BUSINESS LAW

OFFER & ACCEPTANCE

COMPETENCY OF PARTIES
CONSIDERATION
Communication of Offer, Acceptance and Revocation

When the contracting parties are face to face with each other, there is
immediate communication of offer and acceptance. The moment
offeree gives his acceptance, there is a valid agreement.

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Competency, Consideration
Communication of Offer, Acceptance and Revocation

When the parties are at a distance from each other, the services of a
post office are utilized to enter into a contract. In this case, the
following rules shall apply:

1. Communication of offer
2. Communication of Acceptance
3. Communication of Revocation
4. Time of Revocation

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Consideration
 Communication of offer

• Section 4 of the Contract Act, 1872

The communication of a proposal is complete when it comes to the
knowledge of the person to whom it is made. When an offer is sent by
post, its communication is complete when the letter containing the
offer comes to the knowledge of offeree.

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Consideration
Communication of offer
• Example
a. A offers, by letter to sell a van to B for Rs. 5mn. The letter reaches B
on 10th March. The communication of the offer is complete on 10th
March.
b. Y sends a letter to Z offering to sell his motorcycle for R. 40k. The
letter never reaches to Z. It means, the offer is not complete.

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Consideration
Communication of Acceptance
Communication of an acceptance is complete against the offeror, when
the letter of acceptance is posted to the offeror i.e. when letter of
acceptance is out of control of the acceptor. The communication of an
acceptance is complete against the acceptor, when letter of acceptance
comes to the knowledge of offeror.

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Consideration
Communication of Acceptance
Example:
A offers, by letter, to sell a van to B for Rs. 5mn. The letter reaches B on
8th March. B accepts the offer and posts a letter on 9th March. The letter
reaches A on 11th March.

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Consideration
Communication of Revocation
Revocation means cancellation There may be revocation of an offer
and acceptance. The communication of revocation is complete:

a. Against a person who makes it, when it’s put in course of

transmission to the person to whom it is made, so as to be out of
the power of a person who makes it.
b. Against the person to whom it is made, when it comes to his
knowledge.

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Consideration
Communication of Revocation
Example:
A revoked his offer by letter on 8th May. The letter reached B on 10th
May. The revocation is complete against A on 8th, when letter is posted.
The revocation is complete against B on 10th when letter reaches him.

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Consideration
Time of Revocation
An offer may be revoked any time before the communication of its
acceptance is complete against the offeror, but not afterwards. An
acceptance may be revoked any time before the communication of the
acceptance is complete against the acceptor, but not afterwards.

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Consideration
Time of Revocation
Example
A offers by letter to sell his book to B. A can revoke his offer before the
letter of acceptance is posted by B.

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Consideration
 Chapter 3
Consideration & Object

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Consideration
Meaning & Definition
A consideration is one of the essentials of valid contract. The term
“consideration” means something in return. An agreement without
consideration is Void. The consideration is a benefit received by a party
to the contract in return for the promise made by him.

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Consideration
Meaning & Definition
Different authors have defined consideration as follows:
Pollock: The consideration is the price for which the promise of the
other is bought and the promise thus given for value is enforceable.
Lush J: A valuable consideration may consist of some right, interest,
profit or benefit accruing to one party and some forbearance,
detriment, loss or responsibility given, suffered or undertaken by
others.

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Consideration
Meaning & Definition
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 of promise.

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Consideration
Meaning & Definition
Example
a. A agrees to sell his house to B for Rs. 10mn. For A, consideration is
Rs. 10mn. For B, it’s house.
b. C promises to repair B’s car and B promises to pay him Rs. 500. The
promise of one party is the consideration for the other party.

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Consideration
Essentials of Valid Consideration
1. Desire of Promisor
2. Promisee or other person
3. Act or abstinence
4. Past, present or future
5. Adequacy of consideration
6. Legal and certain

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Consideration
Desire of Promisor

For a Valid consideration, the act of abstinence that creates a

consideration must be done at the desire of the promisor. It means that
any act performed at the desire of a third party or an act done
voluntarily does not create a valid consideration.

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Consideration
Desire of Promisor
Example
a. C saved B’s house from fire. B did not ask for help. C cannot demand
payment for his services because he acted voluntarily.

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Consideration
Act or Abstinence
A consideration may be an act or abstinence. An act means doing
something. When consideration is an act, it is called positive
consideration. Abstinence means not doing something. When
consideration is abstinence, it is called negative consideration.

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Consideration
Act or Abstinence
Example
a. P agrees to construct Q’s house for Rs. 10mn. Q’s promise to pay Rs.
10mn is the consideration for P’s promise to construct the house.
b. C promises not to sue his debtor B if B pays him additional Rs. 50k.
The abstinence of C is the consideration for B’s payment.

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Consideration
Adequacy Consideration
It is not necessary that the consideration must be adequate. The parties
are free to decide the value of consideration. However, inadequate
consideration may create doubt about free consent of the parties.
Inadequate consideration is considered by the court in deciding cases,
If the consent is proved to be free, inadequate consideration is Valid.

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Consideration
Adequacy Consideration
Example
A agrees to sell his car worth Rs. 200k for Rs. 50k with free consent. The
contract is valid.

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Consideration
Legal & certain
The consideration must be legal and certain. The consideration is not
valid in the following circumstances:
a. A promise to do something which is physically impossible.
b. A promise to do something which is illegal
c. A promise to do something which is uncertain.
d. A promise to do something which a person is already responsible to
perform under the law.

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Consideration
Legal & certain
Example
a. C promises to put life in B’s dead cat and B promises to pay him Rs.
100k.
b. D promises to pay Rs. 100k to B if B promises to beat C. The
consideration is not valid.
c. C employs B for some work and promises to pay a reasonable
amount. The consideration is not valid.

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Exceptions to Considerations

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Exceptions to consideration
An agreement without consideration is void. However, the following
agreements are valid even without consideration.
1. Natural Love and affection
2. Time-Barred debt
3. Completed Gift
4. Remission by promisee

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Natural Love and affection
Section 25(1) The agreement made on account of natural love and
affection between the parties is valid even without consideration if the
following conditions are satisfied:
a. The contract must be in writing
b. The contract must be registered according to the law
c. The contract must be based on natural love and affection
d. There must be near relation between the parties to the contract

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Consideration
Natural Love and affection
Example
F, on account of natural love and affection, promises to give Rs. 100k to
his son S. F puts agreement in writing and gets it registered. S can
enforce it.

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Consideration
Time-barred debt
Section 25(3) A debt becomes time-barred if it is not paid or claimed
for a period of 3 years from the date it becomes due. A time-barred
debt is not recoverable. An agreement to pay a time-barred debt is
valid even without consideration if the following conditions are fulfilled.
a. The debt must be time-barred
b. The promisor himself must be liable for the debt.
c. There must be a promise to pay time-barred debt.
d. The promise must be in writing and signed by the debtor or his
agent.

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Consideration
Time-barred debt
Example
C owes Rs. 10k to B but debt becomes time-barred. C signs a written
promise to pay Rs. 10k to B on account of the debt. It’s a valid contract.

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Consideration
Completed gift
Section 25 Expl.1 An agreement to make a gift is not enforceable by
law. However, any gift given by a donor to donee is valid even without
consideration. The gift is completed when the possession is transferred
to the donee by the donor.

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Consideration
Completed gift
Example
C transferred property to B by a registered deed as a gift. It’s a valid
contract even without consideration.

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Remission by promisee
Section 63
When a person agrees to receive less than what is due, it is known as
remission. If a creditor agrees to give up a part of his claim, there is no
need for consideration in such an agreement. Similarly an agreement to
extend the time for performance of a contract need not be supported
by consideration.

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Consideration
Remission by promisee
Example
A owes Rs. 5k to B. A pays Rs. 2k and B accepts it in full satisfaction of
the whole debt. The whole debt is discharged.

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