Offer, Acceptance, Consideration and Capacity

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Text of Offer, Acceptance, Consideration and Capacity

OFFERA person is said to have made a proposal, when he 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. Sec. 2(a) Offer could be general offer (Mrs. Carlil Vs. Carbolic Smoke Ball Co.) as well as could be particular offer. In addition to this offer could be divided on the basis of its formation. On this basis it could be express offer or implied offer.

Legal Rules As To Offer Capable of being accepted Definite, Unambiguous and certain Different from declaration of intention or announcement (Harris Vs. Nickerson) Different from invitation to make an offer Different from newspaper advertisement (Exception is an offer of reward to finder of lost goods)


Must be communicated (Lalman Shukla Vs. Gauri Dutt) Statement of price is not an offer Should not contain any term the non-compliance of which could be treated as acceptance. If there is any special term in the contract, it must be properly communicated to the offeree prior to the acceptance (Parker Vs. S.E.Railways) and (Olley Vs. Marlborough Court Ltd.).

Types of Offer Implied or Express Offer Particular or General Offer Cross Offer Counter Offer

AcceptanceWhen the person to whom the proposal is made signifies his assent there to, the proposal is said to be accepted. Sec. 2(b) Acceptance to an offer is what a lighted match is to a train of gunpowder. It produces something which cannot be recalled or undone. Acceptance could be express as well as implied.

Legal Rules as to Acceptance Must be absolute and unqualified Must be communicated (Brogden Vs. Metropolitan Railways) and (Felthouse Vs. Bindley) Must be in accordance to prescribed or usual and reasonable mode. Within reasonable time. Cannot precede an offer. Should be prior to lapse or withdrawal of an offer.


Cannot be implied from silence (Harvey Vs. Facey). In case of particular offer, it should be accepted by only that person to whom offer was being made (Boulton Vs. Jones). However in case of general offer it could be accepted by any person from that group to whom offer was being made (Mrs. Carlil Vs. Carbolic Smoke Ball Co.) . Must be after the knowledge of offer (Lalman Shukla Vs. Gauri Dutt).

Special Rules Agreement to agree in future: An agreement to enter into an agreement upon the terms to be afterwards settled between the parties i.e. agreement to agree in future is no contract (Loftus Vs. Roberts). Communication (Sec. 4): A. Communication of Offer: The communication of offer is complete when it comes to the knowledge of the person to whom it is made. B. Communication of Acceptance: The communication of acceptance is complete (i) as against to offeror when it is put into a course of transmission to him. (ii) as against to the acceptor, when it comes to the knowledge of the proposer.


Revocation (Sec. 4): means withdrawal. It is complete (i) as against the person who makes it, when it is put into a course of transmission to the person to whom it is made. (ii) as against the person to whom it is made, when it comes to his knowledge. A. Revocation of Offer (Sec. 5): An offer may be revoked only before communication of acceptance. B. Revocation of Acceptance (Sec. 5): An acceptance could be revoked at any time, before it is complete as against to the acceptor.

Lapse of Offer Notice of Revocation Lapse of time Non-fulfillment of condition Death or insanity of the offeror Counter offer Not accepted by prescribed mode Change of law

ConsiderationWhen at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, something, such act or abstinence or promise is called a consideration for the promise. Sec 2(d)

Legal Rules as to Consideration Must move at the desire of promisor (Durga Prasad Vs. Baldeo). May move from the promisee or any other person (Chinnaya Vs. Ramayya). May be an act, abstinence or forbearance or a return promise. May be past, present or future.

Cont. Need not to be adequate. Must be something which a promisor is not already bound to do (Ramchandra Vs. Kaluraju). Must not be illegal, immoral or opposed to public policy. Must be real and not illusory i.e. there should not be any: Physical Impossibility

Legal Impossibility Uncertain consideration Illusory Consideration

Stranger to ContractAccording to the Doctrine of Privity of Contract, A person who is not a party to contract cannot sue upon though he is beneficiary in contract. A contract cannot confer rights or impose obligations arising under it on any person other than parties to it (Dunlop Pneumatic Tyre Co. Ltd. Vs. Selfridge & Co. Ltd.).

Exception to Stranger to Contract A Trust or Charge Marriage Settlement Doctrine of Estoppels Assignment of a Contract Contract entered into through an agent Covenants running with the land

General Rule As to ConsiderationThe general rule is ex nudo pacto non oritur actio i.e. an agreement without consideration is void. But there are certain exceptions to this rule laid u/s 25 & 185.

Exceptions to General RuleSec. 25(1): An agreement without consideration is enforceable provided it is : written registered under the respective law Made on account of love and affection between the parties standing in near relation to each other.

Case Laws: (1) Balfour Vs. Balfour (2) Rajlukhy Vs. Bhootnath

Cont.Sec. 25(2): A promise to compensate for voluntary services, wholly or partly, could be enforced. Sec. 25 (3): A promise to pay a time-barred debt is enforceable provided it is in writing and duly signed by the debtor or his authorised agent.

Cont.Others: (1) Completed Gifts (2) Agency (3) Charitable Subscription

Capacity To ContractEvery person is competent to contract who (a) is of the age of majority according to the law to which he is subject, (b) is of sound mind, (c) is not disqualified from contracting by any law to which he is subject. Sec. 11

MinorAccording to Indian Majority Act 1875, a minor is a person who has not completed 18 years of his age. In the following cases, he must have incomplete 21 years of his age: (a) When a guardian of a minors property has been appointed under the Guardians & Wards Act. (b) Where the superintendence of a minors property is assumed by a court of wards.

Minors Agreement An agreement with or by a minor is void & inoperative abinitio (Mohiri Bibi Vs. Dharmodas Ghose) Minor can be a promisee or beneficiary (Sharafat Ali Vs. Noor Mohd.) No ratification is possible Cannot be asked to pay for received benefits Always plead minority (Leslie Vs. Shiell)

Cont. No specific performance Cannot be a partner Liable for necessaries Can be a agent Liable in tort Parents are liable for the contract

Person of Unsound Mind Lunatics Idiots Drunken OR Intoxicated Persons

Other PersonsAlien Enemies Foreign Sovereigns Corporations Insolvents Convicts