Indian Contract Act, 1872

Essentials of Contract

Jus in personam - A sells his car to B for Rs. 1 lacs. A has a right to recover the price of the car
from B. The right of A is a right in personam, i.e., against a particular person. This is jus in
personam.

Jus in rem - B buys a car and becomes the owner of the car. He has a right to have a quiet
possession of the car and enjoy it against the whole world. Nobody in the world can disturb him
in his right. The right of B is jus in rem, i.e., right against the whole world.

Case Study 1 : A and B of Srinagar entered into a contract on 1 August 2010 as per the
provisions of the Indian Contract Act. Can they enforce the contract?

Case Analysis : No they cannot enforce contract.

Indian Contract Act is applicable to whole of India except to the state of Jammu & Kashmir.

Case Study 2 : A promised to pay his son B a sum of Rs. 1 lakh if B passed C.A. exams in the
first attempt. B passed the examination at first attempt but A failed to pay the amount as
promised. B files a suit for recovery of the amount. State whether B can recover the amount
under the Indian Contract Act, 1872.

Case Analysis : B cannot recover anything from A.

Promise by A is not with an intention to create legal relation. Social agreement is created. Social
agreement is not enforceable.

Case Study 3 : Salman promises to Katrina to give real pearl necklace at the time of his
marriage. Salman fails to give it at the time of marriage. Can Katrina complain about non-
fulfillment of promise against Salman at any court?

Case Analysis : Katrina cannot complain in any court.

Promise by Salman is not with an intention to create legal relation. Social agreement is created
but is not enforceable.

Case Study 4 : State with reason in brief, whether any contract is made in following cases:

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  You have invited your business partner for lunch.

 When you eat meals at restaurant.

 When you board a public bus.

 When you call a taxi on telephone.

 When you put a coin in the slot of weighing machine.

Case Analysis :

o No contract made: Invitation for launch is social agreement. Intention to create

legal relation is missing.

o Yes contract is made: Order for meal is offer while serving meal is an
acceptance. It is agreement with all elements of contract.

o Yes contract is made: You agree to pay to the bus company for taking you at
the agreed stop or place. It is enforceable agreement.

o Yes contract is made: You agree to hire service from the taxi company. It is
acceptance to your offer to pay money to taxi company. It is enforceable
agreement.

o Yes contract is made: It is enforceable agreement with all essential of valid

contract is presence.

Case Study 5: A husband agreed to pay 30 pound to his wife every month while he was
abroad. As he failed to pay the promised amount, his wife sued him for the recovery of the
amount.

Case Analysis: Here she could not recover it as it was a social agreement and the parties did
not intend to create legal relations.

Case Study 6: A invites B to a dinner and B accepts it. A fails to serve the dinner. Can B sue A?

Case Analysis: Here B cannot sue A for breach of contract, as an invitation for dinner is a
social agreement.

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Case Study 7 : Mohan agrees to pay Sohandada Rs. 50,000 to kill business competitor. Mohan
has borrowed this money from his friend but now refuse to pay back. Can his friend claim it by
approaching court? Would your answer be different in any manner if his friend do not have
knowledge about purpose of borrowing?

Case Analysis : His friend cannot recover the money provided if he has knowledge about
purpose of use of fund. Contract to be valid must have lawful object.

Case Study 8 : A offered to take a house on lease for a period of three years if the house was
handsomely decorated. Is it valid offer? Why?

Case Analysis : No it is not valid offer.

- Offer to be valid must be certain and unambiguous. The word `handsomely decorated’ is not
showing certainty. What should be considered as handsomely decorated is always
questionable.

Case Study 9 : A promises to deliver his watch to B and, in return, B promises to pay a sum of
Rs. 2,000. Is it an agreement or a contract?

Case Analysis : It is a contract.

A offers while B accepts offer by agreeing to deliver his watch. Rs. 2,000 and watch are
consideration. Thus, all elements of valid contracts are present.

Case Study 10 : A, a tradesman, left certain goods at B’s house by mistake B treated and used
the goods as his own. Can trade men recover money of goods used by B?

Case Analysis : Yes trade man can recover money of goods from B.

When B treated and used the goods of his own in spite of having knowledge that it does not
belong to him, he has given acceptance. Thereby valid contract is made.

Case Study 11 : A agrees to sell his DVD player to B promising to deliver it on the date of
payment. B promises to pay the amount with one month. What kind of contract it is?

Case Analysis : It is bilateral contract.

In bilateral contract, both the parties exchange a promise to each other to be performed within a
stipulated time.

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 Offer and Acceptance

Case Study 12 : A asks B, the shopkeeper, `what is price of apple?’ B says `10 Rs. Kg.’ Is there
any valid contract between A and B?

Case Analysis : No contract between A and B.

When B says Rs. 10 Kg. It is invitation to make an offer. It is not an offer and therefore it cannot
be said as contract.

Case Study 13 : An auctioneer advertised in a newspaper that a sale of office furniture would
be held on a certain date. A person, with the intention to buy furniture, came from a distant place
for the auction but he auction was cancelled. Can he file a suit against the auctioneer for his
loss of time and expenses?

Case Analysis : Person cannot file suit for any loss against auctioneer.

- Advertisement by auctioneer in newspaper is an invitation to make an offer. Hence, it does not

create any obligation or responsibility on part of auctioneer.

Case Study 14 : SBI Bank has communicated voluntary Retirement Scheme to all its
employees. One of manager has applied under it but bank has refused his application. Does
bank manager has any right against the bank? Why?

Case Analysis : Bank manager has no right against the bank.

Voluntary Retirement Scheme (VRS) is considered as an invitation to make an offer. When

employee apply under scheme, it is regarded as an offer to bank. As it is invitation to make an
offer, no contract is said to be made between the bank and the bank manager.

Case Study 15 : A and his wife book a room in a hotel, and paid rent in advance. When they
entered into the room, they found a notice exempting the proprietor of the hotel from the liability
for loss of theft or articles of clients, staying therein. Due to the negligence of the hotel staff,
their articles were stolen. A filed a suit on the proprietor for compensation of damages.

Case Analysis : The court held the proprietor liable to pay compensation, since the terms of
proposal were communicated after acceptance. Hence, the terms were not a part of the contract
and A was not bound by them.

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Case Study 16 : A says to B `I offer to sell my car to you for Rs. 2 lakhs’ and B accepts the offer
by saying clearly `I accept your offer’. Is it valid offer? If so, which kind of offer it is?

Case Analysis : Yes it is valid offer.

It is express offer as it is carried out by use of words. At the same time, it can be said as specific
offer because A has made offer to B, specific offer.

Case Study 17 : B makes to memories’ a proposal to his parrot and sends him to A to recite the
proposal. The parrot does so. Is it valid proposal?

Case Analysis : It is not valid proposal.

Proposal to be valid must be certain and possible in the eye of law. Parrot cannot speak.

Case Study 18 : A advertises in a paper that any person who found his lost dog can get a
reward of Rs. 5000. Can advertisement be said as general offer? If any person who finds lost
dog claim the reward money?

Case Analysis : Yes, advertisement is general offer.

General offer is made to public at large which can be accepted by any one.

Any person who found lost dog can claim reward if he has knowledge about the offer. Person
cannot accept the offer without its knowledge.

Case Study 19 : A offers B to sell his house for Rs. 15 lakh and directs him to send his
acceptance only by e-mail. B sends a letter of acceptance by post. Is there valid contract
between parties? What would be your opinion if A does not reject the acceptance made by e-
mail within reasonable time?

Case Analysis : No valid contract if A writes rejection notice to B within reasonable time.

Offer should be accepted as per method prescribed by offeror. If it is accepted by some other
method, offeror is required to write letter of rejection notice in writing to the offeree. If offeror
does not write rejection notice, he has deemed to accepted acceptance. Therefore, if A does not
write rejection letter, valid contract is made between them.

Case Study 20 : A’ invites tenders for the supply of 10 quintals of cotton. ‘B’, ‘C’ and ‘D’ submit
their tenders. When the contract can be concluded?

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Case Analysis : A contract is concluded when tender of either B, C or D is accepted.

Tender is an offer. While acceptance of tender will be regarded as acceptance of offer makes
contract.

Case Study 21 : A offered a reward to anyone who has returned his lost dog. B brought the dog
to A without having heard of the offer. Can B claim reward from A?

Case Analysis : B cannot claim reward from A.

Person accepting offer should have knowledge about it. B was not aware about the offer. He
has not heard about offer.

Case Study 22 : Amar Posts a letter of offer to Kamla on 1 January 2011 which is received by
Kamla on 5 January 2011. Kamla posts letter of acceptance to Amar on 12 January 2011 which
is received by Amar on 17 January 2011.

 When communication of an offer is completed?

 When Amar is bound by an acceptance?

 When Kamla is bound by an acceptance?

Case Analysis : Communication of offer completed on 5 January

Communication of offer is said to be completed when offer comes to the knowledge of an

offeree.

Amar is bound by acceptance on 12 January.

Acceptance is bound to offeror when the letter of acceptance is posted by the offeree (i.e. 12
January).

Kamla is bound by acceptance on 17 January.

Acceptance is bound to offeree when the letter of acceptance is received by the offeror (i.e. 17
January).

Case Study 23 : Further assume that Amar revokes his offer by posting a letter on 7 January
2011, which is received by Kamla on 13 January 2011.

 Is revocation of an offer by Amar is binding on Kamla?

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  Would your answer be different in any manner if Kamla has received the said
letter on 11 January 2011?

 Further assume that if Kamla revokes her acceptance by posting letter on 14 January
2011 which is received by Amar on 16 January 2011.

 Is revocation of letter of acceptance binding on Amar?

 Would your answer be different if Kamla revokes her acceptance by posting letter
on 18 January 2011?

 Case Analysis : Revocation of offer by Amar is not binding on Kamla as it is received to

Kamla on 13 January.

 Kamla has accepted the offer on 12 January. Once offer is accepted, it becomes
contract and there is no possibility to withdraw offer.

 But if revocation of the offer by Amar is received by Kamla on 11 January.

 Offer is considered as withdrawn. Letter of revocation of offer is received by

Kamla on 11 January before he has accepted offer. Kamla has accepted offer on
12 January.

 Revocation of letter of acceptance is binding to Amar.

But if Kamla post her revocation of letter of acceptance after she gets bound by acceptance,
it is not binding to Amar.

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