LAW OF CONTRACT

Syllabus- Nature of Contract –Elements of Contract- Offer and Acceptance-consideration –Legality of Objects-
Performance of contracts
1. Définition of contract. Essentials of a valid contract
2. Discharge of a contract and the ways in which a contract may be discharged
3. Definition of an offer and acceptance and types of offer.
4. “Ex. Nudo Pacto non oritur actio”, i,e, an agreement without consideration is
void-[or] ‘No consideration no contract’ –
5. Object of a contract must be legal

NOTES
Nature of contract

The Contract came into force on 1 September 1872.

The Indian Contract Act was passed and implemented to control various kinds of commercial
and business contracts.
This act is not complete code of contracts.It deals with general principles of The Law of Contract
and special Contract.
The act is applicable to the whole India except for the state of Jammu and Kashmir.
The Contract Act only provides rules and regulations for the purpose of contract. It does not list
any rights and liabilities between parties to the contract.
Rights and liabilities and their manner of performance are decided by the parties themselves
under the contract but it is within the purview of the act.

I. DEFINITIONS AND ESSENTIAL ELEMENTS OF A VALID CONTRACT

Offer(i.e. Proposal) [section 2(a)]:-When one person signifies to another his willingness to do or
to abstain from doing anything, with a view to obtaining the assent of that other person either
to such act or abstinence, he is said to make a proposal.

Acceptance 2(b):- When the person to whom the proposal is made, signifies his assent there to ,
the proposal is said to be accepted.

Promise 2(b) :- A Proposal when accepted becomes a promise. In simple words, when an offer is
accepted it becomes promise.

Promisor and promise 2(c) :- When the proposal is accepted, the person making the proposal is
called as promisor and the person accepting the proposal is called as promisee.

Consideration 2(d):- When at the desire of the promisor, the promisee or any other person has
done or abstained from doing something or does or abstains from doing something or promises
to do or abstain from doing something, such act or abstinence or promise is called a
consideration for the promise.

Agreement 2(e) :- Every promise and set of promises forming the consideration for each other.
In short, agreement = offer + acceptance.

Contract 2(h) :- An agreement enforceable by Law is a contract.

Void agreement 2(g):- An agreement not enforceable by law is void.

Voidable contract 2(i):- An agreement is a voidable contract if it is enforceable by Law at the

option of one or more of the parties there to (i.e. the aggrieved party), and it is not enforceable
by Law at the option of the other or others.

Void contract :- A contract which ceases to be enforceable by Law becomes void when it ceases
to be enforceable.
Defendant - A person against whom a suit has been filed in court and who has to defend
himself against the charges of breach of contract is called the defendant.
Plaintiff - A person who files a suit in a court of law against another for breach of contract is
called the plaintiff.

II. ESSENTIALS OF VALID CONTRACT [Sec.10].

“All agreements are contracts, if they are made by free consent of the parties, competent to
contract, for a lawful consideration and with a lawful object, and not hereby expressly declared
to be void.” - Sec.10.

1. Proper offer and Acceptance with intention to create legal relationship.

Cases:- A and B agree to go to a movie on coming Sunday. A does not turn in resulting in loss of
B’s time B cannot claim any damages from B since the agreement to watch a movie is a
domestic agreement which does not result in a contract.
In case of social agreement there is no intention to create legal relationship and there the is no
contract (Balfour v. Balfour)
[an agreement of a purely domestic [i.e. between a husband and wife] or social nature is not a
contract ]
In case of commercial agreements, the law presume that the parties had the intention to create
legal relations.
[Rose and Frank Co. v. J.R. Crompton and Bros]
There was an agreement between Rose Company and Crompton Company, where of the former
were appointed selling agents in North America for the latter. One of the clauses included in the
agreement was:
“This arrangement is not... a formal or legal agreement and shall not be subject to legal
jurisdiction in the law courts”.
Held that: This agreement was not a legally binding contract as the parties intended not to have
legal consequences

2. Lawful consideration :- consideration must not be unlawful, immoral or opposed to the

public policy.

3. Capacity:- The parties to a contract must have capacity (legal ability) to make valid
contract.
Section 11:- of the Indian contract Act specify that every person is competent to contract
provided.
(i) Is of the age of majority according to the Law which he is subject, and
(ii) Who is of sound mind and
(iii) Is not disqualified from contracting by any law to which he is subject.
Person of unsound mind can enter into a contract during his lucid interval.
An alien enemy, foreign sovereigns and accredited representative of a foreign state.
(iv) Insolvents and convicts are not competent to contract.

4. Free consent :- consent of the parties must be genuine consent means agreed upon
samething in the same sense i.e. there should be consensus – ad – idem. A consent is said to be
free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake.
Thus, where ‘A’ who owns 2 cars x and y wishes to sell car ‘x’ for Rs. 30,000. ‘B’, an
acquaintance of ‘A’ does not know that ‘A’ owns car ‘x’ also. He thinks that ‘A’ owns only car ‘y’
and is offering to sell the same for the stated price. He gives his acceptance to buy the same.
There is no contract because the contracting parties have not agreed on the same thing at the
same time, ‘A’ offering to sell his car ‘x’ and ‘B’ agreeing to buy car ‘y’. There is no consensus-
ad-idem

5. Lawful object
The object of agreement should be lawful and legal.
Two persons cannot enter into an agreement to do a criminal act.
Consideration or object of an agreement is unlawful if it
(a) is forbidden by law; or
(b) is of such nature that, if permitted, would defeat the provisions of any law; or
(c) is fraudulent; or
(d) Involves or implies, injury to person or property of another; or
(e) Court regards it as immoral, or opposed to public policy.

6. Possibility of performance:
The terms of the agreement should be capable of performance.
An agreements to do act, impossible in itself cannot be enforced.
Example : A agrees to B to discover treasure by magic. The agreement is void because the act
in itself is impossible to be performed from the very beginning.
7. The terms of the agreements are certain or are capable of being made certain [29]
Example : A agreed to pay Rs.5 lakh to B for ultra-modern decoration of his drawing room. The
agreement is void because the meaning of the term “ ultra – modern” is not certain.

8. Not declared Void

The agreement should be such that it should be capable or being enforced by law.
Certain agreements have been expressly declared illegal or void by the law.

9. Necessary legal formalities

A contract may be oral or in writing.
Where a particular type of contract is required by law to be in writing and registered, it must
comply with necessary formalities as to writing, registration and attestation.
Hence, we can conclude “All contracts are agreement, but all agreements are not contracts.”

Distinction between Contract Agreement

Contract &
Agreement Basis
1. Section : Sec. 2(h) Sec. 2(e)
2. Definition : A contract is an Every promise or every set of
agreement enforceable by promises forming consideration
law. for each other is an agreements.
3. Enforceability : Every promise is not enforceable.
Every contract is
4.Interrelationship enforceable An agreement does not include a
contract.
5. Scope : A contract includes an Its scope is relatively wider, as it
agreement. includes both social agreement
The scope of a contract is and commercial agreements.
6. Validity : limited, as it includes only An agreement may be both legal
commercial agreements. and illegal.
7. Legal : Only legal agreements are It is not necessary for every
Obligation called contracts. agreement to have legal
Every contract contains a obligation.
legal obligation.

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III. OFFER/PROPOSAL

A proposal is defined 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.” [Section 2 (a)]. An offer is synonymous with proposal.
The offeror or proposer expresses his willingness “to do” or “not to do” (i.e., abstain from doing)
something with a view to obtain acceptance of the other party to such act or abstinence. Thus,
there may be “positive” or “negative” acts which the proposer is willing to do.
Examples
(1) A offers to sell his book to B. A is making an offer to do something, i.e., to sell his book. It is
a positive act on the part of the proposer.
(2) A offers not to file a suit against B, if the latter pays A the amount of Rs. 200 outstanding.
Here the act of A is a negative one, i.e., he is offering to abstain from
filing a suit.

HOW AN OFFER IS MADE?

An offer can be made by (a) any act or (b) omission of the party proposing by which he intends
to communicate such proposal or which has the effect of communicating it to the other (Section
3).
An offer can be made by an act in the following ways:
(a) by words (whether written or oral). The written offer can be made by letters, telegrams,
telex messages, advertisements, etc. The oral offer can be made either in person or over
telephone.
(b) by conduct. The offer may be made by positive acts or signs so that the person acting or
making signs means to say or convey. However silence of a party can in no case amount to offer
by conduct.
An offer can also be made by a party by omission (to do something). This includes such conduct
or forbearance on one’s part that the other person takes it as his willingness or assent.
An offer implied from the conduct of the parties or from the circumstances of the case is known
as implied offer.
Examples
(1) A proposes, by letter, to sell a house to B at a certain price. This is an offer by an act by
written words (i.e., letter). This is also an express offer.
(2) A proposes, over telephone, to sell a house to B at a certain price. This is an offer by act (by
oral words). This is an express offer.
(3) A owns a motor boat for taking people from Bombay to Goa. The boat is in the waters at the
Gateway of India. This is an offer by conduct to take passengers from Bombay to Goa. He need
not speak or call the passengers. The very fact that his motor boat is in the waters near
Gateway of India signifies his willingness to do an act with a view to obtaining the assent of the
other. This is an example of an implied offer.
(4) A offers not to file a suit against B, if the latter pays A the amount of Rs. 200 outstanding.
This is an offer by abstinence or omission to do something.
Elements/Main features of a Proposal
1. Existence of two parties
For a valid offer,there must be two parties. A person cannot make an offer to himself.
2. Communication
The offer must be communicated to the offence. If it is never communicated to the offence, it
cannot be accepted and no valid contract comes into existence.
3. Willingness
The offer must show willingness of the offeror. Mere telling or sharing a plan is not an offer.
4. Intention of Obtaining Assent
The offer must be made with a view to obtain the assent of the offeree. The offer made out of a
prank or as a joke is not valid offer, and therefore if accepted, it can never make the valid
contract.
5. May be positive or Negative
The offer may involve doing something or not doing something-Section 2(o).The offer to do
something is a positive offer or not to do something is a negative offer.
6. Offer must be made to create legal relationship
While making the offer,the aim of the offerer should be to primarily create a legal obligation.An
offer that creates only social or moral obligations does not constitute a valid agreement or
contract.
7. The offer may be general or specific
An offer is called specific when it is made to an individual or a group of individuals.In case of a
specific offer ,only the person or group of persons to whom the offer is made can accept or
reject the offer.
8. The offer may be express or implied.
An offer does not necessarily need to be express.it can also be implied.According to Section 9,a
specific offer can be made in words-written or oral.
9 The offer should be a request and not an order.
The person making the offer has the right to set conditions to the acceptance of the offer,but he
does not have any right to set conditions to the non-acceptance of the offer.
10. The offer must be for a possible act
Man can do only what is possible,and the laws accepts that.An offer or a proposal to do
impossible is devoid of practicality or meaning.To make an offer which is humanly impossible is
not recognized by law and as such there can be no compliance.

1. Express Offer -The offer made by using words spoken or written is an express offer.
2. Implied Offer- The offer which could be understood by a conduct of parties or circumstances
of case is called the implied offer.
3. Specific Offer- The offer made to a specific person or a particular person or two or more than
two specific persons.The specific offer is made to an ascertained person.
4. General Offer - It is not necessary that the offer should be made to a specific person.The offer
can bemade to the world at large.If the offer is made to the world at large,it is known as the
general or public offer.
5. Cross Offer - When two parties exchange identical offers in ignorance at the time of each
other’s offer, the offers are called cross offers. There is not binding contract in such a case, as
one’s offer cannot be construed as acceptance by the other.
6. Continuous Offer - It is the offer which is open for a continuous period of time,it is also known
as the open offer or the standing offer.
7. 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.
III. OFFERS EXPLAINED IN DETAIL WITH EXAMPLES

Other types – standard form of offers [Special terms in offer], tenders, intention to offer,
Invitation to treat/offer
A proposal is defined 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.” [Section 2 (a)]. An offer is synonymous with proposal.
The offeror or proposer expresses his willingness “to do” or “not to do” (i.e., abstain from doing)
something with a view to obtain acceptance of the other party to such act or abstinence. Thus,
there may be “positive” or “negative” acts which the proposer is willing to do.
Examples
(1) A offers to sell his book to B. A is making an offer to do something, i.e., to sell his book. It is
a positive act on the part of the proposer.
(2) A offers not to file a suit against B, if the latter pays A the amount of Rs. 200 outstanding.
Here the act of A is a negative one, i.e., he is offering to abstain from
filing a suit.
An offer can be made either:
1. to a definite person or a group of persons, or
2. to the public at large.
The first mode of making offer is known as specific offer and the second is known as a general
offer. In case of the specific offer, it may be accepted by that person or group of persons to
whom the same has been made. The general offer may be accepted by any one by complying
with the terms of the offer.
The celebrated case of Carlill v. Carbolic Smoke Ball Co., (1813) 1 Q.B. 256 is an excellent
example of a general offer and is explained below.
Examples
(1) A offers to sell his house to B at a certain price. The offer has been made to a definite
person, i.e., B. It is only B who can accept it [Boulton v. Jones ]
(2) In Carbolic Smoke Ball Co.’s case (supra), the patent-medicine company advertised
that it would give a reward of £100 to anyone who contracted influenza after using the smoke
balls of the company for a certain period according to the printed directions. Mrs. Carlill
purchased the advertised smoke ball and contracted influenza in spite of using the smoke ball
according to the printed instructions. She claimed the reward of £100. The claim was resisted by
the company on the ground that offer was not made to her and that in any case she had not
communicated her acceptance of the offer. She filed a suit for the recovery of the reward.
Held: She could recover the reward as she had accepted the offer by complying with the terms
of the offer.
The general offer creates for the offeror liability in favour of any person who happens to
fulfil the conditions of the offer. It is not at all necessary for the offeree to be known to the
offeror at the time when the offer is made. He may be a stranger, but by complying with the
conditions of the offer, he is deemed to have accepted the offer.
An offer must be distinguished from (a) a mere declaration of intention or (b) an invitation to
offer or to treat.
Offer vis-a-vis declaration of intention to offer
A person may make a statement without any intention of creating a binding obligation. It may
amount to a mere declaration of intention and not to a proposal.
Examples
(1) An auctioneer, N advertised that a sale of office furniture would take place at a particular
place. H travelled down about 100 Km to attend the sale but found the furniture was withdrawn
from the sale. H sued the auctioneer for his loss of time and expenses.
Held: N was not liable [Harris v. Lickerson. (1875) L.R.S. Q.B. 286.].
(2) A father wrote to his would-be son-in-law that his daughter would have a share of what he
would leave at the time of his death. At the time of death, the son-in-law staked his claim in the
property left by the deceased.
Held: The son-in-law’s claim must fail as there was no offer from his father-in-law creating a
binding obligation. It was just a declaration of intention and nothing
more [Re Ficus (1900) 1. Ch. 331.].

Offer vis-a-vis invitation to offer

An offer must be distinguished from invitation to offer. A prospectus issued by a college for
admission to various courses is not an offer. It is only an invitation to offer. A prospective
student by filling up an application form attached to the prospectus is making the offer. An
auctioneer, at the time of auction, invites offers from the would-be-bidders. He is not making a
proposal.
A display of goods with a price on them in a shop window is construed an invitation to offer and
not an offer to sell.

Example
In a departmental store, there is a self-service. The customers picking up articles and take them
to the cashier’s desk to pay. The customers action in picking up particular goods is an offer to
buy. As soon as the cashier accepts the payment a contract is entered into
[Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern)
 Likewise, prospectus issued by a company for subscription of its shares by the members
of the public, the price lists, catalogues and quotations are mere invitations to offer. On the
basis of the above, we may say that an offer is the final expression of willingness by the offeror
to be bound by his offer should the other party choose to accept it. Where a party, without
expressing his final willingness, proposes certain terms on which he is willing to negotiate, he
does not make an offer, he only invites the other party to make an offer on those terms. This is
perhaps the basic distinction between an offer and an invitation to offer.

In Harvey v. Facie, the plaintiffs (Harvey) telegraphed to the defendants (Facie), writing:

“Will you sell us Bumper Hall Pen?* Telegraph lowest cash price.” The defendants replied also *
Bumper Hall Pen’ was the name of the real estate. by a telegram, “Lowest price for Bumper Hall
Pen £900”. The plaintiffs immediately sent their last telegram stating: “We agree to buy Bumper
Hall Pen for £900 asked by you”. The defendants refused to sell the plot of land (Bumper Hall
Pen) at that price. The plaintiffs contention that by quoting their minimum price in response to
the inquiry, the defendants had made an offer to sell at that price, was turned down by the
Judicial Committee.
Their Lordship pointed out that in their first telegram, the plaintiffs had asked two questions,
first as to the willingness to sell and second, as to the lowest price. They reserved their answer
as to the willingness to sell. Thus, they had made no offer. The last telegram of the plaintiffs was
an offer to buy, but that was never accepted by the defendants.

The offer must be communicated to the offeree.

An offer must be communicated to the offeree before it can be accepted. This is true of specific
as well as general offer.
Example
G sent S, his servant, to trace his missing nephew. Subsequently, G announced a reward for
information relating to the boy. S, traced the boy in ignorance of the announcement regarding
reward and informed G. Later, when S came to know of the reward, he claimed it.
Held, he was not entitled to the reward on the ground that he
could not accept the offer unless he had knowledge of it [Lalman Shukla v. Gauri Dutt, II, A.L.J.

The offer must not contain a term the non-compliance of which may be assumed to amount to
acceptance. Thus, the offeror cannot say that if the offeree does not accept the offer within two
days, the offer would be deemed to have been accepted.
Example
A tells B ‘I offer to sell my dog to you for Rs. 45. If you do not send in your reply, I shall assume
that you have accepted my offer’. The offer is not a valid one.

A tender is an offer as it is in response to an invitation to offer.

Tenders commonly arise where, for example, a hospital invites offers to supply eatables or
medicines. The persons filling up the tenders are giving offers. However, a tender may be
either:
(a) specific or definite; where the offer is to supply a definite quantity of goods, or
(b) standing; where the offer is to supply goods periodically or in accordance with the
requirements of the offeree.
In the case of a definite tender, the suppliers submit their offers for the supply of specified
goods and services. The offeree may accept any tender (generally the lowest one). This will
result in a contract.
Example - A invites tenders for the supply of 10 quintals of sugar. B, C, and D submit their
tenders. B’s tender is accepted. The contract is formed immediately the tender is accepted.
In the case of standing offers, the offeror gives an open offer whereby he offers to supply goods
or services as required by the offeree. A separate acceptance is made each time an order is
placed. Thus, there are as many contracts as are the acts of acceptance.
Example
[Great Northern Railway v. Witham (1873) L.R. 9 C.P. 16].
The G.N. Railway Co. invited tenders for the supply of stores. W made a tender and the terms of
the tender were as follows: “To supply the company for 12 months with such quantities of
specified articles as the company may order from time to time. The company accepted the
tender and placed the orders. W executed the orders as placed from time to time but later
refused to execute a particular order.
Held: W was bound to supply goods within the terms of the tender

The Supreme Court of India in this regard has observed: As soon as an order was placed a
contract arose and until then there was no contract. Also each separate order and acceptance
constituted a different and distinct contract [Chatturbhuj Vithaldas v. Moreshover Parashram AIR
1954 SC 326].
Revocation or Withdrawal of a tender. A tenderer can withdraw his tender before its final
acceptance by a work or supply order. This right of withdrawal shall not be affected even if there
is a clause in the tender restricting his right to withdraw. A tender will, however, be irrevocable
where the tenderer has, on some consideration, promised not to withdraw it or where there is a
statutory prohibition against withdrawal
[The Secretary of State for India v. Bhaskar Krishnaji Samani AIR 1925 Bom 485].

Special terms in a contract.

The special terms, forming part of the offer, must be duly brought to the notice of the offeree at
the time the offer is made. If it is not done, then there is no valid offer and if offer is accepted,
and the contract is formed, the offeree is not bound by the special terms which were not
brought to his notice. The terms may be brought to his notice either:
(a) by drawing his attention to them specifically, or
(b) by inferring that a man of ordinary prudence could find them by exercising ordinary
intelligence.
(a) the examples of the first case are where certain conditions are written on the back
of a ticket for a journey or deposit of luggage in a cloak room and the words. “For conditions see
back” are printed on the face of it. In such a case, the person buying the ticket is bound by
whatever conditions are written on the back of the ticket whether he has read them or not.

Examples

(1) P, a passenger deposited a bag in the cloakroom at a Railway Station. The acknowledgement
receipt given to him bore, on the face of it, the words “See back”. One of the conditions printed
on the back limited the liability of the Railways for any package to £10. The bag was lost, and P
claimed £24. 10s, its value, pleading that he had not read the conditions on the back of the
receipt.
Held : P was bound by the conditions printed on the back as the company gave reasonable
notice on the face of the receipt as to the conditions at the back of the document [Parker v.
South Eastern Rly. Co. (1877) ].

(2) A lady, L, the owner of a cafe, agreed to purchase a machine and signed the agreement
without reading its terms. There was an exemption clause excluding liability of the seller under
certain circumstances. The machine proved faulty and she purported to terminate the contract.
Held : That she could not do so, as the exemption clause protected the seller from the liability
[L’Estrange v. Grancob Ltd. (1934) 2 R.B. 394].

(3) T purchased a railway ticket, on the face of which the words: “For conditions see back” were
written. One of the conditions excluded liability for injury, however caused. T was illiterate and
could not read. She was injured and sued for damages.
Held : That the railway company had properly communicated the conditions to her who had
constructive notice of the conditions whether she read them or not. The company was not
bound to pay any damages [Thompson v.

[4] Example
A passenger was travelling with luggage from Dublin to Whitehaven on a ticket, on the back of
which there was a term which exempted the shipping company from liability for the loss of
luggage. He never looked at the back of the ticket and there was nothing on the face of it to
draw his attention to the terms on its back. He lost his luggage and sued for damages.
Held : He was entitled to damages as he was not bound by something which was not
communicated to him [Henderson v. Stevenson (1875) 2 H.L.S.C. 470].

Detailed observations with respect to printed conditions on a receipt were made by the Bombay
High Court in R.S. Deboo v. M. V. Hindlekar, AIR 1995 Bom. 68. These observations are:
1. Terms and conditions printed on the reverse of a receipt issued by the owner of the laundry or
any other bailee do not necessarily form part of the contract of bailment in the absence of the
signature of the bailor (customer) on the document relied upon. The onus is on the bailee to
prove that the attention of the bailor was drawn to the special conditions before contract was
concluded and the bailor had consented to them as contractual terms.
2. It cannot be just assumed that the printed conditions appearing on the reverse of the receipt
automatically become contractual terms or part of the contract of bailment.
3. In certain situations, the receipt cannot be considered as a contractual document as such, it
is a mere acknowledgement of entrustment of certain articles.

Cross Offers
Where two parties make identical offers to each other, in ignorance of each other’s offer, the
offers are known as cross-offers and neither of the two can be called an acceptance of the other
and, therefore, there is no contract.
Example
H wrote to T offering to sell him 800 tons of iron at 69s. per ton. On the same day T wrote to H
offering to buy 800 tons at 69s. Their letters crossed in the post. T contended that there was a
good contract.
Held: that there was no contract. [Tinn v. Hoffman & Co. (1873) 29 L.T. Exa. 271.].

TERMINATION OR LAPSE OF AN OFFER

An offer should be accepted before it lapses (i.e. comes to an end). An offer may come to an
end in any of the following ways stated in Section 6 of the Indian Contract Act:
1. By communication of notice of revocation:
An offer may come to an end by communication of notice of revocation by the offeror. It
may be noted that an offer can be revoked only before its acceptance is complete for the
offeror. In other words, an offeror can revoke his offer at any time before he becomes before
bound by it. Thus, the communication of revocation of offer should reach the offeree before the
acceptance is communicated.
2. By lapse of time;
Where time is fixed for the acceptance of the offer, and it is not acceptance within the
fixed time, the offer comes to an end automatically on the expiry of fixed time. Where no time
for acceptance is prescribed, the offer has to be accepted within reasonable time. The offer
lapses if it is not accepted within that time. The term ‘reasonable time’ will depend upon the
facts and circumstances of each case.
The offer must be accepted by the offeree within the time mentioned in the offer and if no time
is mentioned, then within a reasonable time. The offer lapses after the time stipulated in the
offer expires if by that time offer has not been accepted. If no time is specified, then the offer
lapses within a reasonable time. What is a reasonable time is a question of fact and would
depend upon the circumstances of each case.
Example -M offered to purchase shares in a company by writing a letter on June 8. The company
allotted the shares on 23rd November. M refused the shares. Held : That the offer lapsed as it
was not accepted within a reasonable time [Ramsgate Victoria Hotel Co. v. Montefiore
3. By failure to accept condition precedent:
Where, the offer requires that some condition must, be fulfilled before the acceptance of
the offer, the offer lapses, if it is accepted without fulfilling the condition.
4. By the death or insanity of the offeror:
Where, the offeror dies or becomes, insane, the offer comes to an end if the fact of his
death or insanity comes to the knowledge of the acceptor before he makes his acceptance. But
if the offer is accepted in ignorance of the fact of death or insanity of the offeror, the
acceptance is valied. This will result in a valid contract, and legal representatives of the
deceased offeror shall be bound by the contract. On the death of offeree before acceptance, the
offer also comes to an end by operation of law.
5. By counter –
offer by the offeree: Where, a counter – offer is made by the offeree, and then the
original offer automatically comes to an end, as the counter – offer amounts to rejections of the
original offer.
An offer terminates by counter-offer by the offeree.
When in place of accepting the terms of an offer as they are, the offeree accepts the same
subject to certain condition or qualification, he is said to make a counter-offer.
The following have been held to be counter-offers:
(i) Where an offer to purchase a house with a condition that possession shall be given on a
particular day was accepted varying the date for possession [Routledge v.Grant (1828) 130 E.R.
920].
(ii) An offer to buy a property was accepted upon a condition that the buyer signed an
agreement which contained special terms as to payment of deposit, making out title completion
date, the agreement having been returned unsigned by the buyer [Jones v. Daniel (1894) 2 Ch.
332].
(iii) An offer to sell rice was accepted with an endorsement on the sold and bought note that
yellow and wet grain will not be accepted [All Shain v. Moothia Chetty, 2 Bom L.R. 556].
(iv) Where an acceptance of a proposal for insurance was accepted in all its terms subject to the
condition that there shall be no assurance till the first premium was paid [Sir Mohamed Yusuf v.
S. of S. for India
6. By not accepting the offer,
according to the prescribed or usual mode: Where some manner of acceptance is
prescribed in the offer, the offeror can revoke the offer if it is not accepted according to the
prescribed manner.
7. By rejection of offer by the offeree:
Where, the offeree rejects the offer, the offer comes to an end. Once the offeree rejects
the offer, he cannot revive the offer by subsequently attempting to accept it. The rejection of
offer may be express or implied.
8. By change in law:
Sometimes, there is a change in law which makes the offer illegal or incapable of
performance. In such cases also, the offer comes to an end.
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[IV] ACCEPTANCE

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)].
Acceptance 2(b):- When the person to whom the proposal is made, signifies his assent there to ,
the proposal is said to be accepted.

Rules governing acceptance

1. Acceptance must be absolute and unqualified

Example: A offers to sell his house to B for Rs. two lakhs. B accepts the offer and
promises to pay the price in four installments. This is not pay the acceptance as the acceptance
is with variation in the terms of the offer.
2. Acceptance must be communicated: Mere mental acceptance is no acceptance, But there is
no requirement of communication of acceptance of general offer.
Example The manager of Railway Company received a draft agreement relating to the
supply of coal. The manager marked the draft with the words “Approved” and put the same in
the drawer of his table and forgot all about it. Held, there was no contract between the parties
as the acceptance was not communicated. It may however, be pointed out that the Court
construed a conduct to parties as railway company was accepting the supplies of coal from time
to time.
3. Manner of acceptance
General rule say that it must be as per the manner prescribed by offeror. If no mode is
prescribed in which it can be accepted, then it must be in some usual and reasonable manner.
4. If there is deviation in communication of an acceptance of offer, offeror may reject such
acceptance by sending notice within reasonable time. If the offeror doesn’t send notice or
rejection, he accepted acceptance of offer.
Example: A offers B and indicates that the acceptance be given by telegram. B sends his
acceptance by ordinary post. It is a valid acceptance unless A insists for acceptance in the
prescribed manner.
5. Acceptance of offer must be made by offeror.
Example : A applied for the headmastership of a school. He was selected by the
appointing authority but the decision was not communicated to him. However, one of members
in his individual capacity informed him about the selection. Subsequently, the appointing
authority cancelled its decision. A sued the school for breach of contract. The Court rejected the
A’s action and held that there was no notice of acceptance. “Information by unauthorized
person is as insufficient as overhearing from behind the door”.
6. Acceptance must be communicated to offeror
7. Time limit for acceptance
If the offer prescribes the time limit, it must be accepted within specified time.
If the offer does not prescribe the time limit, it must be accepted within reasonable time.
Example : A applied (offered) for shares in a company in early June. The allotment
(Acceptance) was made in late November. A refused to take the shares. Held, A was entitled to
do so as the reasonable time for acceptance had elapsed.
8. Acceptance of offer may be expressly (by words spoken or written); or impliedly (by
acceptance of consideration); or by performance of conditions (e.g.in case of a general
offer)
9. Mere silence is not acceptance of the offer
Example A offers to B to buy his house for Rs.5 lakhs and writes “If I hear no more about
it within a week, I shall presume the house is mine for Rs.5 lakhs. “B does not respond. Here, no
contract is concluded between A and B.
10. However, following are the two exceptions to the above rule. It means silence amounts
as acceptance of offer. Where offeree agrees that non – refusal by him within specified
time shall amount to acceptance of offer. When there is custom or usage of trade which
specified that silence shall amount to acceptance.
11. Acceptance subject to the contract is no acceptance
If the acceptance has been given ‘subject to the contract” or subject to approval by certain
persons, it has not effect at all. Such an acceptance will not create binding contract until a
formal contract is prepared and signed by all the parties.

LAPSES
1. In case of acceptance by post - Where the acceptance is given by post, the communication of
acceptance is complete as against the proposer when the letter of acceptance is posted. Thus,
mere posting of letter of acceptance is sufficient to conclude a contract. However, the letter
must be properly addressed and stamped.
2. Delayed or no delivery of letter - Where the letter of acceptance is posted by the acceptor but
it never reaches the offeror, or it is delayed in transit, it will not affect the validity of
acceptance. The offeror is bound by the acceptance.
3. Acceptance by telephones telex or tax - If the communication of an acceptance is made by
telephone, tele-printer, telex, fax machines, etc, it completes when the acceptance is received
by the offeror. The contract is concluded as soon as the offeror receives not hears the
acceptance.
4. The place of Contract - In case of acceptance by the post, the place where the letter is posted
is the place of contract. Where the acceptance is given by instantaneous means of
communication (telephone, fax, tele-printer, telex etc.), the contract is made at the place where
the acceptance is received, 5. The time of Contract - In case of acceptance by post, the time of
posting the letter of acceptance to the time of contract. 6. Communication of acceptance in
case of an agent. Where the offer has been made through an agent, the communication of
acceptance is completed when the acceptance is given either to the agent or to the principal.

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[V] CONSIDERATION

“Ex. Nudo Pacto non oritur actio”, i,e, an agreement without consideration is void.

1.(a) Consideration is a quid pro quo i,e something in return it may be –

(i) some benefit right, interest, loss or profit that may accrue to one party or,
(ii) some forbearance, detriment, loss or responsibility suffered on undertaken by the other
party [currie V mussa]
(b) According to Sir Frederick Pollock, “consideration is the price for which the promise of the
other is bought and the promise thus given for value is enforceable.

2. Definition [Sec 2(d)]:- when at the desire of the Promisor, the promise or any other person.
(a) has done or abstained from doing , or [Past consideration]
(b) does or abstains from doing, or [Present consideration]
(c) promises to do or abstain from doing something [Future consideration ] such act or
abstinence or promise is called a consideration for the promise.
3. Example
(i) ‘P’ aggress to sell his car to ‘Q’ for Rs.50,000 Here ‘Q’s Promise to pay Rs50,000 is the
consideration for P’s promise and ‘P’s promise to sell the car is the consideration for ‘Q’s
promise to pay Rs.50,000.
(ii) ‘A’ promises his debtor ‘B’ not to file a suit against him for one year on ‘A’s agreeing to pay
him Rs.10,000 more. Here the abstinence of ‘A’ is the consideration for ‘B’s Promise to pay.

Consideration must move at the desire of the promisor.

D constructed a market at the instance of District collector. Occupants of shops promised to pay
D a commission on articles sold through their shops. Held, there was no consideration because
money was not spent by Plaintiff at the request of the Defendants, but at instance of a third
person viz. the Collector and, thus the contract was void.
Durga Prasad v. Baldeo

2. Consideration may move from the promisee or any other person who is not a party to the
contract. [Chinnaya’s Vs Ramayya]
A owed Rs.20,000 to B. A persuaded C to sign a Pro Note in favour of B. C promised B that he
would pay the amount. On faith of promise by C, B credited the amount to A’s account. Held,
the discharge of A’s account was consideration for C’s promise.
National Bank of Upper India v. Bansidhar
3. Consideration may be past, present, Future:
Under English law, Past consideration is no consideration.
Present consideration :- cash sale

Kinds of Consideration:

1) Past consideration: where the promisor had received the consideration before the date of the
promise, the consideration is termed as “past consideration”. It means a past act or
forbearance. Examples:
a) A renders some services to B in the month of June. In July, B promises to pay A $100. the
consideration of A is past consideration. b) a teaches the son of B’s request in the month of
January and in February B promises to pay A $200 for his services. The services of A will be past
consideration.

2) Present consideration: where the promisor receives consideration along with his promise, the
consideration is termed as “present consideration”. in other words, when the consideration and
the promise are simultaneous, it is called present consideration. present consideration is also
called “ executed consideration”.
Example:
A agrees to sell his car to B fro a sum of $5000. B pays money to A at the time of making of the
contract consideration will be taken as “present” for A.
A receives $200 in return for which he promises to deliver goods to B. the money A receives is
the present consideration for the promise he makes to deliver the goods.

3) Future consideration: this is also called “executory consideration” where the promisor has to
receive consideration in future for his promise, the consideration is said to be “Future
consideration” it is a promise for the promise. Mutual promises to marry, or promise to work
return of promise of payment are examples of future consideration.
Example: a) A promises to deliver car to B after a week. B promises to pay the price after a
month. The promise of A is supported by the promise of B. the consideration in this case is
future.

Legal Rules for valid consideration

From the above definition it can be inferred that, 1. Consideration must be at the desire of the
promisor.
(2) Consideration may move from one person to any other person (3) Consideration may be
past, present or future and [4]. Consideration should be real and not illusory. Illusory
consideration renders the transaction void consideration is not valid if it is. (i) Physically
impossible (ii) Legally not permissible (iii) Uncertain (iv) illusory (fulfillment of a pre existing
obligation)
5. Must be legal:- Consideration must not be unlawful, immoral or opposed to public policy.

6. consideration need not be adequate. A contract is not void merely became of the fact that
the consideration is inadequate. The law simply requires that contract should be supported by
consideration. So long as consideration exists and it is of some value, courts are not required to
consider its adequacy.
Example:
A agreed to sell a watch worth Rs.500 for Rs.20, A’s consent to the agreement was freely given.
The consideration, though inadequate. Will not affect the validity of the contract. However, the
inadequacy of the consideration can be considered in order to know whether the consent of the
promisor was free or not .

7. The performance of an act what one is legally bound to perform is not consideration for the
contract mean’s something other than the promisor’s existing obligation – A contract not
supported by consideration is void .
8. Act Promisor bound to do is not consideration
EXCEPTIONS TO CONSIDERATION
An agreement without consideration is void. Not only that, even inadequate consideration would
render the enforceability of the contract quite difficult as the free consent of the parties would
become suspect. The Act however contains certain exceptions to this important rule. These are:
Exceptions to the Rule “ No consideration . No contract”.
1. Written and registered agreements arising out of love and affection:- [25 (1)]
Expressed in writing and registered under law for the time being in force for registration
of document
Natural love and affection
Between parties standing in a near relation to each other

Example:- An elder brother, on account of natural love and affection, promised to pay the debts
of his younger brother. Agreement was put to writing and registered. Held, agreement was valid.
Exception: - Rajlukhy Dabee Vs Bhootnath Mukharjee
Example: A Hindu husband by a registered document, after referring to quarrels and
disagreements between himself and his wife, promised to pay his wife a sum of money for her
maintenance and separate residence. Held that the promise was unenforceable since natural
love and affection was missing.
2. Promise to compensate [25(2)]
Promise to compensate wholly or in part Who has already voluntarily done something for the
promisor Something which the promisor was legally compellable to do.
Example:- A finds B’s purse and give to him. B Promise to give A Rs.500. This is a valid contract.
3. Promise to pay a time – barred debt. [Sec 25(3)]
A debt barred by limitation con not recovered. Hence, a promise to pay a such a debt is without
any consideration.
Can be enforced only when – in writing and sighed by Debtor or his authorized agent.
Example : A owes B Rs.10,000 but the debt is barred by Limitation Act. A signs a written
promise to pay B Rs.8,000 on account of debt. This is a valid contract.
4. Completed gift- gift do not require any consideration.
5. Agency (185) – According to the Indian contract Act. No consideration is necessary to
create an agency.
6. Bailment (148)- consideration is not necessary to effect a valid bailment of goods. It is
Called Gratuitous Bailment.
7. Remission
Charity- If a person promises to contribute to charity and on this faith the promises undertakes
a liability for the promised subscription, the contract shall be valid.
8 Trust
When a trust is created in favour of any third party. The third party being thebeneficiary
can enforce the contract

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[VI] LEGALITY OF OBJECT

According to section 10 of The Indian Contract Act, 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 void. It should be for lawful consideration
and with a lawful object.
What consideration and objects are lawful and what not (Section 23)
The consideration or object of an agreement is lawful, unless:
1. It is forbidden by law
When something is forbidden by law, an agreement to do that is unlawful. An agreement to do
what has been prohibited by the Indian Penal Code or by some other law cannot be enforced.
2. Defeat the provisions of law
If the object or consideration of an agreement is of such a nature that, if it is permitted, it would
defeat the provisions of any law, such an agreement is void. Certain acts may not be expressly
forbidden by law, but if they result in circumventing any law, they cannot be encouraged
3. Is fraudulent
If the consideration or object of an agreement is to commit a fraud, the agreement is void. An
agreement to avoid competition with one another cannot be considered to be either fraudulent
or opposed to public policy.
4. Agreement injurious to the person or property of another
If the consideration or the object of an agreement is to cause an injury to the person or property
of another, the agreement is unlawful, and therefore void. Injury here means harm which is
unlawful, for example, an agreement to commit fraud or a tort
5. Immoral or opposed to public policy
If the consideration or object of an agreement is regarded by a court to be immoral or opposed
to public policy, the agreement is unlawful and void. Public policy means the policy of the law at
a stated time. An act which is injurious to the interest of the society is against public policy. If an
agreement is prejudicial to social or economic interest of the community, it will be against
public policy to enforce such an agreement. On the one hand a persons right of contractual
freedom should be maintained, on the other hand if the contract is against public policy the law
must not allow that to be enforced. Lawful object and consideration•
A ,B and C enter into contract to share profits, to be acquired by fraud.• X pays 1000 Rs to Y to
beat Z. Y does not. X can not recover his money back.
X promises to pay Y Rs 50000 if he secures employment for him in govt sector.• X who knows
that Y has committed a murder, receives Rs 7 lakh from y in consideration of not exposing.
6. Agreement in restraint to trade
• X a seller of imitation jewellary in England sold his business to Y and agreed not to deal for
two years-in imitation jewellary in certain foreign countries• X after selling the goodwill of his
business to Y promises not to carry the similar business anywhere in the world.
7. Agreement to do impossible act•
A agrees to give Rs 10000 to B ,if he marries C (a Hindu) who is already married to D.
[VII] PERFORMANCE OF CONTRACT

Execution of a contract by which the contracting parties are automatically discharged of their
obligations under it. Although contracts usually call for full and precise performance, a
substantial performance may be acceptable under certain circumstances, on a pro rata basis, or
on payment of damages for the unfinished or defective performance.

Discharge of Contract – A contract may be discharged

1. By performance – Actual performance, Attempted performance
2. By agreement or consent – Express consent, Implied consent (novation, recission, alteration)
3. By impossibility of performance
4. By lapse of time
5. By operation of law – By death, By merger, By insolvency
6. By breach of contract – actual breach, anticipatory breach

1. Discharge by performance
Discharge of a contract means termination of contractual relation between the parties to a
contract in other words a contract is discharged when the rights and obligations created by it
are extinguished (i.e. comes to an end).
fulfillment of obligations by a party to the contract within the time and in the manner prescribed
in the contract.
(a) Actual performance – no party remains liable under the contract. Both the parties performed.
(b) Attempted performance or tender.:- Promisor offers to perform his obligation under the
contract but the promise refuses to accept the performance. It is called as attempted
performance or tender of performance

2. BY MUTUAL AGREEMENT (BY IMPLIED CONSENT)

1. Novation – Sec 62
2. Rescission – Sec 62
3. Alteration – Sec 62
4. Remission – Sec 63
5. Waiver
6. Merger

DISCHARGE BY MUTUAL AGREEMENT

(a) Novation [Sec 62] – Novation means substitution of a new contract in the place of the
original contract new contract entered into in consideration of discharge of the old contract. The
new contract may be.
Between the same parties (by change in the terms and condition)
Between different parties (the term and condition remains same or changed)

Following conditions are satisfied :-

(1) All the parties must consent to novation

(2) The novation must take place before the breach of original contract.

(3) The new contract must be valid and enforceable.

Example:

A owes B Rs.50,000. A enters into an agreements with B and gives B a mortgage of his estate
for Rs.40,000 in place of the debt of Rs.50,000. (Between same parties)

A owes money Rs.50,000 to B under a contract. It is agreed between A, B & C that B shall
henceforth accept C as his Debtor instead of A for the same amount. Old debt of A is
discharged, and a new debt from C to B is contracted. (Among different parties)

(b) Rescission [62]:- Rescission means cancellation of the contract by any party or all the parties
to a contract. X promises Y to sell and deliver 100 bales of cotton on 1st oct his go down and Y
promises to par for goods on 1st Nov. X does not supply the goods. Y may rescind the contract.

(c) Alteration [62] :- Alteration means a change in one or more of the terms of a contracts with
mutual consent of parties the parties of new contracts remains the same.
Ex:- X Promises to sell and delivers 100 bales of cotton on 1st oct. and Y promises to pay for
goods on 1st Nov. Afterwards X and Y mutually decide that the goods shall be delivered in five
equal installments at is godown . Here original contract has been discharged and a new contract
has come into effect.

(d) Remission [63]:- Remission means accepting a lesser consideration than agreed in the
contract. No consideration is necessary for remission. Remission takes place when a Promisee-
(a) dispense with (wholly or part) the performance of a promise made to him.
(b) Extends the time for performance due by the promisors
(c) Accept a lesser sum instead of sum due under the contract

(d) Accept any other consideration that agreed in the contract

A promise to paint a pictured for B. B after words for him to do so. A is no longer
bound to perform the promise.

(e) Waiver:- Intentional relinquishment of a night under the contract.

(f) Merger :- conversion of an inferior right into a superior right is called as merger.
(Inferior right end)
 Basis Novation Alteration
1. Meaning It is substitution of an existing It is alteration to some of the
contract with new one. terms and conditions of the
original Contract.
2. Change in It is made by – (a) change in the Terms of the contract may be
parties terms of the contract or (b) change altered by mutual agreements by
in the Contracting Parties. the same contracting parties. So,
there is no change in the parties.
3. New A New Contract comes into It is not essential to substitute a
Contract existence in place of the old one. new contract in place of the old
contract.
4. Performance Old contract need not be performed Old contract as per the altered
New contract must be performed. terms shall be performed.

3. DISCHARGE BY OPERATION OF LAW

1. Death of one of the party

2. Merger of contract
3. Insolvency of one of the party
4. Unauthorized alteration in the agreement/contract

4. DISCHARGE BY OPERATION OF LAW

(a) Death :- involving the personal skill or ability, knowledge of the deceased party one
discharged automatically. In other contract the rights and liability passed to legal represent.
Example : A promises to perform a dance in B’s theatre. A dies. The contract comes to an end.

(b) Insolvency:- when a person is declared insolvent. He is discharged from his liability up to the
date of insolvency.
Example: A contracts to sell 100 bags of sugar to B. Due to heavy loss by a major fire which
leaves nothing to sell, A applies for insolvency and is adjudged insolvent. Contract is
discharged.
(c) By unauthorized material alteration – without the approval of other party – comes to an end
– nature of contract substance or legal effect.
Example : A agrees upon a Promissory Note to pay Rs.5,000 to B. B the amount as Rs.50,000. A
is liable to pay only Rs.5,000.

(d) Merger: When an inferior right accruing to a party in a contract mergers into a superior right
accruing to the same party, then the contract conferring inferior right is discharged.

Example: A took a land on lease from B. Subsequently, A purchases that land. A becomes owner
of the land and ownership rights being superior to rights of a lessee, the earlier contract of
lease stands terminated.

5. Rights and liabilities vest in the same person: Where the rights and liabilities under a
Contract vest in the same person, the contract is discharged.
Example: A Bill of Exchange which was accepted by A, reaches A’s hands after being
CASE STUDY

1. Carlil /Vs/ Carbolic Smoke Ball Co.’s

Facts-- A patent-medicine company advertised that it would give a reward of £100 to anyone
who contracted influenza after using the smoke balls of the company for a certain period
according to the printed directions. Mrs. Carlill purchased the advertised smoke ball and
contracted influenza in spite of using the smoke ball according to the printed instructions. She
claimed the reward of £100. She filed a suit for the recovery of the reward
The claim was resisted by the company on the ground that offer was not made separately to
her and further she had not communicated her acceptance of the offer and thereby there is no
agreement or a valid contract.

Decision: the court held that this contract is a general offer and hence if any person who
happens to fulfil the conditions of offer is deemed to have accepted the offer. Thus Mrs. Carlil
had accepted the offer by complying with the terms of the offer. Thus there is a valid contract .
Hence she can recover the reward.
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2. [Rose and Frank Co. v. J.R. Crompton and Bros]

Facts- There was an agreement between Rose Company and Crompton Company, where of the
former were appointed as selling agents in North America for the latter. One of the clauses
included in the agreement was: “This arrangement is not a formal or legal agreement and shall
not be subject to legal jurisdiction in the law courts”. Is the contract valid?

Decision:. As per contract law, “An agreement/arrangement enforceable by law is a contract”.

In the aforesaid case, the parties intended not to have legal consequences the parties intended
not to have legal consequences. Hence the agreement is not a legally binding contract
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3. (Balfour v. Balfour)-

Facts:- An agreement between husband and wife to forgo maintenance if she files a
divorce suit against her husband. Is the agreement valid

Decision:- In case of social agreement there is no intention to create legal relationship and
hence there the is no contract. i.e any agreement of a purely domestic nature [i.e. between a
husband and wife] or social nature is not a contract. Hence the aforesaid agreement to forgo
maintenance is void in the eyes of law.
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4. Lalman Shukla /Vs/ Gauri Dutt

Facts:- Mr.Gauridutt sent his servant Lalman to find his lost nephew. When the servant
had left, Gauridutt announced reward to anyone, who will trace the boy. Lalman found the boy
and brought him home. When Lalman came to know he claimed for reward. Will he succeed ?
Decision: One of the essential characteristic of a valid offer is that ‘Offer must by
communicated to whom it was made”. An offer accepted without its knowledge does not confer
any legal rights on the acceptor. In the above case, Lalman did not have any knowledge about
the reward when he left to trace the boy and found him. Therefore Lalman is not entitled to
claim the reward.
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5. In Harvey v. Facie, the plaintiffs (Harvey) telegraphed to the defendants (Facie), writing:
“Will you sell us Bumper Hall Pen?* Telegraph lowest cash price.” The defendants replied also *
Bumper Hall Pen’ was the name of the real estate. by a telegram, “Lowest price for Bumper Hall
Pen £900”. The plaintiffs immediately sent their last telegram stating: “We agree to buy Bumper
Hall Pen for £900 asked by you”. The defendants refused to sell the plot of land (Bumper Hall
Pen) at that price.
The plaintiffs contention was that by quoting their minimum price in response to the inquiry, the
defendants had made an offer to sell at that price, was turned down by the Judicial Committee.
Their Lordship pointed out that in their first telegram, the plaintiffs had asked two questions,
first as to the willingness to sell and second, as to the lowest price. They reserved their answer
as to the willingness to sell. Thus, they had made no offer. The last telegram of the plaintiffs was
an offer to buy, but that was never accepted by the defendants
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6. Facts : A’ promises to drop legal prosecution which he has initiated against ‘Y’ for
robbery and ‘Y’ promises to restore the value of the things taken. Is this agreement valid.
Decision: An agreement must be supported by lawful consideration. This consideration must
not be forbidden by law, fraudulent, implies injury to another or opposed to public Policy. In the
above case, to drop a legal prosecution is unlawful and forbidden by law. Hence the agreement
is void
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7. Mrs.Stella delivered her wedding gown to a dry cleaner for dry cleaning and took the
receipt. On the back of the receipt, certain conditions were printed in English and one among
them was that ‘in case of lost of the goods, the liability of the Dry Cleaner Company is limited
to only 50 % of the cost of the goods. Mrs. Stella did not look back and received the receipt. The
wedding gown was lost and the customer claimed actual value of the gown. Discuss the legal
position on the following:
[a] There is nothing on the face of the receipt to draw the attention of the customer as ‘see
back for conditions’ and Mrs. Stella does not have enough knowledge regarding English
Language
Decision:- Any special terms in offer or standard form contracts must also be communicated
along with the offer. Now that applying the said legal fact in the above situation, I am of the
view that, Mrs. Stella is entitled to claim compensation because there was no indication on the
fact of the receipt to draw her attention to the special terms printed on the back of the receipt.
[b] On the face of the receipt, it is prominently mentioned ‘See back”. Though Stella has
sufficient knowledge in English, she did not read the conditions.
Decision: Since the special terms are prominently brought to the knowledge of the customer,
she cannot claim the actual value of goods and she is entitled to claim on 50 % of the cost of
the gown.
But as decided in Lily white Dry cleaners /Vs/ Munnuswamy, that such a clause was
unreasonable and opposed to public policy as allowing such clause would enable the Dry
cleaners to deceive the customer on the wrap of lost formula and purchase the goods at 50% of
market value.
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8. Mr.Arun offered to sell his two plots of land to Mr.Lal for a certain price. Mr.Lal accepted
the offer for one plot. Is there a valid contract?
Decision: An acceptance must be for the whole of the contract. But in the above case,
Mr.Lal had not accepted to purchase both the plot. Hence the above contract is not a valid
contract.
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9. Ram having his shop at Coimbatore enters into an agreement with Raghu to sell 1000 bags of
cement @ Rs.1000 per bag and to deliver at Tirupur. Decide the following legal positions: [Case
study under the chapter ‘Discharge of contract’]
[a] unknown to both the parties the cement was destroyed due to heavy rain at the time of
agreement
Decision: The contract is void on the ground of mutual mistake
[b] Due to lorry strike, the price of per bag of cement had increased to Rs.1500/-
D: the contract is not discharged because of non performance of contract due to strikes,
lock-out or civil disturbances or commercial impossibility.
[c] At the time of agreement, Mr.Ram knows that due to heavy rains the goods would have
been destroyed.
D: the contract is void but Ram who has knowledge regarding the non-availability of
the goods at the time of contract should compensate the buyer Raghu for the loss sustained by
the non-performance
[d] the goods could not be delivered because of a road accident
D: if the goods are destroyed or damaged or perished in the accident, then the
contract becomes impossible to perform i.e supervening Impossibility
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10. Decide the two cases
(a) A promises to deliver goods to B on a certain day on payment of
Rs. 5,000. A dies before that day. Advice B.
The rights and liability involving goods passes on to the legal representatives of any deceased
person. Hence B can pay the balance amount of Rs.5000 to the legal heirs/ representatives of
the A and can receive the goods and conclude the contract
(b) A promises to paint a picture for Y by a certain day, at a certain price. A dies before the
day. Whether the contract can be enforced by B.
Any contract involving personal skill or ability or knowledge of one of the deceased party
to a contract dies with him and the any contract involving such skills automatically discharges.
Hence since painting is a personal skill, on death of A, the contract discharges and hence B
cannot enforce the contract.
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