Indian Contract Act, 1872 CONTRACT, OFFER, ACCEPTANCE, CONSIDERATION,

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 A’s 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 person’s 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 Harish’s 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 son’s birthday.
Bharat had done the mgmt for the party. Bharat had come to
Amar’s office that evening, to collect Rs20000 for having
done the work.
Ram was the son of an ex- colleague of Amar. Ram’s 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 Amar’s 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 – X’s 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 father’s 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 father’s 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 X’s brother Z & he promises to
withdraw the suit for a consideration of Rs. 500.
It is legally impossible.

35. THANK YOU

ANY QUESTIONS????