1. INDIAN CONTRACT ACT, 1872 CONTRACT OFFER ACCEPTANCE
CONSIDERATION
2. The Contract Act is the law of those agreements which create
obligation and there is a legal remedy for the breach thereof.
3. CONTRACTS 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. Contract : Agreement + enforceable
by law. i.e. legal obligations to do or abstaining from doing
anything. ALL CONTRACTS ARE AGREEMENT BUT ALL AGREEMENTS ARE NOT
CONTRACTS. A legally binding agreement- legally enforceable means
that a court will say that an agreement is a contract
4. EXAMPLES: I promise to bring chocolates to the whole class.
Is there a contract? I promise to give you a new bicycle if you
agree not to eat Chinese food for one year. Is there a
contract?
5. BILATERAL A promise for a promise UNILATERAL A promise for
an actVALID A contract that has all the nec. Elements VOID No
contract w/out legal obligation VOIDABLE A contract where a party
has the option of voiding UNENFORCEABLE A contract which can not be
enforced because of legal defenses EXPRESS Formed by words IMPLIED
IN FACT Formed at least in part by the parties conduct QUASI
CONTRACT Imposed by law to prevent unjust enrichment EXECUTED A
fully performed contract EXECUTORY A contract not yet fully
performed FORMAL Requires a special form for creation INFORMAL
Requires no special form
6. ESSENTIAL ELEMENTS OF A VALID CONTRACT: (SEC. 10) Agreement
- Offer & acceptance Legal consequences - rights &
obligations Capacity of the contracting parties Consideration Legal
object Free consent Certainty Possibility of performance Writing
& registration Not expressly declared to be void.
7. OFFER AND ACCEPTANCE
8. OFFER Section 2(a) of Indian contract act defines offer as
when one person signifies to another his willingness to do or to
abstain from doing something with a view to obtaining the assent of
other , such act or abstinence is said as proposal.
Offerer/Proposer/Promisor - a person making offer.
Offeree/proposee- person to whom offer is made Offerer accepting
the offer is acceptor/promisee.
9. MODE OF OFFER Offer may be made in writing or verbal Offer
may be express or implied Something that is said to indicate that
an offer is being made Something that is done, that though not
expressly communicated, automatically indicate the act of
offer.
10. SPECIFIC AND GENERAL OFFER An offer may be made to a
particular individual or to a group of people If the offer is made
to a specific individual, only that person may accept the offer If
an offer is made to a group of people, then anyone from the group
may accept the offer. General offer can be accepted by any person
having notice of the offer by doing what is required under the
offer.
11. I want Reward
12. Carbolic smoke ball company advertised in the newspaper
that whosever would take smoke balls ,manufactured by it ,according
to the printed instructions would not contract influenza. The
company offered a reward of $100 to anyone who contracted influenza
after taking its smoke balls according to the printed instructions
.It was added that $1000 was deposited with alliance bank to show
the sincerity of the company. One Mrs. Carlill used the smoke balls
according to the directions given but contracted influenza. It was
held that the offer was general one ,and Mrs.carlill had accepted
it by acting according to the advertisement and therefore the
company could not get away from responsibility by saying that it
was a mere puff. She was entitled to get reward.
13. LEGAL RULES REGARDING VALID OFFER An offer may be express
or implied It should give rise to legal consequences and be capable
of creating legal relations. Leading Case: Balfour v. Balfour. The
term of the offer must be certain. Leading case : Taylor V.
Portington For example: Offer by A to B to pay a certain sum of
money on the latter marrying As daughter is no offer
14. An offer can be made subject to any terms and conditions.
Offer must be communicated to the Offeree. Leading Case: Lalman
Shukla V. Gauri Dutt It should be made with a intent to obtain the
assent of the other party. An offer should not contain a term the
non compliance of which would amount to acceptance. An invitation
of offer is not an offer
15. LALMAN V. GAURIDUTT It was held that the reward for the
missing child cannot be claimed by a person who traced the child
without any knowledge of the announcement. There was no contract
between the two in the first place because the proposal never came
to the knowledge of the announcement. There was no contract between
the two in the first place because the proposal never came to the
knowledge of the person who found the child and thus he could never
accept it. I want reward
16. LAPSES AND REVOCATION OF OFFER An offer lapses after
stipulated or reasonable time An offer lapses by not being accepted
in the mode prescribed An offer lapses by rejection An offer lapses
by the death or the insanity of the offeror or the offeree before
acceptance An offer lapses by revocation before acceptance An offer
lapses by subsequent illegality or destruction of subject
matter.
17. Transactions that are not Offer but Invitation to Offer
!!
18. An "invitation to treat is where a party is merely inviting
offers, which he is then free to accept or reject. Auctions An
auctioneer's call for bids is an invitation to treat, a request for
offers. The bids made by persons at the auction are offers, which
the auctioneer can accept or reject as he chooses. Similarly, the
bidder may retract his bid before it is accepted. Display of Goods
The display of goods with a price ticket attached in a shop window
or on a supermarket shelf is not an offer to sell but an invitation
for customers to make an offer to buy. Fisher v Bell [1960]
19. Mere Statement of Price A statement of the minimum price at
which a party may be willing to sell will not amount to an offer.
Harvey v Facey [1893] Harvey sent a Telegram to Facey which stated:
- "Will you sell us Bumper Hall Pen? Telegraph lowest cash price.
Facey replied by telegram:- "Lowest price for Bumper Hall Pen 900.
Harvey then replied:- "We agree to buy Bumper Hall Pen for the sum
of nine hundred pounds asked by you. Please send us your title deed
in order that we may get early possession." Held: The Privy Council
held that there was no contract concluded between the parties.
Facey had not directly answered the first question as to whether
they would sell and the lowest price stated was merely responding
to a request for information not an offer. There was thus no
evidence of an intention that the telegram sent by Facey was to be
an offer.
20. Statement of Intention A mere statement indicating a
persons intention to do something is not an offer. Harris v
Nickerson (1873) he case established that an advertisement that
goods will be put up for auction does not constitute an offer to
any person that the goods will actually be put up, and that the
advertiser is therefore free to withdraw the goods from the auction
at any time prior to the auction.
21. ACCEPTANCE Section 2(b) states that A proposal when the
person to whom the proposal is made signifies his assent thereto
the proposal is said to be accepted.
22. LEGAL RULES REGARDING ACCEPTANCE Acceptance must be given
only by the person to whom the offer is made Acceptance must be
absolute and unqualified It should be communicated by the acceptor
It should be given within reasonable time or time stipulated
Acceptance must succeed the offer. Mental acceptance is not
sufficient in law.
23. COMMUNICATION OF OFFER & ACCEPTANCE The communication
of a proposal is complete when it comes to the knowledge of the
person to whom it is made. E.g. - 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. 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 comes to the, knowledge,
of the proposer. 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
A.
24. EXAMPLE A proposes by a letter sent by post to sell his car
to B. The letter is posted on the 1st of the month. B accept the
proposal by a letter sent by post on the 4th. The letter reaches A
on 6th. A may revoke his offer at any time before B post his letter
of acceptance i.e 4th but not afterwards. B may revoke his
acceptance at any time before the letter of acceptance reaches A
i.e. 6th but not afterwards.
25. CHECK YOUR MEMORY Harish says in conversation to suresh
that he will give Rs.10000 to a person whosoever marries his
daughter .Alok marries Harishs daughter and files a suit to recover
Rs10000.will he succeed ? No ,Harish has expressed his wish only
,and has never made an offer with a view to obtaining the assent of
the other party. Secondly there was no offer to Alok or Suresh It
was neither general offer nor specific offer
26. Amar had two visitors in his office one evening, Bharat and
Ram. Bharat ran an event mgmt service. Amar had hosted a party the
previous evening to celebrate his sons birthday. Bharat had done
the mgmt for the party. Bharat had come to Amars office that
evening, to collect Rs20000 for having done the work. Ram was the
son of an ex- colleague of Amar. Rams family had fallen into bad
times. They had accumulated a lot of debts. Ram was studying in the
final year of college. He was going around meeting people his
father had known and soliciting money as donation, so as to be able
to finish his education. Amar was a kind person. He told Ram that
he would give him Rs5000. Ram pleaded and said that if Amar could
give him Rs10000, he would not have to go any further to collect
money. Amar agreed to give him Rs10000 While Amar was in the
process of obtaining the money to give to Bharat and Ram, the phone
rang. It was Amars stock broker. He informed Amar that on a
particular purchase and sale order Amar had a loss of huge amount
of money. He had to pay to the broker Rs9 lakh, within a week. Amar
was very upset. In result he refused to pay the money agreed to Ram
and Bharat.
27. QUESTIONS?? Was there an agreement between Amar and Bharat?
Was there an agreement between Amar and Ram? should agreements be
fulfilled?
28. CONSIDERATION The life blood of every contract !!
29. CONSIDERATION It is quid pro quo i.e. something in return.
It is the price of promise. Section 2 (d) Indian contract act When
at the desire of the promisor, the promisee or any other person has
done or abstain from doing, or does or abstain from doing, or
promises to do or abstain from doing, something, such act or
abstinence or promise is called consideration X agrees to sell his
TV set to Y for rs.8000. TV set is the consideration of Y and rs.
8000 is the consideration of X.
30. CONSIDERATION MAY BE : An act - means doing of something.
An abstinence promising not to do something . A promise the promise
of each party is the consideration for each other
31. ESSENTIALS OF VALID CONSIDERATION Must move at the desire
of the promisor Xs house catches fire, and Y helps in extinguishing
it without being requested to do so by X. Y cannot demand any
payment for his voluntary service. CASE: DURGA PRASAD V. BALDEO D
had built at his own shop, in a market at the request of the
Collector of the District. The shopkeepers in the market promised
to pay D a commission on all articles sold by them in the market. D
sued the shopkeepers for non-receipt of commission. Judgment Held
that the promise to pay commission did not amount to a contract for
want of consideration, because D (the promisee) had constructed the
market not at the desire of the shopkeepers (the promisors) but at
the desire of the Collector of the District to please him.
32. It must move from promisee or any other person For making a
valid contract consideration must be there, it is immaterial who
furnishes it. CASE: CHINNAYYA V. RAMAYYA A father, by a gift deed,
made over certain property to his daughter, with the direction that
the daughter should pay an annuity to the fathers brother. On the
same day, the daughter entered into an agreement with her uncle and
agreed to pay the annuity. Later, the daughter declined to fulfill
her promise on the ground that no consideration was paid by fathers
brother to her. Decision of the Case: The Court held that the
consideration was paid by the father on behalf of her uncle. So the
uncle was entitled to recover the annuity.
33. A STRANGER TO CONSIDERATION CAN SUE, PROVIDED HE IS A PARTY
TO CONTRACT X pays Rs. 50000 to Y directing him to build a house
for Z. Y agrees to do so. Hence, Z is a party to a contract but
stranger to consideration & he can enforce the contract. It
need not be adequate Law only requires presence of consideration
& not the adequacy of it. ( Selling a car for just Rs.
5000)
34. Must be real It must have some value in the eyes of law. It
should not be: (1) Physically impossible making a dead person
alive. (2) Legally impossible X file a suit against Y for non
payment of debt. Y approaches Xs brother Z & he promises to
withdraw the suit for a consideration of Rs. 500. It is legally
impossible.