CA FOUNDATION LAW INDIAN CONTRACT ACT INDRESH GANDHI ( IGSIR )
Section 2(h): an agreement enforceable by law
• Agreement - The term ‘agreement’ given in Section 2(e) of the Act is defined
as- “every promise and every set of promises, forming the consideration for
each other”.
✓ “when the person to whom the proposal is made signifies his assent there to, the
proposal is said to be accepted. Proposal when accepted, becomes a promise”.
• Enforceability by law – An agreement to become a contract must give rise to a
legal obligation
ESSENTIALS OF A VALID CONTRACT
1. Two Parties: It involves at least two parties one party making the offer
and the other party accepting it. A contract may be made by natural
persons and by other persons having legal existence. Case Law - State of
Gujarat vs. Ramanlal S & Co
2. Parties must intend to create legal obligations : intention on the part of
the parties to create legal relationship between them, Social or domestic
type of agreements are not enforceable in court of law and hence they do
not result into contracts.
Case Law - Balfour v. Balfour
3. Other Formalities to be complied with in certain cases – writing or
registration
4. Certainty of meaning - must be certain and not vague or indefinite
5. Possibility of performance of an agreement: should be capable of
performance, an act impossible in itself cannot be enforced.
6. Offer and Acceptance or an agreement
CA FOUNDATION LAW INDIAN CONTRACT ACT INDRESH GANDHI ( IGSIR )
7. Free Consent - Two or more persons are said to consent when they
agree upon the same thing in the same sense. ( consensus ad idem ).
It must be free.
If it is caused by coercion, undue influence, fraud or,
misrepresentation the voidable , if by mistake – Void.
8. Capacity of the parties: Section 11 - a person to enter into a valid
contract if person who attain
• Age of majority
• Is of sound mind
• Not disqualified from contracting by any law to which he is subject
9. Consideration
10. Lawful Consideration and Object
11. Not expressly declared to be void:
Types of Contract
A. On the basis of the validity
• Valid Contract - An agreement which is binding and enforceable is a
valid contract. It contains all the essential elements of a valid
contract
• Void Contract - A contract which ceases to be enforceable by law
becomes void when it ceases to be enforceable { Section 2(j) }
• Voidable Contract - an agreement which is enforceable by law at the
option of one or more parties thereto, but not at the option of the
other or others is a voidable contract { Section 2(i) }
• Illegal Contract - The court will not enforce such a contract but also
the connected contracts. All illegal agreements are void but all void
agreements are not necessarily illegal
• Unenforceable Contract - Where a contract is good in substance but
because of some technical defect it cannot sue upon it
B. On the basis of the formation of contract
• Express Contracts - A contract would be an express contract if the
terms are expressed by words or in writing.
• Implied Contracts: Implied contracts in contrast come into existence
by implication. proposal or acceptance is made otherwise than in
words, the promise is said to be implied.
• Tacit Contracts: The word Tacit means silent.
• Tacit contracts are those that are inferred through the conduct of
parties without any words spoken or written. ( ATM Machine )
CA FOUNDATION LAW INDIAN CONTRACT ACT INDRESH GANDHI ( IGSIR )
• Quasi-Contract - not an actual contract but it resembles a contract.
Created by law under certain circumstances.
• E-Contracts: When a contract is entered into by two or more parties
using electronics means - ED1 - Electronic Data Inter change/ Cyber
contracts or mouse click contracts.
C. On the basis of the performance of the contract
• Executed Contract - When the act is done or executed or the
forbearance is brought on record, then the contract is an executed
contract.
• Executory Contract – PENDING CONTRACT
- Unilateral Contract: Unilateral contract is a one sided contract in
which one party has performed his duty or obligation and the other
party’s obligation is outstanding.
- Bilateral Contract: A Bilateral contract is one where the
obligation or promise is outstanding on the part of both the
parties.
PROPOSAL / OFFER
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.
Classification Of Offer –
1. General offer - offer made to public at large and hence anyone can accept
and do the desired act. Until the general offer is retracted or withdrawn,
it can be accepted by anyone at any time as it is a continuing offer.
Case law - Carlill Vs. Carbolic Smoke Ball Co
2. 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. Boulton v. Jones
3. Cross offer: When two parties exchange identical offers in ignorance at the
time of each other’s offer. There is no binding contract in such a case
because offer made by a person cannot be construed as acceptance of the
another’s offer.
CA FOUNDATION LAW INDIAN CONTRACT ACT INDRESH GANDHI ( IGSIR )
4. Counter offer: When the offeree offers to qualified acceptance of the
offer subject to modifications and variations in the terms of original offer.
Counter-offer amounts to rejection of the original offer. It is also called
as Conditional Acceptance.
5. Standing or continuing or open offer: An offer which is allowed to remain
open for acceptance over a period of time.
Essential of a valid offer:
1. It must be capable of creating legal relations - Offer must be such as in
law is capable of being accepted and giving rise to legal relationship.
A social invitation, even if it is accepted, does not create legal relations
because it is not so intended.
2. It must be certain, definite and not vague: Terms of an offer SHOULD
NOT BE vague or indefinite.
3. It must be communicated to the offeree: An offer must be communicated
to the person to whom it is made, otherwise there can be no acceptance of
it.
An acceptance of an offer, in ignorance of the offer, is not acceptance and
does not confer any right on the acceptor. ( Lalman Shukla v. GauriDutt )
4. It must be made with a view to obtaining the assent of the other party
5. It may be conditional
6. Offer should not contain a term the non compliance of which would amount
to acceptance
7. The offer may be either specific or general
8. The offer may be express or implied
9. Offer is Different from a mere statement of intention, an invitation to
offer, a mere communication of information, A prospectus and
Advertisement, from an answer to a question (Harvey vs. Facie).
10. A statement of price is not an offer
What is invitation to offer?
CA FOUNDATION LAW INDIAN CONTRACT ACT INDRESH GANDHI ( IGSIR )
ACCEPTANCE:
Section 2(b)- When the person to whom the proposal is made signifies his assent
thereto, proposal is said to be accepted. The proposal, when accepted, becomes a
promise
Legal Rules regarding a valid acceptance:
1. Acceptance can be given only by the person to whom offer is made ( Boulton
vs. Jones)
2. Acceptance must be absolute and unqualified - If the proposal prescribes
the manner in which it must be accepted, then it must be accepted
accordingly. Acceptance is valid only when it is absolute and unqualified and
is also expressed in some usual.
3. The acceptance must be communicated: The acceptance must be
communicated in some perceptible form.
Any conditional acceptance or acceptance with varying or too deviant
conditions is no acceptance. Such conditional acceptance is a counter
proposal and has to be accepted by the proposer, if the original proposal
has to materialize into a contract. the offeree must have the knowledge of
the offer made to him. If he does not have the knowledge, there can be no
acceptance
Case law - Brogden vs. Metropolitan Railway Co
4. Acceptance must be in the prescribed mode : Where the mode of
acceptance is prescribed in the proposal, it must be accepted in that
manner otherwise - not in the prescribed manner.
5. Time: Acceptance must be given within the specified time limit, if any, and
if no time is stipulated, acceptance must be given within the reasonable
time and before the offer lapses.
6. Mere silence is not acceptance: The acceptance of an offer cannot be
implied from the silence of the offeree or his failure to answer, unless the
offeree has in any previous conduct indicated that his silence is the
evidence of acceptance. Felthouse vs. Bindley
CA FOUNDATION LAW INDIAN CONTRACT ACT INDRESH GANDHI ( IGSIR )
7. Acceptance by conduct/Implied Acceptance
COMMUNICATION OF OFFER AND ACCEPTANCE
Communication of offer - the communication of offer is complete when it
comes to the knowledge of the person to whom it is made.
Communication of acceptance :
Modes – 1. Communication by act - include any expression of words whether
written or oral.
2. Communication of acceptance by ‘omission’ to do something :
3. Communication of acceptance by conduct.
Communication of acceptance -
In terms of Section 4 of the Act, it is complete,
Ø As against the proposer, when it is put in the course of transmission to
him so as to be out of the power of the acceptor to withdraw the same;
Ø As against the acceptor, when it comes to the knowledge of the proposer
Acceptance over telephone or telex or fax - complete when the acceptance
is received by the offeree. However, in case of a call drops and
disturbances in the line, there may not be a valid contract.
➢ Communication of special conditions: Sometimes there are situations where
there are contracts with special conditions. These special conditions are
conveyed tacitly and the acceptance of these conditions are also conveyed
by the offeree again tacitly or without him even realizing it. Lilly White vs.
Mannuswamy
Standard forms of contracts:
➢ well established that a standard form of contract may be enforced on
another who is subjectively unaware of the contents of the document,
provided the party wanting to enforce the contract has given notice which,
in the circumstances of a case, is sufficiently reasonable.
➢ But the acceptor will not incur any contractual obligation, if the document is
so printed and delivered to him in such a state that it does not give
reasonable notice on its face that it contains certain special conditions.
CA FOUNDATION LAW INDIAN CONTRACT ACT INDRESH GANDHI ( IGSIR )
REVOCATION OF OFFER AND ACCEPTANCE
In terms of Section 5 of the Act a proposal can be revoked at any time before
the communication of its acceptance is complete as against the proposer.
An acceptance may be revoked at any time before the communication of
acceptance is complete as against the acceptor.
Revocation of proposal otherwise than by communication:
Modes :
• By notice of revocation
• By lapse of time
• By non fulfillment of condition precedent
• By death or insanity
• By counter offer
• By the non acceptance of the offer according to the prescribed or usual
mode
• By subsequent illegality
CA FOUNDATION LAW INDIAN CONTRACT ACT INDRESH GANDHI ( IGSIR )
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