The Indian Contract Act, 1872 & Proposal & Acceptance

7/30/2019 The Indian Contract Act, 1872 & Proposal & Acceptance

1/18

THE INDIAN CONTRACT ACT,

1872

Chapter 1

Establishing The Contract


2/18

Contract: Inseparable Part of Ones Life

You.

Buy groceries

Board a train

Hire a cabConsult a doctor or solicitor

Give your any household gadget for repair

Ever realised!In each of the above and numerous such situationsyou enter into a contractual obligation.


3/18

Contract Defined Under The Act

An agreement enforceable by law is a contract.

Section 2(h)

Agreement: Every promise and every set of promises,forming the consideration for each other.

A proposal (offer) when accepted becomes a promise.

Thus, a promise implies an accepted

Mutuality is the very base of an agreement.

Legal obligation: To become a contract , an agreementmust be enforceable by law.


4/18

Forming a Contract: Essential Steps

1. A contract, essentially, is an agreement.

2. An agreement is a set of two promises, one flowing

from the offeror and the other from the offerors

counterpart i.e. acceptor.3. A promise is an accepted offer or proposal.

4. An offer is a promise of performance, which is,

however, contingent upon a return promise or anact of forbearance being received in exchange of it.

OfferAcceptancePromise AgreementContract


5/18

Contract Distinguished From Agreement

Elements. An agreement consists of an offer and itssubsequent acceptance, whereas a contract is composedof an agreement and its legal enforceability.

Essence of a legal relationship. An agreement may notcreate legal relationship. Parties entering into a contractessentially have a common intention of entering intolegal obligation.

Scope. All agreements may not be contracts but all

contracts are primarily agreements.

Enforceability by law. A contract is legally enforceable,whereas an agreement is not necessarily so.


6/18

Essential Elements of Establishing a Valid Contract

Agreement

Intention to create legal relations

Legitimate consideration

Capacity of parties

Genuineness of consent

Lawful object

Certainty

Possibility of performance

Agreements not expressly declared void


7/18

Types of Contracts

Valid contracts, void contracts, and voidable contracts

Unenforceable contracts and illegal contacts

Executed contracts and executory contracts

Express contracts and implied contracts

Unilateral contracts and bilateral contracts

Quasi contracts


8/18


9/18

Difference Between Void and Voidable Contracts

5. Relationship A void contract under no

circumstances results in a

voidable contract.

When a voidable contract is rejected by the

aggrieved party it results in a void contract.

6. Rights of third

party

A void contract confers no rights or

legal remedies to the third party.Rights acquired under voidable contract by an

innocent third party are not wiped out by such

subsequent avoidance of the contract.7. Compensation In case of void contract question of

compensation or damages does not

arise on the non-performance of such

contract.

In case of voidable contract, the party

rescinding the contract can also claim

damages.

8. Effect of lapse

of time

Lapse of reasonable time does not

render a void contract enforceable. It

always remains void i.e.,

unenforceable.

If a voidable contract is not rescinded by the

aggrieved party within reasonable time it may

become enforceable at the option of the other

party (i.e, who induced the contract).


10/18

Chapter 2

Offer And Acceptance

A contract is an agreement which is

reducible to an offer by one party

and its valid acceptance by the other.


11/18

Chapter Objectives

Defining an offer

Essentials of a valid offer

Offers classified

Revocation, termination of offer

Defining acceptance

Legal rules governing a valid acceptance

Communication of offer, acceptance, and their revocation

Contracts over phone


12/18

DEFINING AN OFFER

An offer is a medium through which a person

expresses his intention to enter into a contractual

obligation against a promise or an act of

forbearance.When one person signifies to another person his

willingness to do or to abstain from doing

anything, with a view to obtaining the assent ofthat other to such an act of abstinence, he is said

to have made a proposal. Section 2(a)


13/18

Three Properties of an Offer

Expression of readiness to do or not to do

something. Thus, an offer may involve apositive act or forbearance.

Presence of second party. An offer by aperson to himself will ne a nullity.

Intention of obtaining a response. It is madewith the intention that the other person

accepts it. Mere expression of willingness willconstitute no offer.


14/18

Characteristics of a Valid Offer

Must intend to create and be capable of creating legalobligations

Its terms must be certain

Must be made to obtain the assent of the other party

Must be communicated

May be conditional

Must be distinguished from a query


15/18

Firm Offer Vs Invitation to Treat

Examples of Invitations to Treat

Auctions

Display of goods for salein shelf

An invitation for tenders

Red herring prospectus

General advertisement ofgoods


16/18

Termination of Offer:Modes of

Revocation/withdrawal/cancellation of offer before theofferee accepts it

Failure to fulfil a condition precedent to acceptance

Death or insanity of either party

Refusal or counter-offer

Acceptance differs from the prescribed one

Subsequent illegality or destruction of subject matter


17/18

Acceptance

An acceptance is a manifestation of assent to theterms of the offer.

When the person to whom the proposal is made

signifies his assent thereto, the proposal is said tobe accepted. A proposal, when accepted,becomes a promise. Section 2(b)

Acceptance to an offer is what a lighted match to

is to a train of gunpowder.Thus, an offer becomes irrevocable upon itsacceptance.


18/18

Legal Rules Governing a Valid Acceptance

Must be made by the offeree

Must be unconditional

Must be communicated to the offeror

May be in any form, oral or written

Must be in the mode prescribed by the offeror

Must be given within a reasonable time, if no

time limit is set

Must be given while the offer is in force

Documents

The Indian Contract Act, 1872 & Proposal & Acceptance