Contract Act_Part 1.pdf

Topics covered under this notes Indian Contract Act, 1872 (a) Nature of Contract (b) Classification of Contracts (c) Offer and Acceptance  A) Nature of Contract The law relating to contract is governed by the Indian Contract Act, 187...

Topics covered under this notes Indian Contract Act, 1872 (a) Nature of Contract (b) Classification of Contracts (c) Offer and Acceptance  A) Nature of Contract The law relating to contract is governed by the Indian Contract Act, 1872. - It came into force on September 01, 1872. (Prior to this English law of contract was followed in India. It has XI chapter). - Indian Contract Act applicable to whole of India. - The Act is divisible into two parts. Section 1-75 - deals with the general principles of the law of contract, and therefore applies to all contracts irrespective of their nature. Sections 124-238 - deals with certain special kinds of contracts, e.g., Indemnity and guarantee, bailment, pledge, and agency. (Section 76 to 123 – Removed and converted into Sale of Good Act) -Law of contract creates jus in personem (right against a specific person) and not in jus in rem (the right against a thing at large). Example for jus in personem and in jus in rem jus in personam example.: Mr. A owes an amount of Rs.10,000 to Mr. B. Here Mr. B has the right to recover this amount from Mr. A and only from Mr. A and not from anybody else. Jus in rem example: Mr. X owns 10 acres of land. Here Mr. X is having the full liberty to enjoy the land against every members of the public. Likewise every members of the public is having an obligation that they should not disturb the right of Mr. X. This right of Mr.X is known as Jus in rem.  DEFINITIONS (Sec 2) Offer(i.e. Proposal) [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 person either to such act or abstinence, he is said to make a proposal. Acceptance 2(b):- When the person to whom the proposal is made, signifies his assent there to, the proposal is said to be accepted. Promise 2(b):- A Proposal when accepted becomes a promise. In simple words, when an offer is accepted it becomes promise. Promisor and promisee 2(c):- When the proposal is accepted, the person making the proposal is called as promisor and the person accepting the proposal is called as promisee. Consideration 2(d):- Price paid by the one party for the promise of the other Technical word meaning QUID-PRO-QUO i.e. something in return. Agreement 2(e):- Every promise and set of promises forming the consideration for each other. In short, agreement = offer + acceptance + Consideration. Contract 2(h):- An agreement enforceable by Law is a contract. Void agreement 2(g):- An agreement not enforceable by law is void. Valid agreement 2(h):- An agreement enforceable by law is a contract. Voidable contract 2(i):- An agreement is a voidable contract if it is enforceable by Law at the option of one or more of the parties there to (i.e. the aggrieved party), and it is not enforceable by Law at the option of the other or others. Void contract 2(j):- A contract which ceases to be enforceable by Law becomes void when it ceases to be enforceable. Offer + acceptance = Promise Promise + consideration=Agreement Agreement + enforceability By Law = Contract  CONTRACT Agreement as Defined Agreement - Section 2(e) “every promise and every set of promises, forming the consideration for each other”. Section 2 (b) defines promise as-“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”. The following points emerge from the above definition: when the person to whom the proposal is made signifies his assent on that proposal which is made to him the proposal becomes accepted accepted proposal becomes promise Agreement = Offer/Proposal + Acceptance Contracts as Defined Section 2(h) of the Indian Contract Act, 1872 as- “an agreement enforceable by law”. “Every agreement and promise enforceable at law is a contract.” – Pollock In terms of Section 10 of the Act, “all agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object and are not expressly declared to be void”. Enforceability by law – An agreement to become a contract must give rise to a legal obligation which means a duly enforceable by law. Contract = Accepted proposal/Agreement + Enforceability by law Example : A agrees with B to sell car for Rs. 2 lacs to B. Here A is under an obligation to give car to B and B has the right to receive the car on payment of Rs. 2 lacs and also B is under an obligation to pay Rs. 2 lacs to A and A has a right to receive Rs. 2 lacs. Example : Father promises his son to pay him pocket allowance of Rs. 500 every month. But he refuses to pay later. The son cannot recover the same in court of law as this is a social agreement. This is not created with an intention to create legal relationship and hence it is not a contract. Some obligations are outside the purview of the law of contract, and not enforceable by law Essentials of Valid Contract As given by Section 10 of Not given by Section 10 but are also Indian Contract Act, 1872 considered essential 1 Agreement Two parties 2 Free consent Intention to create legal relationship 3 Competency of the parties Fulfilments of legal formalities 4 Lawful consideration Certainty of meaning 5 Legal object Possibility of performance 6 Not expressly declared to be void [as per Section 24 to 30 and 56] 1) Two Parties: One cannot contract with himself. A contract involves at least two parties- one party making the offer and the other party accepting it. To constitute a contract of sale, there must be two parties- seller and buyer. The seller and buyer must be two different persons, because a person cannot buy his own goods. Case - In State of Gujarat vs. Ramanlal S & Co. when on dissolution of a partnership, the assets of the firm were divided among the partners, the sales tax officer wanted to tax this transaction. It was held that it was not a sale. The partners being joint owner of those assets cannot be both buyer and seller. 2) Certainty of meaning - The agreement must be certain and not vague or indefinite. Example: A agrees to sell to B a hundred tons of oil. There is nothing certain in order to show what kind of oil was intended for. Example: XYZ Ltd. agreed to lease the land to Mr. A for indefinite years. The contract is not valid as the period of lease is not mentioned. 3) Proper offer – There must a proper offer to made. It can be expressed or implied. 4) Proper acceptance – There must a proper acceptance. It can be expressed or implied. 5) Intention to create legal relationship - In case of social agreement there is no intention to create legal relationship and there is no contract (Balfour v. Balfour). Case: A husband agreed to pay to his wife certain amount as maintenance every month while he was abroad. Husband failed to pay the promised amount. Wife sued him for the recovery of the amount. Here, in this case, wife could not recover as it was a social agreement and the parties did not intend to create any legal relations 6) Lawful consideration: - consideration must not be unlawful, immoral or opposed to the public policy. Example:- A agrees to sell his house to B against 100 kgs of cocaine (drugs). Such agreement is illegal as the consideration is unlawful. 7) Capacity:- The parties to a contract must have capacity (legal ability) to make valid contract. Minor, Unsound mind, Lunatic.  is of the age of majority (Age 18) according to the law to which he is subject and is of sound mind (should be in his senses) and is not otherwise disqualified from contracting by any law to which he is subject. 8) Free consent: - consent of the parties must be genuine consent means agreed upon same thing in the same sense i.e. there should be consensus – ad – idem. Consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake. Example - if A says B “Will you buy my red car for Rs. 30000? “and B says “yes” to it. There is said to be consensus ad idem i.e. the meaning is taken in same sense by both the parties. Example: A threatened to shoot B if he (B) does not lend him `2000 and B agreed to it. Here the agreement is entered into under coercion and hence not a valid contract. 9) Lawful object - The object of agreement should be lawful and legal. 10) Possibility of performance: The terms of the agreement should be capable of performance. An agreements to do act, impossible in itself cannot be enforced. 11) Not declared Void - The agreement should be such that it should be capable or being enforced by law. Certain agreements have been expressly declared illegal or void by the law. Example: Threat to commit murder or making/publishing defamatory statements or entering into agreements which are opposed to public policy are illegal in nature. Similarly, any agreement in restraint of trade, marriage, legal proceedings, etc. are classic examples of void agreements. 11) Necessary legal formalities where a particular type of contract is required by law to be in writing and registered, it must comply with necessary formalities as to writing, registration and attestation. Basis Agreement Contract Section Sec. 2(e) Sec. 2(h) Every promise or every set of A contract is an agreement Definition promises forming consideration for enforceable by law. each other is an agreements. Enforceability Every promise is not enforceable. Every contract is enforceable An agreement does not include a A contract includes an Interrelationship contract. agreement. Its scope is relatively wider, as it The scope of a contract is limited, Scope includes both social agreement and as it includes only commercial commercial agreements. agreements. An agreement may be both legal Only legal agreements are valid Validity and illegal. as contract. It is not necessary for every Every contract contains a legal Legal agreement to have legal obligation. obligation.  B) Classification of Contracts On the basis of the validity 1) Valid Contract: An agreement which is binding and enforceable is a valid contract. It contains all the essential elements of a valid contract. Example: A ask B if he wants to buy his bike for Rs.10,000. B agrees to buy bike. It is agreement which is enforceable by law. Hence, it is a valid contract. 2) Void Contract: Section 2 (j) states as follows: “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. Thus a void contract is one which cannot be enforced by a court of law. Example: A contracts with B (owner of the factory) for the supply of 10 tons of sugar, but before the supply is effected, the fire caught in the factory and everything was destroyed. Here the contract becomes void. 3) Voidable Contract: Section 2(i) defines that “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”. Example: X promise to sell his scooter to Y for Rs. 1 Lac. However, the consent of X has been procured by Y at a gun point. X is an aggrieved party and the contract is voidable at his option but not on the option of Y. It means if X accepts the contract, the contract becomes a valid contract then Y has no option of rescinding the contract. 4) Illegal Contract: It is a contract which the law forbids to be made. 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. Despite this, there is similarity between them is that in both cases they are void ab initio and cannot be enforced by law. Example: Contract that is immoral or opposed to public policy are illegal in nature. Similarly, if R agrees with S, to purchase brown sugar, it is an illegal agreement. 5) Unenforceable Contract: Where a contract is good in substance but because of some technical defect i.e. absence in writing, barred by limitation etc. one or both the parties cannot sue upon it, it is described as an unenforceable contract. Example: A bought goods from B in 2015. But no payment was made till 2019. B cannot sue A for the payment in 2019 as it has crossed three years and barred by Limitation Act. A good debt becomes unenforceable after the period of three years as barred by Limitation Act. On the basis of the formation of contract 1) Express Contracts: A contract would be an express contract if the terms are expressed by words or in writing. Section 9 of the Act provides that if a proposal or acceptance of any promise is made in words, the promise is said to be express. Example : A tells B on telephone that he offers to sell his house for Rs. 2 lacs and B in reply informs A that he accepts the offer, this is an express contract. 2) Implied Contracts: Implied contracts in contrast come into existence by implication. Most often the implication is by action or conduct of parties or course of dealings between them. Section 9 - Such proposal or acceptance is made otherwise than in words, the promise is said to be implied.  Example : Where a coolie in uniform picks up the luggage of A to be carried out of the railway station without being asked by A and A allows him to do so, it is an implied contract and A must pay for the services of the coolie detailed by him. Tacit Contracts: The word Tacit means silent. Quasi-Contract: A quasi-contract is not an actual contract but it resembles a contract. It is created by law under certain circumstances. The law creates and enforces legal rights and obligations when no real contract exists. Such obligations are known as quasi- contracts. In other words, it is a contract in which there is no intention on part of either party to make a contract but law imposes a contract upon the parties. Example: Obligation of finder of lost goods to return them to the true owner or liability of person to whom money is paid under mistake to repay it back cannot be said to arise out of a contract even in its remotest sense, as there is neither offer and acceptance nor consent. These are said to be quasi-contracts. E-Contracts: When a contract is entered into by two or more parties using electronics means, such as e-mails is known as e-commerce contracts. In electronic commerce, different parties/persons create networks which are linked to other networks through ED1 - Electronic Data Inter change. This helps in doing business transactions using electronic mode. These are known as EDI contracts or Cyber contracts or mouse click contracts. On the basis of the performance of the contract Executed Contract: The consideration in a given contract could be an act or forbearance. When the act is done or executed or the forbearance is brought on record, then the contract is an executed contract. Example: When a grocer sells a sugar on cash payment it is an executed contract because both the parties have done what they were to do under the contract. Executory Contract: In an executory contract the consideration is reciprocal promise or obligation. Such consideration is to be performed in future only and therefore these contracts are described as executory contracts. Example: Where G agrees to take the tuition of H, a pre-engineering student, from the next month and H in consideration promises to pay G Rs. 1,000 per month, the contract is executory because it is yet to be carried out. A) Unilateral Executory Contracts 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. Example : M advertises payment of award of Rs 5000 to any one who finds his missing boy and brings him. B) Bilateral Executory Contracts Bilateral Contract: A Bilateral contract is one where the obligation or promise is outstanding on the part of both the parties. Example : A promises to sell his plot to B for Rs. 1 lacs cash down, but B pays only Rs. 25,000 as earnest money and promises to pay the balance on next Sunday.  C) Offer and Acceptance Definition of Offer/Proposal: According to Section 2(a) of the Indian Contract Act, 1872, “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”. Essentials of a proposal/offer are - There must be two parties. - The offer must be communicated to the offeree. - The offer must show the willingness of offeror. Mere telling the plan is not offer. - The offer must be made with a view to obtaining the assent of the offeree. - A statement made jokingly does not amount to an offer. - An offer may involve a positive act or abstinence (restraining oneself) by the offeree. - Mere expression of willingness does not constitute an 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: If the terms of an offer are vague or indefinite, its acceptance cannot create any contractual relationship. 3) It must be communicated to the offeree: An offer, to be complete, must be communicated to the person to whom it is made, otherwise there can be no acceptance of it. Unless an offer is communicated, there can be no acceptance by it. case of Lalman Shukla v. GauriDutt - Facts: G (Gauridutt) sent his servant L (Lalman) to trace his missing nephew. He then announced that anybody who traced his nephew would be entitled to a certain reward. L traced the boy in ignorance of this announcement. Subsequently when he came to know of the reward, he claimed it. Held, he was not entitled to the reward, as he did not know the offer. 4) It must be made with a view to obtaining the assent of the other party: Offer must be made with a view to obtaining the assent of the other party addressed and not merely with a view to disclosing the intention of making an offer. Example : Where ‘A’ tells ‘B’ that he desires to marry by the end of 2019, it does not constitute an offer of marriage by ‘A’ to ‘B’. Therefore, to constitute a valid offer expression of willingness must be made to obtain the assent (acceptance) of the other. Thus, if in the above example, ‘A’ further adds, ‘Will you marry me’, it will constitute an offer. 5) It may be conditional: An offer can be made subject to any terms and conditions by the offeror. Example : Offeror may ask for payment by RTGS, NEFT etc. The offeree will have to accept all the terms of the offer otherwise the contract will be treated as invalid. 6) Offer should not contain a term the non-compliance of which would amount to acceptance: Thus, one cannot say that if acceptance is not communicated by a certain time the offer would be considered as accepted. Example : A proposes B to purchase his android mobile for Rs. 5000 and if no reply by him in a week, it would be assumed that B had accepted the proposal. This would not result into contract. 7) For a valid offer, the party making it must express his willingness ‘to do’ or ‘not to do’ something: There must be an expression of willingness to do or not to do some act by the offeror. Example : A willing to sell his good at certain price to B. Example : A is willing to not to dance in a competition if B pays him certain sum of money. 8) An offer can be positive as well as negative: Thus “doing” is a positive act and “not doing”, or “abstinence” is a negative act; nonetheless both these acts have the same effect in the eyes of law. Example : A offers to sell his car to B for 3 lacs is an act of doing. So, in this case, A is making an offer to B. Example : When A ask B after his car meets with an accident with B’s scooter not to go to Court and he will pay the repair charges to B for the damage to B’s scooter; it is an act of not doing or abstinence. 9) The offer may be either specific or general: Any offer can be made to either public at large or to the any specific person. 10) The offer may be express or implied: An offer may be made either by words or by conduct. Example : A boy starts cleaning the car as it stops on the traffic signal without being asked to do so, in such circumstances any reasonable man could guess that he expects to be paid for this, here boy makes an implied offer. 11) Offer must be distinguished from invitation to offer. Example : Menu card of restaurant is an invitation to put an offer. Example : Price – tags attached with the goods displayed in any showroom or supermarket is also an invitation to proposal. If the salesman or the cashier does not accept the price, the interested buyer cannot compel him to sell, if he wants to buy it, he must make a proposal. - An invitation by a company to the public to subscribe for its shares. - Display of goods for sale in shop windows. - Advertising auction sales and - Quotation of prices sent in reply to a query regarding price. 12 Different from mere declaration of intention: Offer is different from mere declaration. Example - A tells B, “I think I should sell my old bike, and buy new one”. Difference between offer and invitation to make an offer Basis Offer Invitation to offer Meaning Section 2(a) of the Act, an offer is Where a party without expressing the final expression of willingness his final willingness proposes by the offeror to be bound by the certain terms on which he is willing offer should the other party to negotiate he does not make an chooses to accept it. offer, but only invites the other party to make an offer on those terms. Intention of If a person who makes the If a person has the intention of the parties statement has the intention to be negotiating on terms it is called bound by it as soon as the other invitation to offer accepts, he is making an offer. Sequence An offer cannot be an act An invitation to offer is always an precedent to invitation to offer act precedent to offer Classification of offer 1) Express offer - When the offeror expressly communicate the offer, is said to be an express offer. It may be made by Spoken / Written word. (By Letter, Email, Verbal etc.) 2) Implied offer – when the offer is not communicate expressly. An offer may be implied form. The conduct of the parties or The circumstances of the case. (By action or custom). 3) General offer: It is an 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. (1893) Facts: In this famous case, Carbolic smoke Ball Co. advertised in several newspapers that a reward of £100 would be given to any person who contracted influenza after using the smoke balls produced by the Carbolic Smoke Ball Co. according to printed directions. One lady, Mrs. Carlill, used the smoke balls as per the directions of company and even then, suffered from influenza. Held, she could recover the amount as by using the smoke balls she had accepted the offer. 4) 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 to whom the offer has been made. [Boulton v. Jones] Example 36: ‘A’ offers to sell his car to ‘B’ at a certain cost. This is a specific offer. 5) Cross offer: When two parties exchange identical offers in ignorance at the time of each other’s offer, the offers are called cross offers. 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. Example 37: If A makes a proposal to B to sell his car for Rs. 2 lacs and B, without knowing the proposal of A, makes an offer to purchase the same car at Rs. 2 lacs from A, it is not an acceptance, as B was not aware of proposal made by A. It is only cross proposal (cross offer). And when two persons make offer to each other, it cannot be treated as mutual acceptance. There is no binding contract in such a case. 6) Counter offer: When the offeree offers to qualified acceptance of the offer subject to modifications and variations in the terms of original offer, he is said to have made a counter offer. Counter-offer amounts to rejection of the original offer. It is also called as Conditional Acceptance. Example 38: ‘A’ offers to sell his plot to ‘B’ for Rs.10 lakhs. ’B’ agrees to buy it for Rs. Rs. 8 lakhs. It amounts to counter offer. It will result in the termination of the offer of ’A’. If later on ‘B’ agrees to buy the plot for Rs. 10 lakhs, ’A’ may refuse. 7) Standing / continuing / open offer: An offer which is allowed to remain open for acceptance over a period of time is known as standing or continuing or open offer. Tenders that are invited for supply of goods is a kind of standing offer. Lapse / Revocation of an offer An offer should be accepted before it lapses (i.e. comes to an end). An offer may come to an end in any of the following ways stated in Section 6 of the Indian Contract Act: 1) By communication of notice of revocation: An offer may come to an end by communication of notice of revocation by the offeror. It may be noted that an offer can be revoked only before its acceptance is complete for the offeror. In other words, an offeror can revoke his offer at any time before he becomes before bound by it. Thus, the communication of revocation of offer should reach the offeree before the acceptance is communicated. 2) By lapse of time; Where time is fixed for the acceptance of the offer, and it is not acceptance within the fixed time, the offer comes to an end automatically on the expiry of fixed time. Where no time for acceptance is prescribed, the offer has to be accepted within reasonable time. The offer lapses if it is not accepted within that time. The term ‘reasonable time’ will depend upon the facts and circumstances of each case. 3) By failure to accept condition precedent: Where, the offer requires that some condition must, be fulfilled before the acceptance of the offer, the offer lapses, if it is accepted without fulfilling the condition. 4) By the death or insanity of the offeror: Where, the offeror dies or becomes, insane, the offer comes to an end if the fact of his death or insanity comes to the knowledge of the acceptor before he makes his acceptance. But if the offer is accepted in ignorance of the fact of death or insanity of the offeror, the acceptance is valid. This will result in a valid contract, and legal representatives of the deceased offeror shall be bound by the contract. On the death of offeree before acceptance, the offer also comes to an end by operation of law. 5) By counter offer by the offeree: Where, a counter offer is made by the offeree, the original offer automatically comes to an end, as the counter offer amounts to rejections of the original offer. 6) By not accepting the offer, according to the prescribed or usual mode: Where some manner of acceptance is prescribed in the offer, the offeror can revoke the offer if it is not accepted according to the prescribed manner. 7) By rejection of offer by the offeree: Where, the offeree rejects the offer, the offer comes to an end. Once the offeree rejects the offer, he cannot revive the offer by subsequently attempting to accept it. The rejection of offer may be express or implied. 8) By change in law: Sometimes, there is a change in law which makes the offer illegal or incapable of performance. In such cases also, the offer comes to an end. ACCEPTANCE Acceptance 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: In case of a specific offer, it can be accepted only by the person to whom it is made. Case Law: Boulton vs. Jones (1857) - Boulton bought a business from Brocklehurst. Jones, who was Broklehurst’s creditor, placed an order with Brocklehurst for the supply of certain goods. Boulton supplied the goods even though the order was not in his name. Jones refused to pay Boultan for the goods because by entering into the contract with Blocklehurst, he intended to set off his debt against Brocklehurst. Held, as the offer was not made to Boulton, therefore, there was no contract between Boulton and Jones. In case of a general offer, it can be accepted by any person who has the knowledge of the offer. [Carlill vs. Carbolic Smoke Ball Co. (1893)] 2) Acceptance must be absolute and unqualified: As per section 7 of the Act, acceptance is valid only when it is absolute and unqualified and is also expressed in some usual and reasonable manner. If the proposal prescribes the manner in which it must be accepted, then it must be accepted accordingly. Case - M offered to sell his land to N for £280. N replied purporting to accept the offer but enclosed a cheque for £ 80 only. He promised to pay the balance of £ 200 by monthly instalments of £ 50 each. It was held that N could not enforce his acceptance because it was not an unqualified one. [Neale vs. Merret W. N. 189]. 3) Acceptance must be communicated: Mere mental acceptance is no acceptance, But there is no requirement of communication of acceptance of general offer. Case - Brogden vs. Metropolitan Railway Co. (1877) - The manager of Railway Company received a draft agreement relating to the supply of coal. The manager marked the draft with the words “Approved” and put the same in the drawer of his table and forgot all about it. Held that, there was no contract between the parties as the acceptance was not communicated. 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. But if the proposer does not insist on the proposal being accepted in the manner prescribed after it has been accepted otherwise, i.e., not in the prescribed manner, the proposer is presumed to have consented to the acceptance. Example : If the offeror prescribes acceptance through messenger and offeree sends acceptance by email, there is no acceptance of the offer, if the offeror informs the offeree that the acceptance is not according to the mode prescribed. But if the offeror fails to do so, it will be presumed that he has accepted the acceptance and a valid contract will arise. 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. What is reasonable time is nowhere defined in the law and thus would depend on facts and circumstances of the particular case. Example : A offered to sell B 50 kgs of bananas at Rs. 500. B communicated the acceptance after four days. Such is not a valid contract as bananas being perishable items could not stay for a period of week. Four days is not a reasonable time in this case Example : A offers B to sell his house at Rs. 10,00,000. B accepted the offer and communicated to A after 4 days. Held the contract is valid as four days can be considered as reasonable time in case of sell of house. 6) Mere silence is not acceptance of the offer Example: A offers to B to buy his house for Rs.5 lakhs and writes “If I hear no more about it within a week, I shall presume the house is mine for Rs.5 lakhs. “B does not respond. Here, no contract is concluded between A and B. However, following are the two exceptions to the above rule. It means silence amounts as acceptance of offer. - Where offeree agrees that non – refusal by him within specified time shall amount to acceptance of offer. - When there is custom or usage of trade which specified that silence shall amount to acceptance. 7) Acceptance by conduct/Implied Acceptance: Section 8 provides the acceptance of the proposal by conduct as against other modes of acceptance i.e. verbal or written communication. Example : When a cobbler sits with a brush and polish, a person giving his shoes for polishing constitutes as acceptance by conduct. General Rules as to Communication of Acceptance The difficulty arises when the contracting parties are at a distance from one another and they utilise the services of the post office or telephone or email (internet). In such cases, it is very much relevant for us to know the exact time when the offer or acceptance is made or complete. Communication of offer: In terms of Section 4 of the Act, “the communication of offer is complete when it comes to the knowledge of the person to whom it is made” Example : Where ‘A’ makes a proposal to ‘B’ by post to sell his house for ` 5 lakhs and if the letter containing the offer is posted on 10th March and if that letter reaches ‘B’ on 12th March the offer is said to have been communicated on 12th March when B received the letter. Thus, it can be summed up that when a proposal is made by post, its communication will be complete when the letter containing the proposal reaches the person to whom it is made. Mere receiving of the letter is not sufficient, he must receive or read the message contained in the letter. He receives the letter on 12th March, but he reads it on 15th of March. In this case offer is communicated on 15th of March, and not 12th of March. There are two issues for discussion and understanding. They are: 1) The modes of acceptance and 2) When is acceptance complete? 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. It will be complete as against the proposer when the letter of acceptance is posted and as against the acceptor when the letter reaches the proposer. For instance in the above example, if ‘B’ accepts, A’s proposal and sends his acceptance by post on 14th, the communication of acceptance as against ‘A’ is complete on 14th, i.e. when the letter is posted. As against ‘B’ acceptance will be complete, when the letter reaches ‘A’. 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. But it is necessary that the letter is correctly addressed, adequately stamped and duly posted. In such an event the loss of letter in transit, wrong delivery, non delivery etc., will not affect the validity of the contract. Acceptance by telephones telex or tax - 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 place of Contract - In case of acceptance by the post, the place where the letter is posted is the place of contract. Communication of acceptance in case of an agent - The communication of acceptance is completed when the acceptance is given either to the agent or to the principal. In such case, if the agent fails to convey the acceptance received from offeree, still the principal is bound by the acceptance. Revocation of Acceptance An acceptance to an offer must be made before that offer lapses or is revoked. The law relating to the revocation of offer is the same in India as in England, but the law relating to the revocation of acceptance is different. Contract through post- as acceptance, in English law, cannot be revoked, so that once the letter of acceptance is properly posted the contract is concluded. In Indian law, the acceptor or can revoke his acceptance any time before the letter of acceptance reaches the offeror, if the revocation telegram arrives before or at the same time with the letter of acceptance, the revocation is absolute.