The Law of Contract: General Principles
As a result of increasing complexities of business environment, innumerable contracts are entered into by the parties in the usual course of carrying on their business. ‘Contract’ is the most usual method of defining the ‘give and take’ rights and duties in a business transaction. This branch of Private law is different from other branches of law in a very important respect. It does not prescribe so many rights and duties, which the law will protect or enforce; it contains a number of limiting principles subject to which the parties may create rights and duties for themselves.
In a sense, parties to a contract are the makers of law for themselves. They can frame any rules they desire to the subject matter of their agreements, and law takes cognizance of their decision unless they are not legally prohibited.
1.1 WHAT IS CONTRACT?
According to Section 2(h) of the Act, the term contract is defined as “an agreement enforceable by law”. On analyzing the definition we find that, the contract is consist of two essential elements: -an agreement, and-enforceability by law.
- The term ‘agreement’ given in Section 2(e) of the Act is defined as “every promise and every set of promises, forming the consideration for each other”. Again Section 2(b) defines promise as “when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted becomes a promise”.
Thus we say that, an agreement is the result of the proposal made by one party to the other party and that other party gives his acceptance thereto.
- Enforceability by law-An agreement to become a contract must give rise to a legal obligation which means a duty enforceable by law. Thus from above definitions it can be concluded that –
Contract=Accepted proposal + Enforceability by law
On elaborating the above, it is obvious that contract comprises of an agreement which is a promise or a set of reciprocal promises, that a promise is the acceptance of a proposal giving rise to a binding contract. And Section 2(h) requires an agreement to be worthy of being enforceable by law before it is called ‘contract’. Where parties have made a binding contract, they created rights and obligations between themselves.
Example: A agrees with B to sell car for ` 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 ` 2 lacs and also B is under an obligation to pay ` 2 lacs to A and A has a right to receive ` 2 lacs.
So Law of Contract deals with only such legal obligations which has resulted from agreements. Such obligation must be contractual in nature. However some obligations are outside the purview of the law of contract.
Example: An obligation to maintain wife and children, an order of the court of law etc. These are status obligations and so out of the scope of the Contract Act.
On what conditions does the Indian Contract Act recognise the “agreement” of the parties (which contains a promise) as a “contract”? The answer to this question will form the subject of our discussion in this Unit.
1.2 ESSENTIAL ELEMENTS OF A VALID CONTRACT
According to Section 10, “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.” The following essential elements must co-exist in order to make a valid contract:
- Proper offer and Proper acceptance with intention to create legal relationship.
- Lawful Consideration and lawful object.
- Capacity to contract.
- Free Consent.
- Agreements not declared void or illegal.
- Certainty of meaning.
- Possibility of performance of an agreement.
- Necessary legal formalities.
- Intention to create legal relationship: The parties ought to have the intention to create an legal obligation between them through the form of offer and acceptance. They should have intention to impose duty on the promisor to fulfill the promise and bestow a right on the promisee to claim its fulfillment. It must not be merely a moral one but it must be legal. If such intention on the part of the parties is lacking at the time of making the contract, there will be no valid contract between them.
Example: 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 no intend to create any legal relations.(Balfour v.Balfour)
- “Lawful consideration” and “Lawful object” is an essential element of a valid contract. Consideration is a technical word meaning thereby quid pro quo i..e. something in return. It must result in benefit to one party and detriment to the other party or a detriment to both.
Example: A agrees to sell his books to B for ` 100, B’s promise to pay ` 100 is the consideration for A’s promise to sell his books and A’s promise to sell the books is the consideration for B’s promise to pay ` 100.
Also, the object of the agreement must be lawful. It must not be illegal, immoral, or opposed to public policy.
Example: ‘A’ promises to drop prosecution instituted against ‘B’ for robbery and ‘B’ promises to restore the value of the things taken. The agreement is void, as its object is unlawful.
If the two essential elements are there we can say that there is a contract which prima-facie will hold good; or at least we can say that there is an existence of contract, although some more necessary elements of validity may be wanting.
- Competent parties: The parties to a contract must have capacity (legal ability) to make valid contract. In every case of there must be assent of the parties. If, therefore, either of the parties to an agreement is deprived of the use of his understanding or if he be deemed by law not to have attained it, there can be no such agreement which shall bind him. Section 11 of the Indian Contract Act specifies that every person is competent to contract provided,
(a) is of the age of majority according to the law to which he is subject, and
(b) who is of sound mind, and
(c) is not disqualified from contracting by any law to which he is subject.
In other words (a) a minor, (b) a person of unsound mind (a person of unsound mind can enter into a contract during his lucid intervals) and (c) a person disqualified from contracting by any law to which he is subject, e.g. an alien enemy, foreign sovereigns and accredited representatives of a foreign state, insolvents and convicts, are not competent to contract.
- Free consent: The consent of the parties must be genuine. The term ‘consent’ means parties to a contract must agree upon the same thing in the same sense. i.e. there should be consensusad- idem. Consent is said to be not free when it is vitiated by coercion, undue influence, fraud, misrepresentation or mistake. In such cases, the contract becomes voidable at the option of the party whose consent is not free.
Example: A threatened to shoot B if he (B) does not lend him ` 2,000 and B agreed to it. Here the agreement is entered into under coercion and hence voidable at the option of B.
- The agreement not expressly declared void: The agreement must not be one, which the law declares to be either illegal or void. A void agreement is one, which is without any legal effects. Illegal agreement is an agreement expressly or impliedly prohibited by law.
Example: Agreements in restraint of trade, marriage, legal proceedings etc. are void agreements. Those agreements prohibited by the Indian Penal Code e.g. Threats to commit murder or publishing defamatory statements or agreements which are opposed to public policy are illegal in nature.
- 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.
- Possibility of performance of an agreement: The terms of agreement should be capable of performance. An agreement to do an act impossible in itself cannot be enforced.
Example: A agrees with B to discover treasure by magic. The agreement cannot be enforced as it is not possible to be performed.
- Compliance of necessary legal formalities: Wherever a particular type of contract requires by law to be in writing and registered, it must comply with the necessary formalities as to writing, attestation and registration otherwise unenforceable.
Example: Where it requires an agreement to make a gift for natural love and affection, there
it must be in writing and registered, to be valid.
1.3 TYPES OF CONTRACT:: Different types of contracts may be classified as follows:
- Valid Contract
- Void Contract
- Voidable Contract
- Illegal Agreement
- Unenforceable Agreement
- Express Contract
- Implied Contract
- Quasi Contract
- Pre-Formation Contract
- Executed Contract
- Executory Contract
- Unilateral Contract
- Bilateral Contract
- On the basis of the validity
- Valid Contract: An agreement which is binding and enforceable is a valid contract. It contains
all the essential elements of a valid contract.
- Void Contract: It is a contract without any legal effect and cannot be enforced in a Court of
Law. Section 2(j) defines a void contract as “a contract which ceases to be enforceable by law
Becomes void when it ceases to be enforceable”.
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.
- Voidable Contract: As per Section 2(i), “an agreement which is enforceable by law at the option of one or more the parties but not at the option of the other or others is a voidable contract.”
Examples: A contract brought about as a result of Coercion, Undue influence, Fraud or misrepresentation would be voidable at the option of the person whose consent was caused by any one of these factors.
- 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 or contracts are not necessarily illegal.
Examples: Contract to commit crime. Contract that is immoral or opposed to public policy are illegal in nature. Similarly, R agrees with S, to purchase brown sugar is an illegal agreement. According to Section 2 (g) of the Indian Contract Act, an agreement not enforceable by law is void. The Act has specified various factors due to which an agreement may be considered as void agreement. One of these factors is unlawfulness of object and consideration of the contract i.e. illegality of the contract which makes it void. Despite the similarity between an illegal and a void agreement that in either case the agreement is void and cannot be enforced by law, the two differ from each other in the following two respects:
- 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.
On the basis of the formation of contract
- Express Contracts: A contract which is made by words either spoken or written is said to be an express contract. According to Section 9 insofar as the 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 ` 2 lacs and B in reply informs A that he accepts the offer, this is an express contract.
2. Implied Contract: By implied contract means implied by law (i.e.) the law implies a contract though parties never intended. According to Section 9 insofar as such proposal or acceptance is made otherwise than in words, the promise is said to be implied. For example, A delivers by mistake goods at B’s warehouse instead of at C’s place. Here there is an obligation on the part of B to return the goods to A, though they never intended to enter into a contract.
3. Tacit Contract is said to be tacit when it has to be inferred from the conduct of the parties.
Examples: Obtaining cash through automatic teller machine, sale by fall of hammer at an auction sale.
- Quasi-Contract: A quasi-contract is not an actual contract but it resembles to 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.
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.
III. On the basis of the performance of the contract
- Executed Contract: If the consideration for the promise in a contract (i.e., any act or forbearance) is given or executed, such type of contract is called contract with executed consideration.
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: It is so called because the reciprocal promises or obligation which serves as consideration is to be performed in future.
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 ` 1,000 per month, the contract is executor because it is yet to be carried out.
- Unilateral Contract: A unilateral contract is a one-sided contract in which only one party has to perform his promise or obligation to do or forbear.
Example: M advertises of payment of a reward of ` 500 to anyone who finds his missing boy and brings him. As soon as B traces the boy, there comes into existence an executed contract because B has performed his share of obligation and it remains for M to pay the amount of reward to B. This type of executed contracts are also called unilateral contract.
- Bilateral Contract: Where the obligation or promise in a contract is outstanding on the part of both the parties, it is known as bilateral contract. Where A promises to sell his plot to B for ` 1 lacs cash down, but B pays only 25,000 as earnest money and promises to pay the balance on next Sunday. On the other hand A gives the possession of plot to B and promises to execute a sale deed on the receipt of the whole amount. The contract between the A and B is executory because there remains something to be done on both sides. Executory contracts are also known as Bilateral contracts.
The English Law classifies the contract into (i) formal contracts, and (ii) simple contracts. Formal Contracts include (a) Contract of record and (b) Contract under Seal.
(a) Contract of Record: A contract of record is either a judgment of a court or a recognisance.
A judgment is an obligation imposed by a Court upon one or more persons in favour of another or others. As a matter of fact it is not a contract in the real sense, since it is not based upon any agreement between the two parties. A recognisance is a written acknowledgement of a debt due to the State. It is usually met with the connection with criminal proceedings.
Contracts of record derive their binding force from the authority of the Court.
(b) Contract under Seal: A contract under seal is one which derives its binding force from its form alone. It is in writing and is signed, sealed and delivered by the parties. It is also called a deed or a specialty contract.
1.4 Proposal / offer:
The words proposal and offer are used interchangeably and it is defined under Section 2(a), of the Indian Contract Act, 1872 as ‘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’. Thus, for a valid offer, the party making it must express his willingness ‘to do’ or ‘not to do’ something. But mere expression of willingness does not constitute an offer.
For instance, where ‘A’ tells ‘B’ that he desires to marry by the end of 2004, 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. 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.
The person making the proposal or offer is called the ‘promisor’ or ‘offeror’, the person to whom the offer is made is called the ‘offeree’ and the person accepting the offer is called the ‘promisee’ or ‘acceptor ’.
Classification of Offer:
(a) General Offer: It is an offer made to the public in general and hence anyone can accept and do the desired act. Section 8 of the Indian Contract Act, points out that performance of the conditions of a proposal is an acceptance of the proposal.
Example: A company advertised to give a reward to anyone who is contracted by influenza after using the medicine of the company for a certain period according to the printed directions. Mrs. ‘X’ purchased the advertised medicine and contracted influenza though using the medicine as per printed instructions. Mrs.’X’ claimed for the reward. The claim was denied by the company on the ground that offer was not made to Mrs.’X’ and also that she had not communicated her acceptance to an offer. It was decided that she could recover the reward as she had accepted the offer by complying with the terms of offer.(Carlill v. Carbolic Smoke Ball Co.)
Example: An advertisement given in the newspaper announcing a reward for tracing out a missing person. It can be accepted by any person who trace out the missing person and is entitled to claim the reward. (Lalman Shukla v.Gauri Dat)
(b) Special Offer: When offer is made to a definite person, it is known as specific offer and such offer can be accepted only by that specified person.
Example: ‘A’ offers to sell his car to ‘B’ at a certain cost.This is a specific offer.
(c) Cross Offers: When two parties exchange identical offers in ignorance at the time of each other’s offer, the offers are called cross offers. There is not binding contract in such a case, as one’s offer cannot be construed as acceptance by the other.
(d) 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.
Example: ‘A’ offers to sell his plot to ‘B’ for `10 lakhs. ’B’ agrees to buy it for 8 lakhs. It amounts to counter offer. It may result in the termination of the offer of ’A’. And if later on ‘B’ agrees to buy the plot for ` 10 lakhs, ’A’ may refuse.
(e) Standing, open or Continuing offer: An offer is allowed to remain open for acceptance over a period of time is known as a standing, open or continuing offer. Tender for supply of goods is a kind of standing offer.
Rules as to offer:
(a) The offer must be capable of creating legal relation: If the offer does not intend to give rise to legal consequences and creating legal relations, it is not considered as a valid offer in the eye of law. A social invitation, even if it is accepted, does not create legal relations because it is not so intended, an offer to one’s wife to purchase a saree is not a valid offer as there is no binding agreement. An offer, therefore, must be such as would result in a valid contract when it is accepted.
(b) The offer must be certain, definite and not vague: If the terms of an offer are vague or indefinite, its acceptance cannot create any contractual relationship. Thus, where A offers to sell B a 100 quintals of oil, there is nothing whatever to show what kind of oil was intended. The offer is not capable of being accepted for want of certainty. But if the agreement contains reference for ascertaining a vague term, the agreement is not void on the ground of its being vague. If in the above example, A is a dealer in coconut oil only, it shall constitute a valid offer since the nature of A’s trade affords an indication as to which oil is being offered.
(c) The offer may be expressed 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 be 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.
(d) The offer must be distinguished from an invitation to offer: An invitation to offer means the person inviting the other party to make an offer. His object is only to circulate information that
he is willing to deal with anyone who, on such information, is willing to have negotiations with him.
Example: An advertisement for sale of goods by auction is an invitation to the offer. It merely invites offers/bids made at the auction.
(e) An offer may be specific or general. Any offer can be made to either public at large or to the any specific person.(Already explained in the heading types of the offer)
(f) The offer must be communicated: An offer, to be complete, must be communicated to the person to whom it is made. Unless an offer is communicated, there can be no acceptance by it. An acceptance of an offer, in ignorance of the offer, is not acceptance and does not create any right on the acceptor.
Example: A nephew of X run away from home. He sent his servant, Y in search of the nephew. After that X announced a reward to anybody giving the information relating to the nephew. The Y, before seeing the announcement, traced the nephew and informed X.
Later on reading the announcement Y claimed for the reward. His suit was dismissed on the ground that he could not accept the offer, unless he had knowledge of it.
(g) The offer must be made with a view to obtaining the consent/assent of the offeree.
(h) An offer may be conditional: An offer can be made subject to any terms and conditions by the offeror. The offeree will have to accept all the terms of the offer, otherwise the contract will be treated as invalid.
(i) The offer should not contain a term the non compliance of which would amount to acceptance. Thus a man 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 ` 500 and if no reply by him in a week, it shall be assumed that B had accepted the proposal. This is not a contract.
Offer and Invitation to Offer: An offer should be distinguished from an invitation to offer. An
offer is definite and capable of converting an intention into a contract. Whereas an invitation to
an offer is only a circulation of an offer, it is an attempt to induce offers and precedes a definite
offer. Acceptance of an invitation to an offer does not result in the contract and only an offer
emerges in the process of negotiation.
When a person advertises that he has a stock of books to sell or houses to let, there is no offer to be bound by any contract. Such advertisements are offers to negotiate-offers to receive offers. In order to ascertain whether a particular statement amount to an ‘offer’ or an ‘invitation to offer’, the test would be intention with which such statement is made. Does the person who made the statement intend to be bound by it as soon as it is accepted by the other or he intends to do some further act, before he becomes bound by it? In the former case, it amounts to an offer and in the latter case, it is an invitation to offer.
Example: The price list of goods does not constitute an offer for sale of certain goods on the listed prices. It is an invitation to offer.
(A) Meaning: A proposal or offer is said to have been accepted when the person to whom the proposal is made signifies his assent to the proposal to do or not to do something [Section 2 (b)].
The rules regarding acceptance are:
- Acceptance must be absolute and unqualified: As per Section 7 an acceptance is valid when it is absolute and unqualified and is expressed in some usual and reasonable manner, unless the proposal prescribed the manner in which it is to be accepted. Thus, if A enquiries from B, “will you purchase my dog for ` 100” ? and B replies, “I shall purchase your dog for ` 100 provided you purchase my cat for ` 60”. B in such a case would not be said to have accepted the proposal of A. Also an acceptance with a variation is no acceptance. It is simply a counter proposal which shall have to be accepted by the original proposer before a contract can be deemed to have come into existence. A counter proposal is the offer by the offeree and can result in a contract only if it is accepted by the other party.
- 2. Communicated to Offeror: It must further be remembered that an acceptance must be communicated to the person who made the offer. An offer made by the intended offeree without the knowledge that an offer has been made to him cannot be deemed as an acceptance thereto. (Bhagwandas v.Girdharilal)
- 3. Acceptance must be in the mode prescribed: 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.
- 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.
Example: X applied for certain shares in a company in June but the allotment was made in November. X refused to accept the allotted shares. It was held that the offeror, X 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.
- 5. Mere silence is not acceptance: The acceptance of an offer cannot be implied from the silence of the offeree or his failure to answer, unless the offeree has in any previous conduct indicated that his silence is the evidence of acceptance.
Example: ’A’ subscribed for the weekly magazine for one year. Even after expiry of his subscription, the magazine company continued to send him magazine for five years. And also ‘A’ continued to use the magazine but denied to pay the bills sent to him. ’A’ would be liable to pay as his continued use of the magazine was his acceptance of the offer.
- Acceptance by conduct: The assent means that acceptance has been signified either in writing or by word of mouth or by performance of some act. Therefore, when, a person performs
the act intended by the proposer as the consideration for the promise offered by him, the performance of the act constitutes acceptance.
For example, when a tradesman receives an order from a customer and executes the order by sending the goods, the customer’s order for goods constitutes the offer, which has been accepted by the tradesman subsequently by sending the goods. It is a case of acceptance by conduct.
1.6 Communication of offer and acceptance
When the contracting parties are face to face, there is no problem of communication, because there is instantaneous communication of offer and acceptance. In such a case the question of revocationdoes not arise since the offer and its acceptance are made instantly. 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. 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: The communication of an offer is complete when it comes to the knowledge of the person to whom it is made (Section 4). An offer may be communicated either
by words spoken or written or it may be inferred from the conduct of the parties. When a proposal is made by post its communication will be complete when the letter containing the proposal reaches the persons to whom it is made.
For example, A makes proposal to B to sell his house for ` two lakhs. The letter is posted on 10th
March. This letter reaches B on 12th instant. The offer is said to have been communicated on 12th, when B receives the letter.
Communication of acceptance: Communication of an acceptance is complete:
(i) as against the proposer, when it is put in course of transmission to him so as to be out of the power of the acceptor to withdraw the same;
(ii) as against the acceptor, when it comes to the knowledge of the proposer.
Communication of acceptance by post: When a proposal is accepted by a letter sent by the post the communication of acceptance 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.
Acceptance over telephone or telex or fax: When an offer is made of instantaneous communication like telex, telephone, fax or through e-mail, the contract is only complete when the acceptance is received by the offeree, and the contract is made at the place where the acceptance is receieved (Entores Ltd. v. Miles Far East Corporation)
1.7 REVOCATION OF OFFER AND ACCEPTANCE
Under Section 4, the communication of a revocation is complete:–
(i) 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 out of the power of the person who makes it;
(ii) as against the person to whom it is made, when it comes to his knowledge.
Let us consider an example. If you (proposer) revoke your proposal by a telegram, the revocation will be complete so far as you are concerned, when you have dispatched the telegram. But in so far as I (acceptor) am concerned, it will be complete when I actually receive the telegram.
As regards the revocation of acceptance, I revoke my acceptance by a telegram my revocation of acceptance is complete as against myself, as soon as I have dispatched the telegram, and as against you when it reaches you.
Under Section 5, a proposal may be revoked at any time, before the communication of its acceptance is complete as against the proposer. An acceptance may be revoked at any time before the communication of acceptance is complete as against the acceptor.
Example: 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 afterwards. Whereas B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.
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. In India, acceptance by a letter can be revoked by a
telegram, if it reaches earlier than, or at the same time as the letter, but in England acceptance once posted cannot be revoked subsequently even by a telegram, even if it reaches earlier than
Modes of revocation: A proposal may be revoked by any of the following methods:
- By notice revocation.
- By lapse of specified time or reasonable time.
- By the death or insanity of the offeror or the offeree.
- In case of nonfulfilment of conditions of offer.
- In case of counter offer.
Contract: A Contract is an agreement enforceable by law [Section 2(h)]. An agreement is enforceable by law, if it is made by the free consent of the parties who are competent to contract and the agreement is made with a lawful object and is for a lawful consideration, and is not hereby expressly declared to be void [Section 10]. All contracts are agreements but all agreements are not contracts. Agreements lacking any of the above said characteristics are not contracts. A contract that ceases to be enforceable by law is called ‘void contract’, [Section 2(i)], but an agreement which is enforceable by law at the option of one party thereto, but not at the option of the other is called ‘voidable contract’ [(Section 2(i)].
Offer and Acceptance: Offeror undertakes to do or to abstain from doing a certain act if the offer is properly accepted by the offeree. Offer may be expressly made or may even be implied in conduct of the offeror, but it must be capable of creating legal relations and must intend to create legal relations. The terms of offer must be certain or at least be capable of being made certain.
Acceptance of offer must be absolute and unqualified and must be according to the prescribed
or usual mode. If the offer has been made to a specific person, it must be accepted by that person
only, but a general offer may be accepted by any person.
Communication of offer and acceptance, and revocation thereof
(a) Communication of an offer is complete when it comes to the knowledge of the offeree.
(b) Communication of an acceptance is complete: As against the offeror when it is put in the course of transmission to him as against the acceptor, when it comes to the knowledge of the offeror.
(c) Communication of revocation of an offer or acceptance is complete: It is complete as against the person making it, when it is put into a course of transmission so as to be out of power of the person making it and as against the person to whom it is made, when it comes to his knowledge.