THE INDIAN CONTRACT ACT, 1872

DEFINATION

Sec.2(h) “An agreement enforceable by law.”

Agreement + enforceability by law = contract.

Agreement must create a legal obligation or duty.

Agreement

Sec. 2(e), “Every promise and every set of promises, forming consideration for each other”

promise

Sec.2(b), “When a 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.”

Agreement = Offer + Acceptance.

Social agreements Legal agreements

Legal agreements are contracts.

Essential elements of a valid contract Offer and acceptance Intention to create legal relationship Lawful consideration. Capacity of parties – Competency Free and genuine consent Lawful object Agreement not expressly declared void Certainty and possibility of performance Legal formalities

Classification of Contract

According to validityValid contract,voidable contract,void contract, Illegal contract,unenforceable contract.

Classification of Contract

o According to formationExpress contract,Implied contract,Quasi contract.

Classification of Contract

According to performanceExecuted contract,Executory contract,Unilateral and bilateral contracts.

Offer and Acceptance

For an agreement

There has to be a clear and definite offer by one person and,

Its unconditional acceptance by the person to whom the offer is made.

Offer

An offer is a proposal by one party to another to enter in to a legally binding agreement with him.

Offer may be express(spoken or written words) or implied.(inferred from conduct)

Constituents of an offer (essential elements)

The offer must show the obvious intention on part of the offerer to be bound by it.

The offerer must make the offer with the view to obtain the assent of the offeree.

It must be definite. It must be communicated to the offeree. Offer may be conditional

Rules of legal offer

1. Offer must be such that as in law it is capable of being accepted and giving rise to a legal relationship.

2. Terms of offer must be definite, clear and certain.

3. The offer must not thrust a burden of acceptance on the offeree.

Invitation to offer, a few possibilities

Display of goods for sale Price lists, catalogues Advertisements Declaration of intention Auctions Tenders Offer of public issue of shares

Termination of offer

Sec.6 of the Act deals with termination of offer.

1. Revocation-offer may be revoked at any time before its acceptance is complete.

2. Lapse of time.(specified time or reasonable time.)

3. Failure of the acceptor to fulfill the condition precedent to acceptance.

4. Death or insanity of proposer.

Other instances of termination of offer

As per sec.6 of the Act. Rejection Counter offer Failure to accept according to the

mode prescribed. Subsequent illegality or destruction

of subject matter.

Acceptance

Acceptance is the act of assenting by the offeree to an offer.

It indicates that the person making it is willing to be bound by the terms of the offer.

Acceptance may be express or implied. Sec.2(b)’when the person to whom

proposal(offer) is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.(i.e.a contract)

Legal rules as to acceptance

It must be absolute and unqualified. It must be made by the party to whom the

offer is made. The acceptance must be expressed in

usual or reasonable manner. It must be given in reasonable time. It cannot be made in ignorance of offer. It must be given before the offer lapses. It must be communicated to the offerer. Mere mental acceptance is no acceptance. (possible cases of acceptance by silence)

Communication of offer, when complete

(the spirit of the law is that the message reaches the concerned party.)

Sec.4 provides that the communication of proposal is complete when it comes to the knowledge of the person for whom it is made.

Communication of acceptance, when complete

Sec.4 ‘The communication of acceptance is complete

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

as against the acceptor: when it comers to the knowledge of the proposer.’