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Or
Every contract is an agreement but every agreement is not contract,
discuss?
Ans: The position relating to revocation of proposal and acceptance has been
described by Anson in the following words, “Acceptance is to offer what a
lighted match is to a train of gunpowder. It produces something which cannot
be recalled or undone.”
Note :
Acceptance must be given within a specified time; if time is not mentioned
then it should be given within a reasonable time.
Acceptance cannot precede an offer.
It must show an intention on the part of the acceptor to fulfill the terms of the
promise.
Acceptance must be only by the party or parties to whom the offer is made.
Acceptance must be made before the offer lapse or before the offer is
withdrawn.
Silence cannot be the mode of acceptance.
Acceptance may be expressed or implied.
The first rule of acceptance must be final and unconditional.The mirror image
of the rule is final means cannot only accept some part of offer and reject
some part of the offer.Acceptance must be unconditional means cannot
suggest or given subject to a conditions or else it would be treated as a
counter offer.
The cardinal principle in the light of section 7 of the Act is that the offer and
acceptance of an offer must be absolute without giving any room of doubt. It is
well settled that the offer and acceptance must be based or founded on three
components—Certainty, commitment and communication. If any one of three
components is lacking either in the offer or in the acceptance there cannot be
a valid contract.
The defendant offered to sell a farm to the claimant for £1,000. The claimant
in reply offered £950 which the defendant refused. The claimant then sought
to accept the original offer of £1,000. The defendant refused to sell to the
claimant and the claimant brought an action for specific performance.
Held:
There was no contract. Where a counter offer is made this destroys the
original offer so that it is no longer open to the offeree to accept.
You have come across a brochure of a law book seller where it provides the
details of books including the author’s name, book title, publisher name and
price of each title. In that, brochure, you have noticed a book
titled; Arbitration, Conciliation and Mediation authored by Mr. Vishnu S
Warrier and published by LexisNexis India.
Cost of said book is quoted as Rs. 395.00/- Only.You are very much concern
about purchasing said book. You cannot just go to said shop, which issued
the brochure and demand the book for Rs. 395/-. The seller may refuse to sell
the book to you.
You cannot hold him responsible for the breach of contract because, the
brochures or the catalogue issued by the book seller are merely an invitation
to offer.But, when you have gone to the shop and made an offer to purchase
the book titled Arbitration, Conciliation and Mediation authored by Mr. Vishnu
S Warrier, it is the actual offer.
Said offer may either accept or reject by the book seller. However, once the
book seller accepts your offer, he is bound to give you a copy of the book
titled Arbitration, Conciliation and Mediation authored by Mr. Vishnu S Warrier
and you are bound to pay him the price.
1. Legal Relationship :-
It is essential for a valid proposal that it must be made with the intention of
creating legal relationship otherwise it will be only invitation. A social invitation
may not create legal relationship.
Example :- Mr. Jhon invites Mr. Robbin at dinner and he accepts. It does not
create any legal relations.
Example :- Mr. Agha offers to sell his house to Miss. Peenu for Rs. 10 lac she
agrees. It is a contract and create legal relationship.
4. Must be Communicated :-
It is also an important rule for the validity of proposal. Without communication
acceptance of proposal by the proposee is not possible. How an offer can be
accepted unless it has been bought to the knowledge of a person to whom it
is made.
7. Communication Method :-
There are three methods of communication proposal can be made orally, in
writing or by conduct. Generally proposals are made orally or writing.
8. Acceptable Proposal :-
If the acceptance of the proposal is not possible then it will be not a valid
proposal. It is essential that acceptance must be possible.
1. An Agreement.
2. Enforceable by law.
Explanation :-
Promise = Proposal + Acceptance.
Agreement = Promise + Consideration of both the parties
Contract = Agreement enforceable at law.
Important Note :- All agreements are not contract but all contract are
agreement. Because agreement is not enforceable by law. It may exist
without any legal obligation.
Free consent: The contract must have been made with the free consent of
the parties. Consent implies agreeing upon the same thing in the same sense
and consent is said to be free if it is not induced by coercion, undue influence,
fraud, misrepresentation or mistake. If the consent is obtained by any of the
above four factors except mistake, the agreement is voidable at the option of
the party whose consent is not free. The party can either reject the contract or
accept it. If the agreement is induced by mutual mistake, the agreement is
void.
Lawful object: The object of the agreement should be lawful and not one of
which the law disapproves. The object would be unlawful if it is forbidden by
law, is fraudulent, or causes injury to the person or property of another, or is
immoral or opposed to any public policy.
Not expressly declared void agreement: The agreements must not have
been expressly declared to be void by any law. There are certain agreements
which have been expressly declared void by the Indian Contract Act like,
agreements in restraint of marriage, trade or legal proceedings, and
agreements with uncertain meaning. In such cases even if the agreement
possesses all the elements of a valid agreement, it will not be enforceable by
law.
The major differences between void contract and voidable contract are as
under:
1. A contract which lacks enforceability is Void Contract. A contract which
lacks the free will of one of the parties to the contract is known as
Voidable Contract.
2. Void Contract is defined in section 2 (j) while Voidable Contract is
defined in Section 2 (i) of the Indian Contract Act, 1872.
3. A void contract was valid at the time when it is created, but later on, it
becomes invalid. Conversely, the voidable contract is valid until the
aggrieved party does not revoke it within stipulated time.
4. When it is impossible, for an act to be performed by the parties, it
becomes void, as it ceases its enforceability. When the consent of the
parties to the contract is not free, the contract becomes voidable at the
option of the party whose consent is not free.
5. In void contract, no party can claim any damages for the non-
performance of the contract. On the other hand, the aggrieved party
can claim damages for any loss sustained.
Examples
A promises B to sell his horse after one month to B for Rs. 50,000.
Before the completion of one month, the horse died. Now, the contract
becomes void as the contract cannot be performed, i.e. the object on
which the parties agreed is no more, so there is an impossibility of
performance of the contract. This type of Contract is known as Void
Contract.
X says to Y, that he should sell his new bungalow to him at a nominal
price otherwise, he will damage his property and Y enters into a
contract due to fear. In this situation, the contract voidable as the
consent of Y is not free, so he has the right to avoid the performance of
his part. As well as he can claim for any damages caused to him.
(1) Illegal agreement is a void agreement and it can never take place of
a contract, whereas an unenforceable contract is a valid contract but it
lacks some technical requirement, if that requirement is supplied, the
contract becomes enforceable.
(2) If a contract is illegal, the Court can refuse to enforce it at his own
motion, for an unenforceable contract Court may ask the defendant to
remove the defect and then it may enforce the contract.
A void agreement has no legal consequences, because it is null from the very
beginning. Conversely, illegal agreement is devoid of any legal effect, since it
is started. All illegal agreement are void, but the reverse is not true. If an
agreement is illegal, other agreements related to it are said to be void.
The difference between void and illegal agreement can be drawn clearly on
the following grounds:
A void agreement is not prohibited by Indian Penal Code (IPC), but IPC
strictly prohibits an illegal agreement.
General offer: The type of offer which is made to the public at large.
Specific offer: The type of offer made to a particular person.
Cross offer: When the parties to the contract accept each other’s offer
in ignorance of the original offer, it is known as the cross offer.
Counter offer: This is an another type of offer in which the offeree does
not accept the original offer, but after modifying the terms and
conditions accept it, it is termed as a counter offer.
Standing offer: An offer which is made to public as a whole as well as it
remains open for a specific period for acceptance it is known as
Standing offer.
Example:
A tells to B,”I want to sell my motorcycle to you at Rs. 30,000, Will you
purchase it?”
X says to Y,”I want to purchase your car for Rs. 2,00,000, Will you sell it to
me?”
The invitation to offer is made to inform the public, the terms and conditions
on which a person is interested in entering into a contract with the other party.
Although the former party is not an offeror as he is not making an offer
instead, he is stimulating people to offer him. Therefore, the acceptance does
not amount to a contract, but an offer. When the former party accepts, the
offer made by the other parties, it becomes a contract, which is binding on the
parties.
Example:
The principal points of difference between offer and invitation to offer are as
follows:
The main objective of making an offer is to enter into the contract, whereas
the main objective of an invitation to offer is to negotiate the terms on which
the contract can be made.
Communication of Offer :
Examples:
A and B are sitting together. A offers his scooter for Rs. 5,000 to B. reach the
ears of B, the offer of A is complete.
A of Agra by a letter to M of Mumbai offers his scooter for Rs. containing the
offer on 9th January. This letter reaches M at Mumbai is complete on 11th
January.
Communication of Acceptance :
It has two parts:
In our illustration above, the offer can be revoked by A at any time before or at
the moment B posts his letter of acceptance in the letter box i.e., before 12th
January and not afterwards.
Revocation of Acceptance :
Continuing our above illustration, B may revoke his acceptance at any time
before the letter of acceptance reaches A i.e., before 14th January.
Communication of Revocation :
(i) As against the person who makes it when it is put into the 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.
(ii) As against the person to whom it is made when it comes to his knowledge.
Example:
A offers his car to B for Rs. 10,000 by a letter which he posts on 10th March.
B receives this letter on 12th March. A revokes his offer by a telegram which
he sends on 10th March. This telegram reaches B on 11th March.
Ans: Section 2 (h) of the Indian Contract Act, 1872 defines a contract as an
agreement enforceable by law. In other words, an agreement which can be
enforced in a court of law is known as a contract. According to Salmond, a
contract is an agreement creating and defining obligations between the
parties’. Sir William Anson defines a contract as a legally binding agreement
made between two or more persons by which rights are acquired by one
or more to acts or forbearances on the part of the other or others’. Hence,
a contract is an agreement between two or more persons which
It is clear from the above definition of the contract that there are two elements
of a contract;
(ii)Legal obligation.
2. X agrees to come to the house of Y for a tea party at Y’s request, there is an
agreement, but it cannot be termed as a contract but it does not attract any
legal enforceability.
Thus, all contracts are agreements but all agreements are not contracts. Only
that agreement which is enforceable by law is a contract, and that which
is not enforceable by law cannot be a contract.
1. If it is forbidden by law.
This clause refers to agreements which arc declared illegal by law. If the
consideration or object for a promise is such as is forbidden by law, the
agreement is void. An act or an undertak-ing is forbidden by law:
7. Traffic in public offices. Agreements for sale or transfer of public offices or for
appointments to public offices in consideration of money are -illegal, being
opposed to public policy. Such agreements, if enforced, would lead to
inefficiency and corruption in public life.
9. Agreements interfering with parental duties. A father, and in his absence the
mother, is the legal guardian of his/her minor child. This right of guardianship
cannot be bartered with any agreement.
The following conditions must be’ satisfied for the application of the exception:
(b) It is registered.
Example: A, out of natural love and affection, promises to give his son B
Rs.5,000. A puts his promise to B in writing and registers it. This is a valid
contract. It will be interested to know that the, expressions ‘near relations’ and
‘natural love and affection’ have not been defined in the Indian Contract Act.
However, the expression ‘near relations’ will include parties related by blood or
marriage. And some kind of natural love and affection is also implied. But love
and affection may be sometimes be overruled by external circumstances. For
example, in Raj Lucky Dabee vs. Bhootnath, husband promised to pay his wife
a fixed sum of money every month for her separate residence and
maintenance. The agreement was contained in the registered document which
mentioned certain quarrels and disagreements between the two. The court
refused to hold the agreement valid as it could not find any love and affection
between the parties whose quarrels had compelled them to separate.
Example: A finds B’s purse and gives it to him. B promises to give him Rs. 500.
This is a contract. In order that a promise to pay for past voluntary services be
binding, the following conditions must be satisfied:
(b) The services must have been rendered for the promisor and not anybody
else.
The following conditions must be satisfied for the application of this exception
(c) The debt must be time-barred i.e., the limitation period for the recovery of
the debt must have expired.
(d) There must be an express promise to pay. The intention should not be
unexpressed. It may be to pay whole or part of the debt.
Example: A owes B Rs.20,000 but the debt is barred by the Limitation Act. A
signs a written promise to pay B Rs.10,000 on account of the debt. This is a
contract.
Completed gift: The gift actually made by a donor and accepted by the donor
are valid even without the consideration. So in case of a gift actually made
consideration is not necessary.