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CONTRACTS

offer
INDIAN CONTRACT ACT, 1872 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;
Essential elements
• It must be made by one person to another
person. In other words, there can be no proposal
by a person to himself
• It must be an expression of readiness or
willingness to do( i.e. a positive act) or to abstain
from doing something( i.e. a negative act)
• It must be made with a view to obtain the the
consent of that other person to proposed act or
abstinence.
Acceptance
• Sec 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;
• (c) The person making the proposal is called
the "promisor", and the person accepting the
proposal is called the "promisee";
• Promisor=Offeror , Proposer
Promisee= offeree ,acceptor
• An offer may, either be an express offer or
implied offer
• Express offer is one which is made by works
spoken or written.
• Implied offer is one which is made otherwise
than in words. It is inferred from the conduct
of the person. Example boarding a bus
• when a person gets into motor bus or hires a
taxi-car going from one place to another.
• He undertakes to pay.
• Automatic machine which vends coffee.
• The offer must be certain or the terms capable
of being made certain
• Section 29 -
• Agreements, the meaning of which is not
certain, or capable of being made certain, are
void.
• (a) A agrees to sell to B "a hundred tons of oil". There is
nothing whatever to show what kind of oil was
intended. The agreement is void for uncertainty.
• (b) A agrees to sell to B one hundred tons of oil of a
specified description, known as an article of
commerce. There is no uncertainty here to make the
agreement void.
• (c) A, who is a dealer in coconut—oil only, agrees to
sell to B "one hundred tons of oil". The nature of A's
trade affords an indication of the meaning of the
words, and A has entered into a contract for the sale of
one hundred tons of coconut—oil.
• (d) A agrees to sell to B "all the grain in my
granary at Ramnagar". There is no uncertainty
here to make the agreement void.
• (e) A agrees to sell to B "one thousand mounds of
rice at a price to be fixed by C". As the price is
capable of being made certain, there is no
uncertainty here to make the agreement void.
• (f) A agrees to sell to B "my white horse for
rupees five hundred or rupees one thousand".
There is nothing to show which of the two prices
was to be given. The agreement is void.
LEROY v SOUTH COAST SECURITY(1991 N.L.380)
• A notice on private round land that
unauthorised or unlawfully parked vehicles
would be immobilized and a levy charged for
release –it is only a warning not an offer.
• Montreal gas co v Vasey (1900 A.C. 595)
• The plaintiff relied on a clause that if the
company were satisfied with him as a
customer the co would “favourably consider
an application for renewal of the contract”
• The court held that there was nothing in these
words to create a legal obligation.
General offer Sec 8
• Performance of the conditions of a proposal,
or the acceptance of any consideration for a
reciprocal promise which may be offered with
a proposal, is an acceptance of the proposal.
• General offer vs specific offer
• Specific offer • General offer
• When it is addressed to • When it is made to
a definite individual or unascertained
body of individuals individuals.
• Offer is made to • It is made to world at
individuals large
BOULTON v JONES
• X offers to buy a car from Y for Rs.2 Laks. This
offer is a specific offer which has been made
to a definite person Y. No person other than Y
can accept this offer.
HARBHAJAN LAL v HARCHARAN LAL
(AIR ALL 539)
• X advertised in the newspaper that he would
pay RS.5000 to anyone traces his missing boy.
• Y, who knew about the reward traced that boy
and sent a telegram to X that he had found his
son. It was held that X was entitled to receive
the amount of reward.
Fisher v.Bell
• The respondent in a showcase of his shop a
flick Knife with a marked prize. Whether it
amount an offer for sale. Court held “ the
knife is there inviting the people to buy and in
ordinary course for sale but t a special statute
overrides the general law since it is prohibited
weapon.”
CARLIL v CARBOLIC SMOKE BALL CO
LTD(1983,1 Q.B 256)
• The defendants advertised that they would
pay £ 100 to anyone who caught influenza
after using their smoke ball thrice daily for
two weeks. They stated that £ 1000 was
deposited in a bank to show their sincerity.
• Mrs. Carlil relaying on the advertisement,
used the smoke ball for the prescribed period.
Having caught influenza ,she sued for the
reward.
• The company was held liable. The declaration
was a true offer and not a mere
advertisement. The bank deposit shown the
intention. The offer was to anybody
performing the condition mentioned in
advertisement. The performance of the said is
the deemed acceptance of the offer.
• Chornton v. Shoe Lane parking Ltd. 1971 2QB
163
• A notice at entrance of the automatic car park
may be offer which can accepted by driving in.
• Offer • Invitation to offer
• Where a person shows his • Where a person invites
willingness to enter into a others to make an offer to
contract. him.
• An offer is made by a • The purpose of inviting an
person with the purpose offer is to receive offer.
of enforcing the contract.
• An offer if acted upon • An invitation to offer , if
results in a contract acted upon results in offer
Invitation to Offer.
Offer is different from invitation to offer. Offer can
only be accepted. Window display in shop is only
an invitation of offer.
Pharmaceutical society v. Boot cash chemist 1953
1 QB 401
When a customer picks up an article in a self service
and takes it to a casher desk for payment, his
action is not acceptance to an offer to sell but an
offer buy which shopkeeper may or may not
accept.
Badriprasanth v. state of MP(AIR 1976)

• The DFO wrote to plaintiff to kindly inform


whether he is ready to pay Rss. 17000/- fot
the contract to fell trees in sundarpany
village. He replied that he was ready to pay
Rs17000/- provided his client a refund
Rs.17000/ - already paid remain unaffected.
The first letter is a invitation to treat
Offer must be communicated to the
offeree
• It may oral or in writing.
• Oral may even on phone.
• Letter may be snail mail, email,SMS
• Lalman v. Gauri Datt
• The defendant sent his servant, plaintiff to find his
missing nephew. The defendant later announced a
reward for anybody tracing the missing boy. Before the
knowledge this announcement the servant traced the
boy. He later demanded the reward and was refused.
Court held offer was not communicated and hence
defendant not liable.
Offer should not burden the offeree.
• Offer should not burden the offeree.
• I offer to sell my bike for Rs.50000/- and if you
have replied in a week it is deemed that you
that accepted
Mere statement of Price is not an
Offer
Harvy v.Fasey
• H telegraphed F “will to sell to bumper hall pen
and telegraph the lowest cash prize” F replied
“lowest cash prize 900” . H telegraphed “we
agree to buy” F not responded. Court held no
contract is created.
• Macpherson v.Appana- A offered to B who was
agent for C to purchase c’s building for Rs6000. C
replied not accept less than Rs.10000. B sold to X
for a higher. Prize A’s suit for specific performance
failed.
Offer is different from mere
declaration of intention
• The offer must be distinguished from mere
declaration of intention.
• Such statements are made merely indicates that
an offer may be made or invited in future.
• FARINE v. FICKER
• A father wrote to his would be son in law that his
daughter would have a share of what he left after
the death of his wife. It was held that the letter is
mere statement of intention and not an offer,
• DEVIDATT v. SHRIRAM
• X, a broker of Mumbai wrote to y a merchant of
Ghasiabad stating the terms on which he is
willing to do business. It was held that the letter
was a mere statement of intention and not an
offer.
• HARRIS v. NICKERSON
• An auctioneer advertised in a news paper that a
sale office furniture on a particular day. Mr X with
the intention to buy furniture came from a
distant place for the auction but it was cancelled.
• It was held that mr X cannot file a suit against
the auctioneer for loss of time and expenses
because the advertisement was merely a
declaration of intention to hold auction and
not an offer to sell.
STANDARD FORM CONTRACTS
• The special terms of the offer must also be
communicated along with the offer.
• If the special terms of the offer are not
communicated, the offeree will not be bound
by those terms.
• The question of special terms arises generally
in case of standard of contracts .
• Standard contracts are made with bi compnies
• Insurance companies
• Railways
• Shipping companies
• Banks
• Hotels
• Dry cleaners.
• Such companies are in a position to exploit the
weakness of general public by including certain
terms which may limit their liabilities.
Handerson v. Stevenson
• X purchased a steamer ticket for travelling
from Dablin to White haven.
• On the back of the ticket, certain conditions
were printed one of which excluded the
liability of the company for loss, injury, delay
to the passengers or his luggage.
• X never looked at the back of the ticket and
there was nothing to draw his attention to the
conditions printed on the back of the ticket.
• His luggage was lost due to the negligence of
the servants of the shipping co.
• It was held that he was entitled to claim for
compensation for the loss of luggage in spiteof
the exemption clause because there was no
indication on the face of the ticket to draw his
attention to the special terms printed on the
back of the ticket.
Parker v.S.E.Rail Co
• P deposied his bags in the cloakroom at a
railway station , on the face of the receipt the
words SEE BACK was printed.
• One of the conditions printed on the back was
• “the liability of therailway co shall be limited
to $10”
• P’s bag was missing and he claimed the actual
value of the bag amounting to $24.
• P admitted that the knowledge of the condition but
denied having read it.
• It was held that P could recover only 10$ because the
railway company have given reasonable sufficient
notice on the face of the ticket as to the existence of
condition.
• Note:- In case of special conditions are printed in a
language which the offeree does not understand ,it is
the duty of the offeree to get translation before
accepting the offer. If he does not get it shall be
presumed that he understood the terms and bound by
it.
OLLEY V MARLBOROUGH COURT LTD.
• The special conditions must be brought to the
knowledge of the offeree before acceptance and
not afterwards.
• The subsequent communication will not bind the
offeree unless he himself aggress there to.
• Mr.X and Mrs’X hired a room in the hotel for a
week, when they entered the room there was a
notice on the wall disclaiming the owners liability
for loss , damage or theft of the article.
• Some of the articles were stolen , it was held
that owner of the hotel is liable as the
conditions were known to offeree only after
the contract is concluded.
LILLEY WHITE DRY CLEANERS V
MUNUSWAMI(AIR 1966 MAD)
• The special terms and condition must be
reasonable.
• What is reasonable is a question of fact .
• If the terms and conditions are unreasonable the
other party will not be bound by them.
• If the dry cleaner limits his liability to 25% of the
market price of the article in case of loss.
• The customer will not be bound by the condition
because the dry cleaner can purchase garments
at 25% of the market price. This term is
unreasonable and opposed to public policy.
CROSS OFFER
• Two offers which are similar in all respects
made by two parties to each other are known
as cross offer.
• Cross offer does not amount to acceptance.
• Example:- X sent a letter to Y offering to sell
his car for 1 lakh. Same time Y wrote a letter
wants to buy car for 1lakh from X.
STANDING OFFER
• An offer of a continuous nature is known as a
standing offer.
• Eg:- Tender.
The Indian Contract, 1872 & The Specific Relief Act, 1963 (Contd.)

COMMUNICATION IN LAW OF CONTRACT


 Communication creates a binding link between the parties.
 Communication to become complete as stipulated in the ICA
 The legal effect of communication will have to be worked out
depending on the mode of communication adopted between the parties.
Modes of communication

Parties facing each other Parties separated by distance


(Contracts inter-praesenti) i) By Post
ii) By Telegram
iii) By Telex
iv) By Fax
v) By Internet

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The Indian Contract, 1872 & The Specific Relief Act, 1963 (Contd.)
COMMUNICATION IN LAW OF CONTRACT ( Contd.)

* Based on the mode of communication adopted the place of conclusion,


the time of conclusion and the courts which will have jurisdiction to
entertain the dispute gets decided.
• Parties facing each other: In these cases no difficulty arises to decide
about the time and place and jurisdiction as well since parties will be at
that place and time when the contract is entered into
• Parties separated by distance: In these cases as parties would be at
different places the time and place of conclusion of contract revolve
around the mode of communication adopted by the parties.
• Communication by Post: This mode envisages exchange of ordinary
correspondence between the two parties. Hence, the time and place of
conclusion will have to be decided as per the following rules/principles
Rule 1: The contract gets concluded at the time and place where the letter
of acceptance is posted. - ADAMS v LINDSELL, 1818 106 E.R. 250.
Rule 2: The above principle can be applied even if the offeror has not
indicated that the offered should send the acceptance by Post. –
DUNLOP v HIGGINS 1848 1 H.L.C. 381.

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The Indian Contract, 1872 & The Specific Relief Act, 1963 (Contd.)
COMMUNICATION IN LAW OF CONTRACT ( Contd.)
Communication by Post – Rules – contd:
Rule 3: The rule of acceptance is complete as soon as it is posted is to be
applied even if the letter of acceptance is lost in transmission. –
HOUSEHOLD FIRE INSURANCE CO., v GRANT, 1879 Ex. D 216.
Rule 4: Communication to a wrong person or to a wrong address will not
bind the offeror. – KARAN SINGH v THE COLLECTOR,
CHATTARPUR, AIR 1980 M.P. 89.
Note: The above rules are followed in English Law to the true letter and
spirit since acceptance once posted cannot be withdrawn. However, these
rules are applicable in Indian Law also subject the manner in which
communication becomes complete as per Section 4 of ICA.
Acceptance by Telephone and Telex: Being instantaneous mode of
communications the principle regarding the place of conclusion of contract
gets modified.
Telex: ENTORES LTD. V MILES FAR EAST CORPORATION, 1955 2 Q.B.
327.
Telephone: BHAGHWAN DAS v GIRDHARILAL & CO., 1966 S.C. 543.

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The Indian Contract, 1872 & The Specific Relief Act, 1963 (Contd.)

COMMUNICATION IN LAW OF CONTRACT ( Contd.)


Revocation of Proposal and Acceptance:
 The above said principles are to be adopted mutatis mutandis when
revocation of proposal and acceptance are made in Indian Law.
 As in English Law once a letter of acceptance is posted it creates a binding
and irrevocable contract, revocation of acceptance cannot be made. But,
in both the laws a proposal made may be revoked.
Acceptance through e-mail communication:
 Communication as outlined in Section 3 of the Act has also been
recognized by Section 10A of the Information Technology Act, 2000.
 As per this provision a contract cannot be denied enforceability on the sole
ground that that electronic records are used in its formation.
 In PROCD INC. v MATHEW ZEIDENBERG, 1996) it has been held that
where a user indicates his assent to the displayed terms by clicking ‘I
agree’ button on a website a valid communication of both the offer and
acceptance is said to have taken place.
 In TRIMEX INTERNATIONAL FZE LTD. v VEDANTA ALUMINIUM
LTD, 2010 3 SCC 1 it has been held that communication taking place
through e-mail has been held to give rise to a valid contract.

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When an offer comes to an end?
• An offer must be accepted before it lapses
(comes to an end).
• An offer may come to an end in any of the
following:
• By revocation
• By lapse of time
• By death or insanity of the offeror or offeree
• By failure to accept condition precedent
• By counter offer
• By not accepting in the prescribed mode
• By rejection of offerby the offeree
• By subsequent illegality or destruction of
subject matter
By revocation

• Revocation of Proposals 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. —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.
• 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.
• Ex 1 X of agra offers by a letter dated 1 jan
sent by post to sell his car to why of delhi for
rs 100000. y accepts the offer on 7 th jan at 1
pm by a letter sent by poist. Here xmay revoke
his offer at any time before 1 pm on 7 th and
not afterwords.
• Ex 2 at an auction sale, the highest bidder is
an offeror and he can revoke before the fall of
the hammer.
By lapse of time
• An offer lapses if it is not accepted within the
fixed time if any prescribed in the offer or within
the reasonable time if no time limit is prescribed.
• Ramsgate victoria co v montefiore
• An offer to buy share of a company was made in
june but the acceptance was communicated in
nov. it was held that offer to buy shares had
lapsed because it was not accepted within a
reasonable time.
By death or insanity
• An offer lapses if
• A) the fact of death or insanity of offeror comes to the
knowledge of the acceptor before he makes
acceptance.
• B) the offeree dies or becomes insane before accepting
the offer because an offer can be accepted only by the
offeree and not by any other person.
• Note: if the offer is accepted in ignorance of the death
or insanity of the offeror, there will be a valid contract.
However in english law the death of the offeror
terminates the contract and the acceptance in
ignorance of death is not valid.
Failure to accept condition precedent
• An offer lapses if it is accepted without
fulfilling the conditions of the offer.
• Ex x offered to sell a car to y for rs 100000
provided y pays an advance of Rs.20000. Y do
not pay the advance. The offer lapses as the
advance is not paid.
By counter offer
• An offer lapses if the counter offer is made because a
counter offer amounts to rejection of the original offer.
• Counter offer means making a fresh offer instead of
accepting the original offer.
• HYDE v WRENCH
• X offered to sell his car to y for 1 lak
• Y replied he would buy at 90000.
• X refused to sell
• Y offered to buy at 1 lak
• Y offered to purchase is a second offer and not
acceptance of original offer
BY NOT ACCEPTING IN THE
PRESCRIBED MODE OR USUAL MODE
• An offer if it is not accepted in the specific
manner( if any prescribed in the offer) or in
some usual and reasonable manner( if no
manner is prescribed.
• x offered to sell his car to y for 60000 and
wrote to y to send his acceptance by telegram.
• Y sent reply by post. X can reject the
acceptance.
By rejection of offer by offeree
• An offer lapses if it is rejected by offeree and
he communicates his refusal to the offeror.
• An offer is rejected if the offeree expressly
reject it or accepts it subject to certain
conditions.
• ONCE THE OFFER IS REJECTED IT CAN NOT BE
REVIVED SUBSEQUENTLY
BY SUBSEQUENT ILLEGALITY OR
DESTRUCTION OF SUBJECT MATTER
• An offer lapses If it becomes illegal or the subject
matter is destroyed before it acceptance.
• X of mumbai offered to sell 1 tonne sugar to y of
delhi for rs.100000 on 15 aug
• Subsequently govt ban interstate movement of
liqour. X offer comes to an end.
• A of agra offered to sell his car to d of delhi ,
before the offer is accepted, the car is destroyed.
Offer comes to an end