Law of Contract and Specific Relief PDF

Toc Authors Details (Page 1 of 1)  Toc (Page 1 of 1)  CHAPTER I 2 PRELIMINARY Agreement and Contract...

Toc Authors Details (Page 1 of 1)  Toc (Page 1 of 1)  CHAPTER I 2 PRELIMINARY Agreement and Contract 2 Essentials of Contract 2 Q. What are the basic essential of valid contract? 2 CHAPTER II PROPOSAL OR OFFER Q. What is an offer and state also essentials of offer? 4 Essential of a Valid Proposal 4 1. The Proposal must be Communicated 4 Q. What principle laid down in section 3? 5 Q. What principle laid down in the case of Lalman Shukla? 5 Q. Explain with the example when the communication is complete. 6 2. Proposal must be certain 6 3. Intention to Create Legal Relationship 6 Q. Whether it is necessary to create legal relationship for a valid 6 contract? Q. Explain the facts of Balfour v. Balfour case. 6 4. Offer may be General or Specific 7 Q. Discuss the facts of Lalman Shukla v. Gauri Dutt case. 7 Q. Laid down the principle in Carlill v. Carbolic case. 7 Offer and Invitation to Offer 8 Q. What is invitation to offer and how it differs from offer? Discuss the 8 relevant case laws. Q. Explain the facts of Harvey v. Facie and principle laid down. 8 Revocation of Proposal 9 Q. How and when proposal is revoked? Explain with examples. 9 CHAPTER III ACCEPTANCE Q. Discuss the facts and principle laid down in "Felthouse v. Bindley". 11 Communic ation of Acceptance must be by a Person who has 12 Authority to Accept Q. Disc uss the mode of communication of acceptance and whether 12 acceptance may inferred from conduct of parties. Acceptance may also be Inferred from the Conduct of Parties 12 (Page 1 of 12)  Implied Acceptance 13 When is Communication of Acceptance Completes 13 Q. Explain the principle laid down in section 4 with relevant examples. 14 Q. How the acceptance in complete by Telex or Telephone? 15 Q. What are the essentials of a valid acceptance? 16 Essentials of a Valid Acceptance 16 1. Acceptance should be Communicated 16 2. Acceptance should be Absolute and Unqualified 17 Q. Discuss the facts of Hyde v. Wrench. 17 3. Acceptance should be Expressed in Usual and Prescribed Manner 18 4. Acceptance should be made while the Offer is Still Subsisting 19 Revocation of Acceptance 19 CHAPTER IV CONSIDERATION Q. What is consideration? Explain with the examples and case laws. 21 Essentials of the Consideration 22 1. At the Desire of the Promisor 22 Q. What are the essentials of the consideration? 22 Q. Discuss the facts of case 'Durgaprasad v. Baldeo.' 22 2. The Promisee or any Other Person 23 Q. What principle laid down in Kedarnath v. Gourie Mohammad? 23 Q. What are the facts in Dulton v. Poole? 23 Q. Define 'Privity of Contract' whether it is applicable in India? 24 Doctrine of Privity of Contract of India 24 Exceptions to the Doctrine of Privity of Contract 25 Q. What are the exceptions to the doctrine of 'Privity of Contract'? 25 Explain with the help of case law. 3. Has Done or Abstained from Doing Something 27 4. Does or Abstains from Doing Something 27 5. Promises to do or to Abstain from Doing Something 27 6. Such Act or Abstinence or Promise is Called Consideration for the 27 Promise Adequacy of Consideration 28 Consideration must be Real 28 (Page 2 of 12)  Exception to Consideration 28 Q. A n agreement without consideration is void? Explain with suitable 28 examples. 1. Natural Love and Affection 29 Q. Define the essentials laid down in section 25(1) 29 2. Promise to Compensate for Something Done Voluntarily 30 3. Promise to Pay a Time-barred Debts 31 4. Promise may Dispense with or Remit Performance 31 5. Consideration not Necessary 31 CHAPTER V CAPACITY TO CONTRACT Q. Who is minor? Whether a minor is competent to make a contract? 32 Discuss briefly. Who is a Minor 32 Nature of Minors Contract 32 Q. Discuss the principle laid down in Mohori Bibi v. Dharmodas Ghose. 32 Q. Explain the status of contract if it is made by guardian in the 33 interest of minor. Effects of Minor's Agreement 34 1. Estoppel against a Minor 34 Q. Discuss the rule defined in the case of Khan Gul v. Lakha Singh. 34 2. Action in Contract cannot be Converted into an Action in Tort 34 3. Doctrine of Restitution 35 Q. Define doctrine of restitution with the help of case laws. 35 Beneficial Contracts 36 Contract of Marriage 36 Contracts of Apprenticeship 36 Q. Explain the facts and principle in Roberts v. Gray case. 36 Ratification 36 Q. Whether a minor's contract is subject to ratification? 36 Necessaries Supplied to Minor: Section 68 37 Q. What things are come under the purview of "necessaries"? 37 What is Sound Mind for the Purpose of Contracting: Section 12 37 Q. When a unsound mind person is capable to enter into the contract. 37 (Page 3 of 12)  CHAPTER VI FREE CONSENT Q. When a consent is said to be free? 38 Q. Define coercion and essential elements of coercion. 38 1. Act Forbidden by IPC 39 Q. Which acts are forbidden by IPC? Explain with the help of relevant 39 case. 2. Unlawful Detaining of Property 39 Q. Define undue influence and explain the essential elements with 40 suitable examples. Unconscionable Transaction 41 Q. What elements are included in the definition of fraud? 42 Q. Explain the principle laid down in the case of Derry v. Peek. 42 1. False Statement of True Facts 43 2. Active Concealment of Facts [Section 17(2)] 43 3. Promise without Intention to Perform it [Section 17(3)] 43 4. Any Other Act Fitted to Deceive [Section 17(4)] 43 5. Any Act or Omission which the Law Declares or Fraudulent [Section 44 17(5)] Q. Define misrepresentation with essential elements with the help of 44 examples and relevant case laws. Essential Elements 44 Q. Under which section and in which cases agreements are to be 44 prove void? Mistake of Fact and Mistake of Law 45 Q. What is the difference between Mistake of fact and mistake in law? 45 Q. Define mistake of fact under sections 20 and 22. 45 Fact Eessential to the Agreement 46 Q. Explain the rule laid down by the Supreme Court. 47 CHAPTER VII LEGALITY OF OBJECT (SECTION 23) Q. "Explain the cases in which the agreement is unlawful thereby 48 declared void"? Q. What is the distinction between illegal and void contracts? 49 1. Forbidden by Law 49 (Page 4 of 12)  Q. Explain the facts of Pearce v. Brooks. 49 2. Defeat the Provisions of any Law 50 3. Fraudulent 50 4. Injury to Person or Property of Another 50 5. Immoral or Opposed to Public Policy 51 Heads of Public Policy 52 Q. Define the heads of public policy. 52 CHAPTER VIII VOID AGREEMENTS Q. What are void agreements? Explain in brief. 53 Q. Explain section 27 with the relevant case law. 54 Q. What are exceptions defined in section 27? 55 Provisions in Partnership Act 55 Q. Wha t are the provisions in partnership which relate with the 55 section 27? Explain with the help of examples. Exceptions Recognised through Judicial Interpretation 55 Q. Explain the circumstances in which agreements are void in restraint 56 of legal proceedings. Q. Define uncertainty with the help of illustrations. 57 Q. Define wager. Whether wager is void? 58 Q. Essent ials of a wagering contract. Explain with the help of 58 illustrations. Q. Define lotteries. 59 Effects of Wagering Contracts 59 Q. What are the effects of wagering contracts? 59 Exception to section 30 59 Q. What are the exceptions of wagering contracts? 59 ¨ Contingent Contracts 60 Q. Define contingent contract: what are the essentials? Define with 60 the help of examples. Essentials 60 ¨ Performance of contract 62 Q. What is the obligation of party to contract? 62 Q. Define the tender of performance. 62 Q. What are the effects of refusal of party? Its perform promise 63 (Page 5 of 12)  wholly. ¨ Performance of joint promises 64 Each Promisor may Compel Contribution 65 Sharing of Loss by Default in Contribution 65 Time and place for performance 66 Q. Define the time and place for performance of contract. 66 ¨ Performance of reciprocal promises 68 Q. Define reciprocal promises. 68 Effect of such Failure when Time is not Essential 70 Effec t of Acceptance of Performance at time other than that 70 Agreed Upon Q. Define the cases in which time is essence of contract. 70 ¨ Discharge of contract (Sections 56-58) 72 Q. Explain the doctrine of impossibility. 72 Q. Discuss the case in which damages are awarded to injured party. 72 Q. Wha t are the grounds of doctrine of frustrations? Explain the 73 suitable case laws. 1. Destruction of Subject-matter 73 Q. Explain the facts of Taylor v. Coldwell. 73 2. Change of Circumstances 73 3. Non-occurrence of Contemplated Event 74 4. Death or Incapacity of Party 74 Q. Discuss the principle laid down in case of Robinson v. Davison. 74 5. Government, Administrative, Legislative Intervention 74 Q. Disc uss the status or position of government in doctrine of 74 frustration. 6. Change in Law 75 Q. Explain the rule laid down in the case of Shyam Biri Works Pvt. Ltd. 75 Q. What promises are said to be reciprocal or alternative? Explain with 75 the help of suitable examples. ¨ Appropriation of contracts (Sections 59, 60, 61) 76 Q. Discuss the "appropriation of contracts" 76 Contracts which need not be Performed 77 Q. Discuss in brief the contracts which need not to be performed. 77 (Page 6 of 12)  Q. Explain the term 'novation' with the help of case laws. 78 1. Novation in the Terms of the Contract 78 2. Novation by Change in the Parties to the Contract 78 Q. What are the consequences of the rescission of a valid contract? 79 ¨ Of Certain relations resembling those created by contract (Sections 82 68-72) Q. Define quasi-contract and what is the legal obligation of such 82 contracts. Q. Explain the facts and principle laid down in Sinclair v. Brougham. 82 1. Cla im for Necessaries Supplied to a Person Incompetent to 83 Contract Q. Explain section 68 with the help of illustrations and suitable case 83 laws. 2. Obligation of Person Enjoying Benefit of Non-gratuitous Act 84 Q. What are the responsibility of finder of goods. 84 Q. Explain the liability of person to whom money paid as thing 85 delivered by mistake or coercion. ¨ Of the consequences of breach of contract 86 Q. Explain the remedies which are available to injured party or breach 86 of contract. 1. Damages 86 2. Quantum Meruit 86 Q. Define Quantum meruit. 86 3. Specific Performance and Injunction 86 Compensation for Failure to Discharge Obligation Resembling those 86 Created by Contract Q. Define liquidated damages. 86 Q. In what circumstances compensation is awarded to injured party 86 for failure to discharge obligations? Explain with the help of illustrations. Remoteness of Damages 88 Q. Define Remoteness of damages. 88 Q. Whether remote damages are subject to compensation to injured 88 party? Q. Explain section 75. 89 Part II (Page 7 of 12)  Specific Contracts (Sections 124-238 Chapter IX Contract of Indemnity and Guarantee ¨ Contract of Indemnity 91 Q. Explain the facts of Adamson v. Jarvis. 91 Q. Define contract of indemnity explained in section 124. 92 Q. Explain the rights which are available to indemnity-holder. 93 ¨ Contract of Guarantee (Sections 126-147) 94 Q. Define the term 'contract of guarantee', 'surety', 'principal debtor', 94 'creditor'. Q. W h a t consideration is required for formation of contract of 95 guarantee. Q. Define continuing guarantee and also explain the revocation of 96 continuing guarantee. Q. Disc uss in brief in which surety is discharge for performance of 98 contract? Q. How surety can be discharged on the compounding giving extra 100 time to the debtor principal? Q. Discuss the liabilities of co-surety. 101 Q. When a guarantee is proved to be invalid? 104 ¨ Distinction between a Contract of Guarantee and a Contract of 106 Indemnity Q. Discuss the point of distinction between a contract of guarantee 106 and contract of indemnity. CHAPTER X Of Bailment (Sections 148-171) Q. Explain the definition of Bailment, bailor and bailee under section 108 148. Q. What are the essential elements of a valid bailment? Explain with 109 the help of examples and case-laws. Q. How delivery is made to bailee by bailor? 110 Q. What are the legal obligations imposed by law an bailor and bailee? 110 Q. What are the grounds on which contract of bailment is terminated? 111 Q. What are the effects of mixture with or without consent bailor's 112 consent? Q. Define lien. What are the kinds of lien? Explain with the help of 116 (Page 8 of 12)  examples. Q. Define General lien of bankers, factors, wharfingers, attorneys and 118 policy-brokers. ¨ Distinction between Particular & General Lien 120 Q. Explain the points of distinction between particular and general lien. 120 ¨ Pledge (Sections 172-181) 121 Q. Define pledge pawnor and pawnee 121 Q. What are the essentials of pledge? Explain in brief. 121 Q. Define the right of pawnee to retain the goods. 122 Q. Explain in brief the rights of pawnee. 123 Q. Define merchantile agent and explain also the pledge by him? 124 ¨ Suits by Bailees or Bailors against Wrong-doers 126 CHAPTER XI AGENCY (Sections 182-238) ¨ Appointment and Authority of Agents 127 Q. Define agency. 127 Q. Define the capacity of person who may employ an agent. 128 Q. Discuss the competency of agent. 129 Q. What consideration is required to form an agency? 129 Q. Discuss the extent of agent's authority. 131 ¨ Kinds of Agents 132 Q. Explain in brief kinds of agents. 132 Q. Explain in brief Del credere agent. 133 ¨ Sub-agents (Sections 190-195) 133 Q. Who may be sub-agent? Explain. 133 Q. Explain-Who can appoint sub-agent and who is responsible for the 134 acts of sub-agent? ¨ Ratification (sections 196-200) 135 Q. Define ratification and what are factors responsible for ratification. 135 ¨ Revocation of Authority (Sections 201-210) 138 Q. When an agent can be terminated and what are the modes of 138 revocation? Q. Discuss the power of principal to revoke the agent's authority. 139 Q. When does agent's authority terminates take effect? 140 (Page 9 of 12)  Q. Explain with the help of illustrations. 141 Q. When the sub-agent's terminates. 142 ¨ Agent's Duty to Principal (Sections 211-221) 142 Q. What are the duties of agent in conducting principal's business? 142 Q. Explain the rights of principal in agency. 144 Q. Define Agent's lien on principal's property. 147 Q. What are essentials for lien? 147 ¨ Principal's duty to agent 147 Q. What are the principal's duties to agent? Explain. 147 ¨ Effect of Agency on Contracts with Third Persons 149 Q. H o w can agent's contract be enforced and what are the 149 consequences thereof? PART II The Specific Relief Act, 1963 ¨ Introduction 154 PART I 155 Preliminary PART II SPECIFIC RELIEF CHAPTER I RECOVERING POSSESSION OF PROPERTY (Sections 5-8) Q. Define the manner for recovery of specific immovable property. 157 Q. What are the essential elements to sue or person dispossessed of 158 immovable property? Q. Explain the principle laid down in section 7. 159 Q. Distinguished section 7 with section 8. 162 CHAPTER II SPECIFIC PERFORMANCE OF CONTRACT (Sections 9-25) Q. Define specific performance. 163 Q. What are the cases in which specific performance of contract 164 enforceable? Q. Explain the specific performance in connection of trust. 166 Q. Whether it is possible for the specific performance of part of 167 contract? Q. What are the rights of purchaser or lessee against the other with 168 (Page 10 of 12)  no title or imperfect title? Q. Explain in brief, the contracts which cannot be specifically enforced 169 by court of law. Q. Expla in the cases. In which who can obtain the specific 171 performance? Q. Explain the parties who are barred to claim relief? 172 Q. Explain the rule laid down in section 17 with illustrations. 174 Q. Discuss specific performance of a contract against whom enforced? 175 ¨ Discretion and powers of court 177 Q. What are the discreation and powers of court? 177 Q. What are the powers of court to award compensation? Explain with 178 examples. Q. What are the powers of the court to grant relief? Explain with 179 relevant case laws. Q. Whe t he r the liquidation of damages is a bar to specific 180 performance? Explain. ¨ Enforcement of awards and direction to execute settlements 180 Q. How can be award for specific enforcement enforced. 180 CHAPTER III Rectification of Instruments Q. W h e n an instrument can be rectified and who may claims 181 rectification? Who may Claim Rectification section 26(1) 182 Discretion of the Court in Granting Rectification section 26(2) 183 Enforcement of Rectified Instrument section 26(3) & (4) 183 Mistake 183 CHAPTER IV Rescission of contracts (Sections 27-30) Q. Disc uss in brief the cases where rescission may be adjudged or 184 refused? Q. Explain the rule laid down in section 28 with the help of suitable 185 case-laws. Q. Define Alternative prayer. 186 CHAPTER V Cancellation of instrument (Sections 31-33) Q. I n what circumstances an instrument may be ordered to be 188 (Page 11 of 12)  cancelled? Explain with the help of suitable case-laws and illustrations. Q. Discuss the facts of Dayawati v. Madanlal Verma. 189 Q. Explain the provision defined in section 33. 189 CHAPTER VI Declaratory Decrees (Sections 34, 35) Q. What are the declaratory decrees and how the court can use his 192 discreationary power? Q. What are the effects of declaration in decrees? 194 CHAPTER VII Injunctions Generally (Sections 36-37) Q. Define injunction. 195 Characteristics 195 Injunction will not be Issued in Cases 195 Q. In what cases the injunction is not issued? 195 Q. What is preventive relief? Give examples also. 196 Q. What are the kinds of injunctions? 196 CHAPTER VIII Perpetual injunctions (Sections 38-42) Q. Discuss the factors in which courts may grant perpetual injunction. 197 Q. Define Mandatory injunction. Explain illustrations also. 199 Q. What are the cases in which injunction can be refused? 200 Table of Cases 203 © Universal law Publishing Co. (Page 12 of 12)  Part I THE INDIAN CONTRACT ACT, 1872 (9 of 1872) Preamble.-Whereas it is expedient to define and amend certain parts of the laws relating to contracts. It is enacted as follows:- Chapter I PRELIMINARY Section 1: Short title.-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 and it shall come into force on the first day of September, 1872. Saving.-Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract, not inconsistent with the provisions of this Act. Interpretation clause.-In this Act the following words and expressions are used in the following senses, unless a 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; (b) When the 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; (c) The person making the proposal is called the "promisor", and the person accepting the proposal is called the "promisee". (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 cease to be enforceable by law becomes void when it cease to be enforceable. Agreement and Contract Contract.-According to section 2(h) of the Indian Contract Act, 1872-"An agreement enforceable by law is a contract." According to Anson: "A Contract consists in an actionable promise or promises. Every such promise involves two parties a promisor and promisee and an expression of a common intention and of expectation as to the act or forbearance promised." All agreements are not enforceable by law and therefore, all agreements are not contracts. Some agreement may be (Page 1 of 7)  enforceable by law and others are not. For example, An agreement to sell a radio set may be a contract but an agreement to go to see a movie may be a mere agreement and not enforceable by law. This contract is a bilateral transaction between two or more person. Every contract has to go through several stages beginning with the stage of negotiation during which the parties discuss and negotiate proposals and counter proposals as also the consideration resulting finally in the acceptance of the proposals. Tarsem Singh v. Sukhminder Singh, MANU/SC/0158/1998 : AIR 1998 SC 1400 (1403): under law it is not necessary that every contract must be in writing. There can be an equally binding contract between the parties on the basis of oral agreement unless there in law which requires the agreement to be is writing. Essentials of Contract What are the basic essentials of valid contract? Section 10 of Indian Contract Act, 1872.-All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Railways invited tenders for the supply of jaggery to the railway grain shops. The respondent submitted his tender for the supply of 14000 imperial maunds of cane jaggery during the month of February and March and the tender was accepted by the latter. So far, the offer of a supply of a definite quantity of jaggery during a specified period at a certain rate and the acceptance of the offer would constitute an agreement, but would fall short of amounting to a legal contract inasmuch as the date of delivery of the jaggery was not specified. Nothing herein contained shall affect any law in force in India, and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses or any law relating to the registration of documents. According to section 10, an agreement to be enforceable must fulfil the following conditions:- (i) An agreement between the two parties. An agreement in the result of a proposal or an offer by one party followed by its acceptance by the other; (ii) Agreement should be done between the parties who are competent to contract; (iii) There should be lawful consideration and lawful object in respect of that agreement; (iv) There should be free consent of the parties, when they enter into the agreement; (v) The agreement must not be one, which has been expressly declared to be void. CHAPTER II PROPOSAL OR OFFER The term 'proposal' has been defined in section 2(a) of the Indian Contract Act, 1872 as follows:- "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." The first step in the formation of a contract is the making of a proposal. Generally speaking there must be at least two persons to make a contract-A person to make the proposal and the other person to accept it. (Page 2 of 7) According to section 2(c).- The person making the proposal is called the promisor and the person accepting the proposal is called the promisee. A proposal to be valid must contain the following essential elements which are:- (i) There must be two parties; (ii) Every proposal must be communicated; (iii) It must be made with a view to create legal relation; (iv) It must be certain and definite. What are the basic essentials of valid contract? Essential of a Valid Proposal A contract come into existence only when all the terms and conditions have been finalised. If the facts of a particular case show that execution of a written contract was a condition precedent for farming into force of the contract between the parties, then it cannot be said that any concluded contract in absence of a written contract being executed has come into force between the parties. The essentials are as follows:- 1. The Proposal must be Communicated Section 2(a) of the Indian Contract Act, 1872 explains that a person is said to make a proposal "when he signifies to another person his willingness to do or to abstain from doing anything". The emphasis, here is upon the requirement that the willingness to make a proposal should be signified. The term signify means to communicate to make known. It means that the proposal should be communicated to the other party. The process of making a proposal is completed by the act of communicating it to the other party. What principle is laid down in section 3? Section 3: Communication, acceptance and revocation of proposal.-The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it. Felthouse v. Bindley, (1863) 7 LT 835: An offer is accepted when the acceptance is communicated. The communication must be made to the offerer and a communication of acceptance made to a third person creates no contract. Pharmaceutical Society of Great Britain v. Boot Cash Chemicals (Southern) Ltd., (1952) 2 QB 795: The exposure of goods by a shopkeeper does not amount to an offer to sell. On picking the goods, it is an offer by the customer and sale is not affected until the buyer's offer price is accepted by the shopkeeper. What principle is laid down in the case of Lalman Shukla? Lalman Shukla v. Gouri Dutt, 1913 All LJ 489: To create a contract it is necessary that a proposal should have been communicated to the propose. An uncommunicated proposal cannot be accepted. The plaintiff did not have the knowledge of the proposal. The case was dismissed. Section 9: Promises, express or implied.-"Insofar as the proposal or acceptance of any promise is made in words, the promise is said to be express. Insofar as such proposal or acceptance is made otherwise than in words, the promise is said to be implied." State of Maharashtra v. Saifuddin Mujjaffarli Saifi, MANU/MH/0008/1994 : AIR 1994 Bom 48: A contract can be implied and it is very clear from section 9 of the Contract Act, but it is a fundamental principle of law that the court should not make a contract for the parties. A contract implied in fact requires meeting of minds. The court should refuse to read an implied term into a contract which is silent on the point or did not clearly indicate the nature of the term. However, when the stipulations (Page 3 of 7) are clear and in contemplation of the parties or which necessarily arise out of the contract between the parties, they will be implied. Upton Rural District Council v. Powell, (1924) 1 All ER 220: A fire broke out in the defendant's farm. He believed that he was entitled to the free services of Upton Fire Brigade and, therefore, summoned it. The Brigade put out the fire. It then turned out that the defendant's farm was not within free service zone of the Upton, which, therefore, claimed compensation for the services. The court said-The, truth of the matter is that the defendant wanted the services of Upton, he asked for the services of Upton and Upton, in response to that request provided the services. Hence, the services were rendered on an implied promise to pay for them. Explain with example when the communication is complete. Section 4: When communication is complete.-The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. Illustration.-A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter. 2. Proposal must be certain Section 29: Agreements, the meaning of which is not certain, or capable of being made certain are void. Illustration: (a) A agrees to sell 'B' "a hundred tons of oil". There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty. (b) A, who is a dealer in Coconut oil only, agrees to sell to B "one hundred tons of oil". The nature of A's trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of Coconut oil. 3. Intention to Create Legal Relationship Whether it is necessary to create legal relationship for a valid contract? The intention of the parties is naturally to be ascertained from the terms of the agreement and the surrounding circumstances. According to Lord Atkin- "There are agreement between parties who do not result in contracts within the meaning of that term in our law. The ordinary example is where two parties agree to take a walk together, or where there is an offer and acceptance of hospitability". They are not contracts because parties did not intend that they shall be attended by legal consequences. Explain the facts of Balfour v. Balfour case. Balfour v. Balfour, (1919) 2 KB 571: The defendant was employed in Ceylon. He along with his wife went to England to enjoy the leave. At the expiry of leave when he was about to return Ceylon, his wife was advised to remain in England on account of her health. Before returning to Ceylon, he promised to pay Å“ 30 every month to his wife for her maintenance. He sent the amount for sometime but subsequently he stopped it as certain differences between them led to their separation. Since by the time of separation, the said allowance had fallen into arrears, the wife brought to an action to recover the arrears. Her claim was dismissed by court. These arrangements do not result in contracts at all, even though there may be what would constitute consideration for the agreements. They are not contracts because parties did not intend that they shall be attended by legal consequences. Lord Atkin observed that - "To create a contract, there must be a common intention of the parties to enter into legal (Page 4 of 7)  relationship, mutually communicated expressly or impliedly." Banwarilal v. Sukhdarshan Dayal, MANU/SC/0013/1972 : (1973) 1 SCC 294: In an auction sale of plots of land, a loudspeaker was spelling out the terms etc., of the sale. One of the statements being that a plot of certain dimensions would be reserved for a Dharamshala (Public Inn). Subsequently, that plot was also sold for private purposes. The purchasers sought to restrain this. The Supreme Court observed that Micro Phones... have not yet acquired notoriety as carriers of binding representation. Promises held out over loudspeakers are often claptraps of politics. In the instant case, the announcement was, if at all, a puffing up of property put up for sale. 4. Offer may be General or Specific An offer need not always be made to an ascertained person but it is neccessary that the ascertained person should accept it. For example, if a person offers a reward to anyone who finds his lost diamond ring, the finder can successfully claim the reward. The position be different if the finder has no knowledge of the reward. Weeks v. Tybald, (1605) 75 ER 982: It was suggested in this case that the offer must be made to a definite person. That case arose out of the defendant's affirmation to the public that he would give Å“ 100 to him that should marry his daughter with his consent. The plaintiff alleged that he did so and sued the defendant. The court rejected this action and said that it is not averred nor declared to whom the words were spoken. Discuss the facts of Lalman Shukla v. Gauri Dutt case. Lalman Shukla v. Gauri Dutt, (1913) 11 All LJ 489: "The defendant's nephew having absconded from home, he sent this servant to find him out. Later on, he offered a reward of Rs. 501 to any one who discovered the boy. This offer came to the knowledge of the servant only after he had already discovered the boy. In a suit filed by the servant to claim the reward, it was held that he could successfully claim the reward only on the basis of contract and in this case there was no communication of proposal to him. He came to know of it after he had already discovered the boy which he was already under obligation to do by the nature of his calling. It was held that since the plaintiff was ignorant of the offer of reward, his act of bringing the lost boy did not amount to the acceptance of the offer, and, therefore, he was not entitled to claim the reward. Laid down the principle in Carlill v. Carbolic case. Carlill v. Carbolic Smoke Ball Co., (1893) 1 QB 256: The defendants advertised their product, "Carbolic Smoke Ball", a preventive remedy against influenza. In the advertisement they offered to pay a sum of Å“ 100 as reward to anyone who contracted influenza, cold or any disease caused by taking cold after having used the, Smoke Ball three times a day for two weeks, in accordance with the printed directions. They also announced that a sum of Å“ 100 had been deposited with the Alliance Bank to show their sincerity in the matter. The plaintiff relying on the advertisement purchased a Smoke Ball from a chemist, used the same in accordance with the directions of the defendants, but still caught influenza. She sued the defendant to claim the reward. It was held that this being a general offer addressed to all the world had ripened into a contract with the plaintiff by her act of performance of the required conditions and thus accepting the offer. Section 8 Acceptance by performing conditions, or receiving consideration.-Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal is an acceptance of the proposal. Bhagwati Prasad Pawan Kumar v. Union of India, MANU/SC/2931/2006 : AIR 2006 SC 2331: Supreme Court clarified the legal position and expressed that the section 8 provides for acceptance by performing conditions of a proposal in this case. The Railway made an offer to the appellant laying down the condition that if the offer was not acceptable, the cheque should be returned with feeling which it would be deemed that the appellant accepted the offer in full and final satisfaction of its claim. Harbhajan Lal v. Harcharan Lal, AIR 1925 Alld 539: Where a general offer is of continuing nature it will be open for acceptance (Page 5 of 7) of any number of persons. State of Tripura v. Bhowmik & Co., AIR 2004 Gau 21: If there being no agreement, there was no breach of contract committed by the respondent and also that since there was no breach of contract, the petitioner cannot retain or forfeit the earnest money deposited by the respondent by way of penalty. Offer and Invitation to Offer What is invitation to offer and how it differs from offer? Discuss the relevant case laws. An offer must be distinguished from an 'invitation to receive offer' or as it is sometimes expressed in judicial language an 'invitation to treat'. In the case of an 'invitation to receive offer' the person sending out the invitation does not make an offer but only invites the other party to make an offer. His object is merely to circulate information that he is willing to deal with anybody who, on such information, is willing to open negotiation with him. Such invitation for offers are therefore not offers in the eye of law and do not become agreements by their acceptance. Cheshire and Fifoot: "An offer capable of being converted into an agreement by acceptance, must consist of a definite promise to be bound, provided that certain specific terms are accepted. The offerer must have completed his share in the formation of a contract by finally declaring his readiness to undertake an obligation upon certain conditions, leaving to the offeree the option of acceptance or refusal." Explain the facts of Harvey v. Facie and the principle laid down. Harvey v. Facie, (1893) AC 552: The plaintiff offered to purchase a plot of land Bumper Hall belonging to the defendant. He made the said offer through the telegraph and asked the defendant to telegraph the lowest price. The defendant sent the reply through the telegraph quoting the lowest price as Å“ 900, The plaintiff was ready to purchase the land at the quoted price and sent his acceptance through telegram. But the defendant refused to sell the land for Å“ 900. The plaintiff therefore sued the defendant for the breach of contract. The judicial committee of the Privy Council dismissed the action and observed-"the mere statement of the lowest price at which the vendor would sell contains no implied contract to sell at that price to the persons making the enquiry." It was observed that the first telegram had asked two questions one regarding willingness to sell and the other regarding the lowest price. In reply only lowest price was quoted and this quoting of the price was not an offer. The third telegram from the plaintiffs saying. We agree to buy was only an offer and not the acceptance of an offer. Since this offer had not been accepted, there was no binding contract between the parties. McPherson v. Appana, MANU/SC/0004/1951 : AIR 1951 SC 184: The plaintiff offered to purchase a lodge owned by the defendants for Rs 6000. He wrote the defendant's agent asking whether his offer had been accepted and saying that he was prepared to accept any higher price if found reasonable. The agent replied "wont accept less than rupees ten thousand". The plaintiff accepted this and brought a suit for specific performance. It was held that the defendant did not make any offer or counter-offer in his cable but was merely inviting offers. There was no assent to the plaintiff's offer to buy at Rs. 10,000 and, therefore, no concluded contract. It was held that in this case the letter from the defendant's agent was not a counter offer but was a mere quotation amounting to invitation to offer. The plaintiff's willingness to pay Rs. 10,000 was an offer and since the same had not yet been accepted, there was no binding contract between the parties. Pharmaceuetical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd., (1952) 2 QB 795: The exposure of goods by a shopkeeper does not amount to an offer to sell. On picking the goods, it is an offer by the customer to buy, and sale is not effected until the buyer's offer price is accepted by the shopkeeper. State Bank of Patiala v. Ramesh Chandra Kanoji, MANU/SC/0157/2004 : AIR 2004 SC 2016: In pursuant to Voluntary Retirement Scheme (VRS) framed by the appellant bank, the respondent employee made an offer by making an (Page 6 of 7)  application seeking voluntary retirement. In the scheme of 15 days time was given to the employee to opt for the scheme. It was also provided that application once made could not be withdrawn. Hence withdrawal, after date of closure of scheme was not permissible. The Supreme Court observed that as scheme was an invitation to offer and not an offer and such schemes being funded schemes employee if permitted to withdraw at any time after closure, then in such event, all calculation of management would fail. Revocation of Proposal How and when proposal is revoked? Explain with examples. A proposer may according to the law revoke a proposal. According to section 5: "A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards." Illustration.-A proposer, by a letter sent by post to sell his house to B. B accept the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but no afterwards. Revocation, how it is made: Section 6.-A proposal is revoked- (1) by the communication of notice of revocation by the proposer to the other party, (2) by the lapse or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance, (3) by the failure of the acceptor to fulfil a condition precedent to acceptance, or (4) by the death or insanity of the proposes, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. Rajendra Kumar Verma v. State of Madhya Pradesh, MANU/MP/0038/1972 : AIR 1972 MP 131: It has been held that a person who makes an offer is entitled to withdraw his offer or tender before its acceptance is intimated to him. The Government by merely providing a clause to the contrary in the tender notice could not take away the legal rights of a person. © Universal law Publishing Co. (Page 7 of 7)  CHAPTER III ACCEPTANCE A proposal when accepted, results in an agreement. It is only after the acceptance of the proposal that a contract between the two parties can arise. According to Anson, "Acceptance is to offer what a lighted match is to a train of gunpowder". An offer creates no legal rights or duties unless it has been accepted. It is an acceptance which converts an offer into a contract. According to section 2(b): When the 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. According to Cheshire and Fifoot: An invitation to accept or even a mental resolve to accept a proposal does not give rise to a contract. There must be some overt or mental manifestation of the intent by speech, writing or other Act. Discuss the facts and principle laid down in "Felthouse v. Bindley Felthouse v. Bindley, (1863) 7 LT 835: The plaintiff wrote a letter to his nephew offering to buy his horse for Å“ 30, 15s. He also wrote in his letter. "If I hear no more about him, I shall consider the horse mine at Å“ 30, 15s." The nephew did not give any reply of his letter. However, he told the defendant, an auctioneer, not to sell the horse. Thus, he intended to reserve the horse for his uncle. But the defendant sold the horse by mistake. The plaintiff, thereupon, sued the defendant, the auctioneer for conversion of property. The court dismissed this plea and held that since the nephew did not communicate his acceptance. No contract took place between the plaintiff and his nephew and consequently he had no right to complain of the sale. The Court also held that the communication of acceptance must be made to offerer himself or his agent. The communication of acceptance to stranger will not be a valid acceptance. Powell v. Lee, (1908) 90 LT 234: The plaintiff was an applicant for the headmastership of a school. The managers passed a resolution appointing him, but the decision was not communicated to him. One of the members, however, in his individual capacity informed him. The managers cancelled their resolution an the plaintiff sued for breach of contract. The court rejected the action and observed that there must be notice of acceptance from the contracting party in some way. Information by an unauthorised person is an insufficient as overhearing from behind the door. Bhagwandas v. Girdharilal and Co., MANU/SC/0065/1965 : AIR 1966 SC 543: The principle is that there should be some external manifestation (Court Act) of acceptance. A mere mental determination to accept unaccompanied by any external indication will not be sufficient. An agreement does not result from a mere state of mind: Intent to accept an offer or even a mental resolve to accept an offer does not give rise to a contract. There must be external manifestation of that intent by speech, writing or other act. Communication of Acceptance must be by a Person who has Authority to Accept Discuss the mode of communication of acceptance and whether acceptance may be inferred from conduct of parties. In order that the acceptance can be treated as valid it is necessary that the same must be communicated to the offeror either by the offeree or by some duly authorised person on his behalf. If the communication is made by an unauthorised person, it does not result in a contract. Powell v. Lee, (1908) 99 LT 284: A communication of acceptance to be valid, must be either by the offeree himself or by his authorised agent. A communication of acceptance by any other person will not be valid. In this case court held that no contract was concluded because a communication of acceptance to be valid must be made by the offeree himself or his unauthorised agent. Karan Singh v. The Collector, Chattarapur, MANU/MP/0016/1980 : AIR 1980 MP 89: In an auction of the quarry lease, (Page 1 of 7)  the petitioner bids of Rs. 1800 was the highest. In accordance with the auction conditions the petitioner deposited the security and earnest money of Rs. 540. The bid was not accepted at the auction. The bid was subsequently accepted by the collector, but instead of sending the communication of acceptance to the petitioner, the same was wrongly sent to somebody else. The officer concerned realized the mistake after the expiry of the period of lease. Then a demand notice was sent to the petitioner asking him to pay the lease money. The petitioner, on the other hand, demanded the refund of the security of Rs. 540. It was held that the petitioner's bid which was an offer although accepted on file, did not result in a contract as no intimation was sent to the petitioner and received by him. The demand notice for recovering the lease money was quashed and the respondent were directed to refund the security deposit. Acceptance may also be Inferred from the Conduct of Parties It is well-settled that an offer may be accepted by conduct. But conduct would only amount to acceptance if it is clear that the offeree did the act with the intention actual or apparent of accepting the offer. Brogden v. Metropolitian Railway Co., (1877) LR 2 App Cas 666: The respondents were being supplied coal and coke for their locomotives by the appellants for sometime without any formal agreement for the same. The respondents sent a draft agreement to the appellant leaving some blanks to be filed and signed by the appellant. The court held that mere silence does not constitute acceptance but it may be implied from the conduct of the parties. In this case the fact that the respondents had placed order for supply of coal and accepted the same, constituted their acceptance and the fact that the appellant supplied the coal on the terms of the agreement clearly showed that the parties had entered into the contractual relationship on the basis of the agreement signed by the appellant. The appellant was, therefore, held liable. Rakesh Kumar Dinesh Kumar v. U.G. Hotels & Resorts Ltd., AIR 2001 HP 135 (138): In a contract for supply of goods by plaintiffs to defendant, there was default by defendant in making payment. Subsequently, the defendant made on offer, in writing to a certain amount in full and final settlement of dues. The conduct of the parties showed that the plaintiff had impliedly accepted the offer and received part of amount. Thereafter the plea that the said offer in writing cannot be termed as fresh concluded contract for time-barred debt and as such suit for recovery was not within limitation would be untenable. Implied Acceptance The acceptance of an offer/promise can be in express terms and can also be in implied terms. Ramji Dayawala & Sons (P) Ltd. v. Import, Invest, MANU/SC/0502/1980 : AIR 1981 SC 2085: The Supreme Court of India has also observed that in the fact of a given case acceptance of a suggestion may be sub silento reinforced by the subsequent conduct. True it is the general rule is that an offer is not accepted by mere silence on the part of the offeree. There may, however, further facts, which taken together with offeree's silence constitutes an acceptance. Bharat Petroleum Corporation Ltd. v. Great Eastern Shipping Co. Ltd., AIR 2008 SC 257: There was an agreement called the time charter party in legal parlance entered into between the appellant and the respondent on 6th may, 1997, for letting on hire vessels for a period of two years, on terms and conditions set-out in the said agreement. The charter party was extended for further period. However, there had been correspondence with regard to the finalization of the hire rates. No new agreement was signed between the parties, however, the appellant continued to use the vessel on hire with them. Under the time charter dated 6th May, 1997. It was held by the Apex Court that the conduct of the parties, as evidenced in the said correspondence and, in particular appellant's silence on respondent letters. Coupled with the fact that they continued to use the vessel, manifestly went to show that they accepted the stand of the respondent sub silento and thus contained to bind themselves by the terms and conditions contained in the Charter Party dated 6th May, 1997. When is Communication of Acceptance Complete As soon as the communication of acceptance is complete, a contract comes into being, whereby both the parties (Page 2 of 7)  become bound in case the parties to the contract are present at the same place, one making the offer and the other communicating the acceptance, both the parties become bound immediately. The problem arises when the parties are at different places and the communication of offer and acceptance is made by post or telephone etc. Explain the principle laid down in section 4 with relevant examples. According to section 4: The communication of an acceptance is complete as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the acceptor, as against the acceptor, when it comers to the knowledge of the proposal. Illustration B accepts A's proposal by a letter sent by post. The communication of the acceptance is complete, as against A when the letter is posted, as against B when the letter is received by B. Postal Communication.-When the parties are at a distance and are contracting through post or by messengers, the question arises when is the contract conducted? Does the contract arise when the acceptance is posted or when it is received. Adam v. Lindsell, (1818) 106 ER 250: On September 2, 1817, the defendants sent a letter offering to sell quantity of wool to the plaintiffs. The letter added "receiving your answer in course of post". The letter reached the plaintiffs on September 5 on that evening the plaintiffs wrote an answer agreeing to accept the wool. This was received by the defendants on September 9. The defendants waited for acceptance upto September 8 and not having received it, sold the wool to other parties on that date. They were sued for breach of contract. It was contended on their behalf that till the plaintiff's answer was actually received there could be no binding contract and therefore they were free to sell the wool on 8th. According to court, the complete contract arises on the date when the letter of acceptance is posted in due course. Household Fire and Accidental Insurance Co. v. Grant, (1879) Ex D 216: In this case, the defendants made an application for the allotment of shares in the plaintiff's company. The plaintiff posted a letter of acceptance in due lime but the defendant never received this letter. Yet it was held that the contract was complete when the letter of acceptance was posted and hence the defendant was bound by the acceptance. The siger L.J. stated that an acceptance "which only remains in the breast of the acceptor without being actually and by legal implication communicated to the offeror, is no binding agreement." The acceptor, in posting the letter has put it out of his contract and done an extraneous act which clinches the matter, and shows beyond all doubt that each side is bound. Dunlop v. Higgins, (1848) 1 HLC 381: Dunlop & Co. offered to sell 200 tons of iron pigs at 65 shilling per ton to Higgons & Co. through their letters dated 22nd and 28 January, 1945. Higgins & Co. received the letters an 30th Jan and replied the same day, indicating their acceptance to purchase the iron pigs in accordance with the offer. Due to frosty weather there was disruption in the train service and the letter of acceptance instead of reaching on 31st January reached Dunlop & Co. on 1st February Dunlop & Co. refused to supply iron pigs on the ground that the receipt of the letter of acceptance by them had been delayed. It was held that Develop & Co. had become bound by the contract as soon as the letter of acceptance was posted to them, i.e., on 30th January, 1945. Bhagwandas v. Girdharilal & Co., MANU/SC/0065/1965 : AIR 1966 SC 543: This rule was based on commercial expediency or watch which also called the 'empirical grounds'. It makes a large inroad upon the concept of consensus 'a meeting of minds' which is the basis of foundation of formation or contract. Kulkuram Kesharwari v. State of Madhya Pradesh, MANU/MP/0047/1986 : AIR 1986 MP 204: The Madhya Pradesh High (Page 3 of 7)  Court observed that the general rule is that it is the acceptance of offer by the offeree and intimation of that acceptance to the offerer which result in a contract. Progreesive Construction Ltd. v. Bharat Hydro Power Corp. Ltd., AIR 1996 Del 92: It has been held that when the parties enter into contract by correspondence by post, the contract would be deemed to be complete, where the offer was received and the acceptance was posted. The place of delivery of letter is irrelevant and, therefore, the cause of action does not arise where the contract of letter is delivered. How the acceptance is complete by Telex or Telephone? Acceptance by Telephone or Telex.-Sections 4 and 5, which make provisions about the communication of offer and acceptance and the revocation thereof, do not make a mention whether these provisions relate to communication made with the help of telephone and telex also, when the parties are in each other's presence or though separated in space yet are in direct communication as by telephone, the contract is not complete until the offerer comes to know the fact of acceptance. Entares Ltd. v. Mills Far East Corporation, (1955) 2 QB 327: The plaintiff made an offer from London by telex to the agents in Holland of the defendant of the purchase of certain goods, and the offer was accepted by a communication received on the plaintiff's telex machine in London. On the allegation that breach of contract was committed by the defendant corporation, the plaintiff sought leave to serve notice of a writ on the defendant corporation claiming damages for the breach of contract. The defendant corporation contended that the contract was made in Holland. Court of Appeal held that where a contract is made by instantaneous communication for example by telephone the contract is complete only when the acceptance is received by offerer, since generally an acceptance must be notified to the offerer to make a binding contract. Denning L.J.: That the rule about instantaneous communications between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offerer, and the contract is made at the place where the acceptance is received. In the case of telephone conversation, in a sense the parties are in the presence of each other: each party is able to hear the voice of the other. There is instantaneous communication of speech intimating offer and acceptance, rejection or counter-offer. Intervention of an electrical impulse which results in the instantaneous communication of messages from a distance does not alter the nature of the conversation so as to make it analogous to that of an offer and acceptance through post or by telegraph. Quadricon Pvt Ltd. v. Bajrang Alloys Ltd., MANU/MH/1379/2007 : AIR 2008 Bom 88: The plaintiff has stated that the defendant accepted the purchase order by "its letter", indicating thereby that the documents had been sent by post. The plaintiff however pleaded that acceptance was communicated by the defendants by fax sent from Raipur to the plaintiff at Mumbai. The plaintiff having failed to prove the averment, the contract could not be said to have been concluded at Mumbai, the court held. If it was found that the letter of acceptance was communicated by fax, it would have led to the conclusion that the contract was completed and formed in Mumbai where the communication of the acceptance was received. Sapna Ganglani v. R.S. Enterprises, AIR 2008 Kar 178: The Karnataka High Court has observed that whether a contract in respect of immovable property, entered into through e-mail was enforceable, was a mixed question of facts and law. The question the court said could be decided by the trial Court after full-fledged trial. What are the essentials of a valid acceptance Section 7: Acceptance must be absolute.-In order to convert a proposal into a promise the acceptance must,- (1) be absolute and unqualified, (2) be expressed in some usual and reasonable manner, unless the proposal prescribe the manner in which it is to be accepted, if the proposal prescribe a manner in which it is to be accepted, and the acceptance is not (Page 4 of 7)  made in such manner, the proposer may within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner and not otherwise, but if he fails to do so, he accepts the acceptance. Essentials of a Valid Acceptance (1) Aceeptor should be communicated by the offeree to the offeror. (2) Acceptance should be absolute and unqualified. (3) Acceptance should be made in some usual and reasonable manner, unless the proposal prescribes the manner of acceptance. (4) Acceptance should be made while the offer is still subsisting. 1. Acceptance should be Communicated When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. It means that the offeree must signify his assent, or communicate the acceptance. The communication of acceptance is deemed to be made by any act or omission of the party accepting, by which he intends to communicate such acceptance or which has the effect of communicating it. For a valid contract, the acceptance must be communicated and moreover, such communication should be made to the offeror. If I decide to accept your offer but do not communicate my acceptance to you or after having decided to accept your offer I tell my servant about my intention, that cannot give rise to a contract. Illustration.-A law book seller, without any order from A sent by post a costly law book to him with the note that if he did not return the book, he would presume that the same has been accepted by him. A was of course ready to return the book but the book-seller was not agreeable to accept the same inasmuch as a new edition of the book had been published during this period. Is A in any way liable to the book-seller? The court observed that the offeror cannot impose upon the offeree an obligation to accept nor proclaim that silence of the offeree shall be deemed acceptance. Therefore, A was not bound to return the book nor to communicate his refusal to accept. Since there was no concluded contract between A and the law book-seller, A was not in anyway liable to book-seller. 2. Acceptance should be Absolute and Unqualified Acceptance means an acceptance without any deviation of any kind in the proposal or without any conditions. In other words, unconditional acceptance without seeking any modification in the proposal is regarded as absolute and unqualified acceptance. If conditions are imposed while communicating acceptance or any variation or modification are sought in the proposal, then such an acceptance cannot be regarded as valid acceptance as the same as not absolute and unqualified. If I offer to sell my radio to you for Rs. 500 and you convey that you are willing to pay only Rs. 400 for the same, there is no contract in this case. Your willingness to pay Rs. 400 is not acceptance to my offer, it is counter-offer by you. Claridges Infotech Pvt. Ltd. v. Surendra Kapur, MANU/MH/0318/2008 : AIR 2009 Bom 1: By your counter-offer you are willing to purchase the radio for Rs 400 instead of Rs. 500. A contract can arise if I unconditionally accept your offer (counter-offer). By conditional acceptance or the counter-offer, the original offer is deemed to be rejected. Once the original offer is destroyed by counter-offer, it is a dead offer and cannot be accepted unless renewed. Technocom v. Railway Board, AIR 2009 Pat 15: Where acceptance is subject to any condition to be fulfilled by the acceptor on the spot, the acceptance cannot be treated as valid as the same not being absolute and unqualified. Discuss the facts of Hyde v. Wrench. (Page 5 of 7)  Hyde v. Wrench, (1840) 3 Beave 334: There an offer was made by A to B for the sale of a form for 1000 pounds. B rejected this offer and said that he will pay only Å“ 950 to which A did not agree. Thereupon, B said that he was willing to pay 1000 pounds to which also A did not agree. B sued A and contended that there was a contract by which A was bound. It was held that B had once rejected A's offer by his counter-offer to pay 950 Pounds and this made the original offer to lapse, and therefore, no contract had resulted in this case. Union of India v. Uttam Singh Duggal and Co. (Pvt) Ltd., AIR 1972 Del 110: Thus offer and acceptance must be identical to each other. The Delhi High Court observed-"When there is variance between the offer and acceptance even in respect of any material term, acceptance cannot be said to be absolute and unqualified and the same will not result in the formation of a legal contract." Suraj Besan & Rice Mills v. Food Corporation of India, AIR 1988 Del 224: A composite offer, the court said could not be accepted in part unless the party agreed to that course. It was not open to the defendant, the court ruled, to accept only part of the plaintiff's counter-proposal and unilaterally style it as an "unconditional" acceptance. The only course was to reject the plaintiff's conditional counter-proposal in its entirely. Stevenson, Jaques & Co. v. Mclean, (1880) 5 QBD 346: The offeror made an offer to sell iron at 40 shilling net cash per ton. After receiving the offer the offeree sent a telegram to the offeror to know about the terms of delivery and payment. It was held that this enquiry did not mean the rejection of the original offer or a counter-offer and therefore the offeree could still accept the offer. It was observed that in this case it was a "mere enquiry, which should have been answered and not treated as a rejection of the offer. 3. Acceptance should be Expressed in Usual and Prescribed Manner Acceptance must be in some usual and reasonable manner or in the manner communicated by the proposer. It is not usual to accept a business offer by a plaint in a suit for specific performance, nor it is usual to communicate acceptance by serving a copy of the plaint through the medium of the court. According to section 7(2), the acceptance must be expressed in some usual and reasonable manner unless the proposal prescribed the manner in which it is to be accepted. It means that if the manner of acceptance has been prescribed by the proposal, the acceptance has to be in that prescribed manner, otherwise the same may be made in some usual or reasonable manner For example, if an offer is made by post and no mode is prescribed, the acceptance may also be made by post. But if A in Lucknow sends a proposal to B in Calcutta and B send a man with letter of acceptance of walk down from Calcutta to Lucknow to communicate it to A, it will not be usual and reasonable. Life Insurance Corporation of India v. R. Vasireddy, AIR 1984 SC 1014: In the contract of Life Insurance, the Supreme Court held that mere encashment of a cheque of the first insurance premium or mere delay in conveying the acceptance of the proposal did not mean its acceptance. In case the formal internal procedure of approval of the proposal by the Divisional Manager has yet to be gone through, the contract does not arise untill the same is done. Therefore, if the proposer died before the needful was done his widow could not claim the assured amount of Rs. 50,000. Chairman-cum M.D. T.N. Tea Plantation Corporation Ltd. v. Sriniwasa Timbers, MANU/TN/0052/1999 : AIR 1999 Mad 111: The respondents had made the highest bid for the grant of a forest contract by the appellant to them. The bid was accepted subject to the condition that the respondent would deposit the prescribed amount and execute the agreement. The respondent failed to fulfil this condition and the appellant cancelled the contract and returned the earnest money deposited by the respondent tenderer. The tenderer accepted the refund of earnest money without protest. The respondent then challenged the decision of the appellant to cancel the contract. It was held that the contract was subject to conditions which were not fulfilled, and, therefore, the cancellation of the contract was valid. A conditional acceptance does not result in a concluded contract unless the said condition gets fulfilled. 4. Acceptance should be made while the Offer is Still Subsisting (Page 6 of 7)  To be legally effective acceptance must be given within the specified time limit, and if no time is stipulated, acceptance must be given within a reasonable time because an offer cannot be kept open indefinitely. Shree Jaya Mahal Co-operative Housing Society v. Zenith Chemical Works Pvt. Ltd., MANU/MH/0038/1991 : AIR 1991 Bom 211: Where M applied for certain shares in a company in June but the allotment was made in November and he refused to accept the allotted shares, it was held that the offeror M could refuse to take shares as the offer stood withdrawn and could not be accepted because the reasonable period during which the offer could be accepted had elapsed. Revocation of Acceptance Section 4: The communication of a revocation is complete as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be put of the power of the person who makes it, as against the person to whom it is made, who it comes to his knowledge. Illustration A revokes his proposal by telegram. The revocation is complete as against A when the telegram is dispatched. It is complete as against B when B receives it. B revokes his acceptance by telegram. B's revocation is complete as against B when the telegram is dispatched, and as against A when it reaches him. Section 5: Revocation of acceptance.-An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwords. Illustration A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwords. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwords. Section 6: Revocation, how it is made.-A proposal is revoked- (1) by the communication of notice of revocation by the proposer to the other party, (2) by the lapse of time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance, (3) by the failure of the acceptor to fulfil a condition precedent to acceptance, (4) by the death or insanity of the proposer, if the fact of his death, or insanity comes to the knowledge of the acceptor before acceptance. © Universal law Publishing Co. (Page 7 of 7)  CHAPTER IV CONSIDERATION According to Anson's Law of Contract "Consideration is necessary for the formation of every simple contract: an informal promise without consideration is not actionable in English law even though the promise or may have acted upon it to his detriment. Denning L.J.: Consideration is a cardinal necessity of the formation of contract. Consideration, of course, must be something which is of some value in the eye of the law. Motive must not be confused with consideration. Blackstone: Consideration is the recompense given by the party contracting to the other. It is the price of the promise. Pollock: Consideration is the price for which the promise of the other is bought, and the promise thus given for value is enforceable." Justice Patterson: Consideration means something which is of some value is the eyes of the law. It may be some benefit to the plaintiff or some detriment to the defendant. Lord Green: A consideration some sort or other is so necessary to the forming of a contract, that a nudum pactum or agreement to do or pay something on one side without any compensation on the other will not at law support an action and a man cannot be compelled to perform it. Currie v. Misa, (1875) LR 10 Exch 153 it is observed that a valuable consideration in the sense of the law, may consist either in some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. In the Fazaluddin v. Panchamdas, AIR 1957 observed that the consideration is due price of a promise, a return or quid pro quo, something of value received by the promisee as inducement of the promise. What is consideration? Explain with examples and case laws. Section 2(d) Indian Contract Act, 1872.-When at the desire of the promisor, the promisee or any other person has done or abstains from doing, or does or abstains from doing, or promises to do or to abstains from doing something, such act or abstinence or promise is called a consideration for the promise. Under Indian Law also, consideration is necessary for the formation of contract. Section 10 of Indian Contract provides, "All agreements are contracts if they are made by the free consent of parties and competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void. Chidambara Iyer v. P.S. Renga Iyer, MANU/SC/0279/1965 : AIR 1966 SC 193: The Supreme Court quoted that consideration means a reasonable equivalent or other valuable benefit passed on by the promisor to the promisee or by the transferor to the transferee." Section 25 lays down the general rule that "an agreement without consideration is void". Illustration (a) A promises, for no consideration to give to B Rs. 1000. This is a void agreement. (b) A, for natural love and affection promises to give his son B Rs. 1000. A puts his promise to B into writing and registers it. This is a contract. Essentials of Consideration (i) at the desire of the promisor. (ii) the promisee or any other person (Page 1 of 9)  (iii) has done or abstained from doing something, or (iv) does or abstain from doing something, or (v) promises to do or to abstain from doing something, and (vi) such act or abstinence or promise is called a consideration for the promise. 1. At the Desire of the Promisor What are the essentials of consideration? It is essential that the consideration must have been at the desire of the promisor, rather than merely voluntarily or at the instance of third party. The act or abstinence must be done at the desire of the promisor. An act done at the desire of a third person will not constitute a good consideration. Discuss the facts of case 'Durgaprasad v. Baldeo.' Durgaprasad v. Baldeo, ILR (1880) 3 All 221: The plaintiff built a market at the desire of the Collector of the District. The defendant who subsequently occupied one of the shops in the market agreed to pay a certain commission on all goods sold through him in the market. An action brought by the plaintiff on the breach of said promise was dismissed on the ground that the plaintiff built the market at the desire of the collector and not that of the defendant and hence the promise was without consideration and could not be enforced. The only ground for the making of the promise is the expense incurred by the plaintiff is establishing the market but it is clear that anything done in that way was not 'at the desire' of the defendants so as to constitute consideration. Kedarnath v. Gourie Mohammad, ILR (1886) 14 Cal 64: The plaintiff was Municipal Corporation and one of the trustee of the Howrah Town Hall Fund. When the subscriptions list reached a certain point, the Commissioners including the plaintiff entered inter a contract for the purpose of building the Town Hall. The defendant on being applied to, had subscribed his name in the book for Rs. 100. The question to be decided was whether the plaintiff, as one of the persons who made himself liable on the faith of the promised subscriptions, could sue on behalf of himself and all those in the same interest with him to recover the amount of the subscription from the defendant. The court decided the question in the affirmative and held the defendant is liable to pay Rs. 100, the subscription promised by him. 2. The Promisee or any Other Person What principle is laid down in Kedarnath v. Gourie Mohammad? In India, there is a possibility that consideration for the promise may move not from the promisee but a third person, who is not a third party to the contract. For example. A promises to give his watch to B and a consideration of Rs. 2000 for the same is given to A by X and not by B. This will not constitute a valid contract in England as consideration for A's promise in favour of B was not provided by the promisee B himself but by somebody else. What are the facts in Dulton v. Poole? Dulton v. Poole, (1677) 2 Lev 210: Plaintiff's father decided to cut the family tree for the marriage of his daughter, the plaintiff. His son promised to pay Å“ 1000 for plaintiff's marriage and asked his father not to cut the family tree. The plaintiff's father did accordingly. Subsequently, the father, the plaintiff, therefore sued the defendant to recover the money. It was held that although the plaintiff was not a party to the contract between the father and the son, yet she was entitled to recover the promised sum from the defendant. It is clear that the defendant gave this promise to his father and it was the father alone who, by abstaining from selling the wood had furnished consideration for the promise. The plaintiff was neither privy to the contract nor interested in the consideration. (Page 2 of 9)  Tweddle v. Atkinson, 123 ER 762: 1 B&S 23: The Court of Queen's Bench refused to follow this principle. The plaintiff was to be married to the daughter of one G and in consideration of this intended marriage G and the plaintiff's father entered into a written agreement by which it was agreed that each would pay the plaintiff a sum of the money. G failed to do so and the plaintiff sued his executors. Whitman J. considered it to be an established principle "that no stranger to the consideration can take advantage of a contract, although made for his benefit. Although the sale object of the contract was to scare a benefit to the plaintiff he was not allowed to sue as the contract was made with his father and not with him. Define 'Privity of Contract.' Whether it is applicable in India? Wightman J. observed: It is now well-established that no stranger to the consideration can make advantage of a contract although made for his benefit. Cromption J. also emphatically remarked: It would be a monstrous proposition to that a person was a party to the contract for the purpose of suing upon it for this own advantage, and not a party to it for the purpose of being sued. The above principle is known as the "Privity of Contract", which mean that a contract between the parties only and no third person can sue upon it even if it is avowedly made for his benefit. Dunlop Pneuatic Tyre Co. Ltd. v. Selfridge & Co. Ltd., (1915) AC 847: Plaintiff sold certain goods to one Dew & Co. and secured an agreement from them not to sell the goods below the list price and that if they sold the goods to another trader they would obtain from him a similar undertaking to maintain the price list. Dew so sold the motor tyres to the defendants (Selfridge & Co.) who agreed not to sell the tyres to any private customer at less than the list prices the plaintiff sued the defendants for breach of this contract. It was held that assuming that the plaintiffs were undisclosed principals, no consideration moved from them to the defendants and that the contract was unenforceable by them. Venkatachinnaya v. Venkataramaya, ILR (1881) 4 Mad 137: In this case, the defendant's mother gave her daughter her share in the Zamindari by a registered deed of gift. In consideration of the share in the Zamindari received in pursuance of the above provision of the deed. The defendant on the same date executed an agreement in favour of the donor's brother promising to fulfil the terms of the deed. But she falied to fulfil the said promise. A suit was brought to recover the amount due with interest by the donor's brother. The defendant resisted the suit on the ground that no consideration moved from the side of the donor's brothers and the promise could not be enforced. The Madras High Court held that the defendant was liable. Venkatachinnaya v. Venkataramaya, ILR (1881) 4 Mad 137: In that case, A an old lady granted an estate to her daughter with a direction that that the daughter should pay an annuity of Rs. 653, to A's brothers. On the same day, the defendants made a promise with the plaintiffs that she would pay the annuity as directed by A. The defendant failed to pay the stipulated sum. In an action against her by the plaintiff she contended that since the plaintiff themselves had furnished as consideration, they had no right of action. The Madras High Court held that in this agreement the consideration has been furnished by the defendant's mother and that is enough consideration to enforce the promise between the plaintiff and the defendant. Doctrine of Privity of Contract of India The doctrine of privity of contract means that only those persons who are parties to the contract can enforce the same. A stranger to the contract cannot enforce a contract even though the contract may have been entered into for his benefit. If in a contract between A and B some benefit has been conferred upon X, X cannot file a suit to enforce a contract because A and B are the only parties to a contract whereas X is stranger to the contract. Jamuna Das v. Ram Avtar, (1911) 9 Ind App 7: A purchaser of property contracted with the seller to pay off the (Page 3 of 9)  mortgage debt. In an action brought by the mortgagee against the purchaser to recover a mortgage debt. It was held by the Privy Council that he was not entitled to force the contract so as to compel the purchaser to pay off the debt because he was not a party to the contract. Lord MacNaughtan stated: The mortgagee has no right to avail himself of that. He was no party to the sale. The purchaser entered into no contract with him, and the purchaser is not personally bound to pay this mortgage debt. Krishnalal v. Promila Bala, MANU/WB/0065/1928 : AIR 1928 Cal 518: The Chief Justice observed that there is nothing in section 2 to encourage the idea that contracts can be enforced by a person who is not a party to the contract. M.C. Chacko v. State Bank of Travancore, MANU/SC/0008/1969 : (1969) 2 SCC 343: Where a suit is for recovery of adviser changes against financier and the owner of circus, the plaintiff advisor is not a party to agreement between financier and owner of circus, though the proposal of financier was approved by financier but that was done on behalf of circus owner, it was held that there was no privity of contract between t