Indian contract act, 1872

The communication of proposal is complete when it becomes to the knowledge of the person to
whom it is made.

The communication of an acceptance is complete-

As against the proposer, when it is put in a course of transmission to him so at to be out the
power of the acceptor;

As against the acceptor, when it comes to the knowledge of the proposer.

The communication of a revocation is complete-

As against the person who makes it, when it is put into a course of transmission to the person to
whom it is made, so as to be out of the power of the person who makes it;

As against the person to whom it is made, when it comes to his knowledge.

Illustrations

(a) A propose, by letter to sell a hose to B receives the letter.

The communication of the proposal is compelet when B receives the letter

(b) 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 received by A.
(c) A revokes his proposal by telegram
The revocation is complete as against A when the telegram is dispatched. It is
complete as against B when B receives it.
B revokes his acceptance by telegram. B’ revocation is complete as against B when
the telegram is dispatched, and as against A when it reaches him.
we know that two very important aspects of a contract are the offer and the acceptance of the of
However, in the practical world of business and economics, the communication of the offer and
the acceptance and the timings of theses are also very important factors. Let us look at this
communication timeline and also learn about the revocation of an offer.

Communication of offer an acceptance

Now we have seen previously that an offer cannot be revoked after the offeror has
communicated it to the offeree. Then the offer become binding, it creates legal relations between
the two parties.

So when it the communication compete? Effective communication of the offer and a clear
understanding of it is important to avoid misunderstanding between all the parties.

If the parties are taking face to face this is not a problem. The communication occurs via letter
and emails etc. So, in this case, the timeline of communication is important.

Communication of offer

Section 4 of the Indian contract Act 1872 says that the communication of the offer is complete.
When it comes to the knowledge of the person it has been made to. So when the offeree or any
member of the public becomes aware of the offer, the communication of the offer is said to be
complete.

So when two people are talking, face to face or via telephone, etc the communication will be
complete as soon as the offer is made. Example if A tells B he will fix roof for five thousand
rupees,the communication is complete as soon as the words are spoken.

Let us the same example . a writes to B offering to fix his roof for five thousand rupees.He posts
the letter on 2nd july. The letter reaches B on 4th july. So the communication is said to complete
on 4th july.
Communication of acceptance

Modes of acceptance

In this case of communication of acceptance, there are two factor to consider, the mode of
acceptance and then the timing of it. Let us first talk about the mode of acceptance can be done
in two ways, namely

A. Communication of acceptance by an act:

This is would include communication via words, whether oral or written. So this will
include communication via telephone calls, letter,e-mails,telegraphs, etc.

B. Communication of acceptance by conduct:

the offeree can also convey his acceptance of the offer through some action of his
conduct.So Say when you board a bus, you are accepting to pay the bus fare via your
conduct.

Timing of acceptance

The communication of acceptance has two parts. Lets us take a look

A. As against the offeror.for the proposer,the communication of the acceptance is complete

when he puts suchs acceptance in the course of transmission. After this is out his hands to
revoke such acceptance, so his communication will be complete then.so,for example A,
accepts the offer of B via a letter. He posts the letter on 10th july and the letter reaches B on
14th for B the communication of the acceptance is complete on 10th july itself.
 B. As against the Acceptor: the communication in case of the acceptor is complete when the
proposer acquires knowledge of such acceptance.so in the above example,A’s
communication will be complete on 14th july,when B learns of the acceptance.

Revocation of offer

The Indian contract act lays out the rules of revocation of an offer in section 5. The it says the offer may

be revoked anytime before the communication of the acceptance is complete against the proposer. Once
the acceptance is communicated to the proposer, revocation of the offer is now not possible.

Let us take the same example of before. A accepts the offer and posts the letter on 10 th july. B gets the
letter on 14th july. But for B the acceptance has been communication on 10 th july itself. So the revocation
of offer can only happen before the 10th of july.

Revocation of acceptance

Section 5 also states thats acceptance can be revoked until the communication of the acceptance is
complete against the acceptor. No revocation of acceptance can happen after such date.

Again from the above example, the communication of the acceptance is complete against A on 14 th july .
so till that date, so technically between 10th and 14th july, A can decide to revoke the acceptance.

Types of contract- based on formation

While getting into a contract, we saw some important aspects of an agreement as well as a contract.We
also saw that some contract are void contracts if certain aspects are missing from them. For example, a
contract for a lease is void if it is not registered.
Such conditions allow us to classify contacts on the basis of the terms or condition under which
the agreements or contracts come into existence. On the basis of the formation of a contract,
there are four types of contracts. They are listed below.

Express contract

The section 9 of the act defines what is meant by the term express: “promises, express and
implied- In so far as the proposal or acceptance f any promise is made in words, the promise is
said to be express”.

This means that if a proposal or a promise is expressed by listing the term in words-in writing or
orally is said to be an express contract as long as it gets acceptance from the other party

The terms of the express contract are clearly stated either orally or in writing. So the main
aspects of the express contract is that the terms of the contract expressed clearly, for example,
consider the following:

A person A sends a text from his phone to person B, proposing to sell their bike for a cost of Rs.
10,000/-.

The person B calls the first person and agrees to the terms of the promise.

This is an express contract as the terms have been stated clearly in oral as well as written form.
Note that the communications could be entirely oral or written.

Implied contract
The second part of section 9 of the act defines what is meant by an implied contract: “In so far
as such proposal or acceptance is made otherwise than in words, the promise is said to be
implied.”

Going by the defined we can say that a contract in which the terms of the agreement are not
expressed in written or oral form is an implied contract. Let us see an example to understand this.

For example, you board a rickshaw and the driver starts to drive.You tell the driver the address
where he has to drop you. The driver stop nd you pay him

As you can see this is a contract but did you and the driver express any of the terms in written
and oral form? No, the intent was implied by your conduct and thus there was an implied by your
contract.

Quasi –contract

They are not contract in the sense that no agreements are made between any of the parties. In
fact, there is no contract prior to some court order. Let us fist see an example and then we will
get a clear idea of what we mean by quasi contract.

For example a bank mistakenly transfers a large amount of money into your account. Now there
is no written or oral or any sort of agreement between you and bank but the money doesn’t
belong to you.

You will have to return the money even if you don’t want to. The bank will approach the court
and the court will issue an order to return the money, which is becoming a qusai-contract.

So here we see that a qusai-contract is not agreed upon by the two parties but it comes into
existence by a court order. It is thus enforce by the law which also created to stop any of the
parties from taking unfair advance of the other.

Consider this example . you have a yard and you commission a person to build a small door for
your car. You come home one day to find out that the mansion has made a big door which is
very expensive. At the same time very good for the value of your property. Now,what would
happen if you both approach the court?

The courts usully enforce what is known as the “ quantum merit” which means “as much as is
deserved”. Since the work was done also increased the value of your property, it would be
immoral if the worker doesn’t get paid for the extra work and materials. The payment might be
lesser than the normal cost but the quantum merit will apply. The a quasi-contract.

E-contract

When a contract is formed by the use of electronic device and means,it is called an electronic
contract or an e-contract.the electronic means and devices may include emails, tests, telephone,
digital signatures etc. They are also know as the cyber contract, the EDI contract or the electronic
data interchange contract. The terms of the contract are listed by electronic means or implied by
the actions of the users.

Types of contract-Based on validity

now that you know what a contract is, can you identify the various types of contracts? proper
knowledge of the types of contract classified as per their validity.

Types of contracts on the Basis of Validity

Chapter 2 of the Indian contract act,1872 discusses the validity or enfroceabitity, we have have
five different types of contract as given below.

Valid contracts

The valid contract as discussed in the topic on “essentials of a contract is aggrement that is
legally binding and enforceable. it must qualify all the essentials of a contract

Void Contract Or Agreement

The section 2(j) of the Act defines a void contract as “A contract which ceases to be enforceable by
law becomes void when it ceases to be enforceable”. This makes all those contracts that are not
enforceable by a court of law  as void.

We have already stated examples of these kinds of contracts in the “Essentials of a Contract”.

Example: A agrees to pay B a sum of Rs 10,000 after 5 years against a of Rs. 8,000. A dies of
natural causes in 4 years. The contract is no longer valid and becomes void due to the non-
enforceability of the agreed terms.

Voidable Contract

These types of Contracts are defined in section 2(i) of the Act: “An agreement which is enforceable
by law at the option of one or more of the parties thereto, but not at the option of the other or others,
is a voidable contract.” This may seem difficult to wrap your head around but consider the
following example:

Suppose a person A agrees to pay a sum of Rs. 10,0000 to a person B for an antique chair. This
contract would be valid, the only problem is that person B is a minor and can’t legally enter a
contract .

So this contract is a valid contract from the point of view of A and a “voidable” contract from the
point of view of B. As and when B becomes a major, he may or may not agree to the terms. Thus
this is a voidable contract.

A voidable contract is a Valid Contract. In a voidable contract, at least one of the parties has to be
bound to the terms of the contract. For example, person A in the above example.

The other party is not bound and may choose to repudiate or accept the terms of the contract. If they
so choose to repudiate the contract, the contract becomes void. Otherwise, a voidable contract is a
valid contract.

Illegal Contract

An agreement that leads to one or all the parties breaking a law or not conforming to the norms of
the  is deemed to be illegal by the court. A contract is also illegal.

Several examples may be cited to illustrate an illegal contract. For example, A agrees to sell
narcotics to B. Although this contract has all the essential elements of a valid contract, it is still
illegal.

The illegal contracts are deemed as void and not enforceable by law. As section 2(g) of the
Act states: “An agreement not enforceable by law is said to be void.”
Thus we can say that all illegal contracts are void but the reverse is not true. Both the void contracts
and illegal contracts can’t be enforceable by law. Illegal contracts are actually void ab initio (from
the start or the beginning).

Also because of the criminal aspects of the illegal contracts, they are punishable under law. All the
parties that are found to have agreed on an illegal promise are prosecuted in a court of law.

Unenforceable Contracts

Unenforceable contracts are rendered unenforceable by law due to some technical. The contract
can’t be enforced against any of the two parties.

For example, A agrees to sell to B 100kgs of rice for 10,000/-. But there was a huge flood in the
states and all the rice crops were destroyed. Now, this contract is unenforceable and can not be
enforced against either party.

Enforceable By Law

Now let us try to understand this aspect of the definition as is present in the Act. Suppose you agree
to sell a bike for 30,000 bucks with a friend. Can you have a contract for this?

Well if you follow the steps in the previous section, you will argue that once you and your friend
agree on the promise, it becomes an agreement. But in order to be a contract as per the definition of
the Act, the agreement has to be legally enforceable.

Thus we can say that for an agreement to change into a Contract as per the Act, it must give rise to
or lead to legal obligations. In other words, must be within the scope of the law. Thus we can
summarize it as Contract = Accepted Proposal (Agreement) + Enforceable by law (defined within
the law)

Proposal or Offer
The whole process of entering into a contract starts with a proposal or an offer made by one party to another.
To enter into an agreement such a proposal must be accepted. Let us take a look at the definition and
classification of an offer and the essentials of a valid offer.

Proposal or Offer

According to the Indian Contract Act 1872, proposal is defined in Section 2 (a) as “when one person
will signify to another person his willingness to do or not do something (abstain) with a view to
obtain the assent of such person to such an act or abstinence, he is said to make a proposal or an
offer.”

Let us look at some features or essentials of such an offer

 The person making the offer/proposal is known as the “promisor” or the “offeror”. And
the person who may accept such an offer will be the “promisee” or the “acceptor”.
 The offeror will have to express his willingness to do or abstain from doing an act. Only
willingness is not enough. Or simply a desire to do/not do something will not constitute an
offer.
 An offer can be positive or negative. It can be a promise to do some act, and can also be a
promise to abstain (not do) some act/service Both are valid offers.