1.

Essential of Valid Contract

Synopsis

* Definition and Meaning of Contract

* Formation of Contract

* Types of Contracts

* Essential of a Valid Contract

* Conclusion

LAW OF CONTRACT

What is a Contract ?

According to Section 2(h) of the Act,Contract is “An Agreement enforceable by law “. According to the
Act only legal agreement are enforceable and Social agreement are not enforceable by law.

Legal Agreement means a written document that will identify the parties roles and responsibilities under
the agreement. Once the written document is signed,either manually,digitally or electronically,the
documents becomes legal binding.

For Example- Sale Deed,Gift Deed,Lease Agreement etc

Social Agreement means when a group of people agree to give up certain rights and accept a certain
authority in order to protect their other rights. The Social Contract is what allows any government to
work,but it’s important to note that government and a social contract are different things.

For Example- social agreement are not considered a contract as they do not create any legal obligations
on any party specifically. Every citizen of India should follow the rules framed by Indian Constitution
SECTION 10 of the Indian Contract Act 1872 lays down that “ All Agreements are Contracts if they are
made by the free consent of the parties,competent to contract for a lawful consideration and with a
lawful object and are not hereby expressly declared to be void “

ESSENTIALS OF A VALID CONTRACT

For a Contract to be Valid,it must be enforceable by law and must include the following essentials given
under section 10 of the Indian Contract Act.

• TWO PARTIES - A Valid Contract must include a minimum of two parties; One that
makes the Offer and the Other to whom the offer has been made and who must accept the proposal or
offer for it to become enforceable.

• COMPETENCY OF THE PARTIES - The Parties must be legally competent to enter into a
Contract.According to Section 11 of the Indian Contract Act,a person who is of the age of majority as per
law to which he is subject and who is of sound mind and is not disqualified from contracting by any law
to which he is subject.

• FREE CONSENT - The Parties Entering into a Contract must give their Free Consent to
the Contract.Consent is said to be free when it is not caused by Coercion,Undue
Influence,fraud,misrepresentation,mistake. Section 13 to 22 of the Contract Act explain about free
consent.

• LAWFUL CONSIDERATION AND OBJECT - The Contract must involve Consideration as

per the principle of “ quid pro quo” that is “ Something in Return “. A Valid Contract must include a
Consideration that must be Something of Value. Hence the Consideration and Object of an agreement
must be lawful.An agreement without lawful consideration and object is void.Section 23 to 25 of the Act
explain about the lawful consideration and Object.

• VOID CONTRACT - The next essential of a Valid Contract is that the agreement should
not be expressly declared to be Void by the Contract Act.The agreement should not be opposed to
public policy.

• WRITING - The Provision of Section 10 of the Contract Act provides that wherever the
provisions of any other law requires,the Agreement must be in Writing. The immovable property must
compulsorily be registered under the Transfer of Property Act,Indian Registration Act,Indian Stamps Act.
Such transfers of immovable property not only be in Writing,but it must be registered according to the
provisions of the existing laws.

Thus if any of the above essentials are lacking then the agreement becomes invalid.

TYPES OF CONTRACT

1. VALID CONTRACT- A Contract is said to be Valid Contract when the Contract has all the
essential ingredients present in it.

2. VOID CONTRACT - A Contract is said to be Void when a Contract is Void from the
beginning when it was made, and which cannot be enforceable by law.It lacks enforceability.A Void
Contract cannot be converted into Valid Contract at Option of the parties. [ section 2(g) ]

3. VOIDABLE CONTRACT - A VOIDABLE Contract is a Contract,not a void Contract.This

Contract can be Affirmed or Rejected by the Parties. This Contract Starts as Valid but later there will be
an Option for the parties to move forward with it or deny it. It can be declared invalid at the request of
any party because of any defects.

For Example- Contract is VOIDABLE only when it is induced by Coercion,Undue influence,Fraud

or misrepresentation.

4. ILLEGAL CONTRACT - When the Subject matter or the terms or Condition are not
accepted by Society and it is already unlawful then it becomes an illegal Contract.

For Example - A contract of waging war, or Criminal Conspiracy etc

FORMATION OF CONTRACT
A Contract is Formed between two parties who agree to provide some sort of service or delivery of
goods in exchange for money. The Contract,or legal agreement, is formed when the following elements
are met:

1. Offer

2. Acceptance

3. Consideration

4. Mutual Assent

5. Legal Capacity

With regard to Contract Formation between such parties,one party generally initiates the formation of
the contract by making an offer to the other party.After that, the receiving party must accept the offer
as is. Once this happens, the parties will need to exchange something of consideration. This can be
something of monetary value or a promise to perform under the contract.

Thereafter, the parties will have to prove mutual assent. If one of the parties was forced or coerced into
the contract, then mutual assent doesn’t exist, and the contract is not legally binding or
enforceable.Lastly,the parties must prove that they are both legally capacitated.

Difference between VOID and VOIDABLE Contract

VOID CONTRACT VOIDABLE CONTRACT

1. It is often rigid in Nature It is Flexible in Nature

2. A Contract is Void,when it is immoral,impossible,opposed to public policy,without consideration,or
when it was made with a minor Contract is VOIDABLE only when it is induced by coercion,undue
influence,fraud or misrepresentation

3. A Void Contract cannot be converted into a valid contract,even at the option of the parties thereto
A VOIDABLE Contract can be converted into a Valid Contract,at the option of the parties

4. It Cannot give any legal rights. It is nullity A VOIDABLE contract is legally effective unless and until
it is disputed and set aside by person entitled to do so.

2. Offer

Synopsis

*Definition and Meaning of offer

* Essential of a Valid Offer

* conclusion

OFFER [ Sec 2(a) ]

OFFER and PROPOSAL are similar terms. According to 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 to such act or abstinence,he is said to make a proposal “.

Generally the term “ OFFER “ and “PROPOSAL “ means that to say that you are willing to do something
Or to say what you are willing to give for something.

The Person WHO MAKES the Offer or Proposal is called “ PROPOSER” or “ OFFEROR” .

The Person to WHOM the Offer or Proposal is MADE is called “ PROPOSEE” or “ OFFEREE “.

Equivalent Words

OFFER = PROPOSAL
 OFFEROR = PROPOSER

OFFEREE = PROPOSEE

For making an agreement,there must be a proposal and it’s acceptance. The Proposal or Offer is the
starting point of an agreement.

ESSENTIALS Of A VALID OFFER

1. Purpose Of Offer

2. Intention and Legal consequences of Offer

3. Communication of Offer

4. Invitation to Offer

5. Assent Of Other Party to a Offer

Explanation:-

1. PURPOSE OF OFFER : The terms of the Offer must be definite or Capable of being made
definite.if the Offer is uncertain an essential element is lacking and it cannot be accepted. The Offer as
defined in Section 2(a) has two purposes. In the first place an expression of the Offeror’s willingness to
do or to abstain from doing something.Secondly,it is made with a view to obtaining the assent of the
Offeree to the proposed act or abstinence. Section 29 of the contract act provides that “Agreements,the
meaning of which is uncertain,or capable of being made certain are void “. Vague or Uncertain terms do
not make an offer.Unless all the material terms of the contract are agreed there is no binding contract
between the parties.

For Example:- “A” Offers to pay “Good Price “ for imported leather Sofa Set of “B”. This Offer is
uncertain and cannot be accepted. [ Because the consideration amount is not certain]

Case Law:- Taylor V/S Portington (1855)

In this case “A” promised “B” to take a lease of a house for 3 years at 85,000 rupees per annum,if
the house were put into through repair and the drawing rooms decorated according to present style.
The Court held that the terms stated in this case were too uncertain and that the promise could not be
enforced.

2. INTENTION and LEGAL CONSEQUENCES:- The term “ INTENTION “ is not defined in the
Indian Contract Act 1872. The Offer arises from the “ INTENTION “. Section 2(a) uses the word
“Willingness “ which is equal to “Intention “. The Offer must be made with willingness to do business on
the proposed terms and Conditions. The use of the word “Willingness “ shows that intention to be
bound by the proposal when accepted is an integral part of the concept of agreement.Every Party who
offers,must know the legal consequences of the offer.An Offer or its acceptance should be made with
the intention of creating legal relations. The intention of the parties is naturally to be known from terms
of the agreement and the surrounding circumstances. Hence Intention must be one to give rise to legal
consequences is the primary requisite of a Valid Offer,which later turns into an agreement and creates
legal relations between the parties.

For Example:- If “A” invites “B” to dinner and then forgets all about it and goes out of town on the
stipulated date and time. Here “B” cannot claim compensation for expenses and inconvenience as there
was no intention to create a legal obligations.

Case Law:- Balfour V/S Balfour (1919).

In this case the Husband promised to pay 30₹ to his wife every month. On his failure to pay, the
wife sued him for the recovery of the amount. The Court held that she could not recover as the
agreement did not create any legal relationship. The Court observed that there is no contract between
the parties. The parties never intended to make bargain which could be enforced in law. The husband
expressed only his intention to make this payment and he promised to make it and was bound in honour
to continue it so long as he was in a position to do so. The wife on the other hand,made no bargain at
all. Offers made in just or excitement cannot be construed as offers as they lack contractual
intention,and are made without any thought or intention of creating binding obligation.

3. COMMUNICATION:- An Offer must be Communicated to the Offeree. Every Offer must

be made known to the offeree otherwise he will not be in a position to accept such as he will have no
knowledge of the Offer. The mere desire to enter into an agreement will not constitute an offer.
Communication may done in the following ways:-

I) In Person:- by words of mouth,by writing,by conduct.

II) By Post, By E-mail ,By WhatsApp,By SMS,etc.

 4. INVITATION TO OFFER:- An Offer must be distinguished from an invitation to offer
because both are different things.Thus the following are not offers but only invitation for an Offer.

I) A Catalogue of goods for sale;

II) The mere quotation of terms by trader;

III) Advertisement for sale or auction of goods;

IV) Advertisement for tenders

But the following are Offers

I) A tender to supply goods at a certain time;

II) A request for a Loan;

III) Bids in an Auction Sale;

Hence an invitation to make an offer is a mere statement of the person’s intention or declaration of
his willingness to enter into negotiation. It is an advertisement inviting others to make an offer.It is not
an Offer which is capable of being turned into contract by acceptance.Price lists and
catalogues,advertisements in newspapers and enquiries from customers are considered to be merely
statements of intention.

Case Law:- Pharmaceutical Society of G B V/S Boots Cash Chemists ( 1921)

In this case a Shop keeper displays goods for sale in a Shop with price tags attached to each
article.The Court held that this is only an invitation to an offer or expression of an intention to sell. The
shop keeper cannot be compelled to sell the goods at the price mentioned.

5. ASSENT OF OTHER PARTY:- The Proposal must be made with a view to obtaining assent
of the other party.Since the Contract requires “Consensus ad idem” (Consent at the same time), unless
the offeree is aware of the offer,there can be no acceptance and consequently no contract. The terms of
an offer must be definite.

Conclusion

Thus by above explanation we can say that section 2(a) reveals three essential elements in an offer:

I) Expression of willingness to do or not to do something

II) Made to another person that is a person cannot make an offer to himself

III) With the Object of gaining the consent of the other person to such act or abstinence

Difference Between OFFER and INVITATION TO OFFER

OFFER INVITATION To OFFER

1. Offer is the First Step For Formation of a Contract When a Person expresses something to another
person to invite him to make an offer,it is known as invitation to offer

2. Offer is made to get accepted Invitation to offer is made to get Offer

3. Object of Offer is to enter into Contract It’s Object is to receive Offers from people after which
Contract will be created

4. Offer becomes an agreement when it is accepted An invitation to Offer becomes an Offer

5. Offer gives rise to legal consequences It does not give rise to legal consequences

6. In an Offer the person making the proposal/Offer is called as Offeror/Proposer In the invitation
to Offer the party,who has put or arranged the goods or advertised in any media can not be termed as
Offeror.

7. In the Offer,the Offeror must signify his intention/Willingness In an invitation to offer the party need
not signify his intention/willingness

8. Illustrations:- An advertisement for the lost Goods Illustration:- Price List in any shop, hotel is an
invitation to offer

WHEN “AN INVITATION TO OFFER “ BECOMES “ OFFER “?

In the Book shops the books are arranged in systematically. The Customers may go in and pick up books
and look at them even if they do not actually buy them.Arranging the books systematically by the shop
owner and seeing the books by the customer ,no contractual obligations arises between them.Until this
stage, it is an invitation to offer.If the customer wants to purchase a book,he has to pick up that book
and comes to the counter and has to say to the shop owner. “ I Want to Buy this Book “. If the Shop
keeper wants to sell it,he tells the customer. “ Welcome,pay the amount “. Then Contractual Obligations
arises between them. If the Shop Keeper does not want to sell the book,he may say “ Sorry,Sir.I Cannot
sell the book to you.Because this is the only copy I have and I have already promised to one of my
customers “. Then No contractual relation arises between them.

INVITATION To OFFER

The term “Invitation to Offer “ is not defined in Indian Contract Act 1872. Invitation To Offer means
“Where a party,without expressing his final willingness,proposes certain terms on which he is willing to
negotiate.He does not make an offer,but he only invites the other party to make an offer on those
terms. It is called “ Invitation to Offer “.

Example for Invitation to Offer:-

1. An advertisement in the newspaper “house to let” or “house for sale”.

2. An advertisement of the bookshop owner that he has a stock of books to sell.

3. An advertisement of the cloth shop owner that he has a stock of clothes to sell

4. A Shopkeeper’s catalogue of prices,Hotel Menu Cards,etc;

5. A banker’s catalogue of charges

6. A Tender advertisement

The above illustration are not “offers “. They are only “ Invitation to Offer “. Because there is “ no final
willingness “ from the said of the party. Now itself the party cannot be termed as “Offeror “. Invitation
to Offer is different from a legal offer. “Invitation to offer “ does not possess the legal requirements of
an offer,which are embodied in section 2(a). It is just like an enquiry.

Equivalent Terms

Invitation to Offer = Offers to Negotiate.

Case Laws:-

Harvey V/S Facie. ( 1893)

The Plaintiff telegraphed to the defendant :- “ will you sell us your Bumper Hall Pen Estate? ( a name of
the estate) Telegraph lowest cash price “.

The defendant replied by telegram : - “ Lowest price for Bumper Hall pen estate is 900£”

The Plaintiff sent their last telegram:- “ We agree to buy Bumper Hall pen Estate for 900£ asked by You “

The defendant did not reply. The Plaintiff send for specific performance of the contract. Later, the
defendant refused to sell the estate. The Plaintiff sued the defendant for breach of the contract.

Judgement:- The Court held that the above correspondence did not conclude as a successful contract. In
their telegram, the plaintiff asked the defendant two questions:-

(1) About their willingness to sell their estate

(2) The lowest rate.

It was an Enquiry.It was an invitation to offer.The defendant answered only for the Second question.
They did not answer the first question about “Willingness “. It is one of the fundamental principles of
Law of Contract is that a Valid Offer must contain willingness. Hence mere statement of the lowest price
itself was not an offer. Therefore,no contract arose between the plaintiff and defendant and the
defendant were not bound to it.

Mac Pherson V/S Appanna AIR 1951 SC 184,

In this case the plaintiff made an offer to the agent of the defendant to purchase the defendant’s
building for Rs 6000/- . In response to the request of the agent, the defendant said that he would not
accept less than Rs 10,000/- . The Plaintiff agreed to this price but the defendant sold the property to
another for a still higher price.

The Supreme Court has held that a mere statement of the lowest price does not amount to an offer
to sell at that quoted price to the party making an enquiry.

Harris V/S Nickerson, (1873)

In this case the Defendant advertised to auction certain furniture at a certain place at a certain date. The
Plaintiff relying on the advertisement and intending to buy furniture travelled all the way to the place of
auction spending money on transport. When the plaintiff reached the place of auction he found the
furniture withdrawn from the auction. The Plaintiff filed a suit for breach of contract.

The court held that the announcement or advertisement to hold an auction is not an offer but only
an invitation to offer and therefore the breach of contract does not arise.

State Aided Bank of Travancore Ltd. V/S Dhrit Ram AIR 1942

It was held that a banker’s Quotation giving particular of interest on deposits by way of reply to an
enquiry is not an offer but only an invitation to offer.A contract arises only if application form for
opening an account is accepted by the banker by the issue of a deposit receipt.

3. Consideration

* Definition and Meaning of Contract

* Section 10

* Section 25

* Explanation of Section 2(d)

* Characteristics of Consideration

* Essential of Consideration

* Exception of Consideration

* Conclusion

[20:37, 7/14/2023] vinay sir RCL: CONSIDERATION [Sec 2(d)]

Consideration is one of the essential elements of a Valid Contract. The word “Consider” is derived from
the Latin word “Considerare” and the meaning of the word “Consideration “ is “Payment or Reward “.

When a Party to an agreement promises to do “Something “,he must get “Something “ in return for it. If
he does not get something in return,the contract is not valid.This “Something in Return “ is called
“Consideration “. Consideration is the foundation of every Contract.It is the sign and symbol of a
bargain. Consideration is a legal evidence of the intention of the parties to effect their legal relation.

According to Blackstone, “ Consideration is the recompense given by the party contracting to the other
“.

According to Justice Patterson “ Consideration means something which is some value in the eye of law.
It may be some benefit to the plaintiff or some detriment to the defendant “.

In Kusonia Bhatia V/S State of U.P AIR 1981

In this case court held that “ Consideration means a reasonable equivalent or other valuable benefit
passed on by the Promisor to the Promisee or by the transferor to the transferee”.

In Currie V/S Misa (1875)

In this case it is stated that “ A Valuable consideration in the sense of the law,may consist either in some
right,interest,profit or benefit accruing to one party or forbearance,detriment,loss, or responsibility
given,suffered or undertaken by the other “.

SECTION 2(d) of the contract Act provides that “ 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,promises to do or abstain
from doing something,such act or abstinence or promise is called a consideration for the promise “.
Thus,Consideration is the price of a promise,a return or quid pro quo for a promise made.

According to Section 10 of the Act,All agreement are contract which are made by the

(I) Free Consent of the Parties

(II) Competent to Contract

(III) For Lawful Consideration, and

(IV) with Lawful Object.

Hence a “lawful consideration” is the most essential element of a Valid Agreement to become a
Contract.
SECTION 25 of the Act lays down that “A Contract without Consideration is Void “.

Explanation of Section 2(d) :-

Consideration may be:-

1. An Act, that is “Doing of something in a positive form “.

Example:- “A” agrees to sell goods (a positive act) to “B” for 5 lakhs. For “A”s promise, the
consideration is 5 lakhs.For “B”s promise, the consideration is the goods.

2. An Abstinence or Forbearance,that is abstaining or refraining from doing something,

that is a negative form.

Example:- “A” promises “B” not to file a suit against him if he pays him 2 lakhs. The abstinence of “A” is
the consideration for “B”s payment.

3. A promise and a return promise and law enforcers only those promises which are made
for consideration.

Example:- “A” agrees to sell his house to “B” for 15 lakhs.Here “B”s promise to pay the sum of 15 lakhs
of rupees is the consideration for “A”s promise to sell the house and “A”s promise to sell the house is
the consideration for “B”s promise to pay the sum of 15 lakhs of rupees.

CHARACTERISTICS OF CONSIDERATION:-

The law only requires that consideration should be present in the formation of contract:-

1. The Consideration should be lawful and not unlawful.

For Example:- Where “A” asks “B” to beat “C” for which he promises to pay 50,000 rupees,the
consideration for this promise is unlawful and the contract is not enforceable at law.

2. The Consideration should be real and not illusory.

For Example:- In Alliance Bank V/S Broom (1864)

In this case “A” borrows Rs 5000/ at 6% interest from “B”,repayable on demand. “B” made the
demand and on failure of “A” to pay,he was about to file a suit against “A” to get back his money. “A”
requested “B” to postpone the filing of the suit and agreed to pay interest at the rate of 9%. On refusal
to pay interest at the rate of 9% “B” filed suit and got decree against “A”. Consideration here was real.

3. It must be of some Value. The Consideration must be of Some Substantial Value.

For Example:- A promise given by a master of a ship to his sailors in the course of voyage,to give them
extra wages if they continued service till the voyage was over. It was held that without Consideration,for
the promise merely undertook to fulfill conditions of an existing contract.

LEGAL RULES OR ESSENTIAL FEATURES OF CONSIDERATION:-

According to Section 10 of the Contract Act, “CONSIDERATION “ is the most essential element of a Valid
Agreement to become a Contract. The General Rule is that “ An Agreement made without Consideration
is Void “.

The following are the legal rules or essential features of Consideration:-

1. Consideration is Essential to Every Contract.

2. Consideration must move at the desire of the Promisor and from the Promisee or any
other Person.
 3. Consideration need not be Adequate

4. Consideration must not be illusory but real and Competent

5. Pre- Existing Legal Obligation

6. Consideration must be Legal or Lawful

7. Consideration may be Past,Present or Future ( Executed,Executory and Past

Consideration)

Explanation:-

1. CONSIDERATION IS ESSENTIAL TO EVERY CONTRACT:-

A contract not supported by consideration is void and can only be called a gratuitous promise.

In Abdul Aziz V/S Masum Ali (1914)

A person had verbally promised to the Secretary of the Mosque Committee to subscribe a “sum
of money “ for rebuilding the mosque.On a suit by the Secretary to enforce this simple promise,it was
held that the promise was not enforceable as there was no consideration in the sense of benefit to the
Promisor or Defendant to the Promise.

In the words of Salmond “ A Promise without Consideration is a Gift; One made for Consideration is a
bargain “.

2. CONSIDERATION MUST MOVE AT THE DESIRE OF THE PROMISOR AND FROM THE
PROMISEE OR ANY OTHER PERSON:-
 Consideration may move from the promisee or any other person. Under English Law, the
Consideration must move from the promisee only. Under Indian Law, the Consideration may move from
the promisee or any other person,that is even a Stranger.

ENGLISH LAW

In Tweedle V/S Atkinson (1861)

In this case an agreement was entered by the father of the bride and the father of the
bridegroom.According to the agreement,the bride’s father should pay 200 pounds to bridegroom in
consideration of the bridegroom’s father paying the bride,100 pounds.Amount not being paid,the Son-
in- Law Sued the Father-in-Law’s estate in the hands of executors. The Court held that the promise was
unenforceable since the plaintiff was a stranger to the consideration.

INDIAN LAW

In Chinnayya V/S Ramayya (1881)

In this case “A” by a deed of Gift transferred her property in favour of her daughter “B”, with the
instructions that “B” should pay her uncle “C”,a certain amount of money annually.”B” by an agreement
on the same date with “C”,promised to pay him the agreed amount.Subsequently “B” refused to pay the
amount to “C” on the ground that there was no consideration from “C”. “C” sued “B” to recover the
amount.It was held that there was sufficient consideration for the promise of “B” to “A”s brother and as
such she was liable to pay.

Thus, the rule under English law is that consideration must move from the promisee,whereas under the
Indian Law the consideration may move from the promisee or from any other person.

3. CONSIDERATION NEED NOT BE ADEQUATE:-

Consideration means “Something in Return “. This “Something in Return “ need not necessarily be equal
in value to “Something Given “. The Courts will not inquire into the adequacy of Consideration. Court’s
adhere to the principle that “Consideration need not be adequate, but must be real”. However
according to section 25 of the Act,in case the plea of coercion,fraud or undue influence is raised by a
party to a contract,the adequacy of consideration will also form the part of the evidence to be
considered in deciding the case.

Example:- “A” sells his horse worth of Rs 1,00,000/- to “B” for Rs. 10,000/- willingly. The agreement is a
contract notwithstanding the inadequacy of consideration.

Case Law:- Thomas V/S Thomas (1842)

In this case court accepted as good consideration a promise to pay one pound per year as annual
rent for a big house. The rent though nominal and grossly inadequate did not render the contract
invalid. Although inadequacy of consideration by itself is not a ground for treating the contract as invalid
but it may be a factor which the court may take into consideration to know whether the consent of a
party was free or not.

The Courts in India will not inquire whether a promise is equivalent to the promise obtained.In
other words,the law only insists in the presence of consideration and not on the adequacy of it. The law
leaves the parties free as far as possible to make their own bargains.Adequacy is for the parties to
decide at the time of making contract.

4. CONSIDERATION MUST NOT BE ILLUSORY BUT REAL AND COMPETENT:-

Consideration should be real and should not be unsubstantial,impossible,illusory,unreal or

purely a moral obligation. The Consideration must be real,competent and of some value in the eyes of
the law.There must not be physical impossibility,legal impossibility,uncertainty and illusory
consideration.

The Following are not real Consideration:-

I) “A” promises to “B” a sum of money in consideration of “B”s promise to bring a dead man to life.Here
the consideration,namely,”B”s promise to bring the dead man to life is unreal because “B”s promise is
absurd and physically impossible. [Physical Impossibility]

II)”A” owes Rs 5000 to “B”. He promises to pay Rs 500 to “C”, the servant of “B”. “C” in return promises
to discharge “A” from the debt.”C”s promise is unreal because he,being a servant,cannot discharge a
debt due to his master. [Legal Impossibility]
III)”A” engages “B” for doing a certain work and promise to pay a “Reasonable Sum “. There is no
recognised method of ascertaining the “Reasonable “ remuneration. The promise is not enforceable as it
is uncertain. [ Uncertain Consideration]

IV)”A” promises to give “B” 25 pounds of Gold brought from the Sun. This Consideration is sham and
Illusory.

The Following are Real Consideration:-

I) “A” has a right to Sue his debtor “B” for Rs 15000.But he postpones swing as “B” agreed to pay Rs.
1000 more.Such “Forbearance “ is valuable consideration for promise of “B”. [ Forbearance to Sue]

II) “A” sues to recover a debt of Rs. 12,000/- from “B”. “B” denies the whole debt and promises to pay
Rs. 10,000/- to “A” as a sort of compromise.Thus Compromise of “B” is supported by consideration and
is Valid. [ Compromise of a dispute claim]

III) Consideration for an agreement must be lawful.It must not be illegal,immoral or opposed to public
policy. [ Competency]

5. PRE- EXISTING LEGAL OBLIGATION:-

If a person is already bound by statutory or official duty to do a particular act,the performance of

the act cannot be the consideration for a promise.Similarly,an agreement to perform a contractual duty
with a person to whom it is already owed is not made for consideration.However,a promise by “A” to
perform an existing obligation to “B” will suffice to support a promise by “C” to “A”.

6. CONSIDERATION MUST BE LEGAL OR LAWFUL:-

Section 23 of the Indian Contract Act states that:-

“ The consideration or object of an agreement is lawful,unless:-

• It is forbidden by law,or

• Is of such a nature that,if permitted,it would defeat the provisions of any law; or
 • Is Fraudulent; or

• Involves or implies injury to the person or property of another;or

• The Court regards it as immoral,or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said to be unlawful.Every

agreement of which the object or consideration is unlawful is void”.

For Example:-“A” promises to obtain for “B” an employment in the public service, and “B” promises to
pay Rs. 10 lakhs to “A”. The agreement is void as the consideration for it is unlawful.

7. CONSIDERATION MAY BE PAST,PRESENT or FUTURE:-

Section 2(d) provides that the consideration may be past,present or future.

• Present Consideration:- When Consideration is given simultaneously with promise,that

is at the time of the promise,it is said to be present consideration,Sec 2(d) “…… does or abstains from
doing…….” Shows the consideration for the present tense.

• Past Consideration:- An Act which has already been done in response to the promise is
called as “Past Consideration “. The words Sec 2(d) “….. has done or abstained from doing…..” denote
the consideration for the past. When consideration by a party for a present promise was given in the
past,that is before the date of the promise,it is called past consideration.

• Future Consideration:- The words in sec 2(d) “….. or,promise to do or to abstain from
doing…..” denotes the future consideration.When consideration from one party to the other is to pass
subsequently to the making of the contract,it is future consideration .

EXCEPTIONS To GENERAL RULE OF CONSIDERATION

The Basic Principle is that “An Agreement without Consideration is Void “. However,an agreement made
without consideration is enforceable under these occasions.These circumstances are provided in Section
25.

A) It is in writing and registered [Sec 25(1) ]

B) It is a promise to compensate for something done [ Sec 25(2) ]

C) It is a promise to pay a debt barred by limitation law [Sec 25(3)

EXPLANATION:-

1. Promise made on account of natural love and affection [ written in writing and
registered ]

If an agreement is expressed in writing and registered under law in force and if it is made on
account of natural love and affection between the parties closely related to each other,then such
agreement is enforceable,even if there is no consideration.

The following condition are necessary

(I) The agreement must be between near relatives.

(II) It must be made on account of natural love and affection.

(III) It must be expressed in writing.

(IV) It must be registered under the law governing the registration of documents.

Illustration:- “A” for natural love and affection promises to give his son “B” Rs 10 lakhs. “A” puts
promise to “B” into writing and registered it. This is a Contract.

Venkata swamy V/S Ranga swamy (1903)

“A” on account of natural love and affection,promised to pay the debts of his younger brother
“B”. The promise was put in writing and registered. The agreement was held valid and binding.
Ram Das and others V/S Kishan Dev and another (1986)

In this case a family settlement between cousin brother and sister was made in writing and
registered and made on account of natural love and affection between the parties,it was held that even
if no material consideration was paid by cousin brother,they were entitled to a share in property
according to settlement.

2. Promise to Compensate for Voluntary Services

“ Voluntary Service “ means “service done without any request”. According to section 25(2),a
promise to pay for the past voluntary service is binding even though there is no consideration.

The following conditions are necessary

(I) The act/service must have been done voluntarily

(II) The act/service must be to the Promisor

(III) The Promisor must have been in existence at the time when the service was done.

(IV) The intention of Promisor must have been to compensate the promise

(V) The Promisor must agree to compensate the promisee’s voluntary service.

(VI) The Service rendered must also be legal

Illustration:-

• “A” finds “B”s wallet and gives it to him.”B” promises to give “A” Rs 2000/-. This is a
Contract.
 • “A” says to “B” at the risk of your life,you saved me from a serious accident. “A”
promises to pay Rs 50,000/-. This is a Contract.

Sindhu V/S Abraham

Sindhu,rendered services to a minor Abraham. Abraham,on becoming a major,promised Sindhu to

give charges for the past service.Here,the promise of Abraham is later to the act of Sindhu.So,it is a past
consideration.It was held that the contract could be enforced.

3. Promise to pay a time barred Debt:-

A”Time Barred Debt “ means that if a debt remains unpaid or unclaimed for a period of
three years,then such a debt becomes legally irrecoverable.

A promise made by a debtor to pay a time barred debt is enforceable even though there is no
consideration for such agreement.However,the agreement must be in writing and must be signed by the
debtor or by his authorised agent. The promise may be to pay the whole or any part of the debt.Hence
the promise to pay time barred debt must be an express one and cannot be held to be sufficient if the
intention to pay is unexpressed and has to be gathered from a number of circumstances.

Illustration:- “A” owes “B” Rs 5000/- but the debt is barred by the Limitation Act. “A” signs a written
promise to pay “B” Rs 2000/- on a account of his debt.This is a contract.

Debi Prasad V/S Bhagwati Prasad (1943)

The court held that if an acknowledgment of a debt was with an undertaking to pay interest,then
it was an agreement with a promise to pay the debt and hence covered under section 25(3). The
Following are also Exemptions to the Consideration:-

1. GIFTS:-

Under section 25 explanation 1,the rule that’a contract without consideration is void’ does not
apply to gifts

If a property is gifted by registered deed and attested by two witnesses,then gift is held valid.
 The rule “No Consideration,No Contract “ does not apply to completed gifts.Gifts does not require
any consideration.Absence of consideration shall not affect the validity of any gift actually made.Gifts
once made cannot be recovered on the ground of absence of consideration.

2. Contract Of Agency:-

According to Section 185 of the Contract Act,” No Consideration is necessary to create a contract
of agency “.

3. Charitable Subscription:-

Agreement created for the purpose of charitable subscription or donation is not generally
enforceable,because such agreement is not supported by consideration.But if sufficient steps have been
taken towards the achievement of the object depending on the promise for donation,then such
agreement is enforceable.

4. Remission by The Promisee of performance of the Promise:-

A creditor can agree to give up a part of his claim and there need be no consideration for such an
agreement.Similarly,an agreement to extend time for performance of a contract need not be supported
by consideration.

5. Negotiable Instruments:-

Consideration is not necessary in case of negotiable instruments where consideration is

presumed to have been received.

6. The following agreement have been held to be valid,through without consideration:-

I) An Agreement in the nature of a bonafide dispute as to the right of succession to a priestly office.

II) A mutual agreement to avoid further litigation

III) A Family arrangement providing for the marriage expenses of female members of joint Hindu
family on a partition of the joint family property.
 IV) An Agreement entered into by a Hindu husband with his wife in settlement of a doubtful claim for
maintenance.

4. Acceptance

* Definition and Meaning of Acceptance

* Kinds of Acceptance

* Essential for Acceptance

* Conclusion

[21:25, 7/14/2023] vinay sir RCL: ACCEPTANCE

Acceptance means the expression of willingness to be bound by the terms of the offer. The person who
gives such acceptance of the offer is called offeree or acceptor. Acceptance of an Offer/proposal is very
essential for formation of a contract. A Contract is created only after an Offer is accepted.

Section 2(b) of the Act defines acceptance as “ When the person to whom the proposal is made signifies
his assent thereto the proposal is said to be accepted. A proposal,when accepted becomes a promise “.

The person who makes the proposal is called Proposer or Offeror or Promisor and the person to whom
the proposal is made is called the Proposee or promisee or offeree or acceptor.

A Contract is created only after an offer is accepted. Before the acceptance is made neither party is
bound thereby. At that stage the offeror is free to revoke or withdraw his offer, and the offeree is free
not to accept the offer or to reject the same. After the offer has been accepted,it becomes a promise
and it binds on both the parties to the promise. After acceptance,each party becomes legally bound by
the promise made by him through the medium of offer and acceptance of it. Once an offer is
accepted,an agreement or a promise arises between the Offeror and Offeree. Mathematically it may be
stated as follows
 OFFER + ACCEPTANCE = AGREEMENT

DIFFERENT MODES / KINDS Of ACCEPTANCE:-

Acceptance may be Express or Implied. According to Section 9 of the Contract Act, “ In so far as the
proposal or acceptance of any promise is made in words,the promise is said to be express. In so far as
such proposal or acceptance is made otherwise than in words,the promise is said to be implied “.

1. Express Acceptance

(a) Written Acceptance

(b) Oral Acceptance

2. Implied Acceptance

Explanation

1. EXPRESS ACCEPTANCE

When the acceptance is made by words or in writing then it is called express acceptance. Express
acceptance may further be divided into following types

(a) Written Acceptance:- When acceptance is made in writing,then it is called as written acceptance.

(b) oral Acceptance- when acceptance is made by spoken words,then it is called as oral acceptance.

2. IMPLIED ACCEPTANCE
 Here the acceptance is inferred from the conduct of the offeree or surrounding circumstances
and hence called implied acceptance. In implied acceptance,there is no usage of words for accepting the
offer,but it is inferred by Conduct.

For Example:- Buying a ticket from the conductor while travelling in a bus ,inserting a coin in a weighing
machine and getting the weight measurement card from the machine are examples of implied
acceptance.

Thus According to Section 9 of the Contract Act,” In so far as the proposal or acceptance of any promise
is made in words, the promise is said to be express. In so far as Such proposal or acceptance is made
otherwise than in words, the promise is said to be implied “.

ESSENTIALS OF VALID ACCEPTANCE:-

1. Acceptance must be by the offeree and non else

2. Acceptance must be absolute and unconditional

3. Acceptance must be Communicated

4. Acceptance must be in the Mode Prescribed

5. Acceptance must be given within a Reasonable Time

6. Acceptance must be after an Offer

7. Acceptance should be made while the offer is still subsisting

8. Acceptance by performing conditions,or receiving consideration

9. A Proposal Once Rejected Cannot be Accepted Unless it is Renewed

 10. Death of Offeree

Explanation:-

1. Acceptance must be by the offeree and none else:-

Acceptance must be made by the person to whom the offer is made.When an offer is made
to a specific individual it must be accepted by that particular individual only. If it is made to a special
class of persons it can be accepted by any one from that class.when an offer is made to a general public
it can be accepted by any one from that public.

2. Acceptance must be Absolute and Unconditional:-

Acceptance must be Absolute and Unconditional.If it is a Conditional acceptance it

becomes a Counter Offer. Again that Counter Offer must be accepted by the offeror.Then only Contract
results.According to section 7 of the contract Act “ In order to convert a proposal into a promise,the
acceptance must be absolute and unqualified “. That is to say,until there is such an acceptance the stage
of negotiation has not been passed and no legal obligation is imposed.

For Example:- “H” offered to sell his property to “W” for 1000 pounds. “W” in reply made an offer of 950
pounds. He refused this offer.Subsequently “W” wrote that he was prepared to pay 1000 pounds.It was
held that no contract had been made between the parties because “W” had rejected the original
proposal.A counter offer is thus no acceptance of original

In Neale V/S Merret (1930) In this case “M” offered his land to “N” for 280 pounds.”N” accepted the
offer. He sent a cheque for 80 pounds along with the letter of acceptance to “M”. He further promised
to pay the balance by monthly instalments of 50 pounds. It was held that the acceptance was qualified
or conditional and hence not binding.

3. Acceptance must be Communicated:-

 The Offeree after accepting the offer he must communicate the acceptance to the offeror. If the
person to whom the proposal is made remains silent and does nothing to show that he has accepted the
proposal,then no contract is formed. Mere mental acceptance without expression by words or conduct
is no acceptance.

In Felthouse V/S Bindley (1862)

“F” offered to buy his nephew’s horse for 30 pounds saying “ if I hear no more about him,I shall
consider the horse as mine at 30 pounds “. “B” did not reply, but told his auctioneer that he was not
selling the horse,as it was sold to his uncle.But the auctioneer sold it by mistake to a third party. “F”
sued “B”. It was held that there was no communication of acceptance.Mental acceptance or
uncommunicated acceptance does not result in a contract. Mere silence cannot be regarded as
acceptance of the offer.

4. Acceptance must be in the mode prescribed:-

If the proposer prescribes the mode or manner of acceptance,the acceptance must be made in
accordance with the mode prescribed.

According to section 7(2) of the Contract Act, the acceptance must be,” expressed in some usual and
reasonable manner,unless the proposal prescribed the manner in which it is to be accepted “. It means
that if the manner of acceptance has been prescribed by the proposal, the acceptance has to be in that
prescribed manner,otherwise the same may be made in some usual or reasonable manner.

Usual and reasonable manner of acceptance means the manner which is usually adopted in a particular
kind of transaction according to the usage or custom of trade. Acceptance by post,telegram,telephone
or through personal messenger may be considered to be a usual manner of acceptance.

5. Acceptance must be given within a Reasonable Time:-

If the Offeror prescribes a prescribed time then the acceptor must give his acceptance within the
prescribed time otherwise he must communicate his acceptance within a Reasonable Time.If the offer
stipulates a period of 15 days,time would run from the date of receipt of offer,unless the offer stipulates
that time shall run from the date of the offer,or it’s transmission.
In Shyam Boni works Pvt Ltd V/S Uttar Pradesh Forest Corporation (1990)

In this case after inviting tenders for purchase of tendu leaves the forest corporation could not proceed
to consider the tenders during the stipulated period by injunction issued by the court in certain
litigation.It was held that since the offer of the tender was not accepted within the stipulated period and
was revoked,there was no contract.

6. Acceptance must be after an Offer

There can be no acceptance without an offer. The acceptor must be aware of the proposal at the
time of acceptance. Thus,acceptance must succeed the offer.In other words,acceptance should follow
the offer and not precede.

Example:- In a company shares were allotted to a person who had not applied for them.Subsequently
when he applied for shares,he was unaware of the previous allotment. The allotment of shares previous
to the application is invalid.

7. Acceptance should be made while the Offer is still subsisting

After the Offer has been withdrawn or has lapsed,there is nothing which can be accepted.It is
therefore,necessary that the acceptance should be made while the offer is still alive and subsisting.
Acceptance after the lapse of the offer cannot give rise to a contract.Similarly,the offer is deemed to
have ended by rejection of the original offer or a counter offer. In such a case also,once the offer has
lapsed an attempt to accept the same would not give rise to any legal obligation.

8. Acceptance By Performing Conditions or Receiving Consideration

According Section 8 of the Contract Act provides that “ Performance of the condition of a
proposal,or the acceptance of any consideration for a reciprocal promise which may be offered with a
proposal,is an acceptance of the proposal “. In general offers,performance is expressly or impliedly
indicated as a mode of acceptance.

9. A Proposal Once Rejected Cannot Be Accepted Unless It Is Renewed

Offer once rejected cannot be accepted again unless a fresh offer is made.
In Hyde V/S Wrench (1840) , It was held that a Counter Offer terminated the Original Offer. A Counter
Offer proposing different terms has the same effect as a merely negative refusal; it is no less a rejection
of the original offer.An Original proposal becomes superseded by the counter- Proposal made by the
other party and would not be received even if the maker of the proposal rejects the counter offer.

10. Death Of Offeree

If an Offer is addressed to a man who dies without having accepted or refused it,his executors have
no power to accept it either in England or in India. The proposer cannot be presumed to have intended
to contract with a deceased persons estate.

Conclusion

Therefore The Acceptance of an Offer to be legally effective must satisfy the following requirements:-

1. It must be Absolute and Unqualified

2. It must be expressed in some usual manner

3. It must be by the party named in the offer;and

4. An Acceptance must be communicated to the offeror.