Indian Contract Act Offer Acceptance Damages

8/6/2019 Indian Contract Act Offer Acceptance Damages

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THE INDIAN CONTRACT

ACT (ICA), 1872



What is a contract?Section 2(h)

³An agreement enforceable by law is a

contract´.Thus,

Contract = Agreement + Enforceability atLaw



Agreement?

� Section 2(e)Promise/(s) Promise/(s)

= Agreement(in exchange for)



Promise?

Section 2(b)P

romise =P

roposal/Offer + Acceptance

Proposal?Section 2(a)

Expression of willingness With a view to seek the assent of the otherThus, mere expression of willingness doesn¶tconstitute offer/proposal.



Acceptance

Section 2(b)

Giving of assent to the proposal.Enforceability by Law

Agreements which are not enforceable

Illegal/unlawful agreements, e.g., tosmuggle/to kill

Social Agreements ( Balfour vs. Balfour)



Agreements Declared Void under

ICA

e.g.

Agreement with or by a minor

Agreement in restraint of trade

Marriage brokerage contract

Wagering/Betting Agreements



K inds of ContractsFrom the point of view of Enforceability/ Validity

x V oid

x V oidable

x V alid

x Illegal

x Unlawful

x Unenforceable



Void Agreement vs. Void Contract

� Void Agreement i.e., void-ab-initio i.e. unenforceable from the

very beginningBecomes void ( V oid Contract)

� Voidablei.e., void + ablei.e., capable of being declared void(unenforceable) at the option of one of theparties to the contract but not at the option of the other.



Valid Contract

Section 10To be a valid contract, it must satisfy thefollowing:

1. Off er and Acceptance 2. C onsensus-ad-idem (Meeting of minds) i.e.,

persons must agree to the same thing in thesame sense and at the same time.

3. I ntention to create legal relationship asagainst social relationship or illegal/unlawfulrelationship.



4. F ree and Genuine C onsent , i.e., freefrom coercion undue influence fraud misrepresentation mistake

5 . P arties competent to contract 6. Law f ul consideration and object, i.e.,something in return and that must belaw f ul .



Valid Contract

(µObject¶ and µConsideration¶ usually overlap.However, there may be difference at times e.g.,object may be to kill competition and for thatpurpose in view, a senior manager of thecompetitor may be paid a certain amount to giveunrealistically high quotation.)

Here: Object is to kill competition.C onsideration is :(i) payment of money (ii) giving high quotations



Valid Contract

7 . Agreement not declared void .

8. C ertainty o f Meaning: e.g. sale andpurchase of 100 tonnes of oil. But whichoil? Thus, agreement being uncertain ±not valid.

But, if the seller deals only in one kind of oil and one variety, then it shall be validsince it is capable of being made certain.



Valid Contract

9. P ossibility o f per f ormance:

Impossibility whether known to theparties or not, renders a contract invalid.

10. N ecessary legal f ormalities: e.g.sale-deed of immovable property.



Void vs. Illegal Agreements

Void Agreement Illegal Agreement

1. Unenforceable

2. Not Punishable

3. Collateral

transactions

unaffected.

1. Unenforceable

2. Punishable (fine or

imprisonment or

both)

3. Collateraltransactions are

also void.



Specific and General Off er

� S peci f ic Off er:

made to a specified person or a group of persons.

can be accepted only by the person to whom made.

Thus, if offer is addressed to µA¶, µB¶cannot accept it.

� Case Law: Boulton vs. J ones



Specific and General Off er

� General Off er:

which is not a specific offer. made to the world at large.

can be accepted by anyone by complying with the terms of the offer.

� Case Law: C arlill vs. C arbolic Smoke Ball C o.



Off er vs. Invitation to o ff er

� I llustrations o f I nvitation to Off er:

Prospectus issued by a college. Prospectus issued by a company.

Invitation of bids in an auction.

Price-catalogues, price lists, quotations

Display of goods with a price-tag in a shop window.



Special Terms in a Contract

Examples: Dry cleaner¶s receipt, courier¶s

receipt, shipment receipt, insurance policy, etc.� Binding if communicated or attention drawn tothe fact that there are certain special terms andconditions.

� Not binding if attention is not drawn and theother party not aware of.



Cross Off ers & Counter Off ers

� Cross Offers

Identical offers cross each other and none of theparties is aware of the same. Doesn¶t result in acontract unless one of them is accepted.

� Counter Offer

Instead of accepting an offer, the offeree makes acounter offer, i.e., accepts the same subject tocertain conditions or qualification.



Contracts through Post

� C ommunication o f Off er

is complete when the offeree has theknowledge of the same.

� C ommunication o f Acceptance

It has two aspects, viz.,x As against the proposer

x As against the acceptor



As against the proposer

� Communication is complete as soon as a duly

addressed letter of acceptance is put into thecourse of transmission.

� Whether the same reaches the proposer or not.

As against the acceptor � Communication is complete only when the

proposer has received the letter and learnt thecontents thereof.



Communication of R evocation

� Communication of revocation (of offer or

acceptance) is complete: As against the person who makes it when it

is put into the course of transmission.

As against the person to whom it is made,

when it comes to his knowledge.



¶A lighted match stick to a trainof gunpowder·� Comparing µoffer¶ to a µtrain of

gunpowder¶ and µacceptance¶ to aµlighted match stick¶ ±How farcorrect?

� William Anson¶s observation though validin the English context doesn¶t hold good inIndia since in India acceptance isrevocable.



Claim for Damages

Damages

U/S Section 73

Damages

U/S Section 74

Only damages

naturally flowing

From breach

(Ordinary

Damages)

Special Damages(No claim for

consequential lossunless in theContemplationof the parties

(Hedley v. Baxendale

Exemplary

Damages

Nominal

Damages

Pr e-fixed Damages

Penalty

Liquidated Damages

(What can be r ecover ed is

actual loss or

amount pr efixed,

whichever is less)

Documents

Indian Contract Act Offer Acceptance Damages