1

CONTRACT
UNIT-1

OFFER

(The term contract is defined in section 2 (h) of the Indian contract Act
1872 as follows:-
An agreement enforceable by law is a contract;
The term proposal is defined in section 2(a) of the Indian contract act
1872 as follows:-
WHEN A PERSON SIGNIFIES TO ANOTHER, HIS WILLINGNESS TO DO OR
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 PROPSAL. The word proposal is equivalent with the term offer
under the English Contract Act.)
A proposal made by a person must possess the following essential
characteristics:
Or requisite of a valid officer or essential ingredients of offer.
(1) Purpose of Offer:
The offer as defined in Sec.2 (a) has two purposes. In the first
place, an expression of the offer’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.
(2) An offer must be intended to give rise to legal
consequences:
For an offer to give rise to a valid contract, the parties making
such an offer must have an intention that the offer so made shall
give rise to legal consequences.
In Rose & Frank Co. V. Crompton & Bros. Ltd, two firms
entered into a contract in writing for the sale and purchase of
issue paper of certain quantity at certain agreed price. The
agreement contained a clause with the following terms.
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“This agreement is not entered into nor is the memorandum

written as a formal or legal agreement and shall not be subject to
legal jurisdiction in the law council of law courts but it is only a
definite expression and record of the purpose and intention of
the parties to which they honourably pledge themselves with the
fullest confidence that it will be carried through by each of the
parties with mutual loyalty and friendly cooperation”.
When there was a breach of contract a suit was filled claiming
damages. The Court of Appeal has held that the clause in
question which being a dominant clause clearly expresses the
intention of the parties not to enter into legal obligations and
consequently the offer cannot give rise to legal consequences.
(3) An offer must be one capable of creating legal
relationship between the parties.
Where the parties making the offer do not think of creating legal
relationship among themselves, the offer cannot give rise to valid
contract.
In Balfour v. Balfour (1919), the defendant who was employed
at Ceylon, and who had come to England, finding his wife not
keeping good health promised her that he will send her 30
pounds a month as long as she remained separately from him in
England. When there was a breach of promise, the plaintiff (wife)
filed a suit to enforce the promise. Lord Atkin held that all
agreements between the parties do not result in contracts
enforceable at court of law and the agreements between the
parties agreeing to take a walk together or extending hospitality
or the arrangements between the parties are not intended by
them to be attended to be legal consequences, as such they are
not contracts.
(4) The terms of the offer must be certain or at least must be
capable of being made certain:
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Where the terms of an offer are vague, ambiguous and not

certain or if they are not capable of being made certain, the offer
cannot give rise to a valid contract.
In Taylor v. Partington, a contract was entered into agreeing to
take a house on least for a period of three years at a rent of 85
pounds per annum provide the house was put into through
repairs and the drawing rooms are handsome decorated
agreeing to the latest modern style. The court refused the
specific performance on the ground that the term in question had
imported uncertainty into what might otherwise have amounted
to a contract enforceable at a court of law.
(5) Offer must be addressed
An offer must be addressed to the world at large or to a specific
person. An officer addressed to the world is called General offer
and the Offer addressed to a specific person is called Specific
Offer. An offer cannot take effect so as to create a binding
contract, unless and until it has been brought to the knowledge
of the person to whom it is made.
(6) Communication
An offer must be communicated to the offeree. Communication
may be done in the following ways by swords form mouth, by
writing, by conduct, by post, by telephone, by telegram, by
internet, by email, by fax, by sms, by wlex, or by radio or
television.
(7) 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.
SPECIFIC OFFER AND GENERAL OFFER
SPECIFIC OFFER: Specific offer is also known as offer to an
individual. When the offer is made to a specific or an ascertained
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person, it is known as a Specific offer or offer to an individual.

Example of Specific offer: A Offer to sell his car to B for Rs.1
Lakh. This is a specific offer, offered to an ascertained person,
i.e., B.
There must be an offer or a proposal which the person accepting
has had an opportunity of considering and which, when he
accepts he knows, it will form a binding contract. The prospect
and the acceptor must agree upon the same thing and in the
same sense. Here A offer to sell his car to B (an ascertained
person) for Rs.1 Lakh. B accepts the offer. It forms a binding
contract. It is a specific offer or an offer to an individual.
GENERAL OFFER: An offer may be either specifics or it may be
a general one. An offer is said to be specific when it is made to a
specific ascertained individual or body individuals. An offer is said
to be general when it is made to public at large. Sir John Salmond
calls specific offers as offers to individuals and general offers as
offers at large (In Carlill v., Carbolic Smoke Ball Company,
(1893) the defendants who were the proprietors of a medical
preparation “Carbolic Smoke Ball Company” advertised in the
news paper as follows:
“100 pounds reward will be paid by the Carbolic Smoke Ball
Company to any person who contracts the increasing epidemic
influenza after having used the smoke ball three times daily for
two weeks according to the printed directions supplied with each
ball. 1000 pounds are deposited with the Alliance Bank showing
our sincerity in the matter”.
The plaintiff relying on the advertisement purchased the
medicine “Smoke Ball” band used it as per the directions from
20th November, 1891 to 17th January, 1892. The plaintiff Mrs.
Carlill when she was affected by influenza filed a suit against the
defendant company claiming the reward as advertised.
It was contended by the defendants that there was no intention
to enter into legal relations as it was simply a puffing
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advertisement; that the offer was not made to any one person in
particular and that the plaintiff had not communicated her
intention to accept. The first argument was easily disposed of by
BOWEN Lj by saying: “Was it intended that the $100 should, if
the conditions were fulfilled, be paid? The advertisement says the
$1000 is lodged at the bank for the purpose. Therefore, it cannot
be said that the statement that $100 would be paid was intended
to be a mere puff. “His Lordship also exposed the fallacy of the
argument that an offer could not be made to the world at large,
when he said: “Why should not an offer be made to all the world
which is to ripen into a contract with anybody who comes forward
and performs the condition? It is an offer to become liable to
anyone who, before it is retracted, performs the conditions, and
although the offer is made to the world, the contract is made
with that limited portion of the public who come forward and
perform the condition on the faith of the advertisement.

OFFER AND INVITATION TO OFFER

An offer should be distinguished from an invitation to receive
offers, When a man advertises that he has got stock of books to
sell, or houses to let, there is no offer to be bound by any
contract. “Such advertisements are offers to negotiate- offers to
receive offers-offers to chaffer. An offer is the final expression of
willingness by the offeror to be bound by his offer should the
other party choose to accept it. This may be inferred from the
definition of “Proposal” in Section 2(a), which emphasises that
there should be the expression of willingness to do or abstain
with a view to obtaining the assent of the other. The offeror must
have expressed his willingness to contract in terms of his offer
with such finality that the only thing to be waited for is the assent
of the other party. 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 only invites the other
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party to make an offer on those terms. This is perhaps the basis

distinction between an offer “and an invitation” to receive offers.
The Privy Council in Harvey v Facey has explained the
distinction.
The plaintiffs telegraphed to the defendants, writing: “Will you
sell us Bumper Hall Pen? Telegraph lowest cash price”. The
defendants replied, also by a telegram: “Lowest price for Bumper
Hall Pen, $900”.
The plaintiffs immediately sent their last telegram stating: “We
agree to buy Bumper Hall Pen for $900 asked by you.”
The defendants, however, refused to sell the plot of land at that
price. The plaintiffs contended that by quoting their minimum
price in response to the inquiry the defendants had made an offer
to sell at that price. But the Judicial committee turned down the
suggestion. Their Lordships pointed out that in their first
telegram, the plaintiffs had asked two questions, first, as to the
willingness to sell and, second, as to the lowest price. The
defendants answered only the second, and gave only the lowest
price. They reserved their answer as to the willingness to sell.
Thus, they had made no offer. The last telegram of the plaintiffs
was an offer to buy, but that was never accepted by the
defendants. “Their Lordships are of opinion that the mere
statement of the lowest price at which the vendor would sell
contains no implied contract to sell at that price to the person
making the inquiry.”
The principle of this case was followed by the Supreme Court in
McPherson v. Appana.
The plaintiff offered to purchase a lodge owned by the
defendants for Rs. 6000. He wrote the defendant’s agent asking
whether his offer had been accepted and saying that he was
prepared to accept any higher price if found reasonable. The
agent replied: “Won’t accept less than rupees ten thousand”. The
plaintiff accepted this and brought a suit for specific
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performance. It was held that the defendant did not make any
offer or counter-offer in his cable but was merely inviting offers.
There was no assent to the plaintiff’s offer to buy at Rs 10,000
and, therefore, no concluded contract.
Examples of invitation to an officer;
(a) Quotation or catalogue- an offer is altogether different
from quotation or catalogue. Quotation or catalogues or
indicating the price of the goods do not amount to offer by
themselves. They are treated as only an invitation to an
offer. Only when public in response to that quotation or
catalogue makes an application, they are said to make an
offer.
(b) Prospectus: A prospectus issued by a company inviting
public at large to take shares in a company is not an offer
but it is only an invitation to an offer. When public in
response to that prospectus makes an application, they are
said to make an offering to take shares in the company.
(c) Voluntary retirement scheme
Where the rules of VRS (Voluntary Retirement Scheme)
framed by State bank of India offered to its employees to
opt for voluntary retirement and also provided that an
application once made by the employee cannot be
withdrawn, the Supreme Court held that the said scheme is
only an invitation to offer and, as such, the application
made exercising the option can be withdrawn before its
acceptance.
(d) Auction cases : A mere announcement or an
advertisement in the news papers to hold and auction is
not an offer an d therefore the auctioneer is entitled to
withdraw the article from the sale after making an
announcement to hold the auction. In Harris v. Nickerson,
the defendant advertised to auction certain furniture at a
certain place at a certain date. The plaintiff relying on the
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advertisement and intending to buy the 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 an offer and
therefore the breach of contract does not arise.
(e) Tenders: A tender notification inviting tenders is an
invitation to an offer and submission of a tender in
response to such notification is an offer. When the
authority inviting tenders accepts absolutely the tender
then there will be a contract and before the acceptance, a
tender can revoke his offer of tender. In Sri Durga Saw Mill
v. State of Orissa, the Government of Orissa has held an
auction on 27-09-1974 for the purpose of leasing forest
coupes. The petitioner being a successful bidder paid 10%
security deposit and the bid was subject to ratification by
the appropriate authority in the State Government as the
total value of the bid exceeded Rs. 1 Lakh. Meanwhile the
petitioner revoked his bid before the approval of his bid by
the appropriate authority. Despite the revocation by the
petitioner, his bid was accepted by the Government. The
petitioner filed a Writ Petition for the refund of security
deposit and also for issue of an order prohibiting the
Government from accepting the offer. The Orissa High
Court held that the petitioner was entitled to revoke the bid
at any time before it was finally accepted by the
government.

DISTINCTION BETWEEN OFFER AND INVITATION TO OFFER

OFFER INVITTATION TO OFFER
1. In the offer, the offeror 1. In the invitation to offer,
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has intention or the party has no such

willingness to have the intention or willingness to
contract. have the contract.
2. In the offer, the person 2. In the invitation to offer,
making the proposal is the Party, who has put or
called as the arranged the goods, or
“Offer/Promiser/Proposer advertised in any media,
. cannot be termed as
“Offeror/Promisor/Propose
r”
3. An offer, when accepted, 3. An invitation to offer may
becomes a promise. be changed as offer, but
cannot become as a
promise. It is only an
enquiry.
4. In the offer, the offeror 4. In an invitation to offer,
must signify his the party need not signify
intention/willingness. his intention/willingness.
5. An offer may be 5. There is no such division
classified into (i) General among the invitation to
Offer, (ii) Specific Offer. offer.
6. An offer contains legal 6. An invitation to offer does
requirements. not contains legal
requirements.
7. ILLUSTRATIONS 8. ILLUSTRATIONS
(a) An advertisement (a) Prince list in any shop,
for the lost goods hotel is an invitation to
or children is an offer
offer (General (b) Tender, Auction
Offer)
(b) An offer to sell
ones house at
certain rate is an
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offer. (Specific
offer)

CROSS OFFER
MEANING: When the offers made by two persons to each other,
containing similar terms or bargain cross each other in post
they are known as “Cross Offers”
PROBLEM: On 10th Oct. A offers to sell his house to B for Rs.
50,000 through a letter sent by post on the same day, i.e., on
10th Oct., B also writes to A making an offer to purchase A’s
house for Rs. 50,000. Either A or B does not know about the
other’s offer.
Solution: No contract arises between A and B. The contract can
be completed only when A accepts B’ offer or B accepts A’s offer.
Tinn vs. Hoffmann (1873 29 LT 271)
(Cross Offers – not valid)
The defendant offered to the plaintiff to sell 800 tons or iron @
69 sh. Per ton. On the same day the plaintiff also wrote to the
defendant offering to buy 800 tons @ sh. Per ton. The two letters
were crossed each other in post. The defendant could not supply
the material. Plaintiff sued the defendant. The Court of Appeal
held that they were two cross offers. And the offer of neither of
the parties having been accepted by the other. Hence there was
not contract.
Counter offer or Counter Proposal.
MEANING: An offer or proposal is made by the promise. The
person accepting the proposal is called the “PROMISE”. A
proposal when accepted becomes a promise. In order to convert
a proposal into a promise, the acceptance must be absolute and
unqualified. For a valid contract, the promise must accept the
terms and conditions of the proposal of the promise. If any term
is refused or varied or added or deleted by the offeree
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(Promisee), his acceptance merely operates as a counter offer,

When a counter-offer is made by the promise, there could not be
a contract between the parties.
Hyde vs. Wrench (1940. 3 Beav. 334)
Counter Offer
This case-law is a good example for the counter offer. In this
case, the defendant offered to sell his estate for 1,000 on June
6th. On June 8, the plaintiff made a reply offering to purchase it
for 950. It was refused by defendant on June 27. On June 29, the
plaintiff wrote that he prepared to pay 1,000. The defendant
refused. The Court of Appeal held that the plaintiff’s letter
expressing his willingness to purchase for 950. It was not an
acceptance. It was a counter-offer which terminated the original
offer.

U.P Rajkiya Nirman Nigam Ltd. Vs. Indure Pvt. Ltd. (SC 1996
SCC 667)
(Counter Proposal)
The appellant a Government Undertaking tenders. The
respondent, one of the tenderers, made counter proposals for the
performance of the work. Since the tenders the source of the contract
between the parties had not transformed into a contract, even if the
proposal and counter proposal are assumed to be constituting an
agreement, it is a contingent contract until it was accepted by the
appellant. By operation of Section 32 of the Contract Act, the counter-
proposal of the respondent cannot be enforced since the event of
entering into the contract with the appellant had not taken place.
ACCEPTANCE

DEFINITION
Section 2 (b) defines acceptance as follows:
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When the person to whom the proposal is made signifies this assent
thereto, the proposal is said to be accepted. A proposal, when accepted,
becomes a promise.
Thus “acceptance” is the assent given to a proposal, and it has the
effect of converting the proposal into promise.
COMMUNCIATION OF ACCEPTANCE
Acceptance by external manifestation or overt act
The definition clearly requires that the assent should be signified. It
may be signified or expressed by an act or omission by which the party
accepting intends to communicate his assent or which has the effect of
communicating it. [S.3] A very common instance of an act amounting to
acceptance is the fall of the hammer in the case of an auction sale. The
principle is that there should be some external manifestation (overt act) of
acceptance. A mere mental determination to accept unaccompanied by
any external indication will not be sufficient. In the words of SHAJHJ
(afterwards CJ:) “An agreement does not result from a mere state of mind:
intent to accept an offer or even a mental resolve to accept an offer does
not give rise to a contract. There must be some external manifestation of
that intent by speech, writing or other act.”
Such manifestation may be in the form of express words, written or
spoken or maybe signified through conduct. An illustration of acceptance
by conduct is the decision of the House of Lords in Brogden v
Metropolitan Railway Co.-:
B had been supplying coal to a railway company without any formal
agreement. B Suggested that formal agreement should be drown of. The
agents of both the parties meet and drew of a draft agreement it had
some blanks when it was sent to B for his approval. He filled of the branch
including the name of an arbitrator and then returned it to the company.
The agent of the company put the draft in his drawer and it reminded
there without final approval having been signified. B kept of his supply of
coals but on the new terms and also receipt payment on the new terms. A
dispute having arisen B refused to be bound by the agreement.
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The conduct of the company’s agent in keeping the agreement in his

drawer was an evidence of the fact that he had mentally accepted it. But
he had not expressed his mental determination and retention of the
agreement was not a sufficient acceptance. But the subsequent conduct
of the parties in supplying and accepting coal on the basis of proposed
agreement was a conduct that evidenced or manifested their intention.
The final acceptance “was clearly given”, said Lord CAIRNS LC” when the
company commenced a course of dealing which is referable only to the
contract and when that course of dealing was accepted and acted upon by
B in the supply of coals”.
Acceptance by conduct
Another common example of acceptance by conduct is an action in terms
of the offer. All cases of general offers, which are a kind of Unilateral;
contract, demand some act in return for the promise to pay. In express
recognition of this principle. Section 8 provides that “performance of the
conditions of a proposal, of the acceptance of any consideration for a
reciprocal promise which may be offered with a proposal is an acceptance
of the proposal”. Such proposal demand acceptance by performance.
Acceptance of money after prior information that higher rates of interest
would be charged and retention of goods sent on approval amount to
acceptance of the consideration offered along with a proposal. A Canadian
court has gone as far as to hold that, where an offer was made for the sale
of a part of a land and lease of the other part subject to the condition that
the offeree obtained planning permission and the offeree obtained
permission within nine months, a valid contract arose, though no
communication of acceptance had been made during the period of nine
months. “The offeror had indicated a particular mode of acceptance and,
therefore, by doing the act, the offeree had accepted the offer and did not
have to notify the offeror in advance of its intention to accept.”

When communication of ACCEPTANCE is not necessary?

In certain cases, however, communication of acceptance is not necessary.
The offeror may prescribe a particular mode of acceptance, then all that
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the acceptor has to do is to follow that mode. Then, there may be an offer
which impliedly indicates that acting on its terms will be a sufficient
acceptance. Announcement to pay reward for discovering a lost thing is
an offer of this kind. Again, the offeror may have acquiesced in a certain
conduct on the part of the acceptor as equivalent to acceptance. In such a
case also no formal communication of acceptance is necessary. Referring
to the requirement of communication in Carlill v Carbolic smoke Ball
Co.
Mode of Communication:-
Acceptance should be made ion prescribed manner
Acceptance has to made in the manner prescribed or indicated by the
offeror. An acceptance given in any other manner may not be effective.
An acceptance given in any other manner may not be effective,
particularly where the offeror clearly insists that the acceptance shall be
made in the prescribed manner. An American case illustrates this:
A offered to buy flour from B requesting that acceptance should besent by
the wagon which brought the offer. B sent his acceptance by post,
thinking that this would reach the offeror more speedily. But the letter
arrived after the time of the wagon. A was held to be not bound by the
acceptance.
S.7. Acceptance must be absolute- In order to convert a proposal into a
promise, the acceptance must
(1) be absolute and unqualified,
(2) be expressed in some usual and reasonable manner, unless
the proposal prescribes the manner in which it is to be
accepted. If the proposal prescribes a manner in which it is
to be accepted, and the acceptance is not made in such
manner, the proposer may, within a reasonable time after
the acceptance is communicate to him, insist that his
proposal shall be accepted in the prescribed manner, and
not otherwise; but, if he fails to do so, he accepts the
acceptance.
ESSENTIALS OF A VALID ACCEPTANCE
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1. CONSENSUS AD IDEM: Section 2 (a) defines “Proposal” the

“Proposal” has two purposes:
i. Firstly, an expression of the offeror’s willingness to
do or to abstain from doing something.
ii. Secondly, it is made with a view to obtaining the
assent of the offeree to the proposed act or
abstinence.
There must be two parties to a valid contract – (i) Offer and (ii)
Offeree. The essential feature of a contract is that offeror and
offeree should agree the same thing in the same sense. There
should be a meeting of minds. This identity of minds is called
“consensus ad idem”. “Consensus ad idem” can be achieved by the
offeror communicating the offer to the offeree and then offeree
communicating his acceptance to the offeror.
2. ACCEPTANCE: The acceptance may be made by words or
conduct. But it must be absolute unconditional and unqualified
and in the way prescribed by the offeror.
Sec. 3. Communication, acceptance and revocation of proposals:-
The Communication of the proposals, the acceptance of proposals,
and the revocation of proposals and acceptances, respectively, are
deemed to be made by any act or omission of the party proposing,
accepting or revoking by which he intends to communicate such
proposal, acceptance or revocation, or which has the effect of
communicating it.
Sec.7. Acceptance must be absolute. In order to convert a proposal
into a promise, the acceptance must
1. be absolute and unqualified
2. be expressed in some usual and reasonable manner, unless the
proposal prescribes the manner in which it is to be accepted. If
the proposal prescribes a manner, in which it is to be accepted,
and the acceptance is not made in such manner, the proposer
may, within a reasonable time after the acceptance is
communicated to him, insist that this proposal shall be accepted
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in the prescribed manner, and not otherwise, but if he fails to do

so, he accepts the acceptance.
3. COMMUNICATION: “Consensus ad idem” (Consent at the
same time) can only be possible when there is proper
communication between offeror and offeree. Communication is
an essential requisite for a valid acceptance, An offer or proposal
not communicated has no legal effect. The general rule is that
an acceptance must be communicated to a proposal. If a
particular mode of acceptance has been prescribed in the
proposal, that particular mode of communication should be
adopted. If a mode of acceptance is not mentioned, a reasonable
and proper mode of communication should be adopted.
Section 4 of the Indian Contract Act, 1872 explains about the
communication. Sec.4. Communication of a proposal is complete
when it comes to the knowledge of a person to whom it is made.
The communication of a acceptance is complete---
As against the proposer, when it is put in a course of
transmission to him, so as to be out of the power of the acceptor,
As against the acceptor when it comes to the knowledge of the
proposer.
4. LEGAL CONSEQUNCES: The acceptance is the second step of
the agreement. When the person to whom the proposal is made,
signifies his assent therto, the proposal is said to be accepted. A
proposal, when accepted, becomes a promise.
Anson says: “Acceptance is to offer what a lighted match is to a
train of gun powder.”
It shows the legal consequences of an acceptance. When an
agreement is concluded between the promise and promise, both
the parties should adhere to it. They should perform the contract.
If any one of them commits breach, the other becomes entitled
to claim damages. Thus the legal relations are created between
the promisor and promise.
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5. PERFORMANCE OF THE CONDITIONS OF OFFER IS

ACCEPTANCE: In certain occasions, communication of
acceptance is not necessary, i.e., general offer Carlill vs. Carbolic
Smoke ball Co. In certain occasions, the performance itself shows
the acceptance. In certain cases, accepting the consideration
shows the acceptance. Section 8 of the Indian Contract Act, 1872
provides for an implied acceptance of any consideration offered
for a reciprocal promise invited from the promise. This section
recognizes the fact that in cases in which the proposer invites
acceptance by the doing of an act “it is sometimes impossible for
the offeree to express his acceptance otherwise than by
performance of his part of the contract.
6. PROMISE, EXPRESS AND IMPLIED: Section 9 Provides that
the proposal or acceptance of any promise is made ion words the
promise is said to be express. A proposal or acceptance is made
otherwise that in words, the promise is said to be implied.
7. IN THE SAME MANNER PRESCRIBED BY THE OFFEROR:
Acceptance has to be made in the manner prescribed by the
offeor. The offeror has the authority to prescribe certain terms of
his offer, which the offeree has to fulfil. If the offeree opts
another manner, it does not become acceptance. The offeror has
be right to reject any acceptance which is not in the prescribed
manner or not received within a reasonable time or prescribed
time.

COMMUNICATION OF OFFER AND ACCEPTANCE WHEN SAID

TO BE COMPLTED.
GENERAL RULE- The general rule is that an acceptance must be
communicated to the proposer or offerer in a manner prescribed
by the proposer or offer. That particular manner should be
adopted. If the manner in which acceptance should be adopted. If
the manner in which acceptance should have been made has not
been lay down, in that circumstances a reasonable or proper
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mode should be adopted. Section 4 of the Indian contract Act

1872, explained about communication.
Section-4 Communication when complete-The communication
proposer is complete when it comes 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 as
to be out of the power of 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 make 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 persons whom make it;
As against the person to whom it is made, when it comes to his
knowledge.
Illustrations
(A) A proposes, by letter to sell a house to B at a certain price.
The communication of the proposal is complete when B receives
the letter.
(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 is received by A.
(C) A revokes his proposal by telegram.
The revocation as 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’s revocation is complete
as against B, when the telegram is dispatched, and as against A,
when it reaches him.
(Rule of communication when done face to face, by telephone
telex, fax, telegraph, cell phone, sms, internet, etc,
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In this type of communication there is no problem as because the

promise and promisor are present at one place or face to face or
in a position where they can communicate with each other in few
second or minutes or in few hours, In such type of
communication the offer is made by the offeor and the
acceptance is also be made instantly without much delay as in
case of postal communication. Thus a valid contract is concluded
between them.
COMMUNICATION THROUGH POST-
The situation is somehow different in case of postal
communication. When the parties are at distance and gets in
contact through post or by manager, the question arises when is
the contract concluded? Does the contract arise when the
acceptance is posted or when it is received. Answer to the
question is different in respect of English Law and Indian law.
According to English Law when a letter of acceptance is posted,
both the offer and the accepter becomes irrevocably bound. This
situation is described by Anson by its principle “Acceptance is to
an offer what a lighted match is to a train of gun power.” But as
per Indian Law the postal rule is somehow different in
comparison to English Law. In England when a letter of
acceptance is posted, both the offeror and the acceptor become
irrevocably bound. But in India, the acceptor does not become
bound by merely posting his acceptance. He becomes bound only
when his acceptance “comes to the knowledge of the proposer”.
The gap of time between the posting and the delivery of the
acceptance can be utilized by the acceptor for revoking his
acceptance by a speedier communication which will overtake the
acceptance.
The peculiarity of this rule is that after an acceptance is posted
and before it comes to the knowledge of the offeror, only one
party, that is, the offeror, is bound. The acceptor still has the
right to recede form the contract by revoking his acceptance.
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REVOCATION OF OFFER
Q.1. In what circumstances a Valid Offer is treated to
have been revoked? Give examples.
A N S W E R:
SCOPE: Chapter – 1 (Ss. 3 to 9) explains about “the
communication, Acceptance and Revocation of Proposals”.
According to Section 3 the communication of the proposals, the
acceptance of the proposals, and revocation of proposals and
acceptances, respectively, are deemed to be made by any act or
omission of the party proposing, accepting or revoking, by which
he intends to communicate such proposal, acceptance or
revocation, or which has the effect of communicating it.
Section 5 states about “Revocation of proposals and
acceptance”.
Revocation of offer: Section 6 of the Indian Contract Act, 1872
explains about the “Revocation of offer”.
Sec. 6. Revocation how made. A proposal is revoked,-
1. By the communication of notice of revocation by the proposer
to the other party.
2. By the lapse of the time prescribed in such proposal for its
acceptance or, if no time is so prescribed by the lapse of a
reasonable time, without communication of the acceptance.
3. By the failure of the acceptor to fulfil a condition precedent to
acceptance, or
4. By the death or insanity of the proposer, if the fact of his
death or insanity comes to the knowledge of the acceptor
before acceptance.
INGREDIENTS:
1. REVOCATION OF OFFER BY NOTICE: A proposal can be
revoked by the communication of notice of revocation by the
proposer to the other party, at any time before the
communication of its acceptance if complete as against the
 21

proposer, but not afterwards. Section 5 and Section 6 (1)

explain the revocation by notice
Illustration
A proposes, by a letter sent by post, to sell his house to B.
B accepts the proposal by a letter sent by post.
A may revoke his proposal at any time before or at the
moment when B posts his letter of acceptance, but not
afterwards.
2. LAPSE OF TIME: A proposal is revoked by the lapse of the
time prescribed, by the lapse of a reasonable time, without
communication of the acceptance.
PROBLEM: A posts a letter of PROPOSAL TO b ON 1 st January,
2002, Next day A gives a telegram to B, revoking his proposal,
Telegram reaches B, at 10 a.m. on 2 nd January, 2002, B posts
his letter of acceptance on 3rd January, 2002 ignoring the
telegram of A, is there a contract between A and B?
SOLUTION: No. There cannot be any contract between A and
B Revocation of proposal was received by B at 10 a.m. on 2 nd
January, 2002, B ignored it, and sent his letter of acceptance.
Thus no contract was made between them.
3. BY FAILURE TO FULFIL A CONDITION PRECEDENT:
When the offer is subject to some condition precedent, such a
condition has got to be fulfilled by acceptor before making the
acceptance if the acceptor fails to fulfil the condition
precedent to acceptance, the offer stands revoked.
4. BY DEATH OR INSANITY OF THE OFFEROR: An offer is
revoked by the death or insanity of the proposer, If the fact of
his death or insanity comes to the knowledge of the acceptor
before acceptance.
REVOCATION OF ACCEPTANCE
State whether acceptance is revocable in India. If so, when
can it be revoked?
A N S W E R:
 22

GENERAL PRINCIPLE: The effect of acceptance of an offer has

been explained by Anson in his Law of Contracts 23 rd Edition at Page
55, in the following words: “Acceptance is to an offer what a lighted
match is to a train of gunpowder.” This gives the meaning that when
an offer is accepted it cannot be recalled or revoked. It is similar
incidence that the gunpowder may laid without explosion, until it
has been lighted. The man, who laid the train of gunpowder, can
remove it before the match is applied. But when once a lighted
match is applied to the gunpowder, he cannot stop it from
explosion. Similarly, an acceptance may be revoked at any time
before the communication of the acceptance is complete as against
the acceptor, but not afterwards.
SCOPE: Section 5 of the Indian Contract Act, 1872 explains this
principle.
Sec. 5. Revocation of proposals and acceptances.- A proposal may
be revoked at any time before the communication of its acceptance
is complete as against the proposer, but not afterwards.
An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the
acceptor, but not afterwards.
ILLUSTRATIONS
A process, by a letter sent by post, to sell his house to B.
B accepts the proposal by a letter sent by post.
A may revoke his proposal at any time before or at the moment
when B posts his letter of acceptance. But not afterwards.
B may revoke his acceptance at any time before or at the moment
when the letter communication it reaches A, but not afterwards.
When the acceptance is delivered from the promise, it is not
possible to revoke it. That is, why the famous maxim came into
existence saying that the acceptance to an offer is equal to a lighted
match to a train of gun powder.
DIFFERENCE BETWEEN ENGLISH LAW AND INDIAN LAW:
 23

In India, the proposer can revoke his proposal, before the acceptance
received by adopting a speedy method. Example: A, a resident of
Hyderabad, sent a proposal by post to sell his house for one lakh rupees
to B- at Calcutta. Thereafter, he wanted to revoke his proposal. He can
communicate the revocation of his earlier offer by a telegram reaching the
proposer before he becomes aware of the acceptance.

In the English Law, an unqualified acceptance once posted cannot be

revoked even by a telegram or special messenger which overtakes the
posted letter and informs the proposer of the revocation of the
acceptance. This departure from the English Law enables the Indian
acceptor a chance to revoke. However, in both the laws, when an acceptor
accepts a proposal, there are no chances of revocation.

In the English law, When a letter of acceptance is posted, both the

offeror and the acceptor are irrevocably bound as was said by Anson. In
India, the same principle is applicable, when the acceptance is given by
the promise, by oral (telephone, telegram, telex or in the presence of each
other). But the principle is liberal comparing with English law with regard
to the acceptance given by post. The acceptor can withdraw his
acceptance between the gap of posting and the delivery of the
acceptance by using speedier methods of communication. Sections 5 and
6 explain the same.

Example: A book seller orders 100 books of a particular title to the

publishers by ordinary post. Thereafter he intends to revoke his offer. He
may adopt the speed post by sending a notice of revocation or he may
telephone to the publishers, or may send a telegram, ctc. Which will be
more speedier that the ordinary post. In England, it is not possible to
revoke.
REVOCATION OF ACCEPTANCE
 24

It is the general rule laid down that when a proposal is accepted it cannot
be revoked. Under the following circumstances, an acceptance may be
revoked.
1. Before the communication: According to the provisions of
Section 5, an acceptance may be revoked at any time before the
communication of the acceptance is complete as against the
acceptor, but not afterwards.
2. Offer granting time for acceptance: An acceptance to an offer
creates legal relations between the offeror and offeree. If an offer is
coupled with a promise to kept it open for a certain time, Such offer
can be revoked even before that time. The offeree can refuse the
offer at any time before the time fixed. But when he gives
acceptance to such offer, he cannot revoke it.
3. Auction Sales: Sinha J. of the Supreme Court, explained the
principle laid down in auction sales as follows: “it is well settled that
a person who blinds at an auction, thereby does not conclude a
contract, but merely states an offer and like all other offers it is
subject to the ordinary incidents of law, namely that until it is
accepted it is open to the offerer to withdraw it, the time for
withdrawal can however be always determined by a separate and
binding contract for consideration. In auction sales, the acceptance
of a bid may be of three kinds.
(i) Conditional acceptance
(ii) Provisional acceptance; and
(iii) Absolute acceptance when the auctioneer has full powers
to confirm the sake and the sale is complete as soon as the
hammer falls.
4. Qualified acceptance: An acceptance must be absolute and
unqualified. Acceptance cannot be qualified. A qualified acceptance
cannot be concluded as contract
Jugal Kishore Gulab Singh vs. Parastal & Sons (AIR 1930)
(Subject to Confirmation – Qualified acceptance)
 25

An order of goods was accepted subject to confirmation by mail. The

Privy Council held that it was not a concluded contract.
5. Grumbling Assent: Grumbling is not a qualified acceptance. it is
an assent nevertheless. Sir Frederick Pollock says: “Where the
acceptor grumbles at the terms of the offer bur nevertheless
accepts such grumbling assent will be a good acceptance provided
the dissatisfaction stops short of dissent.”
6. Third party’s Discretion: If the terms of the proposal depend
upon the third party’s discretion, in such circumstances, the
acceptor can revoke the acceptance. Where it is an essential
condition to acceptance which is left to a third party’s discretion, the
acceptance can be said to be only qualified.
Stanlay vs. Dowedswell (1875 P.C. 635)
(Third party’s discretion –Qualified acceptance)
The offeree accepted the proposals of the offeror, and further wrote
to the offeror: “my agent will arrange matters with you, if you will
put yourself in communication with him.” The Court held that the
acceptance was not absolute and unqualified. It required the
discretion of the agent of the offeree. Therefore no contract was
concluded between them.
7. DEATH.
English Law: The death of either party before acceptance causes an
offer to lapse and knowledge of death is not essential to the other
party. Death of the proposer revokes an offer even if acceptance is
made in ignorance of the death. The principle is that a dead man
can no more continue to offer than he could begin to offer.
Indian Law: The death offer lapses once the fact of death or insanity
is brought to the knowledge of the offeree before acceptance.
8. INSANITY: According to English law, the insanity of the proposer
will give rise only to a voidable contract. In India, there will be no
contract at all.
DEFINITION AND ESSENTIAL OF VALID CONTRACT
 26

MEANING: The word ‘contract’ us derived from the Latin

‘Contractum’, which gives meaning “Drawn together”. Thus the
meaning of “contract” is a “a drawing other of two or more
minds to form a common intention giving rise to an
agreement”.
DEFINITION:
Blackstone: “A contract is an agreement, upon a sufficient
consideration, to do or not to do, a particular thing.”
Anson: “The law of contract is that branch of law which determines
the circumstances in which a promise shall be legally binding on the
person making it.”
The Indian Contract Act, 1872 Sec. 2 (h) defines: “An
agreement enforceable by law is a contract.”
FORMATION OF CONTRACT
A contract means an agreement which is enforceable by law. An
agreement consist of reciprocal promises between the two parties.
Each party is legally bound by the promise made by him. The law
requires the parties to make their own contract. It will not make a
contract for them. The terms of the contracts are indefinite or
illusory. The parties to a contract in a sense make the law for
themselves in simple we can say: offer + acceptance =
agreement. However, the agreement concluded between the
parties must be enforceable by the law.
THE ESSENTIAL INGREDIENTS OF A VALID CONTRACT
The contract between the two parties is a form of self-regulated
one. The law does not interfere each and every contract. The parties
have the freedom to form a contract for themselves by fixing the
terms and conditions binding on themselves. The parties may create
rights and duties for themselves. The law requires the parties to
make their own contract. It leaves men’s affairs to self-regulation
achieved by agreement of parties. But that freedom should not be
misutilised. Hence the law imposes certain restrictions for the
benefit of the whole society.
 27

Sec.10 What agreements are contracts.- All agreements are

contracts if they are made by the free consent or parties competent
to contract, for a lawful consideration and with a lawful object, and
are not hereby expressly declared to be void.
Nothing herein contained shall affect any law in force in India, and
not hereby expressly repealed, by which any contract is required to
be made in writing or in the presence of witnesses, or any law
relating to the registration of documents.
Thus the Section 10 of the Indian Contract Act, 1872 explains what
agreements are contract, i.e. what is a valid contract. The valid
contract must contain the following essentials
1. Free consent;
2. The parties must be competent;
3. There must be lawful consideration and lawful object;
4. The agreements must not expressly be declared to be void;
5. Wherever the provisions of any other law require, the
agreements must be in writing
1. FREE CONSENT: Two or more persons are said to consent when
they agree upon the same thing in the same sense. Consent is
said to be free when it is not caused by coercion, undue influence
fraud, misrepresentation, mistake Sections13 to 22 of the
contract Act explain the free consent.
2. COMPETENCY OF THE PARTIES: Every persons is competent
to contract who is of the age of majority according to the 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.
Sections 11 and 12 explain the competency of the parties.
3. LAWFUL CONSIDERTION AND OBJECTS: The consideration or
object of an agreement must be lawful. An agreement without
lawful consideration and object is void. Sections 23 to 25 explain
about the lawful consideration and objects.
4. VOID CONTRACTS: The fourth essential ingredient of a valid
contract is that the agreement should not be expressly declared
 28

to be void by the Contract Act. Sections 24 to 30 explain that

certain agreement are void. Agreements in restraint of marriage,
Agreements in restraint of trade, Agreement in restraint of legal
proceeding, Agreements of uncertainty, Agreements by way of
wager are void.
5. WRITING: The proviso of the Section 10 of the Contract Act
provides that wherever the provisions of any other law requires,
the agreement must be in writing.
“ALL AGREEMENTS ARE NOT CONTRACT, BUT ALL
CONTRACTS ARE AGREEMENTS.”
ANSWER
DEFINITIONS:
Section 2 (e) of the Indian Contract Act, 1872 defines
“Agreement”,
Sec.2 (e). “Every promise and every set of promises, forming the
consideration for each other, is an agreement.”
Section 2 (h) defines a contract, “An agreement enforceable by
law is a contract”.
Section 2 (g) explains “Void contract”. “An agreement not
enforceable by law is said to be void.”
AGREEMENT AND CONTRACT
It is the most common method of making a contract through an
agreement. One party makes an offer and the other party
accepts, the same. Thus, between them there arises a process of
mutual negotiations.
Offer + acceptance = agreement
EXAMPLES:
(a) A promise to deliver his house to B and in
return B promise to pay a sum of Rs. 50,000/-
to A. Both of them agree the offer made by the
other party. It is said to be an agreement
between A and B. Thus a valid contract is
concluded between them.
 29

(b) An agreement to sell a sell a scooter is a

contract.
(c) An agreement of lease is a contract.
(d) An agreement of hire-purchase is a contract,
etc.
Section 2 (h) states that an agreement enforceable by law is a
contract. That means an agreement should possess all legal
requirements to become a valid contract, so that it can be
enforceable by law. An agreement which cannot be enforceable law
is no useful. Such agreement becomes ‘void’.
An agreement enforceable by law is a contract, and by such a
contract only legal relations and obligations between the parties
arise. All enforceable agreements contain the legal obligations, and
not merely moral, social or religious obligations.
An agreement which is enforceable by law alone is a contract. The
phrase ‘enforceable by law’ means an agreement which is intended
to be enforced by law should posses all the essential requisites of a
valid contract. Section 10 of the Indian Contract Act explains what
agreements are contracts, i.e., what are valid contracts.
A valid contract should contain the following essentials
1. Free consent;
2. The parties must be competent;
3. There must be lawful consideration and lawful object;
4. The agreement must not expressly be declared to be void;
and
5. Wherever the provisions of any other law in force require the
agreements must be in writing.
If the above requisites are not found in any agreement, it cannot be
treated as a valid contract. Contracts originate from agreements
which are intended by the parties to give rise to legal obligations.
However, there are certain agreement which cannot be called as
contracts.
Examples of agreements which are not contracts:
 30

(a) An agreement to come to dine is a mere agreement. It cannot

be enforceable by law. Because the agreement depends upon
the voilition.
(b) A contract which runs into such minute or numerous details,
or which is so dependent on the personal qualifications or
volition of the parties, or otherwise from its nature is such that
the Court cannot enforce specific performance of its material
terms.
(c) An agreement to do illegal act is not enforceable by law.
Example: An agreement to kill a person is not a contract. An
agreement to injure a person is not a contract. Because these
agreements are against public policy and against the law.
(d) A-an author makes an agreement with B- a publisher to
complete a literary work. B cannot enforce specific
performance of this agreement. Because it involves personal
qualification of A.
(e) A contract to marry B. B cannot enforce specific performance
of this contract.
(f) A contract entered for the purpose of another contract cannot
be enforceable.
Rudar vs. Narayan
(A contract to enter into a contract – not valid)
A-A land lord and B-a tenant made a contract that A would
enter into a contract of lease after 2 years. The Privy Council
held that “A contract to grant a lease cannot be a contract
enforceable in law since law does not recognize a contract to
enter into a contract.”
(g) An agreement of which a material part of the subject-matter
supposed by both the parties to exist, has before it has been
made ceased to exist.
Illustration: A contracts to pay an annuity to B for the lives of
C and D. It turns out that, at the date of contract, C, though
 31

supposed A by and B to be alive, wad dead The contract

cannot be specifically performed.
(h) All void contracts are not enforceable by law. An agreement
with a minor is void. It cannot enforced. Section 2 (g) states
that an agreement not enforceable by law is said to be void.
(i) If the terms of the agreement are not certain and the court
cannot understand or interprete such terms. Such an
agreement is not enforceable.