Introduction: General principles

HISTORY

🞭 Indian Contract Act, 1872.

🞭 1866-Draft code-269 clauses.

🞭 Third Law Commission
🞭 Stone: “It is through contract that man attains
freedom. Although it appears to be subordination
of one man’s will to another, the former gains
more than what he loses.”
🞭 This Act may be called the Indian Contract Act,
1872.
🞭 Extent, Commencement. -It extends to the whole
of India [except the State of Jammu and
Kashmir]; enacted on 25th April 1872 and it came
into force on the first day of September 1872.
🞭 Act No. 9 of 1872
CONTRACTS

🞭 Simple Contracts
🞭 Executed and Executory
🞭 Unilateral and Bilateral
SIMPLE CONTRACTS-ESSENTIALS

🞭 Offer
🞭 Parties must have reached an agreement
🞭 Acceptance
🞭 Certainty
🞭 Parties must intend to enter into legal relations
🞭 Finally, a promise.
EXECUTED AND EXECUTORY

🞭 When both have performed and nothing remains

🞭 When both the parties are yet to perform their
obligation.
UNILATERAL AND BILATERAL

🞭 Unilateral-no one is bound

🞭 Ex- founder of lost goods
🞭 In bilateral promise by one party is exchanged by
the promise for the other.
🞭 Once the parties have reached and agreement,
both the parties are contractually bound with each
party simultaneously being promisor and
promisee.
INTERPRETATION CLAUSE/ SEC-2

🞭 In this Act the following words and expressions

are used in the following senses, unless contrary
intention appears from the context:
🞭 (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;
PROPOSAL/PROMISE

🞭 (b) When a person to whom the proposal is made,

signifies his assent thereto, the proposal is said to
be accepted. A proposal, when a accepted,
becomes a promise;
🞭 (c) The person making the proposal is called the
“promisor”, and the person accepting the
proposal is called “promisee”,
CONSIDERATION/PROMISE
🞭 (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 to abstain from doing,
something, such act or abstinence or promise is
called a consideration for the promise;
🞭 (e) Every promise and every set of promises,
forming the consideration for each other, is an
agreement;
🞭 (f) Promises which form the consideration or part
of the consideration for each other, are called
reciprocal promises;
🞭 (g) An agreement not enforceable by law is said
to be void;
🞭 (h) An agreement enforceable by law is a
contract;
🞭 (i) An agreement which is enforceable by law at
the option of one or more of the parties thereto,
but not at the option of the other or others, is a
voidable contract;
🞭 (j) A contract which ceases to be enforceable by
law becomes void when it ceases to be
enforceable.
AGREEMENT

Sec. 2 (e): Every promise and every set of promises

forming consideration for each other is an
agreement.

Offer/proposal + acceptance = promise

Promise + consideration = Agreement
Agreement + enforceability = contract
OFFER/ PROPOSAL

🞭 Sec. 2 (a): when one person signifies to another

his willingness to do or abstain from doing
something with a view to obtain his assent of that
other to such act or abstinence he is said to make
a proposal”.
REQUIREMENTS OF A VALID OFFER

🞭 Offer must be certain

🞭 Offer may be express or implied
🞭 Offer may be positive or negative
🞭 Offer must intend to create legal obligation
🞭 Offer may be made to a specific person, class of
persons or the world at large.
🞭 Final willingness of offeror
🞭 Must be communicated
A telegraphed to B “will you sell us Bumper Hall Pen?
Telegraph lowest cash price.”
B replied by telegram, “lowest price is 900pounds”
A telegraphed “we agree to buy for the price asked by
you”
A claims that this constituted a valid OFFER which is
accepted.
Harvey v. Facey
[1893] A.C.552.
ISSUE/ HOLDING AND RULE

🞭 Is a statement of the minimum price at which the

seller would sell is an offer?
🞭 No. A mere statement of a minimum selling price
is an invitation to treat and not an offer to sell.
TYPES OF OFFERS

🞭 Cross offer
🞭 Counter offer
🞭 Standing offer/Open Offer
🞭 Invitation to offer
CROSS OFFER

🞭 It refers to an offer made to another in ignorance

that the offeree has made the same offer to the
offeror.
🞭 In cross offer both the parties state to each other
the same proposal.
🞭 An offer by A to sell to B and B to buy from A on
the same terms unaware of the A’s proposition at
that time, is an example of cross offer.
COUNTER OFFER

🞭 A type of offer made in response to another offer,

which was seen unacceptable.
🞭 A counter offer revises the initial offer, making it
more appealing for the person making the new
offer.
🞭 Responding with a counter offer allows a person
to decline a previous offer, while allowing
negotiations to continue.
🞭 Ex- let us say you are selling a vehicle. Buyer
offers Rs. 10000 for the car. In an attempt to get a
higher price you are asking for Rs. 11000 for
counter offer.
🞭 Now if the buyer declines you cannot force him
to buy it for Rs. 10000 even though it was
initially the price offered by him. The first offer
becomes void.
STANDING OFFER

🞭 Agreement under which a vendor allows a buyer

to purchase specified goods or services at a pre
determined price for a certain period and on ‘as
an when’ requirement basis.
INVITATION TO OFFER

🞭 An invitation to offer means an intention of a

person to invite others to with a view to enter into
an agreement.
COMMUNICATION OF OFFER

🞭 Communication is complete when it comes to

other person’s knowledge.
🞭 Lalman v. Gauri Dutt (1913)II All L.J.489.
🞭 Communicated with an intention to create a legal
obligation.
🞭 Balfour v. Balfour (1919) 2 K.B. 571
WHEN IS COMMUNICATION OF OFFER COMPLETE

🞭 The communication of offer is complete when it

comes to the knowledge of the person to whom it
is made.
🞭 In case an offer is made by post, its
communication will complete when the letter
containing the offer reaches the offeree.
🞭 Example- X of Agra sends a letter by post to Y of
Delhi offering to sell his car far Rs 1,00,000. The
letter is posted on 1st January and this letter
reaches on 7th January. The communication of
the offer is complete on 7th January.
🞭 Note: An offer accepted without its complete
communication does not bind the offerer.
🞭 Example In case of Lalman v Gauri Dutt, G sent
his servant L to trace his lost nephew. When the
servant had left, G announced a reward to anyone
who traces the boy. L found the boy and brought
him home. When L came to know of the reward,
he claimed the reward. It was held that L was not
entitled to the reward because he did not know
about the offer when he found the missing boy.
WHEN IS COMMUNICATION OF ACCEPTANCE
COMPLETE 
🞭X of Agra sends a letter by post to Y of Delhi offering to sell his car for Rs. 1,00,000. This

letter is posted on 1st January and reaches Y on 7th January. Y sends his acceptance by post

on 10th January but X receives this letter of acceptance on 15th January. Answer each of

the following questions.

🞭 (a)      When is the communication of offer complete :- 
🞭 7th January

🞭 (b)      When is the communication of acceptance complete as against the offeree:
🞭 10th January

🞭 (c)       When is the communication of acceptance complete as against the acceptor

/offeror:
🞭 15th jan
🞭 (d)      If X sends a telegram on 8th January revoking his
offer and this telegram reaches Y before the letter of the
acceptance is posted. Is revocation of offer is valid?
🞭 Yes it is valid
🞭 (e)      If Y sends a telegram on 14th January revoking his
acceptance and this telegram reaches X before the letter
of acceptance is received by X. Is revocation of
acceptance is valid?
🞭 Yes it is valid
REVOCATION OF OFFER AND ACCEPTANCE

🞭 According to Section 5 of the Indian Contract Act, a proposal may be revoked at

any time before the communication of its acceptance is complete as against the
proposer, but not afterwards.
🞭 We know that communication of acceptance is complete as against the proposer
when a properly addressed and stamped letter of acceptance is duly posted by
the acceptor.
🞭 Hence, an offer can be revoked at any time before the letter of acceptance is
duly posted by the acceptor.
🞭 Thus, the proposer may revoke his offer by a speedier mode of communication
which will reach before the letter of acceptance is posted by the acceptor.
🞭 Example -X of Agra offers by a letter dated 1st
January sent by post to sell his car to Y of Delhi
for Rs. 1,00,000. Y accepts the offer on 7th
January at 1 p.m. by letter sent by post. Here, X
may revoke his offer at any time before 1 p.m. on
7th January but not afterwards.
REVOCATION-CHARACTERISTICS

🞭 (i)      Revocation must always be expressed.

🞭 (ii)     Revocation must move from the offerer himself or a duly
authorised agent.
🞭 (iii)    Notice of revocation of a general offer must be given
through the same channel by which the original offer was made.
🞭 (iv)    Offer cannot be revoked even if the letter of acceptance is
lost or delayed in transit.
TIME LIMIT
🞭 Example X of Agra offers by a letter dated 1st
January sent by post to sell his car to Y of Delhi
for Rs 1,00,000. Y accepts the offer on 7th January
at 1 p.m. by a letter sent by post.
🞭 X receives the letter of acceptance on 15th January
at 3 p.m.
🞭 Here, Y may revoke his acceptance at any time
before 3 p.m. on 15th January but not afterwards.
RULES OF ACCEPTANCE

🞭 The acceptance must be communicated: Powell v Lee (1908) 99 L.T.

284; Robophone Facilities Ltd v. Blank [1966] 3 All E.R. 128. Prior to

acceptance, an offer may be withdrawn.

🞭 As acceptance must be communicated, the offeror cannot include an

Acceptance by Silence clause. This was affirmed in Felthouse v

Bindley, here an uncle made an offer to buy his nephews horse, saying

that if he didn't hear anything else he would "consider the horse mine".

This did not stand up in court, and it was decided there could not be

acceptance by silence.
EXCEPTION

🞭 An exception exists in the case of unilateral contracts, in

which the offeror makes an offer to the world which can be
accepted by some act. A classic instance of this is the case
of Carlil v. Carbolic Smoke Ball Co. [1892] 2 Q.B. 484.
🞭 Typical cases of unilateral offers are advertisements of
rewards (e.g., for the return of a lost dog).
🞭 An offer can only be accepted by the offeree, that is, the
person to whom the offer is made.
🞭 An offeree is not usually bound if another person accepts the

offer on his behalf without his authorisation, the exceptions to

which are found in the law of agency, where an agent may have

apparent or ostensible authority, or the usual authority of an

agent in the particular market, even if the principal did not realise

what the extent of this authority was, and someone on whose

behalf an offer has been purportedly accepted may also ratify the

contract within a reasonable time, binding both parties.

🞭 If the offer specifies a method of acceptance (such as by post or fax),
acceptance must be by a method that is no less effective from the offeror's
point of view than the method specified. The exact method prescribed may
have to be used in some cases but probably only where the offeror has used
very explicit words such as "by registered post, and by that method only“
🞭 Yates Building Co. Ltd v. R.J. Pulleyn & Sons (York) Ltd (1975) 119 Sol. Jo.
370.
🞭 However, acceptance may be inferred from conduct
🞭 Brogden v. Metropolitan Railway Company (1877) 2 App. Cas. 666; Rust v.
Abbey Life Assurance Co. Ltd
GENERAL RULES AS TO COMMUNICATION AND
ACCEPTANCE

🞭 In case of acceptance by post

🞭 Where the acceptance is given by post, the
communication of acceptance is complete as
against the proposer when the letter of acceptance
is posted.
🞭 Thus, mere posting of letter of acceptance is
sufficient to conclude a contract.
🞭 However, the letter must be properly addressed
and stamped.
🞭 Delayed or no delivery of letter
🞭 Where the letter of acceptance is posted by the
acceptor but it never reaches the offeror, or it is
delayed in transit, it will not affect the validity of
acceptance.
🞭 The offeror is bound by the acceptance.
🞭 Acceptance by telephones telex or fax
🞭 If the communication of an acceptance is made
by telephone, tele-printer, telex, fax machines,
etc, it completes when the acceptance is received
by the offeror.
🞭 The contract is concluded as soon as the offeror
receives not hears the acceptance.
🞭 The place of Contract
🞭 In case of acceptance by the post, the place where
the letter is posted is the place of contract.
🞭 Where the acceptance is given by instantaneous
means of communication (telephone, fax, tele-
printer, telex etc.), the contract is made at the
place where the acceptance is received,
🞭 Communication of acceptance in case of an
agent.
🞭 Where the offer has been made through an agent,
the communication of acceptance is completed
when the acceptance is given either to the agent or
to the principal.
🞭 In such a case, if the agent fails to convey the
acceptance received from offeree, still the principal
is bound by the acceptance.
All the Best