COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS

3. Communication, acceptance and revocation of proposals.—The communication of 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.

4. Communication when complete.—The communication of a proposal 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 the acceptor;

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

The communication of a revocation is complete,—

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

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

Illustrations

(a) A 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 post; as against B, when the letter is received by A.

(c) A revokes his proposal by telegram.

The revocation is complete as against A when the telegram is despatched. 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 despatched, and as against A when it reaches him

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 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. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

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.

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 his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance.

8. Acceptance by performing conditions, or receiving consideration.—Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.

9. Promises, express and implied.—In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.

DEFINITIONS IN CONTRACT ACT: SECTION 2

In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context:—

(a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal;

(b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise;

(c) The person making the proposal is called the “promisor”, and the person accepting the proposal is called the “promisee”;

(d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;

(e) Every promise and every set of promises, forming the consideration for each other, is an agreement;

(f) Promises which form the consideration or part of the consideration for each other are called reciprocal promises;

(g) An agreement not enforceable by law is said to be void;

(h) An agreement enforceable by law is a contract;

(i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract;

(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable

CONTRACT LAW

What is Contract Law?

Contract law is the body of law that relates to making and enforcing agreements. A contract is an agreement that a party can turn to a court to enforce. Contract law is the area of law that governs making contracts, carrying them out and fashioning a fair remedy when there’s a breach.

Section 2(h) of the Indian Contract Act, 1872[2] defines a contract as "An agreement enforceable by law". The word 'agreement' has been defined in Section 2(e) of the Act as ‘every promise and every set of promises, forming consideration for each other’

Anyone who conducts business uses contract law. Both companies and consumers use contracts when they buy and sell goods, when they license products or activities, for employment agreements, for insurance agreements and more. Contracts make these transactions happen smoothly and without any misunderstandings. They allow parties to conduct their affairs confidently. Contracts help make sure that the parties to a transaction are clear on its terms.

A contract is a written or expressed agreement between two parties to provide a product or service. There are essentially six elements of a contract that make it a legal and binding document.

In order for a contract to be enforceable, it must contain:

An offer that specifically details exactly what will be provided

Acceptance, which is the agreement by the other party to the offer presented

Consideration, money or something of interest being exchanged between the parties Capacity of the parties in terms of age and mental ability

The intent of both parties to carry out their promise

Legally enforceable terms and conditions, also called object of the contract

How do you form a contract?

A valid contract has four parts:

Offer

First, one party must make an offer. They must state the terms that they want the other party to agree to. If the other side agrees to the terms of the offer, the other side may accept it, and the contract is complete.

An "offer" is the starting point in the process of making an agreement. Every agreement begins with one party making an offer to sell something or to provide a service, etc. When one person who desires to create a legal obligation, communicates to another his willingness to do or not to do a thing, with a view to obtaining the consent of that other person towards such an act or abstinence, the person is said to be making a proposal or offer.

Acceptance

Accepting another party’s offer makes a contract complete. The party that accepts the offer must accept it on the same terms as the terms of the original offer. They must make sure that the other side knows they accept it.

If they propose different terms, there’s no contract. Instead, their terms are a counteroffer. It’s then up to the first party to accept the counteroffer or propose another counteroffer.

An agreement emerges from the acceptance of the offer "Acceptance" is thus, the second stage of completing a contract. An acceptance is the act of manifestation by the offeree of his assent to the terms of the offer. It signifies the offeree's willingness to be bound by the terms of the proposal communicated to him. To be valid an acceptance must correspond exactly with the terms of the offer, it must be unconditional and absolute and it must be communicated to the offeror.

Consideration

A valid contract requires each party to give something up. That’s called consideration. For example, in the case of an employment contract, one party agrees to give up money, and the other party agrees to give up labor. A contract is a two-way street with each party giving up something to get something else that they want.

Mutual intent to enter into an agreement

To have a valid contract, both parties must intend to be bound by the contract. If a document says that it’s only a statement of intent, the parties may not have a mutual agreement to enter into a contract. Informal agreements between friends often fall into this category.

Typically a promise or an offer of a reward in exchange for certain behavior creates an enforceable contract with the person who undertakes the activity. For example, if someone offers a reward for information that leads to an arrest for a crime, the person who provides the information can seek enforcement of the reward. On the other hand, an advertisement is not a contract without an additional, personalized invitation from the seller for the buyer to buy the good.

A contract can be implied. For example, a person who seeks medical treatment has an implied contract with the doctor who treats them to pay a reasonable charge for services. Likewise, a person who orders dinner at a restaurant has an implied contract to pay for the meal that they order.

How do the courts interpret a contract?

To interpret a contract, a court looks at the clear language of the contract from the viewpoint of an objective and reasonable person. If the contract isn’t clear, the court may consider outside evidence including outside statements and the behavior of the parties. It’s best to put a contract in writing, and the statute of frauds may even invalidate some contracts.

Breach of contract

When there’s a disagreement about the terms of a contract or when there’s a breach of contract, the parties might involve a court to resolve the dispute. The party seeking damages must prove that a valid contract exists. They must also convince the court that there’s an appropriate remedy.

Remedies available for breach of contract

There are several remedies that a party might ask a court to impose for a breach of contract. The most common is compensatory damages. These are the real, financial losses that a party has because of the breach of contract. If the parties agree in advance about damages if a breach occurs, that’s called liquidated damages. When a breach occurs without any real damages, the aggrieved party can still get a small amount of damages. That’s called nominal damages.

In some cases, a party acts very poorly and inexcusably to breach a contract. When that happens, the court may award extra damages called punitive damages. However, this is rare. It’s also rare for a court to order the parties to perform the contract. That might happen in a case where compensatory damages are inadequate like in a contract of sale for a rare item.

Standard form of Contract:

The law of contract has in recent time to face a problem, which is assuming new dimensions. The problem has arisen out of the modern large scale and widespread practice of concluding contracts in standardized form. People upon whom such exemption clauses or standard form contracts are imposed hardly have any choice or alternative but to adhere. This gives a unique opportunity to the giant company to exploit the weakness of the individual by imposing upon him terms, which may go to the extent of exempting the company from all liability under contract. It is necessary and proper that their interests should be protected. The courts have therefore devised some rules to protect the interest of such persons

The main provisions of the Act are:-

Atleast two parties are needed to enter into a contact. One party has to make an offer and other must accept it. The person who makes the 'proposal' or 'offer' is called the 'promisor' or 'offeror'. While, the person to whom the offer is made is called the 'offeree and the person who accepts the offer is called the 'acceptor'. There must be an 'offer' and an 'acceptance' to the offer, resulting into an agreement. Both offer and acceptance should be lawful.

The parties must intend to create a legal obligation. The agreement sought to be enforced should contemplate legal relations between the parties to it.

A contract is basically a bargain between two parties, each receiving 'something' of value or benefit to them. This 'something' is described in law as 'consideration'. Consideration is an essential element of a valid contract. It is the price for which the promise of the other is bought. A contract without consideration is void. The consideration may be in the form of money, services rendered, goods exchanged or a sacrifice which is of value to the other party. This consideration may be past, present or future, but it must be lawful.

The parties making the contract must be legally competent in the sense that each must be of the age of majority, of a sound mind, and not expressly disqualified from contracting. An agreement by incompetent parties shall be a legal nullity.

The contracting parties must give their consent freely. 'Consent' means that the parties must agree about the subject matter of the agreement in the same sense and at the same time. Consent is said to be free if it is not induced by coercion, undue influence, fraud, misrepresentation or mistake. The absence of free consent would affect the legal enforc of a contract.

The object of the agreement must be lawful. An agreement is unlawful, if it is:- (i) illegal (ii) immoral (iii) fraudulent (iv) of a nature that, if permitted, it would defeat the provisions of any law (v) causes injury to the person or property of another (vi) opposed to public policy.

An agreement expressly declared to be void under the Contract Act or under any other law, is not enforceable and is, thus, not a contract. The Contract Act declares void certain types of agreements such as those in restraint of marriage, or trade, or legal proceedings as well as wagering agreements.

The terms of a contract must not be vague or uncertain. If an agreement is vague and its meaning cannot be ascertained, it cannot be enforced. Also, the terms of a contract must be such as are capable of performance. An agreement to do an impossible act is void and is not enforceable by law.

Generally, a contract may be oral or in writing. However, certain contracts are required to be in writing and may even require registration. Therefore, where law requires an agreement to be put in writing or be registered, the same must be complied with. For instance, the Indian Trusts Act requires the creation of a trust to be reduced to writing.

Contracts are of various types:- (i) Express Contract; (ii) Implied Contract; (iii) Quasi Contract; (iv)Valid Contract; (v) Void Agreement; (vi) Void Contract; (vii) Voidable Contract.

When a contract is entered into, the parties must perform their respective obligations under the contract. Where a promisor dies before performance of a contract his legal representative is bound to perform the contract unless a contrary intention appears from the words in the contract or the nature of the contract. A promisor must either actually perform or offer to perform his obligation under the contract, to the promisee. This offer is called `tender of performance'. The essentials of a valid tender of performance are:-It must be unconditional;

It must be at a proper time and place, since a tender made before the due date is not effective;

It must be made to the proper person;

It must be of proper quantity and as to the whole of obligation;

It must be made by a person willing and able to perform there and then;

It must give a reasonable opportunity to the promisee, for inspection of goods or articles.

Once the promisor makes a valid tender of performance, it is then for the promisee to accept the performance. If the tender of performance is rejected by the other party, the promisor is not responsible for non-performance and is entitled to sue the promise for breach of the contract.

Contracts which need not be performed are:-

Agreement to do impossible acts, are void and need not be performed.

When a contract is substituted by a new contract, or is rescinded or altered, the original contract need not be performed.

Contracts discharged by operation of law need not be performed.

Contracts which have lapsed by time.

The principles with regard to time and place for performance of a contract:-

Where a contract states the time and place for its performance, the parties must perform accordingly.

Where the contract does not specify any time for its performance, and the promisor has undertaken to perform without a request from the promisee, then it must be carried out within a reasonable time.

Where the contract is to be performed on a certain day and the promisor has undertaken to perform without a request from the promisee, the promisor may perform it at any time during the usual hours of business on such day, at the specified place.

When the promise is to be performed on a certain day, and the promisor has not undertaken to perform without a request from the promisee, the promisee must make a request for the performance at a proper place and within the usual hours of business.

When a promise is to be performed without a request by the promisee, and no place is fixed for its performance, the promisor must request the promisee to fix a reasonable place for the performance and perform the promise at such place.

Contracts of Indemnity and GuaranteeA contract of indemnity is one whereby a person promises to save the other from loss caused to him by the conduct of the promisor himself or of any third person. For example, a shareholder executes an indemnity bond favouring the company thereby agreeing to indemnify the company for any loss caused as a consequence of his own act. The person who gives the indemnity is called the 'indemnifier' and the person for whose protection it is given is called the 'indemnity-holder' or 'indemnified'. A contract of indemnity is restricted to cover the loss caused by the promisor himself or by a third person. The loss must be caused by some human agency. Loss arising from accidents like fire or perils of the sea are not covered by a contract of indemnity.A contract of 'guarantee' is a contract, whether oral or written, to perform the promise, or discharge the liability, of a third person in case of his default. A contract of guarantee involves three persons, viz. a person who gives the guarantee is called the 'surety'; the person in respect of whose default the guarantee is given called the 'principal debtor'; and the person to whom the guarantee is given is called the 'creditor'. A contract of guarantee is a conditional promise by the surety that if the principal debtor defaults he shall be liable to the creditor. Contracts of Bailment and PledgeA 'bailment' is the delivery of goods by one person to another for some purpose upon a contract that they shall, when the purpose is accomplished,be returned or disposed of according to the directions of the person delivering them. The person delivering the goods is called the 'bailor' and the person to whom the goods are delivered is called the 'bailee'. The examples of a contract of bailment are:- delivering a watch or radio for repair; leaving a car or scooter at a parking stand; leaving luggage in a cloak room; delivering gold to a goldsmith for making ornaments; leaving garments with a dry cleaner,etc. The essence of bailment is the transfer of possession. The ownership remains with the owner. There cannot be a bailment of immovable property. A 'pledge' is a bailment of goods wherein the goods are delivered as a security for payment of a debt or performance of a promise.The bailor is called the 'pledgor' or 'pawnor' and the bailee is called the 'pledgee' or 'pawnee'. Thus, pledge is a special kind of bailment. Pledge can be made only of movable properties. In order to make the pledge legally valid it is essential that the pledgor has the legal right or title to retain the goods. Contracts of Agency An 'Agent' is a person employed to do any act or to represent another in dealings with third persons. The person who employs the agent and for whom such act is done,or who is so represented,is called the 'principal'. The relation between the agent and the principal is called 'Agency'. It is only when a person acts as a representative of the other in the creation,modification or termination of contractual obligations,between that order and third persons,that he is an agent. The essence of a contract of agency is the agent's representative capacity coupled with a power to affect the legal relations of the principal with third persons.Contracts of agency are based on two important principles:-Whatever a person can do personally shall also be allowed to be done through an agent except in case of contracts involving personal services such as painting, marriage, singing, etc.

He who does an act through a duly authorised agent does it by himself i.e. the acts of the agent are considered the acts of the principal.A contract is said to be discharged when the liabilities of the parties thereto, come to an end or are determined. A contract may be discharged by any of the following modes:-

By Performance:- when both parties perform their promises and nothing remains thereunder, to be done the contract is discharged.

By Impossibility of Performance:- the impossibility may be initial or subsequent.

By Mutual Agreement:- where the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract stands discharged.

By Remission:- where a party to a contract dispenses with, either wholly or in part, the performance of a contract by the other party, or extends the time for performance, or accepts any other satisfaction instead of performance, the contract stands discharged to the extent remitted.

By Operation of Law:- a contract is said to be discharged by operation of law under the following circumstances:-

Material alteration or loss of a written document;

Merger of an inferior contract into a superior contract;

Discharge of an insolvent;

When rights and liabilities under the same contract become vested in the same person.

By Breach or Non-Performance:- when a party to a contract has refused to perform or is disabled from performing, his promise, the promisee may put an end to the contract on account of breach by the first party.

Where a party to a contract refuses to perform it or becomes disabled to perform it, it amounts to breach of contract and the promisee may set aside the contract unless he has signified by words or conduct, his intention to continue it. The remedies available to the aggrieved party, in case of breach of contract by the other party are:-

Suit for rescission of the contract :- Rescission is the revocation of a contract. When a contract is broken by one party, the other party may sue for rescission and refuse further performance. In such a case, the aggrieved party is absolved of all its obligations under the contract.

Suit for damages:- the party who is injured by the breach of a contract may bring an action for damages. Damage is the monetary compensation allowed by the court to the aggrieved party for the loss or injury suffered by him as the result of breach by the other party.

Suit for injunction:- An injunction is an order of the court requiring a person to refrain from doing some act which has been the subject matter of contract. The power to grant injunction is discretionary and it may be granted temporarily or for an indefinite period.

Suit upon 'Quantum Meruit':- The term "quantum meruit" means, 'as much as is merited' or 'as much as earned'. A suit of quantum meruit is a claim for the value of the material used or supplied under a contract that has become void on account of breach by the other party. When a contract becomes void, any person who has received any advantages under such contract is bound to restore it, to the person from whom he received it.

Suit for specific performance:- When the loss suffered by breach of contract cannot be compensated by damages or where there are no standards to ascertain the quantum of damages, the aggrieved party may approach the Court for the grant of a decree for specific performance of the contract. Specific performance is granted when:-

Money is an adequate remedy

It will be inequitable to either party

The contract is of a personal nature

The court cannot supervise its execution

The principles with regard to time and place for performance of a contract:-

Where a contract states the time and place for its performance, the parties must perform accordingly.

Where the contract does not specify any time for its performance, and the promisor has undertaken to perform without a request from the promisee, then it must be carried out within a reasonable time.

Where the contract is to be performed on a certain day and the promisor has undertaken to perform without a request from the promisee, the promisor may perform it at any time during the usual hours of business on such day, at the specified place.

When the promise is to be performed on a certain day, and the promisor has not undertaken to perform without a request from the promisee, the promisee must make a request for the performance at a proper place and within the usual hours of business.

When a promise is to be performed without a request by the promisee, and no place is fixed for its performance, the promisor must request the promisee to fix a reasonable place for the performance and perform the promise at such place.

Contracts of Indemnity and GuaranteeA contract of indemnity is one whereby a person promises to save the other from loss caused to him by the conduct of the promisor himself or of any third person.For example,a shareholder executes an indemnity bond favouring the company thereby agreeing to indemnify the company for any loss caused as a consequence of his own act.The person who gives the indemnity is called the 'indemnifier' and the person for whose protection it is given is called the 'indemnity-holder' or 'indemnified'. A contract of indemnity is restricted to cover the loss caused by the promisor himself or by a third person.The loss must be caused by some human agency.Loss arising from accidents like fire or perils of the sea are not covered by a contract of indemnity.A contract of 'guarantee' is a contract,whether oral or written,to perform the promise,or discharge the liability,of a third person in case of his default. A contract of guarantee involves three persons,viz. a person who gives the guarantee is called the 'surety'; the person in respect of whose default the guarantee is given called the 'principal debtor'; and the person to whom the guarantee is given is called the 'creditor'. A contract of guarantee is a conditional promise by the surety that if the principal debtor defaults he shall be liable to the creditor. Contracts of Bailment and PledgeA 'bailment' is the delivery of goods by one person to another for some purpose upon a contract that they shall, when the purpose is accomplished,be returned or disposed of according to the directions of the person delivering them. The person delivering the goods is called the 'bailor' and the person to whom the goods are delivered is called the 'bailee'. The examples of a contract of bailment are:- delivering a watch or radio for repair; leaving a car or scooter at a parking stand; leaving luggage in a cloak room; delivering gold to a goldsmith for making ornaments; leaving garments with a dry cleaner,etc. The essence of bailment is the transfer of possession. The ownership remains with the owner. There cannot be a bailment of immovable property. A 'pledge' is a bailment of goods wherein the goods are delivered as a security for payment of a debt or performance of a promise.The bailor is called the 'pledgor' or 'pawnor' and the bailee is called the 'pledgee' or 'pawnee'. Thus, pledge is a special kind of bailment. Pledge can be made only of movable properties. In order to make the pledge legally valid it is essential that the pledgor has the legal right or title to retain the goods. Contracts of Agency An 'Agent' is a person employed to do any act or to represent another in dealings with third persons. The person who employs the agent and for whom such act is done,or who is so represented,is called the 'principal'. The relation between the agent and the principal is called 'Agency'. It is only when a person acts as a representative of the other in the creation,modification or termination of contractual obligations,between that order and third persons,that he is an agent. The essence of a contract of agency is the agent's representative capacity coupled with a power to affect the legal relations of the principal with third persons.Contracts of agency are based on two important principles:-Whatever a person can do personally shall also be allowed to be done through an agent except in case of contracts involving personal services such as painting, marriage, singing, etc.

He who does an act through a duly authorised agent does it by himself i.e. the acts of the agent are considered the acts of the principal.