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V Under section 2(h) of the Indian Contract Act,

1972, ´An agreement enforceable by law is a

A contract must have :- (a) an agreement
(b) the agreement should be enforceable by law.

Offer î Acceptance Contract

V à  : every promise and every set of
promises forming the consideration for each
V What is a Ja A proposal when accepted
becomes a promise

 :- ´Xµ offers to sell his car to ´Yµ for
Rs. 1,00,000. ´Yµ accepts this offer. This offer
after acceptance becomes promise and this
promise is treated as an agreement between
´Xµ and ´Yµ
: an agreement is regarded
as a contract when it is enforceable by law.
A legally enforceable contract requires:
1. An Offer Y  

2. An Acceptance Y 

3. Consideration Y 

Thus, every contract is an agreement, but every
agreement is not a contract.

i. Valid offer and its proper acceptance
ii. Intention to create legal relationship
iii. Free consent
iv. Capacity or competency of parties
v. Lawful consideration
V 3  
'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¶.

Promisor Promisee
Person making the proposal or offer is called promisor and the
person accepting it is called the Promisee.
V ›

An offer can be made by any act which has the
effect of communicating it to another person.
Offer types:
1. Express offer: an offer which is made by words
spoken or written.
2. Implied offer: an offer which is made by
conduct .
Eg. A bid at an auction is an implied offer to
An offer may be:
a    : made to one person or group of
people. Then only that particular person or group
of people can accept.
 ² made to the whole world at large,
particularly seen in the cases of rewards and other
public advertisements. Contract made only with
that person who comes forward and performs the
conditions of the proposal.

 a general offer
will be open for acceptance by any number of
person until it carries a closing date, but where an
offer requires some information about a missing
thing, it is closed as soon as the first information
comes in.
reneral offer case:
V ›

V ·rs Carlill acquired a smoke ball from her chemist.

The smoke ball failed to prevent her from getting
influenza (despite its use as directed from November to
January), ·rs Carlill claimed her £100. When the
company refused to pay she sued them. It was held
that ·rs Carlill could successfully recover the £100. An
offer to the whole world was possible, becoming a
contract with any person(s) who accepted the offer
before its termination. ·rs Carlill had accepted by her
actions, and had turned the offer to the world into a
contract with her personally. The Carbolic Smoke Ball
Company were therefore bound to give her the money
promised in the advertisement.
V According to Section 2(b): When the person to
whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted.
V A proposal when accepted becomes a promise.
V By external manifestation or overt act- assent should
be signified. Signified through any act.
Eg. Fall of hammer in an auction.
V Acceptance by conduct
V Communication to offeror- acceptance must be
communicated to the offeror.
V Communication from acceptor
V When communication not necessary
Eg. Announcement to pay reward for discovering a lost
V When no manner is prescribed
Eg. E-mail.
Communication is complete when posted-
according to à
Complete contract arises on the date when the
letter of acceptance is posted in due course.
However, à 

, in
- when a letter of acceptance is posted
and is out of the power of the acceptor, the
proposer becomes bound. But the acceptor will
become bound only when the letter is received
by the proposer.
1. Absolute and unqualified
2. ·anner in which acceptance is to be given
3. Communication
4. By whom
5. To whom
6. Time limit
a à 

 :- according to
section 7(1) of Indian contract act , ´in order to
convert a proposal into a promise, the
acceptance must be absolute and unqualifiedµ.
i.e. offer must be accepted as it is without
variation or condition.
Example: x offered to sell 2 plots of land to y at
certain price. Y accepted the offer for 1 plot. It
was held that the acceptance was not valid
because it was not for the whole of the offer. [
bhawan vs sadula].
- According to section 7(2) of Indian
contract act 1872, the acceptance of an offer
must be given in the following manner.




(B) If the proposal The offer must be accepted
prescribes the manner in in the prescribed manner.
which it is to be accepted.
Œ ›
 ² The acceptance is said to be
complete only when it has been communicated
to the offerer.
Example: x offered to supply coals to railway
company. The manager of the company
accepted the offer and put it in the drawer of
his table and forgot all about it. It was held that
no contract was made because acceptance was
not communicated .
[ Brogden Vs ·etropolitan railway Co.]
   acceptance must be communicated by the
offeree himself or by a person who has the authority to

   Acceptance must be communicated to the

offerer himself.
Example: F offered by a letter to buy his nephew·s horse
for $30 saying ´if I hear no more about him, I shall
consider the horse mine.µ The nephew sent no reply at
all but told B his auctioneer, not to sell that particular
horse as he intended to sell that horse to F. B sold the
horse by mistake. It was held that F will not succeed
because his nephew had not communicated acceptance
to him. [ Felthouse Vs Bindley case]
V Contracts over telephone/ telex/ fax- These
type of contracts is treated on the same
principal as an oral agreement between 2
V Revocation means ¶ taking back· or ¶withdrawal·

´an acceptance may be revoked at any time before
the communication of the acceptance is complete
as against the acceptor, but not afterwardsµ. i.e.
before the letter of acceptance is duly posted by the

 : x of Agra offers by a letter dated 1st January
sent by post to sell his car to Y of Delhi for Rs.
100000. Y accepts the offer on 7th Jan at 1pm. By
letter sent by post. Here X may revoke his offer at
any time before 1 pm. On 7th Jan. but not
V Revocation must always be expressed.
V Revocation must move from the offerer himself
or a duly authorized agent.
V Offer cannot be revoked if the letter of
acceptance is lost or delayed in transit.

says an acceptance once made is
irrevocable whereas 

states that
acceptance is generally revocable. An acceptor may
cancel his acceptance by a speedier mode of
communication which will reach earlier than the
acceptance itself.
! in case the letter of acceptance and telegram
containing revocation of acceptance are delivered
to the proposer at the same time. Then the
formation of contract depends upon the fact which
one is read first by the offerer. renerally assumed
that telegram is read first.
*efinition : Pollock
´Consideration is the price for which the
promise of the other is bought and the promise
thus given for value is enforceableµ

Example: A agrees to sell his car to B for

Rs.1,00,000. Car is the consideration for B and
price is the consideration for A
When at the desire of the promisor, the promisee or any
other person has done or abstained from doing, or does
or abstains from doing, or promises to do or to abstain
from doing something, such act or abstinence or
promise is called a Consideration for the promise´

àn act i.e.. *oing of something
The act must not however be one is under a legal duty to perform.

à promises B to guarantee payment of price of the goods which B sells on credit to C.

Here selling of goods by B to C is consideration for à¶s promise

àn abstinence or forbearance
Here consideration is in a negative form.

à promises B not to file a suit against him if he pays him Rs.500. The abstinence of à
is the consideration for B¶s payment

à return promise
à agrees to sell his horse to B for Rs.10,000. Here B¶s promise to pay the
sum of Rs.10,000 is the consideration for à¶s promise to sell the horse
and à¶s promise to sell the horse is the consideration for B¶s promise to
pay the sum of Rs.10,000

rratuitous or voluntary promises are often made
rashly and without due deliberation.
If there is ³something for nothing´ it supplies no
means and not affords any remedy to compel the
performance of an agreement made without
sufficient consideration

1. It must move at the desire of the promisor
If it is done at the instance of a third party or without the
desire of the promisor, it will not be a good consideration

Example: A sees B·s house on fire and helps in

extinguishing it. B did not ask for A·s help.
A cannot demand payment for his service.

CASE : Durga Prasad Vs. Baldeo

B spent some money on the improvement of a market at
the desire of the Collector of the District.
In consideration of this D who was using the market
promised to pay some money to B.
Held, the agreement was void being without Consideration
as it had not moved at the desire of D
nder Indian Law, Consideration may move from the promisee
or any other person, i.e. even a stranger
This means as long as there is consideration for a promise it is
immaterial who has furnished it but the stranger to
consideration will be able to sue only if he is a party to the

Cà  : Chinnayya( àunty) Vs. Ramayya(*aughter)

It should be noted that the following are the
good consideration for a contract:

´Ñorbearance to sue
´Compromise of a dispute claim
´Composition with creditors



CASE : Debi Radha Rani Vs. Ram Dass

D is ready to sue her husband for maintenance allowance.
On husband·s agreeing to pay her a monthly allowance by
way of maintenance, she forbears to sue
Held, the wife·s forbearance to sue amounts to
consideration for the husband's agreement for payment of
maintenance allowance

ëhe claim should be reasonable and the person
claiming should honestly believe that it is a valid
claim. He should also act bona fide (genuine)
If it turns out that the claim was frivolous (playful)
and the claimant was not acting bona-fide, the
other party can claim compensation.





Past consideration
When consideration by a party for a present promise was given in
the past i.e. before the date of the promise, it is said to be past
E.g. : A renders some service to B at latter·s desire. After a month
B promises to compensate A for the services rendered to him. It is
past consideration

Present consideration
When consideration is given simultaneously with promise, at the
time of the promise, it is said to be present consideration
Eg : Cash Sale

Ñuture consideration
When consideration from one party to the other is to pass
subsequently to the making of the contract, it is future contract
Eg : D promises to deliver certain goods to P after a week; P
promises to pay the price after a fortnight. ëhe promise of D is
supported by the promise of P

´Something in returnµ need not necessarily equal to value
of ´something givenµ
B promised to pay certain bills if H would hand over a
guarantee to him. H handed over the guarantee but it
turned out to be unenforceable. Held, as B received
what he had asked for there was consideration for his
promise, although guarantee was of smaller value than
he had supposed

Physical impossibility
It must be real, competent and of some value n the eyes of the law.
ëhere is no real consideration in the following cases
Hall Vs. Cazenove
A promises to put life into B·s dead wife should B pay him
Rs.500. A·s promise is physically impossible of
Legal impossibility
Harvey Vs. Gibbons
A owes Rs.100 to B. He promises to pay Rs.20 to C, the
servant to B, who in return promises to discharge A from
the Debt. ëhis is legally impossible because C cannot give
discharge for a debt due to B, his master

ncertain consideration
A engages B for doing a certain work and promises to pay
a reasonable sum. ëhere is no recognized method of
ascertaining the ´reasonableµ remuneration. ëhe promise
is unenforceable as consideration is uncertain.

Illusory consideration
â Stilk Vs. Myrick
 ëwo of the crew of a ship deserted it half way through a
voyage. ëhe captain thereby promised to divide the
salary of the deserters among the rest of the crew if they
worked the vessel home. Held, they could not recover
the amount as the consideration was illusory. ëhey
were already under an obligation to bring the vessel

Ô. It must be something which the promisor is
already bound to do.

Cases: 1.Chintamana vs. Kalu Raju(advocate)

2. Collins vs Godefroa( witness)

8. It must not be illegal, immoral or opposed to

public policy.

Cà :
B and C get into an agreement where B will
write a Book for C and C will pay Rs.10,000 to
B wrote a book for C but C failed to give the
money to A.
A is claiming to recover Rs.10,000 from C.

1. A person who is not a party to a contract
cannot sue upon it even though the contract
is for his benefit and he provided
2. A contract cannot confer rights or impose
obligations arising under it on any person
other than the parties to it. ëhus, if there is
a contract between A and B, C cannot
enforce it.

S bought tyres from the Dunlop Rubber Co,
and sold them to D, a sub-dealer, who agreed
with S not to sell these tyres below Dunlop·s
list price and to pay the Dunlop Co. $5 as
damages on every tyre D undersold.
D sold two tyres at less than the list price and
there upon the Dunlop Co. sued him for the
breach. Held, the Dunlop Co, could not
maintain the suit as it was a stranger to the

1. à trust or charge.
2. Marriage settlement, Partition or other family
3. àcknowledgement or ³estoppel´
4. Contracts entered into through an agent
5. Covenants running with the land.

1. Trust or Charge:

Cà  : M.K. RàPàI V . JOHN,à.I.R.

à agrees to transfer certain properties to be held by T in trust
for the benefit of B. B can enforce the agreement even though
he is not a party to the agreement.

2. . Marriage settlement, Partition or other family arrangements:


Two brothers, on a partition of joint properties,
agreed to invest in equal shares a certain sum of
money for the maintenance of their mother.
Held, she was entitled to require her sons to make
the investment.

Œ.Acnowledgement or ´estoppelµ:

E.g.: A receives some money from ë to be paid

over to P. A admits of this receipt to P. P can
recover the amount from A who shall be regarded
as the agent of P.

4. Contract agreed into through an agent:

5.Covenants running with the land: In cases
of transfer of immovable property, the
purchaser of land with notice that the owner
of the land is bound by certain conditions of
covenants created by an agreement affecting
the land shall be bound by them although he
was not party to the original agreement which
contained the conditions or covenants.

V Natural love and affection

V Past voluntary services

V Time-barred debt

V Completed gift


who is of the age of majority
of sound mind, and
not forbidden under any other law
V Who is a Minor?
V What happens to a contract with or by a
Contract is void-ab-initio, i.e., neither the
other party nor the minor can enforce.
V Case law : Mohiri Bibi vs. *harmdas
V Minor can be a promisee/beneficiary.

V Minor cannot ratify even after attaining

V What about a situation where minor
represents to be of the age of majority?
V If benefits received can be traced in the same
or altered form, Minor liable to restore.
V Minor liable for necessaries supplied to him
or any loan for necessaries to him or to any of
his dependants.
V However, only properties of the minor, if any
shall be liable.
V Case: Raj Rani V Prem àdib
V Idiots
V Lunatics
V Intoxicated persons
   except for
necessaries as in the case of Minor.
V Person — —   — —    but
occasionally of sound mind can make a
contract when of sound mind.
V Person — —   —    but
occasionally of unsound mind cannot make a
contract when of unsound mind.
V (Inder ingh V Parmeshwardhari ingh)
V Consent- two or more persons are
said to consent when they agree
upon the same thing at the same
V When it is not made under › ( ec15)
V When not made under 
ec 16)
V When consent is not given under  ( ec
V When it is not by  

( ec 18)
V When there is no  between the parties(
It can be only when there is a Mistake of fact
and not mistake of Law ( ecs 20-22)
V àct Prohibited under Indian Penal Code or *etention of
property ± *uress in nglish Law
V Committing or threatening to commit any act under the
Indian Penal Code

V nlawful detaining, threatening to detain, prejudice to any

person or property

V o that a person enter into an agreement

.g.. Threat to commit suicide, agree on some things so as to
avoid prosecution
V ome relations between the parties
V That relationship is of a dominating nature- or where the
person can use his will due to such position and
V Obtain an unfair advantage over the other party

Real and apparent authority-

or a fiduciary relationship or
the mental capacity of the party is temporarily or permanently
affected due to age, illness, mental or bodily illness.
V Income Tax authority or a Magistrate
V *octor Patient, Creditor *ebtor, Teacher -Pupil
V ruardian and Child- It should have a trust and
confidence relations so as not to exploit .g.
olicitor buying the property or selling his
property by under valuing or overvaluing
V Mental *istress but not statutory compulsion or
urgent need of money
V Unconscionable Bargains not allowed
V Contracts with the pardanashin lady
V Unequal Bargain, trindhan given as a security
by the wife when the husband is in debt
V Remedy-Recission of Contract allowed± ec 19
V àct committed by a person, or his agent or under his
connivance etc with the intent to deceive another
party or his agent to him to enter into contract
V àssertion of Facts without belief in their truth
( *erry V Peek)
V àctive concealment-
> But mere silence not fraud------
> ntil there is a duty to speak ,
> when silence is deceptive,
> change the circumstances,
> half truth
V Promise made without intention to perform
V àny other act which will deceive or declared to be
fraud------------------ º

V Positive assertion- Not warranted of the person making- not
true, though he believes to be true
e.g. car has traveled only 1000 KM,
Mr. Kapil *ev will become the director. But it will be untrue.

V àny breach of duty- without the intention to deceive and

gives an advantage (gaining) to the person committing it or
any other person claiming under him ( constructive fraud)
e.g. Conceal the content of the document
V Misleading others to his or someone else¶s prejudice.
By Inducing mistake about subject matter,
suppression of vital facts which are material facts ---
but not expression of opinion± change of
circumstances to be stated,

V Causing however innocent a party to agreement

might have been ------to make mistake as to the
substance of the thing which is the subject matter of
the agreement

V In all the above instances the consent must have been

given by misrepresentation, which has caused to
agree to give consent to the contract- º

V When parties are under the mistake as to the
matter of fact essential to agreement ± may be
as to the
a) Mistake as to ubject matter
Horse dead while the parties are
ship is sunk while contracting
*ifferent subject matter in mind
b) Mistake as to the Identity of the Person
Mistake as to the identity caused by Fraud
V Mistake as to the Nature of Promise
e.g.. Thinking that à is signing a power of
attorney, while it was a gift deed
V Mistakenly signing wrong documents

V Mistake of the both the parties- º

signing a separation deed , when actually not married(
ralloway V ralloway)

" #$ because it is
mistake of one party
V " %& #'
V "  & 


V " 

V #   

V J J 
V ·ost contract suits are not brought over
questions regarding the formation of a contract;
they are brought because of what one party
considers to be an improper termination of a
V A contract can be discharged through the
performance of its terms.
V A discharged contract is a nullity.
A contract may be discharged ²

1. By performance.

2. By agreement or consent

3. By impossibility or performance

4. By lapse of time

5. By operation of law

6. By breach of contract.
$ When both the
parties perform their promises, the contract
is discharged. Performance should be
complete, precise and according to the
terms of the agreement. ·ost of the
contracts are discharged by performance in
this manner.
Tender is not actual performance but is only
an offer to perform the obligation under the
contract. Where the promisor offers to perform
his obligation, but the promisee refuses to
accept the performance, tender is equivalent
to actual performance.
The effect of a valid tender is that the contract
is deemed to have been performed by the
tenderer. The tenderer is discharged from the
responsibility for non-performance of the
contract without in any way prejudicing his
rights which accrue to him against the
V A party to a contract is under a legal obligation
to perform.
V rood faith is a requirement of all parties to a
V The party is only required to perform the
actions contemplated in the contract, and any
assumed duties, as well.
V ·any contracts contain provisions allowing the
parties to terminate the contract under certain
V These are called ´termination provisions.µ
V Contracts cannot last forever.
V Contracts without termination dates are
revocable by either party after reasonable
V Contracts can contain provisions that
automatically renew the contract for another
V When a contract contains a clause stating that it
may only be terminated for good cause it is
usually construed to be terminable at will by
the parties.
V A contract is valid if it contains a provision
stating that either party can revoke it at any
time, for any reason.
V The method used to provide notice of
termination can be set out in the contract.
V Once the contract terminates, the legal
obligations of the parties are extinguished.
V ·any contracts are not successfully
discharged, leading to disputes between the
V After creating a contract, the parties are free to
mutually abandon, modify or rescind the
V When the parties abandon a contract, they are,
in effect, agreeing to rescind the contract.
V ½ does not modify the contract terms;
it eliminates them.
V In order to demonstrate a valid rescission, there
must be a demand or tender of full
V There must also be an unambiguous,
affirmative act by a party showing the
intention to rescind the contract.
V When the parties agree to abandon or rescind
the contract, the agreement must be mutual
and must be made prior to either party actually
performing any actions
V Only the parties to the contract may rescind it.
V A fully discharged contract cannot be
V ·any jurisdictions also have a rule that
prevents partially executed contracts from
being rescinded.
V Canceling a contract is a formal declaration that
a contract is legally ineffective and cannot form
the basis of a legal duty.
V Rescission restores the parties to their positions
prior to the creation of the contract.
V Judges will usually not order rescission when
the contract is illegal, or where the parties are
equally at fault, or where someone other than
the parties to the contract is seeking rescission.
V When a party breaches a contract, he or she
violates some contractual duty.
*m ݈!(m" m!m%m( )
) "à#›
 The first paragraph

of ec. 56 lays down that ³an

agreement to do an act impossible

in itself is void´. This is known as

pre-contractual or initial


Impossibility which arises
subsequent to the formation of a
contract (which could be performed
at the time when the contract was
entered into) is called post-
contractual or supervening Impossibility.
*m ›à!( º#m#" m!m%m(

1. *estruction of subject-matter of contract.

2. Non-existence or non-occurrence of a

particular state of things.

3. *eath or incapacity for personal service.

4. Change of law or stepping in of a person

with statutory authority.

5. Outbreak of war.
V The parties are free to negotiate the possible
remedies for a breach of a contract, and even to
stipulate what types of actions will be
considered a breach.
V When one party commits a breach the other
party is not relieved of all contractual
V In some cases, a party may bring suit for a
breach before the other party has actually
committed one.
V ·aterial breach gives the other party the right
to rescind the contract.
V A material breach is the failure of one party to
do some act that is so central to the agreement
as to actually defeat the reason for having the
contract in the first place.
V Impossibility
V Subsequent Illegality
V Acts of rod/Nature
V Death of a Party
V Destruction
V War
V There are two types of impossibility: subjective
impossibility and objective impossibility.
V Under subjective impossibility, a party states
that he or she cannot perform the duties
outlined in the contract.
V In most jurisdictions, this claim is not a legal
V Objective impossibility is a claim that the
action itself cannot be done by anyone.
V When performance under a contract is
impossible, a party cannot attempt to substitute
a different type of performance.
V When the subject of the contract is ruled to be
illegal after the contract was created, the courts
have ruled that failure to perform in this
situation is excusable.
V When the performance under a contract is
made impossible by an act of rod, the
performance is excused.
V Death of the party who was to perform the
duty under the contract usually results in a
legal excuse.
V When the contract is based on the continued
existence of a particular item and that item is
destroyed, the obligation to perform under the
contract is destroyed along with it.
V A contract may be cancelled when war breaks
out in the country where the contract is to be
A hires B' s ship to go to Bombay, and there take on board, on the first
of January, a cargo which A is to provide and to bring it to Calcutta,
the freight to be paid when earned. B' s ship does not go to Bombay,
but A has opportunities of procuring suitable conveyance for the
cargo upon terms as advantageous as those on which he had
chartered the ship. A avails himself of those opportunities, but is put
to trouble and expense in doing so. A is entitled to receive
compensation from B in respect of such trouble and expense.

A, a builder, contracts to erect and finish a house by the first of

January, in order that B may give possession of it at that time to C, to
whom B has contracted to let it. A is informed of the contract between
B and C. A builds the house so badly that, before the first of January, it
falls down and has to be re- built by B, who, in consequence, loses the
rent which he was to have received from C, and is obliged to make
compensation to C for the breach of his contract. A must make
compensation to B for the cost of rebuilding the house, for the rent
lost, and for the compensation made to C.
A contracts to supply B with a certain quantity of iron at a fixed price,
being a higher price than that for which A could procure and deliver
the iron. B wrongfully refuses to receive the iron. B must pay to A, by
way of compensation, the difference between the contract price of the
iron and the sum for which A could have obtained and delivered it.

A,- having contracted with B to supply B with 1, 000 tons of iron at 100
rupees a ton, to be delivered at a stated time, contracts with C for the
purchase of 1, 000 tons of iron at 180 rupees a ton, telling C that he
does so for the purpose of performing his contract with B. C fails to
perform his contract with A, who cannot procure other iron, and B, in
consequence, rescinds the contract. C must pay to A 20, 000 rupees,
being the profit which A would have made by the performance of his
contract with B.