Contract Unit 1 : Nature of Contract

“an agreement enforceable by law”

Not given by Section 10 but are also

Agreement - The term considered essential Validity
‘agreement’ given in Section Valid Contract
2(e) of the Act is defined as- • Two Parties Void Contract
“every promise and every set • Parties must intend to create legal Voidable
of promises, forming the obligations Illegal Contract
Other Formalities to be complied Unenforceable
consideration for each other”. •
with in certain cases
when the person to whom the
• Certainty of meaning Formation of contract
• Possibility of performance of an
proposal is made signifies his Express
agreement
assent there to, the proposal Implied
is said to be accepted. Proposal Tacit
when accepted, becomes a As given by Section 10 of Indian Quasi
promise”. Contract Act E-Contracts

Enforceability by law – An • Offer and Acceptance or an

agreement
Performance
agreement to become a • Free Consent
contract must give rise to a • Capacity of the parties Executed Contract
legal obligation. • Consideration Executory Contract
• Lawful Consideration and Object • Unilateral Contract
• Not expressly declared to be void • Bilateral Contract
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PROPOSAL Essential of a valid offer

“when one person 1. It must be capable of creating legal relations

signifies to another his
willingness to do or to 2. It must be certain, definite and not vague
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abstain from doing
anything with a view to 3. It must be communicated to the offeree
obtaining the assent of
that other to such act 4. It must be made with a view to obtaining the Use code IGSIR
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proposal”. 5. It may be conditional

Types of offer 6. Offer should not contain a term the non

compliance of which would amount to acceptance
What is invitation to
• General offer offer?
• Special/specific 7. The offer may be either specific or general
Whereas an invitation
offer to an offer is only a
• Cross offer 8. The offer may be express or implied
circulation of an offer,
• Counter offer it is an attempt to
• Standing or 9. Offer is Different from a mere statement of
intention, an invitation to offer, a mere induce offers and
continuing or open precedes a definite
offer communication of information, A prospectus and
Advertisement offer
 COMMUNICATION OF OFFER AND ACCEPTANCE
ACCEPTANCE
Communication of offer: In terms of Section 4 of the Act,
Section 2(b) of the Act, “the communication of offer is complete when it comes to
the knowledge of the person to whom it is made”.
“When the person to whom the
proposal is made signifies his assent communication of acceptance is complete
thereto, proposal is said to be • As against the proposer, when it is put in the course
accepted. The proposal, when of transmission to him so as to be out of the power of
accepted, becomes a promise”. the acceptor to withdraw the same
• As against the acceptor, when it comes to the
Legal Rules regarding a valid acceptance knowledge of the proposer
1. Acceptance can be given only by
the person to whom offer is Modes of acceptance :
made • by any act
2. Acceptance must be absolute • by omission
and unqualified • acceptance by conduct
3. The acceptance must be
communicated: Acceptance over telephone or telex or fax
4. Acceptance must be in the Use code
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6. Acceptance by conduct/Implied Standard forms of contracts subscription
REVOCATION OF OFFER AND ACCEPTANCE
Modes of revocation of offer:
• In terms of Section 5 of the Act a
proposal can be revoked at any time
• By notice of revocation
before the communication of its
• By lapse of time
acceptance is complete as against the
• By non - fulfillment of condition precedent
proposer
• By death or insanity
• By counter offer
• An acceptance may be revoked at any
• By the non acceptance of the offer
time before the communication of
according to the prescribed or usual mode
acceptance is complete as against the
• By subsequent illegality
acceptor.

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