business law unit - 2 notes b.com second year. semester - iii

BusinessLawUnit–2NotesB.com SecondYearSemester–IIIMrs.Aarati

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Q1.Defineconsideration.Explaininbrieftheessentialsofavalidconsiderationwithsuitablecaselaws.

I. Meaningofconsideration-Thelawenforcesonlythosepromiseswhicharemadeforconsideration.Whenonepartypromisestodosomething,itmustgetsomethinginreturn.,“thissomethinginreturn”iscalledasconsideration.Considerationissomethingofvaluewhichthepromiseehasgiven,givesallpromisestogiveinreturnforthepromise.

II. Definitionofconsideration-AccordingtoSec2(d)ofIndianContractAct1872,“whenatthedesireofthepromisor,thepromiseoranyotherpersonhasdoneorabstrainedfrom doing,ordoesorabstrainsfrom doingorpromisestodoorabstrainfrom doing,suchactorabsistinenceorpromiseiscalledaconsiderationforthepromise.”

III. Essentialsofavalidconsideration

a)Considerationshouldbesomethingdesiredbythepromisor-Asperthelegaldefinitionofconsiderationwhenthepromiseoranyotherpersondoessomethingasperthedesireofthepromisoritbecomesaconsideration.

CASELAW-DURGAPRASADVsBALDEO

CASEFACTS-InthiscaseMr.Prasadwasdesiredbyacollectorofdistricttoconstructamarketyardfortheuseofpeopleofthatdistrict.WhenMr.Prasadwasdoingso,atraderMr.BaldeoapproachedMr.Prasadandofferedtopay1%commissiononhissales,ifaconvenientplaceisallottedtohim inthatmarketyard.LaterMr.BaldeostoppedpaymentofcommissionsoMr.Prasadfiledasuitinthecourtoflaw.Thecourtoflawheldthathecannotclaim anycommissionfrom thetraderbecausehehadnotconstructedthemarketyardatthedesireofthetrader.

b)Considerationisveryessentialineverycontract-Considerationisaveryimportantfeatureineverycontract.Apromisecannotbecomeanagreementwithoutconsideration.Anagreementcannotbecomeacontractwithoutalawfulconsideration.Therefore,aruleisconstitutedinlawas“NoconsiderationNocontract.”

CASELAW-ABDULAZIZVsMASOOM ALI

CASEFACTS–InthiscaseMr.Masoom Alipromisedtogiveafundof500


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forrepairsandreconstructionofamosque.Noworkhadbeencarriedoutforrepairsandreconstruction.Thesecretaryofthemosquefiledacaseforfundof500whichwaspromisedbyMr.Masoom Ali.Thecourtheldthatthepromisewasnotenforceablebecausewhomadethepromisedidnotgainanythinginreturnforthepromisehemade.Thesecretaryofthemosquetowhom thepromisewasmadesufferednothing,asnoworkofrepairsorreconstructionhastakenplace.

c)Considerationcanbegivenbythepromiseeorbyanyotherpersons-Asperthelegaldefinition,theconsiderationcanbegiveneitherbythepromiseeorbysomeotherperson,thoughanacceptancecannotbegivenbyathirdparty.Apersonwhogivesconsiderationonbehalfofpromiseeiscalledas“strangertothecontract.”Thisruleoflawisalsoknownas“Doctrineofprivaityofcontract.”

CASELAW-DUNLOPPNEUMATICTYRECO.VsSELFRIDGECO.

CASEFACTS-InthiscaseDunlopCo.suppliedsometyrestoawholesaledealerwithinstructionsthattheyshouldnotsellatapricelessthantheMRP,whichwasfixedbythecompany,otherwise5poundspertyreshouldbepaidasdamagestoDunlopCo.ThewholesaledealersuppliedthetyretotheSelfridgeCo.withthesameinstructions.ButSelfridgeCo.sold2tyresatalesspricethantheMRP.SoDunlopCo.filedasuitfordamages.Thecourtoflawheldthatastrangertocontractcannotenforcethecontractsothecasewasdismissed.

d)Considerationneednotbeadequate-Theconsiderationpayablebythepromiseetothepromisormayormaynotbeequaltowhatthepromisorisdoingforthepromisee.Theadequacyofconsiderationhastobedecidedbythepartiesatthetimeofmakingthecontract.

Forexample-Mr.Aagreestosellhisgoodsworth10,000for1000.Mr.Aconsenttotheagreementwasfreelygiven.

e)Oneconsiderationforoneagreement-Everyagreementshouldhaveonlyoneconsideration,demandingextraconsiderationorsecondconsiderationforthesameagreementbecomesinvalid.


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CASELAW-RAMCHANDRACHINTAMANIVsKALURAJU

CASEFACTS-Inthiscaseanadvocateagreedtocompleteacaseofhisclientforaconsiderationof150.Laterhedemandedextraconsiderationforobtainingthejudgementinashortperiodoftime.Thecourtoflawheldthatthesecondconsiderationcannotbeclaimed.

f) Considerationmaybepositiveornegative-Inthelegaldefinition,“hasdoneorabstrainedfrom doingordoesorabstrainesfrom doingorpromisestodoorabstrainesfrom doing”areused.Thismeansthatdoingsomethingornotdoingsomethingbecomespositiveconsiderationornegativeconsideration.

Forexample-Referunit1

g)Considerationmaybepast,present,future

i) Pastconsideration-Whenthepromisorhasreceivedconsiderationbefore

thedateofpromisetheconsiderationistermedaspastconsideration.

ii)Presentconsideration-Whenthepromisorreceivesconsideration

simultaneouslywiththepromisetheconsiderationistermedaspresentconsideration.

iii)Futureconsideration-Whenthepromisorhastoreceiveconsiderationin

futureforhispromisetheconsiderationistermedasfutureconsideration.

iv)

h)Considerationmaybeinanyform-Considerationmaybeinanyform suchaspaymentofcash,deliveryofgoods,renderingofservices,doingsomething,notdoingsomething,makingaprofit,bearingalossoreventakingupaliability.Butitshouldbesomethingdesiredbythepromisorandalsolawfulasperthelaw.

Q2.ExplainthecapacityofpartiestothecontractunderIndianContractAct.

I. Meaningofcompetentparties-Thecapacitytocontractmeansthecompetence(capability)ofpartiestoenterintoavalidcontract.An


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agreementbetweentwopersonscanbeenforcedinthecourtoflawinbothofthem arecompetenttocontract.ApersonissaidtobemajorbyagesubjecttotheruleofIndianmajorityact1875,soundnessofmindofapersonisdecidedbySec12ofIndianContractAct1872.

II. Definitionofcompetentparties-AccordingtoSec11ofIndianContractAct1872,“everypersoniscompetentwhoisoftheageofthemajorityaccordingtothelawtowhichheissubject,whoisofsoundmindandisnotdisqualifiedfrom contractinganylawtowhichheissubject.”

III. Partiescompetenttocontract-AspertheprovisionofSec11ofIndianContractAct1872,Thefollowingpersonsaresaidtobecompetentparties.

a)Majorbyage-AccordingtoSec5ofIndianContractAct/MajorityAct1875.Apersonwhocompletes18yearsofageiscalledasmajorbyage.

Incaseapersonwhoseparentsarenotaliveandwhoaregroundedbyalegallyappointedguardian,21yearsofageshouldbecompletedtobecomemajorbyage.Thisruleappliestobothmaleandfemale.

b)Personsofsoundmind-Apersonissaidtobeofsoundmindforthepurposeofenteringintocontractifheiscapableofunderstandingthetermsofanagreementatthetimewhenheisenteringintoacontractandheiscapableofframingarationaljudgementabouttheeffectofanagreementonhisowninterest.

c)Personsnotdisqualifiedfrom contracting-Somepersonsaredisqualifiedorprohibitedfrom enteringintoanagreementduringspecifiedperiodoftime,evenafterattainingtheageofmajorityandsoundnessofmind.Alienenemies,insolvenceandconvictscomeunderthiscategory.

IV. Incompetentparties-


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Q3.“Astrangertocontractcangiveorreceivetheconsiderationinacontractbutcannotsue.”Explainwithexceptions.

OR

Explainthedoctrineofprivityofcontract.Giveanaccountonexceptionstothedoctrine.

I. Meaningofstrangertocontract-Itisaruleoflawthatonlypartiestoacontractmaysuitorbesuitedinthatcontract.Thisruleisknownasdoctrineofprivity.Itmeanstherelationshipexistingbetweenpartieswhohaveenteredintocontractualobligations.Thedoctrinesaysthatonlypartiestothecontractcansuitandcanbesuitedagainsteachother.Inotherwords“Astrangertoacontractcannotsueapartyofthecontract.”

CASELAW-DUNLOPPNEUMATICTYRECO.VsSELFRIDGECO.

CASEFACTS-REFERunit1.

II. Exceptionstotheruleofprivityofcontract

i) Trust-Incaseoftrustthebeneficiarymayenforcethecontracteventhoughheisastrangertothecontract,whichiscreatingthetrust,whereabenefitisgiventoapersonbycreatingatrustorchargeinsomepropertyinhisfavor,suchabeneficiarymayenforcethecontracteventhoughheisnotapartytoit.

CASELAW-KHAWAJAMOHD.KHANVsHUSSAINIBEGUM

CASEFACTS-‘D’agreedwithP’sthatPwouldpay500permonthasakharch-i-pandan,ifshemarriesD’ssons.Theallowancewasstoppedaftersometimeafterthecelebrationofmarriage.Psuedherfather-in-lawfor1500asarrearsofallowance.Itwasheldthat‘P’couldrecoverthemoneyeventhoughshewasnotapartytocontract.

ii)Whereprovisionismadeinthepartitionorfamilysettlement-Sometimesanagreementis madeinconnectionwithpartitionorotherfamilyarrangementsandaprovisioninmadeforthebenefitofsomeperson.Insuchcases,apersonforwhosebenefittheprovisionismadeinsuchfamilyarrangements,canenforcetheagreementevenifheisanotapartytothecontract.

CASELAW-SHUPPAAMMALVsSUBRAMANIYAM

CASEFACTS-Inthiscase2brothersinapartitiondeedagreedtopayas300inequalsharetotheirmotherformaintainence.Boththebrotherssubsequentlyrefusedtopaytheamount.Onasuit,itwasheldthatthemothercouldenforce


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thepromiseeventhoughshewasastrangertothecontract.(becauseamothercannotbetreatedasastrangertoherownsons)

iii)Whereprovisionismadeinamarriagesettlement-Aspertheindiantraditionmarriageagreementsaremadebetweentheparentsofbrideandbridegroom orrldersoftheirfamilies.Theagreementisnotmadebetweenthebrideandbridegroom.Therefore,thebrideandbridegroom becomestrangerstotheirownmarriageagreementintheeyesoflawaspertheexistingrule,howeverincaseofbreachofsuchagreementsthebrideorthebridegroom canenforcethecontractbeingthebeneficiaryintheeyesofthelaw.ThisrulewasgivenbyhonourablehighcourtofKeralainthefollowingcase.

CASELAW-ROSEFERNANDEZVsJOSEPHGONGLAVES

CASEFACTS-InthiscasethemarriageagreementwasmadebetweenMr.FernandezthefatherofMissRoseFernandezandMr.JosephGonglavethebridegroom himself.LateronthedeathofMr.Fernandez,Mr.JosephrefusetomarryMs.Rose.SoMs.Rosefiledasuitforpaymentofdamagesforthebreachofthecontract.Thecourtoflawheldthatshecanenforcethecontracteventhoughshewasastrangertothatcontractbecauseshewasthebeneficiaryofthemarriage.

iv)Separateagreementwiththestranger-Whenaseparateagreementisdraftedbetweenthestrangersandthepartyofthecontractempoweringhim toenforcethecontractinthecourtoflaw,hecanenforceit.Separateconsiderationisnotnecessaryforthesecondagreement.Thisrulewaslaiddowninthefollowingcase.

CASELAW-CHINNAYAVsRAMAYA

CASEFACTS-InthiscaseapersontransferredallhispropertytohissonChinnayaandinstructedhim topay1000annuallytoRamaya,theyoungerbrotheroftransferer.ChinnayaalsoagreedtopaythemoneytoRamayabyaseparatewrittenagreement.Buthediscontinuedafterthedeathofhisfather.Thereforethecourtoflawheldthathecanenforcethecontractonthebasisofsecondagreement,eventhoughhewasstrangertothefirstcontract.

Q4.“Anagreementwithoutconsiderationisvoid.”Comment.

OR

“Noconsideration,nocontract.”Explain.

I.Meaningofcontract.


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II.Meaningofconsideration.

III.Theruleof“noconsideration,nocontract.”-Considerationisveryessentialineveryagreement.Novalidcontractcanbecreatedwithoutconsideration.So,theruleismadeas“noconsideration,nocontract.”ThecaseofAbdulAzizVsMasoom Aliandothersexplainstheruleveryclearly.

CASELAW-ABDULAZIZVsMASOOM ALI

CASEFACTS-REFER

IV.Exceptionstothedoctrine-AccordingtoSec25oftheIndianContractAct1872,hasgivenexceptionstothisrulewereavalidcontractcanbemadewithoutconsideration.

a)Naturalloveandaffection-AccordingtoSec25(1),anagreementinwritingwhichisregisteredandisbasedonnaturalloveandaffectionbetweennearrelativesandenforceableevenifthereisnoconsideration.Thefollowingconditionsmustbesatisfiedfortheapplicationofthisexception.

i)Theagreementmustbeinwritingandregistered.

ii)Theagreementmustbebasedonnaturalloveandaffection.

iii)Theagreementmustbebetweenthepartieswhoarenearrelationstoeachother.

CASELAW-RAJLUKHYDABEEVsBHOOTNATH

CASEFACTS-Inthiscase,persontransferredallhispropertyinthenameofhiswifebecauseofsomequarrelsanditwasregistered.Laterhewantedtoavoidtheagreementasthetransferwasmadewithoutconsideration.Thecourtoflawheldthatthetransferbecomesinvalidastherewasnoconsiderationandnonaturalloveandaffectionintheagreement,eventhoughthepartystandsinnearrelationandthetransferwasregistered.

b)Pastvoluntarilyservices-AccordingtoSec25(2),Aservicerenderedbyapersontoanotherwithouthisdemandordesireisknownasvoluntaryservice.Apromisetopayforvoluntaryserviceisbindingeventhoughitiswithoutconsideration.Thefollowingconditionsmustbesatisfiedfortheapplicationofthisexception.

i)Theservicesshouldhavebeenrenderedvoluntarily.

ii)Theservicesshouldhavebeendoneforthepromise.

Forexample-Mr.AfoundMr.B’scycleandgaveittohim.Mr.Bpromisedtogive100toMr.Aasareward.Thisisavalidcontract.

c)Promisetopaytimebarreddebts-AccordingtoSec25(3),apromisetopaytime


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barreddebtsisenforceableifsuchpromiseisinwritingandduelysigned.Thefollowingconditionsmustbesatisfiedfortheapplicationofthisexception.

i)Thepromisetopaymustbedefiniteandexpressed.

ii)Thepromisemustbeinwriting.

iii)Thepromisemustbesignedbythepromisororhisauthorizedagent.

iv)Thedebtmustbetimebarredi.e,.Thelimitationperiodfortherecoveryofdebtmusthaveexpired.

d)Giftactuallymade-AccordingtoSec25,Absenceofconsiderationshallnotaffectthevaliditybetweenthedonoranddoneeofanygiftmade.Therefore,giftsoncemadecannotberecoveredonthegroundsofabsenceofconsideration.

Q5.Discussthecontractenteredwithaminorfrom alegalpointofview?

OR

Explainindetailthespecialrulesregardingminoragreement.

I.Meaningofminor-Aminorisapersonwhohasnotattainedtheageofmajorityforthepurposeofenteringinacontract,theageofmajorityis18years.Thus,aminorisapersonwhoisbelowtheageof18years.Theterm minorisexplainedinSec3ofIndianMajorityAct1875,whichisasfollows;“Aminorisapersonwhohasnotcompleted18yearsofage.”

II. Natureofminor’sagreement-Aminorisnotcompetenttoenterintoavalidcontract.Anagreementwithaminorisvoid-ab-initio.Thecontroversywhetherminorwouldbevoidorvoidableatminorsoptionwasfinallyresolvedin1903bytheprivitycouncilinMohiribibiVsDarmodasGhoshinwhichitwasheldthatminor’sagreementisabsolutelyvoid.

III. Specialneedsregardingminor’sagreement:

1.Agreementwithminorarevoid-ab-initio-Anagreementwithaminorisnotonlyvoidbutitisvoidfrom theverybeginning.Anyagreementwiththeminorcannotbeenforcedinacourtoflaw.Anyamountpaidtotheminorcannotberecordedbecausetheconsiderationgiventoaminorisconsideredasnoconsiderationinlaw.

CASELAW-MOHIRIBIBIVsDHARMODARGHOSH

CASEFACTS-REFER


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2.Minoragreementcannotberatified-Theterm ratificationmaybedefinedasanactofconfirmationorapproving.Thedoctrineofnoratificationimpliesthatanagreementmadebyaminorduringhisminoritycannotberatifiedbyhim onattainingmajority.Thisissobecauseminor’sagreementisvoid-ab-initioandthereforecannotbevalidbyratification.

3.Minorcanpleadminorityatalltimes-Ifaminorenterintoagreementwithamajorpersonbywronglyrepresentinghisageasmajor.Suchagreementalsobecomesvoidbecauseaminorcannotbeheldliableformisrepresentationofhisage.

CASELAW-LESLIEVsSHEILI

CASEFACTS-Inthiscaseaminortookaloanofmajorpersonbyrepresentinghisageasmijor.Thecourtoflawheldthattheamountcannotberecoveredfrom theminoreventhoughhehasmisrepresentedhisage.

4.Minorisnotliableforanyciviltort-Whenaminorcausesalosstoamajorpersonbynotfollowinghisinstructionsorcommittingaciviltorttheminorcannotbeheldliabletopayanydamage.Evenhisparentscannotbeheldliable.

CASELAW-JENNINGSVsRUNDOLL

CASEFACTS-Inthiscaseaminortookaponyonhireatahillstation.Hewasinstructedbytheowneroftheponynottotakeittothetopofthehill,buttheminortookit.Soitfellanddied.Thecourtoflawheldthatthedamagescannotbeclaimedeitherfrom minororfrom hisparentsbecauseminorcannotbeheldliableforciviltort.

5.Agreementmadeforthebenefitsofminorcanbeenforcedbytheminor-Whenanagreementismadebetweenamajorpersonandaminorinwhichtheminorisbeneficiary,itcanbeenforcedbytheminor,butnotbythemajorperson.ThisrulewasgivenbythehonourablehighcourtofKerelatoprotecttheinnocentminorfrom unfairactionofmajor.

CASELAW-ABDULGAFFARVsPYARELAL

CASEFACTS-Inthiscaseamajorpersonpurchasedgoodsoncreditfrom aminorwhowasrunningaprovisionalstoresofhisdiseasedfather.Whenheclaimedtheamountthemajorpersonrefusedtopay.Thecourtoflawheldthatitshouldbepaidtotheminorbecauseheisthebeneficiaryofthatagreement.

6.Minor’spropertyliablefornecessaries-Sometimesapersonsuppliesnecessariestoaminor,insuchcases,thesuppliesofnecessariescanclaim reimbursementfrom thepropertyofminor,butnotpersonallyfrom theminor.

CASELAW-NASHVsINMAN


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CASEFACTS-Inthiscaseaminorpurchased11fancycoatsfrom areadymadegarmentsshoponcredit.Thesellerfiledasuittorecovertheprice.Thecourtoflawheldthateventhoughclothingisnecessariesoflife,fancycoatsarenotnecessariesoflife.Sotheamountcannotbeclaimedfrom aminor.

7.Theminorasapartner-Thepartnershipofpartnersresultsfrom theiragreement(partnershipdeed)aminorbeingincompetenttoenterintoacontractcannotbeapartnerinthefirm.However,hemaybeadmittedonlytothebenefitofthefirm withtheconsentofallotherpartnersaccordingtoSec30(1)oftheIndianPartnershipAct,1932.

8.Theminorasaninsolvent-Aminorcannotbedeclaredasaninsolvent.Thisissobecauseallagreementswithaminorareabsolutelyvoid.Moreover,aminorisnotpersonallyliableforanydebtincurredduringtheperiodofhisminority.

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1.MeaningofAgreementandContract?

MeaningofanAgreement:AnAgreementmeans

communicationbypartiestooneanother,theirintentionto

createrelationship.Thisrequiresaproposalfrom oneside

ofthepartyanditsacceptancebytheotherparty.

MeaningofContract:Arelationshipcreatedbetweentwoor

moreparties/personswiththeirwillingnesstodoornotto

dosomethingandwhichcanbeenforcedinacourtoflawis

knownasacontract.

DefinitionofContract:Accordingtosection2(h)ofIndian

ContractAct,1872.

“Anagreementenforceablebylawisacontract.’’

Anagreementcomesintoexistencewhenonepersons

makesaproposaltodoornottodosomethingtoanother,

andotheracceptsitforaconsiderations,ifthepartiesare

competenttocontractwithfreeconsentandtheobjectare

lawful.


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2.DifferencebetweenAgreementandContract?

a)Meaningofagreement:

Agreement Contract

a)proposal+acceptance

+considerationbecomesan

agreement.

a)agreement+enforceability

oflawbecomesacontract.

b)agreementisafoundation

foracontract.

b)contractisthefinalstage

oftheagreement.

c)allagreementsarenot

contract.

c)allagreementsare

agreements.

d)anagreementbecomesa

contractonlywhen.

d)anagreementwhichisnot

enforceablebylawwillnot

becomecontract.

e)anagreementwillnot

createlegalobligations.

e)acontractcreatelegal

obligationsbetweenthe

parties.

3.DefineContract.ExplaintheessentialsofaValidContract?

I)MeaningofaContract:

II)DefinitionofaContract:

III)EssentialsofaValidContract:


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a)Offer:AccordingtoSection2(a)oftheIndianContract

Act1872,Offermeans“whenonepersonsignifiesto

anotherhiswillingnesstodoorabstainfrom doing

anythingwithaviewtoobtaintheassentofthatother

suchactasabsistence.”

CASELAW :HarveyVsFacey

CASEFACTS:Inthiscaseapersongaveatelegram to

anotheras“willyousellyourbumperhallpen?Quotethecash

prize”.Theotherpersonreplied“Thepriceofbumperhallpen

if$900,”thenthefirstpersongaveanothertelegram as“Iwill

buyitsendthedocuments.”Forthattelegram noreplywas

given.

Thecourtoflawdeclaredthatnoagreementwillcome

intoexistencebetweenthepartiesbecausethepriceQuoted

onrequestwillnotbecomeavalidoffer.

b)Acceptance:Accordingtosection2(b)ofIndianContract

Act,“whenthepersontowhom offerismadesignifieshis

assentthereto,theofferissaidtobeaccepted.

CaseLaw:powelluslee.

CaseFacts:Inthiscaseapersonappearedforan


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interviewforthepostofheadmasterintheschool.Oneof

theboardmemberoftheschooltoldhim thathewas

selectedforthepostofheadmaster.Buttheschool

managementappointedsomeotherpersonforthatpost.

Thecourtoflawheldthatheshouldnottakehis

appointmentascompletedunlesshereceivesanofficial

communicationfrom theschoolauthority.

c)Consideration:Accordingtosection2(d)ofIndian

contractoract1872,“whenthepromisormakesa

proposaltodosomethinghewantsthepromisestodo

somethingforhim ,itisknownasconsiderationinthe

promise.”

CaseLaw:KedarnathvsGhouriMohdandothers.

CaseFact:InthiscaseGhouriMohdandotherspromises

tocontributecertainamountforconstructionoftownhall,

butdidnotdoso.Thesecretaryofthetownhallhas

finishedtheconstructionofthehallbytakingupsome

loan.Thecourtoflawheldthattheamountmustbepaid

byGhouriMohdandothers.

d)CompetentParties:Accordingtosection11ofIndian

ContractAct1872,”Everypersoniscompetenttocontract


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whoisoftheagemajorityaccordingtothelawtowhich

heissubjectandwhoisofsoundmindandisnot

disqualifiedfrom contractingofanylawtowhichheis

subject.

CaseLaw:MohiribibivsDharmodasGhosh.

CaseFact:InthiscaseMohiriBibivs,whoisamoney

lendergavealoantoDharmodaswhoisaminor,after

obtainingapromisernotefrom him.onduedate

DharmodasfailedtorepaybackloanamounttoMohiri

Bibi.SoshefiledacasebutaspertherulesoflawMohiri

cannotrecoverloanamountfrom Dharmodasbecause

anyagreementwithaminorisvoid.

e)FreeConsent:Iftheconsentofthepartiesisnotfree

thennovalidcontractcomesintoexistence.Theconsent

isnotfreewhenitisobtainedbycoercion,undue

influence,fraud,

misrepresentationoffactsandmutualmistakeoffacts.

Accordingtosection13ofIndianContractAct1872.”Two

ormorepersonsaresaidtoconsentwhentheyagree

uponthesamethinginsamesense.”Thisiscalledas


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consensusaditem.

CaseLaw:RanganakkammavsAlwarChetty.

CaseFacts:InthiscaseMrs.Ranganakkammawas

marriedattheageof13yrsandherhusbanddiedwithin

6monthsinanaccidentmr.Alwarwhoisfatherinlawof

mrs.Rangankkammaforcedhertoadoptaboyasasonto

dothefuneralcremationofherhusband.Thedeadbody

ofherhusbandwasstoppedfrom cremationuntilshe

adoptedtheboy.Laterthecourtoflawallowedherto

avoidtheagreementofadoptionofboyonthegroundsof

coercion.

f)LawfulConsiderationandLawfulObject:TheLawful

considerationisthatwhichisneitherfraudulent,forbidden

bylaw,immortalnoropposedtopublicpolicyetc.if

considerationisnotlawfulthennovalidcontractcomes

intoexistence.

Existenceofconsiderationineveryagreementisnot

sufficient,butitmustbealawfulconsideration.Moreover

theobjectoftheagreementshouldalsobelawfulsoalso

toenforceitincourtoflaw.


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g)CreatingLegalObligations:Theagreementsshouldbe

capableofcreatinglegalobligationsbetweentheparties

whichcanbeenforceablebylaw.Onepartyshouldbe

empowertotakelegalactionagainsttheotherparty.Ifthe

otherfailstofulfillhisobligationsundertheagreements.

CaseLaw:BalfourvsBalfour.

CaseFacts:InthiscaseMr.BalfourmovedtoCeylonon

hisjobbutMrs.Balfourbecauseofillhealthhadtostayin

Englandandcouldnotaccompanyhim toCeylon

Mr.Balfourpromisedtosendher30poundspermonth

whilehewasabroad.ButMr.Balfourfailedtopaythat

amount.Mrs.Balfourfiledasuitagainstherhusbandfor

recoveringthesaidamount.Thecourtheldthatitwas

domesticateagreementandthepromisemadebythe

husbandinthecasewasnotintendedtobealegal

obligation.Inthiscasetheintentionnottocreatealegal

obligationwasclearfrom theconductofparties.

Therefore,alltheelementsabovementionedmustbe

presentinordertomakeavalidcontract.So“allcontracts

areagreementsbutallagreementsarenotcontracts.”


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h)Legalformalities:Writtenagreementsshouldbe

properlydraftedonpaperinaproperlanguage.The

agreementshouldbesignedbythepresenceofatleast

twowitnesses.Iftheyinvolveinthetransferofimmovable

property,thenitshouldberegisteredwiththeregisterof

immovableproperties.Theseareknownaslegal

formalities.

4.explaininbrieftheclassificationsofcontractsortypes

ofcontract:

a)Meaningofcontract

b)Definitionofcontract

c)Classificationofcontract

A)Enforceability B)Formation C)Performance

a)Validcontract a)Express

Contract

a)Executed

contract

b)Voidcontract b)Impliedcontractb)Executory

contract

c)Voidcontract c)Quasicontract c)(i)unilateral

contract

d)Voidable

contract

(ii)bilateral

contract


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e)Unenforceable

contract

f)illegal

agreement

[A]Classificationsonthebasisofenforceability:

a)ValidContract:Anagreementsenforceablebylawis

voidcontract.Anagreementbecomesacontractwhenall

theessentialselementsofvalidcontractarefulfilled.If

anyoneelementismissingthencontractisvoidable,void,

illegal/unenforceable.

b)VoidAgreement:Anagreementmaybeenforceableat

thetimewhenitwasmade,butlateronduetosome

reasonsitmaybecomevoidsuchcontractsareknownas

voidcontract.

ForExample:Acontracttoimportgoodsfrom foreign

countriesmaysubsequentlybecomevoidwhenawas

breakoutbetweentheimportingandexportingcountry.


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c)VoidAgreement:Anagreementnotenforceablebylaw

iscalledasvoidagreement.Itis“void-ab-intio”becauseit

isvoidfrom theintialstageitself.Allillegal,immortal

agreementsoragreementswiththeminoragreements

withoutconsiderationaredeclaredasvoidagreements.

d)VoidableContract:Accordingtosection2(i)ofthe

IndianContractAct,1872.”Anagreementwhichis

enforceablebylawattheoptionofoneormoreofthe

partiesthereon,butnotattheoptionofotherorothers,is

avoidablecontract.”

Avoidablecontractisthatwhichcanberescinded(putto

anendorterminated)attheoptionoftheoneofpartiesto

thecontract.Thishappenswhentheelementoffree

consentismissingi.e,thecontractiseffectedbycoercion,

fraud,mistake,undueinfluence,misrepresentation.The

partywhoseconsentisnotfreemayeitheravoidthe

contractormayelecttobeboundbyit.

Acontractisvoidableinthefollowingtwosituationalso:

Situation1:Whenapersonpromisestodosomethingfor

anotherpersonbuttheotherpersonstophim from doing

so,thecontractbecomesvoidableathisoption.

ForExample:mr.Aandmr.Bmadeacontractinwhich


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mr.Ahastodoworkformr.Bfor$10000mr.Awasready

todotheworkbutmr.Bstopshim from doingso.The

contractisvoidableattheoptionofmr.A,hemayeither

electtobeboundbyitormayrescindthecontract.Ifhe

rescientsthecontract,hecanrecoverfrom mr.B

compensationforlosswhichhewasincurred.

Situation2:whenapersonpromisestoperform an

obligationswithinaspecifiedtime,anyfailureonhispart

toperform withinthattimemakesthecontractvoidableat

theoptionofpromises.

e)UnenforceableContract:Itisonewhichcannotbe

enforcedbylaw,becauseofsometechnicalobjecta

technicaldefectlikeabsenceofawrittenform orabsence

ofproperstamping,registrationattestationetcsuch

contractswillnotbeenforcedbythecourtsuntiland

unlessthedefectisractified.

f)IllegalAgreements:Anillegalagreementisoneinwhich

thepartieshavepromisedtoconductanillegaloran

immoralactivitywhichisopposedtopublicpolicysuchan

agreementisvoid.”Allillegalagreementsarevoid

agreementsbutallvoidagreementsarenotnecessarily

illegal.”Anillegalagreementsisnotonlyvoidbetweenthe

immediatepartiesbuteventhecollateralpartiesbecome

taintedwithillegality.Acollateraltransactionisonewhich


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isasubsidiarytotheoriginalcontract.

ForExample:Mr.Aborrows$10000from Mr.Bandenter

intothecontractwithaforeignerMr.C,toimport

prohibitedgoods.Mr.Bknowsthepurposeofloanso

transactionbetweenMr.AandMr.Biscollateraltothe

mainagreement.Itisillegalbecausethemainagreement

isillegal.

B)Classificationonthebasisofformation:

a)ExpressContract:Ifthetermsofthecontractare

expresslyagreeduponeitherbywordsspokenorwritten,

thecontractissaidtobeanexpresscontract.However,

Lawprefersthatpartiesshouldenterintoacontractin

writtenform itservesasanevidenceincourtoflaw.

b)ImpliedContract:Animpliedcontractisthatwhichis

notmadeinwords.Suchcontractcomesintoexistence

onofactorconductofpartiesmaygiverisetoimplied

contract.

c)QuasiContract:Asamatteroffact,quasicontractare

notcontractasthereisnointentionofthepartiestoenter

intocontract.Infactitisanobligationswhichthelaw


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createsintheabsenceofanyagreement.AQuasi

Contractisbasedupontheequitableprinciplethatperson

shallnotbeallowedtoenrichhimselfattheexpenseof

another.

ForExample:Mr.A,atradeleftcertaingoodsatMr.B

housebymistake.Mr.Btreatedthegoodshasowninthis

case,Mr.Bboundtopayforthegoods.

C)Classificationsonthebasisofperformance:

a)ExecutedContract:Executedmeanswhichisalready

done.Anexecutedcontractisoneinwhichboththe

partieshadperformedtheirrespectiveperformance.

ForExample:Mr.AagreestopaintapictureforMr.Bfor

$1000whenMr.ApaintedthepictureandMr.Bpaysforit

thecontractisexecuted.

b)ExecutoryContract:Executorymeansthatwhich

remainstobecarriedoutwhenoneorboththeparties

havetoperform theirobligationsthecontractissaidtobe

executory.


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i)UnilateralExecutoryContract:Acontractisunilateral

whenonepartyhasperformedhisobligationsanditis

onlytheotherpartywhohastoperform hisobligations.

ii)BilateralExecutoryContract:Acontractisbilateralifthe

iftheperformanceofboththepartiesisoutstanding.

ForExample:Mr.Apromisestopaythepriceondelivery

ofcar.Thecontractisbilateralasboththepartieshave

stilltoperform theirobligations.

5.Explaininbriefthetypesorclassificationsofanoffer?

A]Meaningofoffer:

Anofferorproposalisthestartingpointintheformationof

ancontract.Inanagreementtheirmustbeanofferbyone

partyanditsacceptancebytheotherparty.Theofferwhen

acceptedbecomesanagreement.Thepersonmakingan

offeroraproposaliscalledanofferororanofferor

proposerandthepersontowhom anofferismadeiscalled

offeree.

B]definitionofanoffer:

Accordingtosection2(a)ofIndiancontractact,1872,


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“whenonepersonsignifiestoanotherhiswillingnsstodoor

toabstrainfrom doinganythingwithaviewtoobtainingthe

assetofthatothertosuchactorabstinence.”

C]Classificationofanoffer:

Expressoffer

andimplied

offer

Specificoffer

andgeneral

offer

Positiveoffer

andnegative

offer

Crossoffer

andcounter

offer

a)Expressoffer:anoffermaybemadebywordsspokenor

written.Thisiscalledasexpressoffer.

Forexample:Mr.AoffersMr.B“willyoupurchasehouse

for$100000?”thereisanexpressofferexistinghere.

b)Impliedoffer:anoffermaybeimpliedfrom theconductof

partiesorcircumferencesofthecase.


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Forexample:whenapublicbusrunsonaparticularroute,

thereisanimpliedoffermadebythebustocarry

passengersforaparticularfare.Theacceptanceofanoffer

iscompletewhenthepassengersboardsthebus.

c)Specificoffer:whenanoffertoaparticularpersonorbody

ofpersonsthenitisaspecificoffer.Aspecificoffer

canusuallyacceptedonlybythepersonorpersonsto

whom itismade.

d)Generaloffer:whenanofferisaddressedtothewhole

worlditiscalledageneraloffer.ageneraloffercanbe

acceptedbyanyone.

CaseLaw:CarllilvsCarbolicsmokeballco.

CaseFacts:acompanyadvertisedinthenewspaperthata

rewardof100poundswouldbegiventoanyperson

whogetsinfluenceafterusingsmokeballs.Mr.Carllil


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usedthissmokeballsandaftersometimeshewas

affectedwithinfluence.thecourtheldthatMrs.Carllil

couldrecovertheamountof100poundsbythe

companybecauseshehadacceptedthegeneraloffer

givenbythesmokeballcompany.

e)Positiveandnegativeoffer:Anoffermaybetodo

somethingornottodosomething.anoffertodo

somethingisapositiveofferandanoffernottodo

somethingisanegativeoffer.

Forexample:Mr.Aofferstopay$10,000permonthtoMr.B

ifheworksinhiscompanyasatypist.thisisapositive

offer.After2monthswhenMr.Bispreparedtoresign,

Mr.Agaveanotherofferthathewillincreasethesalary

ofMr.Bto12,000.ifhedoeshewillnotresign.thisis

anegativeoffer.ifMr.Bdoesnotresignhisjobthenit

becomeshisacceptancetoMr.A’soffer.

f)Crossoffer:whentwopartiesmakeanidenticalofferto

eachotherinignoranceofeachothers,thistypeof

offeriscalledascrossoffer.insuchacasethecourt

willnotconsideroneofferasavalidofferandtheother

offerasstheacceptance.therefore,thereisno


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contractexistingbetweenthoseparties.

Forexample:Mr.AwritesalettertoMr.Bbygivinganoffer

tosellhishousefor$5,00,000toMr.B,Mr.Balso

writesalettertoMr.AwhichcrossesMr.A‘sletterin

theposttheoffergivenbyMr.BwastobuyMr.A’s

housefor$5,00,000.inthiscaseoffersarecrossed

offersandsothereisnocontract.acontractcanarise

onlywhenanacceptanceisgivenaftertheofferis

made.

g)Counteroffer:whenaproposalismadebyonepartybutit

iscounteredbytheotherparty.anoffercomestoan

endwhentheoffersmakesacounterofferorrejects

theoffer.whereanofferisacceptedwithsome

modificationsintermsoftheofferorwithsomeother

conditionsnotformingpartoftheoffer,suchqualified

acceptanceamountstoacounteroffer.anofferonce

rejectedcannotberevived.

CaseLaw:HydevsWrench

CaseFacts:Inthiscase,Mr.Hydefor10000poundsfor

whichforwhichMr.Hrepliedthathewouldbuythe

house9000poundssoMr.W keptquitewithoutgiving


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anyreply.laterMr.Hagainexpressedhiswillingness

tobuythehousefor10000pounds.Mr.W refusedto

sellhishousetoMr.H.soMr.Hfiledacase,butthe

courtoflawheldthatanofferwhencounteredby

bargainingormodificationsbecomeinvalid.evenifitis

acceptedoffermakingacounteroffernoagreement

comesintoexistence.

Q)Differencebetweenvoidagreementandvoidcontract?

Basisofdistinction Voidagreement Voidcontract

Meaning Itreferstoan

agreementwhichis

enforceablebylaw

andhasnolegal

consequence.

Itimpliesavalid

contractthatcauses

tobeenforceableby

lawbecomesavoid

contractwhenit

lacksenforceability.

Voidabintio Itisvoidbeginning. Itisvalidat

beginningbutlaterit

becomesvoid.

Periodofvalidity Itisnevervalid. Itisvalidtillitdoes

notcausedtobe

enforceable.


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Causes Duetoabsenceof

oneormore

essential.

Duetoimpossibility

ofperformance.

Pre-requisitesof

contract

Whentheagreement

iscreatedallthepre-

requisiteofcontract

butarenotsatisfied

,thusmakingitvoid

.

Whenthecontractis

enteredintoallthe

pre-requisiteof

contractare

satisfiedwhichis

dueto

circumstances

subsequently

becomesvoid.

2)Differencebetweenvoidagreementandvoidable.

Basisof

distinction

Voidagreement Voidablecontract

Void-ab-initio Itisvoidfrom

thebeginning.

Itisvalidwhenit

ismadeand

continuesto

remainvalidtillit

isrepudiatedby

agreedparty.


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EssentialelementItisvoid

becausethe

essential

elementofvalid

contractis

missing.

Itisvoidable

becauseconsent

ofthepartyisnot

free.

Enforceability Itcannotbe

enforcedbyany

party.

Itcontainstobe

enforcedifthe

agreedparty

doesnot

repudiatethe

contract.

Rightof3rdparty Thirdpartydoes

notacquiresany

right.

Athirdpartywho

purchasesgoods

ingoodfaithfor

consideration

beforethe

contractis

repudiate

acquiresgoods

titleofthose

goods.

Damage Thequestionof

damagedoes

notarise.

Theagreedparty

canclaim

damage.


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3)Differencebetweenvoidagreementandillegalagreement.

Basisof

distinction

Voidagreement Illegal

agreement

Meaning Anagreement

whichlackslegal

enforceability.

Anagreement

whosecreation

isforbiddenby

thecourtoflaw

isanillegal

agreement.

Consequences Anagreement

becomesvoid

whenitlosesits

enforceabilityby

law.

Anillegal

agreementis

void-ab-intioi.e.,

voidfrom the

verybeginning.

Prohibitedbylaw No Yes

Scope Wide Narrow

Penalty Partiestovoid

agreementsare

nottableforany

penaltyunderlaw

Partiestoillegal

agreementsare

penalize.


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.

Connected

agreements

Maynot

necessarilybe

voidtheymaybe

validalso.

Allconnected

agreementsare

void.

4)writeashortnoteonsocialagreement?

Meaning:asocialagreementisanagreementwhichisnot

enforcedbythelawandanypromisemadeinthis

agreementisnotintendedtobealegalobligationsas

agreementsofsocialordomesticnaturedonot

contemplatelegalrelations.

Forexample:Mr.AinvitedMr.Btohissonsbirthdayparty

andMr.Bagreedtoattendthepartyontheparticular

day,Mr.BspentRs.500/-astravelexpensesand

reachedtheplacetoattendthepartyandhecomesto

knowthatthepartyhasbeencancelledduetopersonal

reasonsofMr.A.Mr.BfiledasuitagainstMr.Afor

recoveryofRs.500/-whichhespentastravelexpenses.

Thecourtdidnotacceptthecasebecausetheabove

activityisaSocialActivityi.e.,birthdaypartywhichisa

SocialAgreement.

CASELAW :BalfourVsBalfour


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CASEFACTS:Mr.BalfourmovedtoCeylononhisjobbut

Mrs.BalfourhadtostayinEnglandbecauseofherill

health.However,Mr.Balfourpromisedtosend30

poundspermonthwhilehewasaborad.But,Mr.

Balfourfailedtopaytheamountso,Mrs.Balfourfileda

suitagainsther husband for recovering the said

amount.The courtheld thatitwas a domestic

agreementandthatthepromisemadebythehusband

inthiscasewasnotintendedtobealegalobligation

whichwasclearfrom theconductoftheparties.

5)Difference between illegal agreement and unlawful

agreement.

Basis of

distinction

IllegalagreementUnlawful

agreement

Meaning Illegalisdefined

inthecontraryto

or forbidden by

law especially

criminallaw.

Behaviourthatis

notauthorizedby

law ,commission

oforparticipate

inanactivitythat

violates criminal

orcivillaw.

6)Defineoffer.Explaintheessentialsofavalidofferwith


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caselaw?

i)Meaningofanoffer:

ii)Definitionofanoffer:

iii)Essentialsofavalidoffer:

1)Offershouldbevoluntary:Apersonissaidtomakean

offer,whenhesignifieshiswillingnesstoanothertodo

ortoabstrainfrom doinganything.Hence,ananswer

giventoaquestionorareplygiventoanenquirywill

notbecomeavalidofferoraproposal.

CaseLaw:HarveyvsFacey.

CaseFacts:(Refer)

2)Offershouldbecommunicated:Accordingtosection4of

Indiancontract1872,“Thecommunicationofanoffer

iscompletewhenitcomestotheknowledgeofthe

persontowhom itwasmade.

CaseLaw:LalmanShuklavsGuariDutt.


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CaseFacts:Inthiscaseatradernephew (4years)had

absconded from hishouse.so thetradersenthis

munim totracehismissingnephew.traderannounced

arewardof$500whoevertracestheboy.thereward

wasannouncedafterthemunim leftin searchofboy.

Munim tracetheboywithouttheknowledgeofreward.

whenthemunim cametoknownaboutthereward,he

broughtanactionagainsttradertorecoverthesame.

thecourtoflawheldthatmunim wasnoteligibleforthe

rewardbecausehetracetheboywithoutreceivingthe

communicationaboutthereward.

3)offer must be made with willingness : The word

‘willingness’isusedinlegaldefinitionofanofferdoes

notconveythemeaningof‘maredesireofapersonto

dosomething’.Itshouldbecoupledwithhiscapacityto

dowhatheisdesiringorproposing.

Forexample:owneample

4)offermaybepositiveornegative:(refer)

5)obtainingtheassentofthepromise:Asperthelegal


Samala

definition,anoffershouldbemadewithaview to

obtainingtheassentoftheothers,thatmeans,the

promisorshouldexpectareplyoracceptanceofthe

promisetotheproposalmadebyhim .

CaseFax:FarinavsFicus

CaseFacts:Inthiscase,apersonwroteacasualletterto

hiswouldbeson–in-law andexpressedhisintention

thathisdaughterwillbecomearealownerofhisall

propertyafterhisdeath,becauseshewastheonly

childhehad.laterhewantedtosellthepropertydueto

certainunforeseencircumstances.itwasobjectedby

wouldbeson-in-law .thecourtoflaw heldthatthis

lettercannotbeconsideredasanofferbecauseitwas

notwrittenwithaview toobtaintheconsentofthe

otherparty.

6)offermustcreatelegalobligations:Agreementswhich

doesnotcreatelegalobligationsbetweentheparties

cannotbeenforcedin thecourtoflaw .thefriendly

proposals,socialproposal,domesticproposalwillnot

createlegalobligations.

CaseLaw:BalfourvsBalfour


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CaseFacts:

7)offermustbedefiniteandcertain:theterm ofanoffer

mustbedefinite,clear,certain.ifthetermsofthe

offer are uncertain ,no contract willcome into

existence.boththepartiesshouldbeclearaboutthe

legalconsequencesarising outofthecontract.for

example:Mr.AofferedtosellMr.bhundredtonsofoil.

butMr.A who is a traderwho is dealing with 10

differenttypesofoil.theofferisuncertainasthereis

nothingtoshowwhatkindofoilisintendedtobesold.

8)Lapseofanoffer:

a)Ifeitherofferororoffereediesbeforeacceptance.

b)Ifitisnotacceptedwithinaspecifiedtimeorreasonable

time,ifnotimeisspecified.

c)Iftheoffereedoesnotmakeavalidacceptance.

d)Anoffercanalsolapsebyrevocation.

Q7.Whatisavalidacceptance?Givelegalrulesregarding

acceptance.

I.Meaningofacceptance–Acceptanceisthesecondstageinthe

formationofacontract.Aproposalbecomesapromiseonly

whenitisproperlyacceptedbythepromise.Everyproposalmay


Samala

notbeaccepted,thereforeeveryproposalwillnotcreatean

agreement.Acceptedproposalonlywillcreatelegalobligations

betweenthepromisorandpromisee.Anacceptanceisthe

manifestationbytheoffereeofhiswillingnesstobeboundbythe

termsoftheoffer.

II.Definitionofacceptance-AccordingtoSec2(b)of

IndianContractAct1872,“whenthepersontowhom the

proposalismadesignifieshisassentto,proposalissaid

tobeaccepted.Aproposalwhenacceptedbecomesa

promise.”

III.Essentialsofavalidacceptanceorrulesregarding

acceptance-

1)Acceptancemustbeunconditional-Thetermsoftheoffer

mustbeacceptedbytheacceptorwithoutanycondition.

Acceptinganofferwithconditionsamountstocounter

offerandrejectionoftheoriginaloffer.

CASELAW-HYDEVsWRENCH

CASEFACTS-REFER

2)Acceptancemustbecommunicated-Theacceptanceis

completedonlywhenithasbeencommunicatedtothe

offereruntiltheacceptanceiscommunicated,itdoesnot

createalegalrelation.

CASELAW-POWELLVsLEE


Samala

CASEFACTS-REFER

3)Acceptancemaybeexpressedorimplied-Acceptance

canbegiveneitherbywordsspokenorwritten.Such

acceptanceiscalledanexpressedacceptance.Itcanalso

begivenbytheactionsofthepromisee.Itiscalledasan

impliedacceptance.

CASELAW-HARCHARANVsHARBHAJAN

CASEFACTS-Inthiscaseapersonwassittingata

dharmashala,heardanannouncementaboutalostboy.A

rewardof500wasannouncedfortracingtheboy.Hefound

theboyatthedharmashallaandcaughthim.Inthisprocess

hecouldnotheartheaddresssohehandedovertheboyin

thelocalpolicestation.Laterhewenttothataddressto

claim thereward.Thecourtoflawheldthathewaseligible

fortherewardonaccountofimpliedacceptance.

4)Acceptancemustbemadewithinareasonabletime-Ifno

timeisspecified,acceptancemustbegivenwithinthe

reasonabletime.Ifanytimeisspecifiedacceptancemust

begivenwithinthespecifiedtimeonly.


Samala

Forexample-Movieinatheatre.

5)Silenceisnotacceptance-Silenceofapromiseein

respectofaproposalistakenasnon-acceptanceor

rejectionofaproposal.Eventhoughsilenceisconsidered

ashalfacceptanceintheindiantraditionsitisnot

recognizedbylaw.

6)Mentalacceptanceisnoacceptance-Sometimesthe

promisemayacceptaproposalmentallyandinformsitto

anyotherpersonbutnottotheofferorthenitiscalledas

mentalacceptance.Itisinvalidandnoagreementcomes

intoexistencebetweenthepromisorandthepromiseein

suchcases.

CASELAW-FELTHOUSEVsBINDLEY

CASEFACTS-InthiscaseMr.FeltHousewrotealetterto

hisnephewthathewaswillingtobuythenephew’shorse

for30poundsandifhereceivesnocommunicationwithin

3dayshewilldeem itasacceptanceandwillcollectthe

horse.Hisnephewdecidedtosellthehorsetohisuncle

andinstructedhisauctionererMr.Bindleynottosellthe


Samala

horseinauction,buttheauctionerersolditbymistake.

Thecourtoflawheldthattheauctionerercannotbeheld

liablefordamagesbecausenoagreementcameinto

existencebetweentheuncleandhisnephewbecauseof

lackofcommunicationofacceptance.

7)Acceptanceshouldbecommunicatedinareasonable

mode-Sometimesthepromisorprescribesaparticular

modeofcommunicationofacceptance.Insuchcases,

promiseeshouldcommunicatehisacceptanceinthat

particularmodeonly,otherwiseitmayberejectedbythe

promisor.Whennoparticularmodeisprescribed,it

shouldbecommunicatedthroughareasonablemode.

Everymodeofcommunicationrecognizedbythe

governmentofacountryisdeemedtobeareasonable

modeofcommunication.Therefore,acceptancegivenby

postalletters,courierservices,telephoneconversations,

etcbecomesvalidinindia.

CASELAW-NARENDRANATHVsKEDARNATH

CASEFACTS-InthiscaseMr.Kedarnathoffershishouse

tonarendranathforsomeconsiderationandinstructed

him tosendhisacceptanceinwritingthroughapost.But

Mr.Narendranathsentanoralmessagethrougha

messengerthatheiswillingtobuythehouse.But


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kedarnathsoldhishousetosomeotherpersonand

narendranathfiledasuitonhim forrefusingthe

acceptance.Thecourtoflawheldthathecandoso

becausepromiseedidnotfollowtheprescribedmodeof

communicationofacceptance.

8)Acceptanceshouldbegivenbypromiseeonly-Asperthe

legaldefinition,“thepersontowhom aproposalismade

shouldsignifyhisassent,theretoexpresshisacceptance.”

Thatmeansthepromiseeonlyshouldgivetheacceptance.

Ifitisgivenbyanythirdpartyitbecomesinvalidandno

obligationsiscreatedbetweenthepartiesandno

agreementcomesintoexistence.

Q8.Whendoescommunicationandrevocationofofferand

acceptancecomplete?Explainmodesofrevocationofoffer.

OR

Whendoesthecommunicationofaproposalbecome

complete?Howistheproposalrevoked?

A.Whenthepartiestoacontractarefacetofacethe

acceptanceissaidtobecommunicatedassoonasthe

acceptorgiveshisacceptance.Butthepartiesarenotnear


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butatdifferentplacesthentheyneedtosendofferand

acceptanceinanymodeofcommunicationlikeletter,

telegram,courieretc.Sec3toSec5ofIndianContractAct

1872,dealswiththerulesrelatingtocommunicationofoffer,

acceptanceandtheirrevocation.

1.Communicationofoffer-AccordingtoSec4,Anofferissaid

tobecommunicatedorcompletedwhenitcomestothe

knowledgeofpersontowhom itismade.Whenofferissent

bypostthentheofferissaidtobecompletedwhentheletter

reachestheofferee.

Forexample-Mr.AnilofHyderabadsendsalettertoMr.

SunilofDelhiofferingtosellhidhousefor18lakhs.The

letterwaspostedon1stFebandthisletterreacheson7th

Feb.Thecommunicationofofferissaidtobecompleteon

7thFeb.

2.Communicationofacceptance-AccordingtoSec4,An

acceptanceissaidtobecommunicatedin2situations.The

firstisfrom thesideoftheofferorandtheotherisfrom the

sideoftheacceptor,(or)Itcanalsobesaidasagainst

offerorandagainstacceptor.

Forexample-(continuationofex1)Mr.Sunilacceptedthis

proposalandsendshisacceptanceon10thFebandMr.Anil

receivesaletteron17thFeb.

(i) (ii)

1ST 7TH

ANIL SUNIL

17th10TH


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againstacceptor againstofferor

i) Againstacceptor-Theacceptanceissaidtobecomplete

againstacceptorwhenitcomestotheknowledgeofthe

offeror.

ii) Againstofferor-Theacceptanceissaidtobecomplete

whentheacceptanceletterisputincourseof

transmissiontotheofferor,sothattheletterisoutof

reachoftheacceptortotakeback.

3.Revocationofoffer-AccordingtoSec5,Revocationmeans

cancellation/takingback/withdrawal.Anoffercanbe

revokedatanytimebeforethecommunicationofits

acceptanceiscompleteasagainstanofferorbutnot

afterwards,whichmeansanoffercanbewithdrawnbefore

theoffereepostshisletterofacceptance,butnotafterwards.

Forexample-(continuationofex1&2)Iftheofferor(Mr.

Anil)wantstorevokehisofferheneedstosendhis

revocationbefore10thFEB.

4.Revocationofacceptance-AccordingtoSec5,An

acceptancecanberevokedatanytimebeforethe

communicationoftheacceptanceiscompleteasagainst

theacceptorbutnotafterwards,whichmeansacceptance

canbewithdrawnbeforeacceptanceletterisreceivedbythe

offeror.


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Forexample-(continuationofex1,2&3)IfMr.Sunilwants

torevokehisacceptanceheneedstosendhisletterof

revocationbefore17thFEB,itmustreachMr.Anil.

5.Modesofrevocationofoffer-AccordingtoSec6,

i) Bynoticeofrevocation-Offermayberevokedbya

communicationofanoticeofrevocationbytheofferorto

theotherpartybeforeacceptanceiscompleteagainstthe

offerorhimself.Anoffermadeinwritingmayberevoked

bywordsofmouth.Anoticeofrevocationtobeeffective

mustbecommunicatedtotheofferee.

ii) Bylapseoftime-Anofferwillcometoanendbylapseof

timeprescribedinsuchofferforitsacceptanceasifno

timeisprescribed,bythelapseofreasonabletime.

iii) Bycounteroffer-Anoffercomestoanendwhenthe

offereemakesacounteroffer.Whereanofferisaccepted

withsomemodificationsinthetermsoftheoffer.Such

acceptanceamountstoacounteroffer.

CASELAW-HYDEVsWRENCH

CASEFACTS-REFER

iv) Bydeathorinsanity-Anofferisrevokedbythedeathor

insanityoftheofferorifthefactofhisdeathorinsanity

comestotheknowledgeoftheacceptorbefore

acceptance.

v) Bynon-fulfilmentofconditionprecedent-Aproposalis

revokedwhentheacceptorfailstofulfillacondition


Samala

precedenttotheacceptanceoftheproposalwhichwas

conditionaloffer.

Forexample-XmayoffertosellcertaingoodstoYona

conditionthatYpaysacertainamountbeforeacertain

date.TheproposalisrevokedifYfailstopaythe

requestedamountwithingiventime.


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business law unit - 2 notes b.com second year. semester - iii

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