, Mr Wrench refused to sell his farm.

Issues in Hyde v Wrench

The complainant brought an action for specific performance, claiming that as Mr Wrench
refused to sell the farm, this was a breach of contract. The issue in this case was whether
there was a valid contract between the parties and if a counter offer was made in discussions,
whether the original offer would still remain open.

Decision / Outcome of Hyde v Wrench

The court dismissed the claims and held that there was no binding contract for the farm
between Mr Hyde and Mr Wrench. It was stated that when a counter offer is made, this
supersedes and destroys the original offer. This original offer is no longer available or on the
table. In this case, when Mr Hyde offered £950, he cancelled the £1,000 offer and could not
back track and accept.

He cannot come back to 1000 pounds and agrees that he is ready to buy it for 1000.

Revocation of Acceptance : Section 5 of ICA

• Revocation of proposals and acceptances.—A proposal may be revoked at any time

before the communication of its acceptance is complete as against the proposer, but
not afterwards. 

• An acceptance may be revoked at any time before the communication of the

acceptance is complete as against the acceptor, but not afterwards. 

• Illustrations: 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.

Revocation of proposals and acceptances

• Section 5. Revocation of proposals and acceptances.—A proposal may be revoked at

any time before the communication of its acceptance is complete as against the
proposer, but not afterwards. An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the acceptor, but not
afterwards.

Revocation of Acceptance

• According to English Law an acceptance once made is irrevocable. In the words of

Anson:

                          "Acceptance is to offer what a lighted match is to a train of gunpowder."

Both do something which cannot be undone.".

This rule is obviously in its operation only to postal acceptance. It is suggested in Anson that
in other cases "an acceptance can be revoked at any time before acceptance is complete,
provided of course, that the revocation itself is communicated before the acceptance arrives."

In India on the other hand acceptance is generally revocable. An acceptor may cancel his
acceptance by a speedier mode of communication which will reach earlier than the
acceptance itself. (Section 5 of ICA)

• Thus the communication of revocation should reach earlier than the acceptance itself.
What will be the result if they reach together. The section does not make this point
clear. But the only illustration appended to Section 5 seems to show that in such case
also the acceptance will be deemed to have been revoked. 

• B may revoke his acceptance at any time before or at the moment when the letter
communicating it reaches A, but not afterwards.

Revocation how made.—A proposal is revoked— (1) by the communication of notice of

revocation by the proposer to the other party; (2) by the lapse of the time prescribed in
such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a
reasonable time, without communication of the acceptance; (3) by the failure of the
acceptor to fulfil a condition precedent to acceptance; or (4) by the death or insanity of
the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor
before acceptance.

Consideration

• Consideration is one of the essential element in formation of a contract.

• Contract without consideration is void. – Nudum Pactum 

• Consideration is “quid pro quo” i.e. something in return

• Consideration in ordinary parlance can be said as value of the agreement or the price

of the promise.

• Ex: Mr. A agrees to sell his car to Mr. B for Rs. 2 lacs. Here Mr. A’s promise to sell
a car is consideration for Mr. B and Mr. B’s promise to pay Rs. 2 lacs is
consideration for Mr. A.
• According to Pollock : “Consideration is the price for which the promise of the other
is bought, and the promise thus given for value is enforceable.”

• According to Justice Lush in the landmark judgement of Currie v Misa (1875) LR

10 Exch 153. According to him “A valuable consideration, in the sense of the law,
may consist either in some right, interest, profit, or benefit accruing to one party, or
some forbearance, detriment, loss or responsibility give, suffered or undertaken by the
other.”

• Sir Charles Pollock which was approved by Lord Dunedin in the case of Dunlop
Pneumatic Tyre Co Ltd v Selfridge Co Ltd (1915) ac 847

• "An act or forbearance of one party or the promise thereof is the price for which the
promise of the other is bought, and the promise thus given for value is enforceable."

• Section 2(d):”When at the desire of the promisor, the promisee or any other person

has done or abstained from doing, or does or abstains from  doing, or promises to do
or abstain from doing something, such act or abstinence or promise is called a
consideration for the promise.”

• When at the desire of the promisor, the promisee or any other person:

• (a) has done or abstained from doing or (Past Consideration)

• (b) does or abstains from doing or (Present Consideration)

• (c) promises to do abstains from doing something (Future Consideration)

• Such act or abstinence or promise is called a consideration for the promise.

1) Consideration must move at the desire of the promisor. 

Ø Durga Prasad v Baldeo (1881) 3 ALL 221

Ø FACT:
Latest article
Durga Prasad had constructed some shops at the market with the promise of paying
commissions on the sales made from the shop. Baldeo had spent some money for the
improvement of the condition of the market on the authority of the government. The
issue of a consideration was brought before the court.
 JUDGEMENT:
The court nullified the agreement because of the lack of a consideration which must
be as desired by the promisor.

Ø Kedar Nath v. Gorie Md. 1886 ILR 14 Cal. 64- "In consideration of your agreeing to

enter into a contract to erect town hall, I undertake to supply money for it."

Facts:

A Town Hall was planned to build in Howrah. Based on it, all the subscriptions, funds, and
interested persons came up for the construction. Municipal Commissioner of Howrah, the
Plaintiff entered into an agreement with the contractor and supplied necessary information of
the plans.

Later on, with an upswing of subscriptions and plans, there was a rise in the cost of
construction making it from Rs.20,000 to Rs.40,000. The defendant made a subscription to
pay Rs. 100 for the construction of Town Hall. However, he refused to pay the amount. The
Plaintiff commenced an action to claim the amount.

Issues:

1. Whether the lawsuit initiated by the Plaintiff and all other interested, is
maintainable?
2. Whether the Defendant is liable to pay the amount?

Judgement:

In an ordinary situation, if somebody puts his name for a subscription for a charitable object,
it cannot be recovered, as there is no consideration.

However, in this particular case, persons subscribing knew the purpose for which the money
was applied and was also aware that on the account of their subscription, the plaintiff entered
into the contract. The court considered this a perfectly valid contract and with good
consideration.
The Court held that even if the defendant does not benefit from the promise he made for a
charitable purpose, he is liable to pay the amount. He was responsible for his promise. A
promise once made cannot be taken back after its commencement. It reaffirmed the rule of
law by stating that, “Any act done at the will of the promisor’s wish is taken as the fulfillment
of consideration of a contract.”

2) Consideration may move from promisee or any other person.

Ø Chinnaya v Ramayya  ILR (1876-82) 4 Mad 137

Ø Facts: A lady granted/ gifted a property consisting of some land to her daughter
(defendant) by a gift deed. The deed was registered to the proper authorities. One of
the terms of the deed was that the daughter had to pay a sum of Rs.653 annually.
Later the old lady died, and the defendant refused to pay the money the sister whom
she had promised to pay so. And hence the plaintiff sued the defendant for the
recovery of the same.
Ø Issue: Whether the plaintiff can bring an action against the defendant for the amount
promised in a contract where the consideration for such promise has been furnished
by the mother of the defendant (plaintiff’s sister)?
Ø Judgement: The Madras High Court held that in this agreement between the
defendant and plaintiff the consideration has been furnished on behalf of the plaintiff
(sister) by her own sister (respondents mother). Although the plaintiff was stranger to
the consideration but since he was a party to the contract he could enforce the promise
to the promisor, since under law, Consideration may be given by the promise or
anyone on her behalf – vide section 2(D) of Indian Contract Act,1872.
Ø Thus, consideration furnished by the old lady constitutes sufficient consideration for
the plaintiff to sue the defendant on her promise.
Ø Dutton v. Poole (1677)

Facts

A son made a contract with his father for his father to not cut down an oak woodland. As
consideration for this, the son would make a payment to his sister of £1000 once she had
married. The money gained from the woodland would have been paid to the sister. The father
died before the sister was married and the son subsequently refused to pay his sister the
money as was previously agreed, at the time of her marriage. The sister sued her brother for
the amount that was originally promised between the father and son.

Issue

The concept of privity of contract had not been fully established at this stage and therefore
this decision had significant importance to the broader subject. The court had to understand
whether the daughter could be considered to be privy to the contract between the father and
son regarding the payment. Within this, it was vital for the court to establish whether the
daughter had given consideration for the promise that was made by the son, to his father, to
pay the daughter the sum of money upon her marriage.

Decision/Outcome

The court found in favour for the sister on the basis that the relationship between the father
and the daughter had made the sister a party to the agreement, even if she was not included at
the time the contract was agreed. The relationship between father and daughter was found to
extend the consideration that the father gave in the promise to the children. (Scroggs CJ)

Legal Rules of Consideration

• (3) Executed and Executory Consideration

• (4) Consideration may be past, present and future consideration.

• (5) Consideration need not be adequate. (Chappel & Co. Ltd. v. Nestle Co. Ltd.
(1960) All ER 2232

• (6) Performance of what one is legally bound to perform

• (7) Consideration must be real and not illusory.

• (8) Consideration must not be unlawful, immoral or opposed to public policy (section
23 & 24)

Privity of Contract
 • The doctrine of privity of contract means that a contract cannot, as a general rule,
confer rights or impose obligations arising under it on any person except the parties to
it.

• If Mr. A makes a contract with Mr.B, he comes under a legal obligation to pay

damages if he fails to keep his promise. The enforceability or liability as regards this
contract lies firmly in the hands of A and B to the exclusion of others, this is the
foundation of the doctrine of privity of contract.

Tweddle v Atkinson [1861] EWHC J57 (QB)

A couple were getting married. The father of the bride entered an agreement with the father
of the groom that they would each pay the couple a sum of money. The father of the bride
died without having paid. The father of the son also died so was unable to sue on the
agreement. The groom made a claim against the executor of the will.

Held:

The claim failed: The groom was not party to the agreement and the consideration did not
move from him. Therefore he was not entitled to enforce the contract.

Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge Ltd. (1915) AC 847

Facts

Dunlop was a tire manufacturer who agreed with their dealer to not sell the tires below a
recommended retail price (RRP). As part of the agreement, Dunlop also required their dealers
to gain the same agreement with their retailers, who in this instance was Selfridge. The
agreement held that if tires were sold below the RRP, they would be required to pay £5 per
tire in damages to Dunlop. This was agreed between the dealer and Selfridges, which
effectively made Dunlop a third-party to that agreement. Sometime after this, Selfridge sold
the tires below the agreed price and Dunlop sued for damages and an injunction to prevent
them from continuing this activity. At the initial trial, the decision was given to Dunlop. This
was appealed by Selfridge and the decision was reversed. Dunlop appealed.

Issue
Selfridge argued that Dunlop could not enforce the contract as Dunlop was not part of the
agreement between the dealer and Selfridges. On this basis, the question for the court was
whether Dunlop had the right to access damages without a contractual relationship.

Decision/Outcome

The court held in a unanimous decision that Dunlop could not claim for damages in the
circumstances. The court found that firstly, only a party to a contract can claim upon it.
Secondly, Dunlop had not given any consideration to Selfridge and therefore there could be
no binding contract between the parties. Lastly, Dunlop was not listed as an agent within the
contract and could therefore not be included as a valid third-party who had rights to claim on
the contract.

Jamnadas v. Ramavtar (AIR) 1957 Punj. 169)

There is no provision in the Indian Contract Act, 1872 either for or against the rule of ‘privity
of contract’. In the case of Jamna Das vs. Ram Avtar,[5] X mortgaged some property to Y
and then sold it to Z who agreed with X to pay the mortgage debt to Y. Y sued Z for the
recovery of the mortgage money. It was held that Y could not succeed as he was not party to
the agreement between X and Z.

M.C. Chacko v. State Bank of Travancore (1969) 2 SCC 343

In M.S. Chacko vs. State Bank Of Travancore,[6] X Bank was indebted to the State Bank of
Travancore under an overdraft. A was the manager of the said X Bank and his father –B, had
guaranteed the repayment of the overdraft. B gifted his properties to the members of his
family. The gift deed provided that any liability under the guarantee should be met by A
either from the bank or from the share of the property gifted to him. The State Bank of
Travencore sought to hold A liable on the basis of the gift deed. It was held that the State was
not a party to the deed and could not enforce it.

Exceptions to the doctrine of Privity of Contract

• (a) Beneficiaries in the case of trust: A beneficiary under an agreement to create

a trust can sue upon the agreement, though he was not a party to the contract between
the settler and the trustees.
 • Klause Mittlebacchert v. East India Hotels Ltd.

Facts:

The plaintiff was a co-pilot in Lufthansa airlines. He stayed in a five star hotel named ‘Hotel
Oberoi Intercontinental’ in New Delhi. The plaintiff visited the swimming pool and while
diving the plaintiff met with an accident and was seriously injured. His head hit on the
bottom of the swimming pool. He was taken to the hospital which was located nearby. The
blood started bleeding from his right ear and appeared to have paralysed in the arms and the
legs. He spends a lot of money on medicines, special diet and rehabilitation but he died 13
years after the accident. The plaintiff filed a suit against the Hotel Oberoi Intercontinental by
claiming Rs.50 lakhs as compensation.      

Issues:

1. Whether it was a failure on the part of the plaintiff to take reasonable care of
himself?            
2. Whether the defendant was held liable for negligence?

Observation:

It was observed that a five star hotel charges a high price from its guests and thus the hotel
should make good services to their guests. It was the duty of the hotel management to take
care of their guests. Any latent defect in their structure or service may lead to hazardous to
the guests and would attract the breach of duty to take care. It was also observed that the
depth of the swimming pool is not sufficient; it was the duty of the hotel management to
maintain sufficient water in the swimming pool. It was clearly observed that there is no
failure on the part of the plaintiff. Thus the plaintiff was injured only because of the negligent
act by the defendant. 

Judgment:

The Hon’ble Delhi High Court said that the plaintiff was injured only because of the
negligent act of the defendant and there is no failure on the part of the plaintiff. Thus the
defendant is liable to pay the compensation of Rs.50 lakhs.
 • Rana Una Nath Baksh Singh v. Jang Bahadur AIR (1938) P.C. 245

Facts of the case ( Klaus Mittelbachert vs East India Hotels Limited )

 Klaus Mittelbachert, the plaintiff was a co-pilot in Lufthansa. He landed at

Delhi and was scheduled to continue the flight to Frankfurt on 14th August,
1972. For the intervening time, elected in the air-line terminology as lay- over-
period, he attested into and stayed at the Hotel Oberoi Intercontinental.
 Hotel Oberoi Intercontinental is owned by the defendants. One of the
defendants was its Chairman and it was allegedly being managed by another
defendant at the material time. The Hotel had a swimming pool installed with
a diving board.
 In the afternoon of August 13, 1972 the plaintiff (Klaus Mittelbachert ) visited
the swimming pool. At about 6.00 p.m. while driving the plaintiff met with an
accident. He had hit his head on the bottom of the swimming pool. He was
taken out bleeding from right ear and appearing to have paralyzed in the arms
and the legs. He was taken to Holy Family Hospital where he remained under
medical observation until August, 21, 1972 on which date he was taken to
Germany under medical escort.
 On 24th March, 1973 he was discharged from the Clinic. Further treatment
prolonged but the situation of the plaintiff did not improve. He was shifted
back to his residence where his medications resumed.
 The present suit has been filed for recovery of an amount of Rs.50 lacs by way
of damages with interest calculated @ 12% from the date of the filing of the
suit until payment and costs.
 According to the plaintiff, the accident was caused by what in the
circumstances amounted to a trap. The diving board placed at the swimming
pool suggested a proper depth of water into which a swimmer could dive. The
defendant hotel owed the plaintiff a duty to take care and make certain of his
safety.
 The defendants have denied their liability. It is submitted that defendants No.2
and 4 have been unnecessarily joined as parties to the suit as none of them can
 be held liable or personally liable. The defendants admit that defendant No.1 is
the owner of defendant No.3 and is solely responsible for the acts of defendant
No.3.
 A material occurrence during the pendency of the suit and resulted in the death
of plaintiff due to cardiac arrest.

Issues of Klaus Mittelbachert case

(a) The first issue that is raised deals with deciding whether the defendants were in control of
the   premises of Hotel Inter- continental or not on the day of the incident.
(a) The first issue that is raised deals with deciding whether the defendants were in control of
the   premises of Hotel Inter- continental or not on the day of the incident.

(b) Another issue that was raised was that whether there was any failure on the part of the
plaintiff to take reasonable care of himself in his own interest and who has the last
opportunity of avoiding the accident. It was also debatable that whether the disabilities
attributed and the death of the plaintiff was the direct result of the accident that took place or
not.

Decision of the Case (Klaus Mittelbachert vs East India Hotels Ltd)

Co pilot of Lufthansa is wounded by a flaw in the pool of Hotel Oberio Intercontinental
which was reserved by Lufthansa itself and not Klaus Mittelbachert. Hence, there was no
Privity of Contract among Klaus Mittelbachert & the hotel. It was alleged by the Delhi High
Court, that though the contract was among Lufthansa & the hotel, the beneficiaries are the
staff who would stay, and therefore the contract was for their assistance. The defendant hotel
owed the plaintiff a responsibility towards apt attention and security. Having failed therein
the defendants are guilty of negligence and are, therefore, liable to compensate the plaintiff
for the consequences flowing from the accident.

Conclusion
All these issues are inter-connected. They emerge out of the contending pleas raised by the
plaintiff and the defendants as to whether the negligence was on the part of the defendants or
on the part of the plaintiff or whether it was a case of contributory negligence as suggested by
the defendants. According to the plaintiff the accident was in the circumstances amounted to
a trap. There was implied insinuation by the hotel that there was proper depth of water. The
hotel owed the plaintiff a duty to ensure his safety and having failed therein must be held to
have been negligent.

 Dutton v. Poole
 Nawab Khwaja Muhammad Khan v. Nawab Hussaini Begum 

Facts

Khwaja Muhammad Khan(defendant) entered into a contract on 25th October 1877 with the
father of Husaini Begum(plaintiff) for the marriage of his son Rustam Ali and the plaintiff. The
contract expressed that after the marriage, the defendant would pay rupees 500 per month on
perpetuity bases as kharch-i-padan, out of specific properties mentioned in the contract. The
marriage took place on 2nd November 1877 however both Rustam Ali and Husaini
Begum(plaintiff) were minors due to which plaintiff was welcomed in her matrimonial home in
1883 and the couple lived together till 1893 after which due to various differences plaintiff left
her matrimonial home and started residing at her pre-nuptial home. And during this time the
defendant discontinued the payment of rupees 500 as agreed earlier. The suit was bought in this
respect, the subordinate judge provided the decision in favor of Khwaja Muhammad
Khan(defendant) but the subsequent appeal was made to the High Court where the decision of the
subordinate court was reversed and the court pronounced the decision in favor of Husaini begum
(plaintiff). This led Khwaja Muhammad Khan to appeal before Privy Council.
Issues

 Whether the plaintiff is legally entitled to bring legal action against the defendant as she is
not the party to the contract?
 Whether the right of the plaintiff to receive kharch-i-pandan is forfeited, as she has
ceased to reside with her husband in her matrimonial home?

The decision, according to the court the principle laid down in Tweddle v. Atkinson was
not applicable in this case. The court held that the contract which was executed created a
charge on the immovable property and designated the plaintiff as the sole beneficiary under
it, therefore even if she is not a party to the contract she is qualified to proceed with the legal
actions for enforcement of her claim. Additionally, the charge created by the defendant which
 tied him to make regular payments, and the contract which was executed did not provide any
reference to the condition that such payment would be rendered only if she resides with her
husband at her matrimonial home. The only time provided in the agreement was regarding
the commencement of payments. Therefore, the court gave a decision in favor of the plaintiff.

 (b) Beneficiaries of Family Settlement/Marriage Settlements/Family Partition

 (c) Assignment of Contract

 (d) Agency Contract

 (e) Official Receiver

 (f) Acknowledgement of Debt

 (g) Covenant Running with Land (Tulk v. Moxhay)

Exceptions to the Rule “No Consideration No Contract”

• The general rule is that an agreement made without consideration is void (Section 25).
In every valid contract, consideration is very important. A contract may only be
enforceable when consideration is there. However, the Indian Contract Act contains
certain exceptions to this rule. In the following cases, the agreement made without
consideration, shall be valid and enforceable:

• Section 25: An agreement made without consideration is void, unless—

• (1) it is expressed in writing and registered under the law for the time being in force
for the registration of [documents], and is made on account of natural love and
affection between parties standing in a near relation to each other; 
• (1) Agreement made out of Natural Love and Affection (section 25(1))

• Following conditions must be fulfilled under section 25(1) to make an agreement

enforceable without consideration.

• It must be made out of natural love and affection between the parties

• Parties must stand in near relationship with each other.

• It must be in writing

• It must also be registered under the law.

• Section 25(2) - Compensation for past voluntary services: it is a promise

to compensate, wholly or in part, a person who has already voluntarily done
something for the promisor, or something which the promisor was legally compellable
to do; 

• In order that a promise to pay for the past voluntary services be binding, the following
essential factors must exist:

• The services should have been rendered voluntarily.

• The services/act must have been already done and  must have been rendered for
the promisor.

Ø The promisor was legally compellable or bound to do that act.

• Section 25(3) Promise to pay time barred debt: It is a promise, made in writing
and signed by the person to be charged therewith, or by his agent generally or
 specially authorized in that behalf, to pay wholly or in part a debt of which the
creditor might have enforced payment but for the law for the limitation of suits.

• Ex: Mr. A is indebted to Mr. B for Rs. 1 lac, but the debt is barred by the
Limitation Act. Mr. A signs a written promise now to pay Rs. 1 lac in final settlement
of the debt. This is the contract without consideration, but enforceable.

• The following conditions must be satisfied for the payment of the time-barred debt:

Ø The debt must be a time-barred debt.

Ø The creditor must have enforced the payment but failed due to limitation of suits.

Ø The promisor/debtor now wishes to pay the time barred debt.

Ø The promisor must put his promise in writing and signed by himself or his authorised
agent.

Ø It can be whole or can be part payment of the outstanding debt.

Ø (4) Agency: According to section 185 of the Indian Contract Act, 1872,
no consideration is necessary to create an agency agreement.

Ø (5) Completed gifts: The rule no consideration no contract does not apply in case of
completed gifts.

Ø Explanation(1) to section 25: “Nothing is this section shall affect the validity, as
between the donor and the donee, of any gift actually made.
 Ø Explanation (2) to section 25: “An agreement to which the consent of the promisor is
freely given is not void merely because the consideration is inadequate; but the
inadequacy of the consideration may be taken into account by the court in
determining the question whether the consent of the promisor was freely given. 

Capacity of Parties

Meaning and Definition

– According to section 10: Every Agreement is a contract if made by the parties

competent to contract.

– Now who are parties competent to enter into a contract?

– Section 11. Who are competent to contract.—Every person is competent to

contract who is of the age of majority according to the law to which he is subject,
and who is of sound mind and is not disqualified from contracting by any law to
which he is subject. 

– Analysis of Definition:

– As per section 11 following parties are competent to enter into a contract

1) Person who is of the age of majority

2) Person who is of a sound mind (section 12)

3) Person not disqualified by law 

– Who is a major?

Ø So According section 11 of the ICA, every person is competent to contract who is of

the age of majority according to the law to which he is subject, 

Ø According to section 3 of the Indian Majority Act, 1875, declares that every person
domiciled in India shall be deemed to have attained his majority when he shall
have completed his age of eighteen years, and not before.

Ø Therefore, we can say that a person above the age of eighteen years is a major as per
the Indian Majority Act, 1875 and is competent to enter into a contract as per section
11 of the ICA, 1872.
 Ø In other words, we can interpret that a person below the age of eighteen years is a
minor and is incompetent to enter into a contract.

– Therefore, following persons are not capable of entering into a contract:

1) Minor (who has not attained the age of 18)

2) Person of an unsound mind 

3) Person disqualified by law to enter into a contract.

Minor’s Agreement

• Law dealing with Minor is based on 2 principles:

• Law protects minors against their own inexperience, which may enable an
adult to take an unfair advantage of a minor, or to induce a minor to enter
into a contract. 

• The Law should not cause unnecessary hardships to persons who deal fairly
with minors.

– 1) A contract made with or by a minor is void ab initio.

Ø Mohiribibi v Dharmodas Ghosh (1903) Cal 539

Facts of the case-

Dharmodas Ghose was the respondent in this case. He was a minor (i.e. has not completed
the 18 years of age) and he was the sole owner of his immovable property. The mother of
Dharmodas Ghose was authorized as his legal custodian by Calcutta High court.

When he went for the mortgage of his own immovable property which was done in the favor
of appellant i.e. Brahmo Dutta, he was a minor and secured this mortgage deed for Rs. 20,000
at 12% interest rate as per year.

Brahmo Dutta who was a money lender at that time and he secured a loan or amount of Rs.
20,000, and the management of his business was in the control of Kedar Nath and Kedar Nath
acted as the attorney of Brahmo Dutta.
Dharmodas Ghose’s mother sent a notification to Brahmo Dutta informing him about the
minority of Dharmodas Ghose on the date on which such mortgage deed was commenced,
but the proportion or the sum of loan that was actually provided was less then Rs. 20,000.

The representative of the defendant, who actually acted instead of on behalf of money lender
has given money to the plaintiff, who was a minor and he fully had knowledge about the
incompetency of the plaintiff  to perform or enter into contract and also that he was
incompetent legally to mortgage his property which belonged to him.

On 10th September 1895 Dharmodas Ghose along with his mother brought an legal action
against Brahmo Dutta by saying that the mortgage that was executed by Dharmodas was
commenced when he was a minor or infant and so such mortgage was void and
disproportionate or improper and as a result of which such contract should be revoked.[i]
When this petition or claim was in process, Brahmo Dutta had died and then further the
appeal or petition was litigated by his executor’s. The plaintiff argued or confronted that in
such case no relaxation or any sought of aid should be provided to them because according to
him, defendant had dishonestly misinterpreted the fact about his age and because if mortgage
is cancelled at the request by defendant i.e. Dharmodas Ghose.

Issues before the court-

 Whether the deed was void under section 2, 10 and 11 of the Indian Contract
Act, 1872 or not?

 Whether the defendant was liable to return the amount of loan which he had
received by him under such deed or mortgage or not?

 Whether the mortgage commenced by the defendant was voidable or not?

Judgement-
 According to the verdict of Trial court, such mortgage deed or contract that was
commenced between the plaintiff and the defendant was void as it was accomplished
by the person who was an infant at the time of execution of mortgage.
 When Brahmo Dutta was not satisfied with the verdict of Trial Court he filed an
appeal in the Calcutta High court.
  According to the decision of Calcutta High court, they agreed with the verdict that
was given by Trial court and dismissed the appeal of Brahmo Dutta.
 Then he later went to Privy Council for the appeal and later the Privy Council also
dismissed the appeal of Brahmo Dutta and held that there cannot be any sought of
contract between a minor and a major person.
 The final decision that was passed by the council were-
 Any sought of contract with a minor or infant is void/void ab- initio (void from
beginning).
 Since minor was incompetent to make such mortgage hence the contact such made or
commenced shall also being void and not valid in the eyes of law.
 The minor i.e. Dharmodas Gosh cannot be forced to give back the amount of money
that was advanced to him, because he was not bound by the promise that was
executed in a contract.

Conclusion-
 In Mohori Bibee v/s Dharmodas Ghose, at the end it can be concluded that any
agreement or deed in which minor is party to it or is included in such agreement shall
be declared null and void because such agreement is not agreement in the eyes of law.
In cases minors parents or custodians shall not be liable for the dealing done by the
minor without their consent, and hence they will be not liable to return the amount
back taken by the minor out of the moral obligation.

– 2) Minor can be beneficiary or can take benefits out of a contract

– 3) Minor’s property is liable for the necessaries supplied to him.

– 4) A minor can plead his minority ie No Estoppel against Minor

– 5) No ratification after attaining the age of majority.

– 6) Doctrine of Restitution

Ø Leslie v Sheill (1914) 3 KB 607

 FACTS:

Ø  Defendant obtained loans from plaintiff by fraudulently misrepresenting that he was

of full age at the time of contract. Defendant sued him to recover the money.

ISSUES:

Ø 1) Whether defendants are entitled to equitable restitution against loan given to

minor?

Ø 2) Whether they could claim restitution either under action for tort arising out of
contract, or of quasi-contractual claim?

HELD:

Ø 1) If an infant obtains property or goods by misrepresenting his age, he can be

compelled to restore it so long as the same is  traceable in his possession. This is
known as  equitable doctrine of restitution.

Ø However, in present case, since the money was spent by the defendant, there was
neither any possibility of tracing it nor any possibility of restoring the thing got by
fraud, for if the court will ask defendant to pay the equivalent sum as that of loan
received, it would amount to enforcing a void contract. Restitution stops when
repayment begins and equity does not enforce against minor any contractual
obligation.

Ø 2) Infant can’t be held liable for a wrong when the cause of action is ex contractu or
is so directly connected with the contract that it would be an indirect way of
enforcing the contract. But, if the wrongful act though connected with the subject
matter of the contract, yet is independent of it in the sense of not being an act
contemplated by it, then infant can be liable.

Ø In present case, since an action either on torts or on quasi contractual claim would be
tantamount to enforcing the contract by making defendant liable to pay the damages
or restitution, hence, no such action lies.
 Ø Khan Gul v. Lakaha Singh (AIR 1928 Lah 609)

FACTS

 The defendant (minor) intentionally misrepresented himself as an adult and agreed with
the plaintiff for the sale of his property.
 The plaintiff paid him a certain sum of money and was ready to pay the balance amount,
but the defendant refused to furnish the possession of the property to the plaintiff, which
led to this case.

ISSUE

 Whether the doctrine of estoppel applies to minors?

 Whether the defendant can refuse to perform his part of the contract and additionally keep
the benefit (consideration) received by him?

DECISION

 The courts concluded that the doctrine of estoppel cannot apply to minors as it would
cause absurdity and injustice.
 The court relied on Jenning v. Rundall which stated that protection provided to minors
should be used as a shield and not as sward, therefore exercising their equitable
jurisdiction the courts restored the status of both the parties which they possessed before
the formation of contract and stated “it would be sheer injustice if an infant keeps not
only property but also the money received under the contract. As the transaction is wiped
out is only fair that both parties should revert and in this case, restitution is not provided
because there is a contract instead it is provided there is none and both parties should
revert to original status”.

Ø Ajundhia Prasad v. Chandan Lal (AIR 1937 All 610)

FACTS

 A mortgage deed was executed by two infants who deliberately suppressed the fact of
their infancy and the appointment of a certified guardian for them. The mortgagee
unknown to the fact agreed to pay a certain sum of money for their marriage expenses.
Thereafter the suit was filed for the recovery of money under Section 68 of the Indian
 Contract Act, 1872, the lower courts found minors were in reality above 18 years but
below 21 which still was considered minor/infant additionally, courts affirmed that
marriage expenses are not necessities, therefore, no relief can be provided under section
68 of The Indian Contract Act,1872 but subsequently the lower appellate court relied on
the case of Khan Gul vs Lakha Singh and stated that fraudulent representation of minors
makes them liable to pay the principal amount with future interest and in default sale of
property subsequent to which this instant case came into existence.

ISSUE

 Whether a mortgagee be granted a decree to recover the principal amount with

future interest under section 65 of The Indian Contract Act,1872 or by application
of any equitable principle. Even if the minor has intentionally misrepresented
himself as an adult?

CONTENTIONS

 The whole contention relied on the case of Mohori Bibi v. Dharmodardas Ghose. It was
first argued that the in presence of a relevant provision i.e. Section 65 of the Indian
Contract Act, 1872 the decision should not be based on equitable principle as courts of
equity cannot compel a person to pay regarding a transaction that is characterized as void
by legislation.
 Additionally, it was contended that Section 65 of the Indian Contract Act, 1872 will not
be applicable as the initial requirement for this section is “the existence of
agreement/contract by competent parties” and has already affirmed minors agreement
are void, they were never considered as a contract.

RATIO DECIDENDI

 The courts opined, if Section 65 of the Indian Contract Act, 1872 is employed against a
minor when he is a defendant the result of such would be chaotic, all agreements by
minors would by default be upheld and enforced against them regardless of the fact that
any mistake, misrepresentation, or fraud was committed or not.
 A decree of restoration would impose liability to pay on minors and such would quash the
protection provided by the legislation to them. This would open a wide door for mischief
 and misuse. People would continue to contract with minors with confidence furthermore
it will be easy for people to obtain documentary evidence to support the charge of fraud
against the minors.
 The court also affirmed the view that restitution is only possible in reference to minors
when property needs to be restored as it is traceable and courts after considering a
contract void on the ground of infancy cannot compel to refund any money as it is non-
traceable and granting a money decree against a minor would be amount to imparting
pecuniary liability which is void.

DECISION

 The courts after in examining all the authorities and provision provided that the courts
could not award a decree of restitution in respect of repayment of money and the court
reversed the decision of the lower appellate court and pronounced the decision in favor of
minor.

– 7) No Insolvency

– 9) Minor can be an agent

– 10) Minor as a partner: A minor can be admitted to the benefits of partnership with

the consent of all the existing partners. It should be noted that consent of all
the partners is required for a minor to be admitted in a partnership. (Sec 30 of the
Partnership Act, 1932)

– There must be a partnership in existence before a minor can be admitted to its

benefits. Thus, a minor cannot form a new partnership but can be admitted in an
existing partnership.

– There cannot be a partnership consisting of all minors. Minor is entitled for the profits
and is not liable for the losses.