THE INDIAN CONTRACT ACT, 1872

UNIT -1 NATURE OF CONTRACT

The Law of contract: Introduction

The Law of Contract constitutes the most important branch of mercantile or commercial law. It
affects everybody, more so, trade, commerce and industry. It may be said that the contract is
the foundation of the civilized world. The law relating to contract is governed by the Indian
Contract Act, 1872. It came into force on September 01, 1872. The preamble to the Act says
that it is an Act "to define and amend certain parts of the law relating to contract". It extends to
the whole of India.
The Act mostly deals with the general principles and rules governing contracts. The Act is divisible
into two parts. The first part (Section 1-75) deals with the general principles of the law of
contract, and therefore applies to all contracts irrespective of their nature. The second part
(Sections 124-238) deals with certain special kinds of contracts, e.g., Indemnity and
guarantee, bailment, pledge, and agency.
As a result of increasing complexities of business environment, innumerable contracts are entered
into by the parties in the usual course of carrying on their business. ‘Contract’ is the most usual
method of defining the rights and duties in a business transaction.

1.1. WHAT IS A CONTRACT?

The term contract is defined under section 2(h) of the Indian Contract Act, 1872 as-
“An agreement enforceable by law”.
The contract consists of two essential elements:
i) an agreement, and
ii) Its enforceability by law.

i) Agreement - The term ‘agreement’ given in Section 2(e) of the Act is defined as-
“every promise and every set of promises, forming the consideration for each other”.
To have an insight into the definition of agreement, we need to understand promise.
Section 2 (b) defines promise as-“when the person to whom the proposal is made signifies
his assent there to, the proposal is said to be accepted. Proposal when accepted, becomes a
promise”.
The following points emerge from the above definition:
i) When the person to whom the proposal is made
ii) Signifies his assent on that proposal which is made to him
iii) The proposal becomes accepted
iv) Accepted proposal becomes promise
Thus, we say that an agreement is the result of the proposal made by one party to the other
party and that other party gives his acceptance thereto of course for mutual consideration.
Agreement = Offer/Proposal + Acceptance
ii) Enforceability by law – An agreement to become a contract must give rise to a legal
obligation which means a duly enforceable by law.
Thus, from above definitions it can be concluded that –
Contract = Accepted proposal/Agreement + Enforceability by law
Contract comprises of an agreement which is a promise or a set of reciprocal promises, that a
promise is the acceptance of a proposal giving rise to a binding contract. Further, section 2(h)
requires an agreement capable of being enforceable by law before it is called ‘contract’. Where
parties have made a binding contract, they created rights and obligations between themselves.
Example 1: Mr. A agrees with Mr. B to sell car for Rs. 5 Lacs to Mr. B. Here Mr. A is under
an obligation to give car to Mr. B and Mr. B has the right to receive the car on payment of R s .
5 Lacs and also M r . B is under an obligation to pay R s . 5 Lacs to M r . A and M r . A has a
right to receive Rs. 5 Lacs.
Example 2: Father promises his son to pay him pocket allowance of Rs. 2 0 0 0 every month. But
he refuses to pay later. The son cannot recover the same in court of law as this is a social
agreement. This is not created with an intention to create legal relationship and hence it is
not a contract.
So, Law of Contract deals with only such legal obligations which has resulted from agreements.
Such obligation must be contractual in nature. However, some obligations are outside the
purview of the law of contract.
Example 3: An obligation to maintain wife and children, an order of the court of law etc. These are
status obligations and so out of the scope of the Contract Act
Difference between Agreement and Contract
Basis of Agreement Contract
differences
Meaning Every promise and every set of Agreement enforceable by law.
promises, forming the consideration (Agreement + Legal enforceability)
for each other.
(Offer + Acceptance)
Scope It’s a wider term including both legal
It is used in a narrow sense with
and social agreement. the specification that contract is
only legally enforceable
agreement.
Legal obligation It may not create legal obligation. Necessarily creates a legal
An agreement does not always obligation. A contract always grants
grant rights to the parties certain rights to every party.
Nature All agreement are not contracts. All contracts are agreements.
1.2 ESSENTIALS OF A VALID CONTRACT
As given by Section 10 of Indian Not given by Section 10 but are
Contract Act, 1872 also considered essential
1 Agreement 1 Two parties
2 Free consent 2 Intention to create legal relationship
3 Competency of the parties 3 Fulfilments of legal formalities
4 Lawful consideration 4 Certainty of meaning
5 Legal object 5 Possibility of performance
6 Not expressly declared to be void [as per
Section 24 to 30 and 56]

In terms of Section 10 of the Act, “all agreements are contracts if they are made by the free
consent of the parties competent to contract, for a lawful consideration and with a lawful object and
are not expressly declared to be void”.
Since section 10 is not complete and exhaustive, so there are certain others sections which
also contains requirements for an agreement to be enforceable. Thus, in order to create a valid
contract, the following elements should be present:
1. Two Parties: One cannot contract with himself. A contract involves at least two parties- one
party making the offer and the other party accepting it. A contract may be made by natural
persons and by other persons having legal existence e.g. companies, universities etc. It is
necessary to remember that identity of the parties be ascertainable.
Example: To constitute a contract of sale, there must be two parties- seller and buyer. The
seller and buyer must be two different persons, because a person cannot buy his own goods.
Case Law: In State of Gujarat vs. Ramanlal S & Co. when on dissolution of a partnership, the
assets of the firm were divided among the partners, the sales tax officer wanted to tax this
transaction. It was held that it was not a sale. The partners being joint owner of those assets
cannot be both buyer and seller.
2. Parties must intend to create legal obligations: There must be an intention on the part of
the parties to create legal relationship between them. Social or domestic type of agreements are
not enforceable in court of law and hence they do not result into contracts.
Example 1: A husband agreed to pay to his wife certain amount as maintenance every month
while he was abroad. Husband failed to pay the promised amount. Wife sued him for the
recovery of the amount. Here, in this case, wife could not recover as it was a social agreement
and the parties did not intend to create any legal relations. (Balfour v. Balfour)
Example 2: M r . Lekhpal promises to gift brand new BMW car to his son if the son passes the
CA exams. On passing the exams, the son claims the car. Here, the son could not recover as it
was a social agreement.
Example 3: Mr. X sold goods to Mr. Y on a condition that he must pay for the amount of goods
within next 15 days. Here Mr. X intended to create legal relationship with Mr. Y. Hence the
same is contract. On failure by Mr. Y for making a payment on due date, Mr. X can sue him
in the court of law.
3. Other Formalities to be complied with in certain cases: A contract may be written or
spoken. As to legal effects, there is no difference between a written contract and contract made
by word of mouth. But in the interest of the parties the contract must be written. In case of
certain contracts some other formalities have to be complied with to make an agreement
legally enforceable.
For e.g. Contract of Insurance is not valid except as a written contract. Further, in case of
certain contracts, registration of contract under the laws which is in force at the time, is
essential for it to be valid, e.g. in the case of immovable property.
Thus, where there is any statutory requirement that any contract is to be made in writing or in
the presence of witness, or any law relating to the registration of documents must be complied
with.
4. Certainty of meaning: The agreement must be certain and not vague or indefinite.
Example 8: Mr. A agrees to sell to Mr. B a hundred tons of oil. There is nothing certain in
order to show what kind of oil was intended for.
Example 9: XYZ Ltd. agreed to lease the land to Mr. P for indefinite years. The contract is not
valid as the period of lease is not mentioned.
5. Possibility of performance of an agreement: The terms of agreement should be capable
of performance. An agreement to do an act impossible in itself cannot be enforced
Example 10: A agrees with B to discover treasure by magic. The agreement cannot be enforced
as it is not possible to be performed. OR Mr. P agrees with Mr. Q to make his dead wife
alive if he (Mr. Q) pays him Rs. 5 Lacs in cash.
According to Section 10 of the Indian Contract Act, 1872, the following are the essential
elements of a Valid Contract:
1. Offer and Acceptance or an agreement: An agreement is the first essential element of a valid
contract. According to Section 2(e) of the Indian Contract Act, 1872, “Every promise and every
set of promises, forming consideration for each other, is an agreement” and according to Section
2(b) “A proposal when accepted, becomes a promise”. An agreement is an outcome of offer and
acceptance.
2. Free Consent: Two or more persons are said to consent when they agree upon the same
thing in the same sense. This can also be understood as identity of minds in understanding the
terms viz consensus ad idem. Further such a consent must be free. Consent would be
considered as free consent if it is not caused by coercion, undue influence, fraud,
misrepresentation or mistake.
Example 11: A, who owns two Horses is selling white Horse to B. B thinks he is purchasing the
black Horse. There is no consensus ad idem and hence no contract.
To determine consensus ad idem the language of the contract should be clearly drafted. Thus, if
A says B “Will you buy my white Horse for Rs. 2 Lacs? “And B says “yes” to it. There is said to
be consensus ad idem i.e. the meaning is taken in same sense by both the parties.
Example 12: A threatened to shoot B if he (B) does not lend him Rs. 10 Lacs and B agreed to
it. Here the agreement is entered into under coercion and hence not a valid contract
3. Capacity of the parties: Capacity to contract means the legal ability of a person to enter
into a valid contract. Section 11 of the Indian Contract Act specifies that every person is
competent to contract who
a) Is of the age of majority according to the law to which he is subject and
b) Is of sound mind and
c) Is not otherwise disqualified from contracting by any law to which he is subject.
A person competent to contract must fulfil all the above three qualifications.
Qualification (a) refers to the age of the contracting person i.e. the person entering into
contract must be of 18 years of age. Persons below 18 years of age are considered minor,
therefore, incompetent to contract.
Qualification (b) requires a person to be of sound mind i.e. he should be in his senses so that
he understands the implications of the contract at the time of entering into a contract. A lunatic, an
idiot, a drunken person or under the influence of some intoxicant is not supposed to be a person
of sound mind.
Qualification (c) requires that a person entering into a contract should not be disqualified by his
status, in entering into such contracts. Such persons are an alien enemy, foreign sovereigns,
convicts etc. They are disqualified unless they fulfil certain formalities required by law.
Contracts entered by persons not competent to contract are not valid.
4. Consideration: It is referred to as ‘quid pro quo’ i.e. ‘something in return’. A valuable
consideration in the sense of law may consist either in some right, interest, profit or benefit
accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or
undertaken by the other.
Example 13: Mr. A agrees to sell his laptop to B for R s . 20, 000. Mr. B’s promise to pay Rs.
20, 000 is the consideration for M r . A’s promise to sell his laptop. Mr. A’s promise to sell the
laptop is the consideration for B’s promise to pay R s . 2 0 , 0 0 0 .
5. Lawful Consideration and Object: The consideration and object of the agreement must be
lawful.
Section 23 states that consideration or object is not lawful if it is prohibited by law, or it is such
as would defeat the provisions of law, if it is fraudulent or involves injury to the person or
property of another or court regards it as immoral or opposed to public policy.
Example 14: ‘X’ promises to drop prosecution instituted against ‘Y’ for robbery and ‘Y’ promises
to restore the value of the things taken. The agreement is void, as its object is unlawful.
Example 15: P agrees to sell his mobile to Q against 100 grams of cocaine (drugs). Such
agreement is illegal as the consideration is unlawful.

6. Not expressly declared to be void: The agreement entered into must not be which the law
declares to be either illegal or void. An illegal agreement is an agreement expressly or
impliedly prohibited by law A void agreement is one without any legal effects.
Example 16: Threat to commit murder or making/publishing defamatory statements or entering
into agreements which are opposed to public policy are illegal in nature. Similarly, any agreement
in restraint of trade, marriage, legal proceedings, etc. are classic examples of void agreements.

1.3 TYPES OF CONTRACT

I. On the basis of the validity
1. Valid Contract: An agreement which is binding and enforceable is a valid contract. It contains
all the essential elements of a valid contract.
Example 17: A ask B if he wants to buy his Cricket Kit for Rs.10, 000. B agrees to buy
Kit. It is agreement which is enforceable by law. Hence, it is a valid contract.
2. Void Contract: Section 2 (j) states as follows: “A contract which ceases to be enforceable
by law becomes void when it ceases to be enforceable”. Thus a void contract is one which
cannot be enforced by a court of law.
Example 18: Mr. X agrees to write a book with a publisher. Such contract is valid. But after few
days, X dies due to heart attack. Here the contract becomes void due to the
impossibility of performance of the contract. Thus, a valid contract when cannot be performed
because of some uncalled happening becomes void.
Example 19: A contracts with B (owner of the factory) for the supply of 10 tons of cement, but
before the supply is effected, the fire caught in the factory and everything was destroyed. Here
the contract becomes void.
Note - when a contract is void, it is not a contract at all but for the purpose of identifying it, it
has to be called a [void] contract.
3. Voidable Contract: Section 2(i) defines that “an agreement which is enforceable by law at
the option of one or more parties thereto, but not at the option of the other or others is a voidable
contract”.
This in fact means where one of the parties to the agreement is in a position or is legally entitled
or authorized to avoid performing his part, then the agreement is treated and becomes voidable.
Such a right might arise from the fact that the contract may have been brought about by one of
the parties by coercion, undue influence, fraud or misrepresentation and hence the other party
has a right to treat it as a voidable contract.
Example 20: Mr. X promise to sell his flat to Mr. Y for Rs. 15 Lacs. However, the consent of Mr. X
has been procured by Mr. Y at a gun point. X is an aggrieved party and the contract is voidable
at his option but not on the option of Mr. Y. It means if Mr. X accepts the contract, the contract
becomes a valid contract then Mr. Y has no option of rescinding the contract.
At this juncture it would be desirable to know the distinction between a Void Contract and a
Voidable Contract. These are elaborated hereunder:

S. Basis Void Contract Voidable Contract

No.
 1 Meaning A Contract ceases to be An agreement which is enforceable by
enforceable by law becomes law at the option of one or more of the
void when it ceases to be parties thereto, but not at the option
enforceable. of the other or others, is a
Voidable contract.
2 Enforceability A void contract cannot be It is enforceable only at the option of
enforced at all. aggrieved party and not at the
option of other party.
3 Cause A contract becomes void due A contract becomes a voidable
to change in law or change in contract if the consent of a party
circumstances beyond the was not free.
contemplation of parties.
4 Performance A void contract cannot be If the aggrieved party does not,
of contract performed. within reasonable time, exercise his
right to avoid the contract, any party
can sue the other for claiming the
Performance of the contract.
5 Rights A void contract does not grant The party whose consent was not
any legal remedy to any free has the right to rescind the
party. contract within a reasonable time. If so
rescinded it becomes a void
contract. If it is not rescinded it
Becomes a valid contract.

4. Illegal Contract: It is a contract which the law forbids to be made. The court will not enforce
such a contract but also the connected contracts. All illegal agreements are void but all void
agreements are not necessarily illegal. Despite this, there is similarity between them is that in
both cases they are void ab initio and cannot be enforced by law.
Example 21: Contract that is immoral or opposed to public policy are illegal in nature. Similarly, if
Mr. A agrees with Mr. B, to purchase drugs, it is an illegal agreement.
According to Section 2(g) of the Indian Contract Act, “an agreement not enforceable by law is
void”. The Act has specified various factors due to which an agreement may be considered as
void agreement. One of these factors is unlawfulness of object and consideration of the contract
I.e. illegality of the contract which makes it void. The illegal and void agreement differ from each
other in the following respects:
Basis of Void agreement Illegal agreement
difference
 Scope A void agreement is not An illegal agreement is
necessarily illegal. always void.
Nature Not forbidden under law. Are forbidden under law.
Punishment Parties are not liable for any Parties to illegal
punishment under the law. agreements are liable for
punishment
Collateral Agreement It’s not necessary that Agreements collateral to
agreements collateral to void illegal agreements are
agreements may also be void. always void.
It
May be valid also.

5. Unenforceable Contract: Where a contract is good in substance but because of some technical
defect i.e. absence in writing, barred by limitation etc. one or both the parties cannot sue upon
it, it is described as an unenforceable contract.
Example 22: Mr. X bought goods from Mr. Y in 2018. But no payment was made till 2022. Mr. Y
cannot sue Mr. X for the payment in 2022 as it has crossed three years and barred by Limitation
Act. A good debt becomes unenforceable after the period of three years as barred by Limitation
Act.
II. On the basis of the formation of contract
1. Express Contracts: A contract would be an express contract if the terms are
expressed by words or in writing. Section 9 of the Act provides that if a proposal or
acceptance of any promise is made in words, the promise is said to be express.
Example 23: Mr. P tells Mr. Q on telephone that he offers to sell his cycle for Rs. 5000 and Mr. Q in
reply informs Mr. P that he accepts the offer, this is an express contract.
2. Implied Contracts: Implied contracts in contrast come into existence by implication. Most often
the implication is by action or conduct of parties or course of dealings between them. Section 9
of the Act contemplates such implied contracts when it lays down that in so far as such proposal
or acceptance is made otherwise than in words, the promise is said to be implied.
Example 24: Where a coolie in uniform picks up the luggage of Mr. R to be carried out of the railway
station without being asked by Mr. R and Mr. R allows him to do so, it is an implied contract and
Mr. R must pay for the services of the coolie detailed by him.
Example 25: Mr. Dinesh drinks a coffee in restaurant. There is an implied contract that he
should pay for the price of coffee. OR Mr. Dinesh is travelling by city bus from one location
to another it is oblivious that he will pay appropriate fare for distance travel.
Tacit Contracts: The word Tacit means silent. Tacit contracts are those that are inferred
through the conduct of parties without any words spoken or written. A classic example of tacit
contract would be when cash is withdrawn by a customer of a bank from the automatic teller
machine [ATM]. Another example of tacit contract is where a contract is assumed to have been
entered when a sale is given effect to at the fall of hammer in an auction sale. It is not a separate
form of contract but falls within the scope of implied contracts.
Example: Vending machine of chocolates, chips, biscuits etc.
3. Quasi-Contract: A quasi-contract is not an actual contract but it resembles a contract. It is
created by law under certain circumstances. The law creates and enforces legal rights and
obligations when no real contract exists. Such obligations are known as quasi-contracts. In other
words, it is a contract in which there is no intention on part of either party to make a contract
but law imposes a contract upon the parties.
Example 26: Obligation of finder of lost goods to return them to the true owner or liability of
person to whom money is paid under mistake to repay it back cannot be said to arise out of a
contract even in its remotest sense, as there is neither offer and acceptance nor consent. These
are said to be quasi-contracts.
4. E-Contracts: When a contract is entered into by two or more parties using electronics
means, such as e-mails is known as e-commerce contracts. In electronic commerce, different
parties/persons create networks which are linked to other networks through ED1 - Electronic
Data Inter change. This helps in doing business transactions using electronic mode. These are
known as EDI contracts or Cyber contracts or mouse click contracts.
III. On the basis of the performance of the contract
1. Executed Contract: The consideration in a given contract could be an act or forbearance. When
the act is done or executed or the forbearance is brought on record, then the contract is an
executed contract.
Example 27: When a grocer sells 1 0 k g w h e a t on cash payment it is an executed contract
because both the parties have done what they were to do under the contract.
2. Executory Contract: In an executory contract the consideration is reciprocal promise or
obligation. Such consideration is to be performed in future only and therefore these contracts
are described as executory contracts.
Example 28: Where Mr. Sharma agrees to take the tuition of Harsh, a CA Foundation student, from
the next month and Harsh in consideration promises to pay Mr. Sharma Rs.10, 000 per month, the
contract is executory because it is yet to be carried out.
Unilateral or Bilateral are kinds of Executory Contracts and are not separate kinds.
a) Unilateral Contract: Unilateral contract is a one sided contract in which one
party has performed his duty or obligation and the other party’s obligation is
outstanding.
Example 29: Mr. Mayur advertises payment of award of Rs. 10,000 to anyo ne who finds his
missing boy and brings him. As soon as M r . Yatin traces the boy, there comes into existence
an executed contract because Mr. Yatin has performed his share of obligation and it remains for
Mayur to pay the amount of reward to Mr. Yatin. This type of Executory contract is also called
unilateral contract.
b) Bilateral Contract: A Bilateral contract is one where the obligation or promise
is outstanding on the part of both the parties.
Example 30: Mr. Arijit promises to sell his bungalow to Mr. Sanjay for Rs. 1 Crore cash
down, but Mr. Sanjay pays only 25 Lacs as earnest money and promises to pay the balance
on next Monday. On the other hand, Mr. Arijit gives the possession of bungalow to Mr. Sanjay
and promises to execute a sale deed on the receipt of the whole amount. The contract
between the Mr. Arijit and Mr. Sanjay is executory because there remains something to be
done on both sides. Such Executory contracts are also known as Bilateral contracts.
1.4 PROPOSAL / OFFER [SECTION 2(a)]
Definition of Offer/Proposal:
According to Section 2(a) of the Indian Contract Act, 1872, “when one person 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, he is said to make a proposal”.
Essentials of a proposal/offer are:
1. The person making the proposal or offer is called the ‘promisor’ or ‘offeror’: The person to
whom the offer is made is called the ‘offeree’ and the person accepting the offer is called the ‘promisee’
or ‘acceptor’.
2. For a valid offer, the party making it must express his willingness ‘to do’ or ‘not to do’
something: There must be an expression of willingness to do or not to do some act by the
offeror.
Example 31: Mr. A willing to sell his land at Rs. 20 Lacs to Mr. B.
Example 32: Mr. X is willing to not to take part in State level dance competition, if Mr. Y pays
him Rs. 10 Lacs.
3. The willingness must be expressed with a view to obtain the assent of the other party
to whom the offer is made.
Example 33: Where ‘Mr. P’ tells ‘Mr. Q’ that he desires to marry by the end of 2024, it does not
constitute an offer of marriage by ‘P’ to ‘Q’. Therefore, to constitute a valid offer expression of
willingness must be made to obtain the assent (acceptance) of the other. Thus, if in the above
example, ‘P’ further adds, ‘Will you marry me’, it will constitute an offer.
4. An offer can be positive as well as negative: Thus “doing” is a positive act and “not
doing”, or “abstinence” is a negative act; nonetheless both these acts have the
same effect in the eyes of law.
Example 34: Mr. A offers to sell his gold ring to Mr. B for Rs. 2 Lacs is an act of doing. So, in
this case, Mr. A is making an offer to Mr. B.
Example 35: When Mr. Jay ask Mr. Veeru after his car meets with an accident with Veeru’s bike
not to go to Court and he will pay the repair charges to Veeru for the damage to Veeru’s scooter;
it is an act of not doing or abstinence.
Classification of offer

An offer can be classified as general offer, special/specific offer, cross offer, counter offer,
standing/ open/ continuing offer.

a) General offer: It is an offer made to public at large and hence anyone can accept and do
the desired act (Carlill v. Carbolic Smoke Ball Co.). In terms of Section 8 of the Act, anyone
performing the conditions of the offer can be considered to have accepted the offer. Until the
general offer is retracted or withdrawn, it can be accepted by anyone at any time as it is a
continuing offer.
Case Law: Carlill vs. Carbolic Smoke Ball Co. (1893)
Facts: In this famous case, Carbolic smoke Ball Co. advertised in several newspapers that a
reward of £100 would be given to any person who contracted influenza after using the smoke
balls produced by the Carbolic Smoke Ball Co. according to printed directions. One lady, Mrs.
Carlill, used the smoke balls as per the directions of company and even then, suffered from
influenza. Held, she could recover the amount as by using the smoke balls she had
accepted the offer.
b) Special/specific offer: When the offer is made to a specific or an ascertained person, it is
known as a specific offer. Specific offer can be accepted only by that specified person to whom
the offer has been made. [Boulton v. Jones]
Example 36: ‘A’ offers to sell his guitar to ‘B’ at Rs. 25,000. This is a specific offer.
c) Cross offer: When two parties exchange identical offers in ignorance at the time of each
other’s offer, the offers are called cross offers. There is no binding contract in such a case
because offer made by a person cannot be construed as acceptance of another’s offer.
Example 37: If Mr. A makes a proposal to B to sell his Karate Kit for Rs. 50,000 and M r . B,
without knowing the proposal of Mr. A, makes an offer to purchase the same Karate Kit at Rs.
50,000 from M r . A, it is not an acceptance, as Mr. B was not aware of proposal made by Mr. A.
It is only cross proposal (cross offer). And when two persons make offer to each other, it
cannot be treated as mutual acceptance. There is no binding contract in such a case.
d) Counter offer: When the offeree offers to qualified acceptance of the offer subject to modifications
and variations in the terms of original offer, he is said to have made a counter offer. Counter-
offer amounts to rejection of the original offer. It is also called as Conditional Acceptance.
Example 38: ‘A’ offers to sell his plot to ‘B’ for `10 lakhs. ’B’ agrees to buy it for ` 8 lakhs. It
amounts to counter offer. It will result in the termination of the offer of ’A’. If later on ‘B’ agrees to
buy the plot for 10 lakhs, ’A’ may refuse.
e) Standing or continuing or open offer: An offer which is allowed to remain open for acceptance
over a period of time is known as standing or continuing or open offer. Tenders that are invited
for supply of goods is a kind of standing offer.
Example: Mr. Shyam offers to sell his wrist watch to Mr. Ram with direction that this offer
will be open for Mr. Ram to accept. Means Mr. Ram can accept this at any time within next
one year.
Essential of a valid offer
1. It must be capable of creating legal relations: Offer must be such as in law is capable of
being accepted and giving rise to legal relationship. If the offer does not intend to give rise
to legal consequences and creating legal relations, it is not considered as a valid offer in the eye of
law. A social invitation, even if it is accepted, does not create legal relations because it is not so
intended.
Example: Mr. R invites Mr. S through offer to join his existing business as partner. If Mr. S
accept the partnership proposal of Mr. R then later he cannot deny it, if he does so, Mr. R can
file a case. Here there was an intention to create legal/lawful relations between the parties.
Example: Mr. R invites Mr. S to his sister’s wedding. If Mr. S accept the invitation and promise
to attend the marriage, even if after promising if Mr. S fails to attend the marriage Mr. R cannot
file a suit as there was no intention create legal/lawful relationship, it is a social or domestic in
nature.
2. It must be certain, definite and not vague: If the terms of an offer are vague or
indefinite, its acceptance cannot create any contractual relationship. The offer is not capable of
being accepted for want of certainty.
Example: Mr. A offers to sell M r . B 100 quintals of oil, there is nothing whatever to show what
kind of oil was intended. OR Mr. P offers grocery store owner to send grocery of Rs. 10,000
there is nothing specifically mention what kind of grocery is ordered.
3. It must be communicated to the offeree: An offer, to be complete, must be communicated
to the person to whom it is made, otherwise there can be no acceptance of it. Unless an offer is
communicated, there can be no acceptance by it. An acceptance of an offer, in ignorance of the
offer, is not acceptance and does not confer any right on the acceptor.
This can be illustrated by the landmark case of Lalman Shukla v. Gauri Dutt
Facts: G (Gauri Dutt) sent his servant L (Lalman) to trace his missing nephew. He then
announced that anybody who traced his nephew would be entitled to a certain reward. L traced
the boy in ignorance of this announcement. Subsequently when he came to know of the reward, he
claimed it. Held, he was not entitled to the reward, as he did not know the offer.
4. It must be made with a view to obtaining the assent of the other party: Offer must be
made with a view to obtaining the assent of the other party addressed and not merely with a
view to disclosing the intention of making an offer.
Example: One fine day while having general talk with Rohit Sharma, Mr. Mahendra Singh
Dhoni shared that he is planning to sell his bungalow of Ranchi to get shifted to Mumbai.
Here there is no offer unless & until Mr. Dhoni further adds will you purchase my bungalow
in Rs. 5 Crore.
5. It may be conditional: An offer can be made subject to any terms and conditions by the
offeror.

Example 39: Offeror may ask for an advance payment of 50% of total order at the time of
confirming order (at the time of accepting offer). The offeree will have to accept all the terms of
the offer otherwise the contract will be treated as invalid.
6. Offer should not contain a term the non-compliance of which would amount to
acceptance: Thus, one cannot say that if acceptance is not communicated by a certain time the
offer would be considered as accepted.
Example 40: A proposes B to purchase his mobile for Rs. 15000 and if no reply by him in a
week, it would be assumed that B had accepted the proposal. This would not result into
contract.
7. The offer may be either specific or general: Any offer can be made to either public at
large or to the any specific person. Example already discussed above.
8. The offer may be express or implied: An offer may be made either by words or by
conduct.
Example 41: A boy starts cleaning the car as it stops on the traffic signal without being asked
to do so, in such circumstances any reasonable man could guess that he expects to be paid for
this, here boy makes an implied offer.
9. Offer is Different from a mere statement of intention, an invitation to offer, a mere
communication of information, a prospectus and Advertisement.
i) A statement of intention and announcement.
Example 42: A father wrote his son about his wish of making him the owner of all his property
iis mere a statement of intention.
Example 43: An announcement to give scholarships to children scoring more than 95% in 12th
Board is not an offer.
ii) Offer must be distinguished from an answer to a question.
Case Law: Harvey vs. Facie [1893]

In this case, Privy Council succinctly explained the distinction between an offer and an invitation
to offer. In the given case, the plaintiffs through a telegram asked the defendants two questions
namely,
i) Will you sell us Bumper Hall Pen? and
ii) Telegraph lowest cash price.
The defendants replied through telegram that the “lowest price for Bumper Hall Pen is £ 900”.
The plaintiffs sent another telegram stating “we agree to buy Bumper Hall Pen at £ 900”.
However, the defendants refused to sell the property at the price.
The plaintiffs sued the defendants contending that they had made an offer to sell the property
at £ 900 and therefore they are bound by the offer.
However, the Privy Council did not agree with the plaintiffs on the ground that while plaintiffs
had asked two questions, the defendant replied only to the second question by quoting the price
but reserved their answer with regard to their willingness to sell. Thus, they made no offer at
all. Their Lordships held that the mere statement of the lowest price at which the vendor would
sell contained no implied contract to sell to the person who had enquired about the price.
The above decision was followed in Mac Pherson vs. Appanna [1951] where the owner of the
property had said that he would not accept less than £ 6000/- for it. This statement did not
indicate any offer but indicated only an invitation to offer.
iii) A statement of price is not an offer: Quoting the price of a product does not constitute it
as offer. (Ref. case of Harvey vs. Facie as discussed above)
Example 44: The price list of goods does not constitute an offer for sale of certain goods on the
listed prices. It is an invitation to offer.
iv) An invitation to make an offer or do business. In case of “an invitation to make an offer”, the
person making the invitation does not make an offer rather invites the other party to make an
offer. His objective is to send out the invitation that he is willing to deal with any person who, on
the basis of such invitation, is ready to enter into contract with him subject to final terms and
conditions.
Example 45: An advertisement for sale of goods by auction is an invitation to the offer. It merely
invites offers/bids made at the auction.
When goods are sold through auction, the auctioneer does not contract with anyone who
attends the sale. The auction is only an advertisement to sell but the items are not put for sale
though persons who have come to the auction may have the intention to purchase. Similar
decision was given in the case of Harris vs. Nickerson (1873).
Similarly, Red Herring Prospectus issued by a company, is only an invitation to the public to
make an offer to subscribe to the securities of the company.
10. A statement of price is not an offer
What is invitation to offer?
An offer should be distinguished from an invitation to offer. An offer is definite and capable
of converting an intention into a contract. Whereas an invitation to an offer is only a circulation
of an offer, it is an attempt to induce offers and precedes a definite offer. An invitation to offer
is an act precedent to making an offer. Acceptance of an invitation to an offer does not result in
the contract and only an offer emerges in the process of negotiation.
When a person advertises that he has stock of books to sell or houses to let, there is no offer to
be bound by any contract. Such advertisements are offers to negotiate-offers to receive offers.
In order to ascertain whether a particular statement amounts to an ‘offer’ or an ‘invitation to offer’, the
test would be intention with which such statement is made. Does the person who made the
statement intend to be bound by it as soon as it is accepted by the other or he intends to do some
further act, before he becomes bound by it. In the former case, it amounts to an offer and in the
latter case, it is an invitation to offer.
Difference between offer and invitation to make an offer:
Basis Offer Invitation to offer
Meaning Section 2(a) of the Act, an offer is Where a party without expressing his
the final expression of willingness final willingness proposes certain
by the offeror to be bound by terms on which he is willing to
the offer should the other party negotiate he does not make an offer,
chooses to accept it. but only invites the other party to
make an offer on those terms.
 Intention of If a person who makes the If a person has the intention of
the parties statement has the intention to be negotiating on terms it is called
bound by it as soon as the other invitation to offer
accepts, he is making an offer.
Sequence An offer cannot be an act An invitation to offer is always an act
precedent to invitation to offer precedent to offer
Example i) An invitation by a company to the Mr. A makes offer to sell his furniture
public to subscribe for its shares. to Mr. B at Rs. 10,000. If Mr. B
ii) Display of goods for sale in shop accepts it, it will become binding &
windows. enforceable contract for both the
parties.
iii) Advertising auction sales and
iv) Quotation of prices sent in reply
to a query regarding price

How to make an offer?

1.5 ACCEPTANCE
Definition of Acceptance: In terms of Section 2(b) of the Act, ‘the term acceptance’ is
defined as follows:
“When the person to whom the proposal is made signifies his assent thereto, proposal is said to
be accepted. The proposal, when accepted, becomes a promise”.
Analysis of the above definition
i) When the person to whom proposal is made - for example if M r . A offers to sell photocopy
machine to M r . B for R s . 2 5 , 0 0 0 . Here, proposal is made to Mr. B.
ii) The person to whom proposal is made i.e. Mr. B in the above example and if Mr. B signifies
his consent on that proposal, then we can say that Mr. B has signified his consent on the
proposal made by Mr. A.
iii) When M r . B has signified his consent on that proposal, we can say that the proposal has
been accepted.
iv) Accepted proposal becomes promise.
Relationship between offer and acceptance: According to Sir William Anson “Acceptance
is to offer what a lighted match is to a train of gun powder”. The effect of this observation
is that what acceptance triggers cannot be recalled or undone. But there is a choice to the
person who had the train to remove it before the match is applied. It in effect means that the
offer can be withdrawn just before it is accepted. Acceptance converts the offer into a promise
and then it is too late to revoke it. This means as soon as the train of gun powder is lighted it
would explode. Train of Gun powder [offer] in itself is inert, but it is the lighted match [the
acceptance] which causes the gun powder to explode. The significance of this is an offer in itself
cannot create any legal relationship but it is the acceptance by the offeree which creates a legal
relationship. Once an offer is accepted it becomes a promise and cannot be withdrawn or revoked.
An offer remains an offer so long as it is not accepted but becomes a contract as soon as it is
accepted.
Legal Rules regarding a valid acceptance
1) Acceptance can be given only by the person to whom offer is made: In case of a
specific offer, it can be accepted only by the person to whom it is made.
Case Law: Boulton vs. Jones (1857)
Facts: Boulton bought a business from Brocklehurst. Jones, who was Broklehurst’s creditor,
placed an order with Brocklehurst for the supply of certain goods. Boulton supplied the goods
even though the order was not in his name. Jones refused to pay Boultan for the goods
because by entering into the contract with Blocklehurst, he intended to set off his debt against
Brocklehurst. Held, as the offer was not made to Boulton, therefore, there was no contract
between Boulton and Jones.
In case of a general offer, it can be accepted by any person who has the knowledge of the offer.
[Carlill vs. Carbolic Smoke Ball Co. (1893)]
2. Acceptance must be absolute and unqualified: As per section 7 of the Act, acceptance is
valid only when it is absolute and unqualified and is also expressed in some usual and reasonable
manner unless the proposal prescribes the manner in which it must be accepted. If the proposal
prescribes the manner in which it must be accepted, then it must be accepted accordingly.
M offered to sell his land to N for £280. N replied purporting to accept the offer but enclosed a
cheque for £ 80 only. He promised to pay the balance of £ 200 by monthly instalments of £ 50
each. It was held that N could not enforce his acceptance because it was not an unqualified one.
[Neale vs. Merret 1930].
A offers to sell his house to B for R s . 60, 00,000/-. B replied that, “I can pay R s . 55, 00, 000 for
it. The offer of ‘A’ is rejected by ‘B’ as the acceptance is not unqualified. B however changes his
mind and is prepared to pay Rs. 60, 00,000. This is also treated as counter offer and it is up to A
whether to accept it or not. [Union of India v. Bahulal 1968].
Example 46: ‘A’ enquires from ‘B’, “Will you purchase my car for Rs. 2 lakhs?” If ‘B’ replies “I shall
purchase your car for Rs. 2 lakhs, if you buy my motorcycle for Rs. 50,000/-, here ‘B’ cannot be
considered to have accepted the proposal. If on the other hand ‘B’ agrees to purchase the car
from ‘A’ as per his proposal subject to availability of valid Registration Certificate / book for the
car, then the acceptance is in place though the offer contained no mention of R.C. book. This is
because expecting a valid title for the car is not a condition. Therefore, the acceptance in
this case is unconditional.
3. The acceptance must be communicated: To conclude a contract between the parties, the
acceptance must be communicated in some perceptible form. Any conditional acceptance or
acceptance with varying or too deviant conditions is no acceptance. Such conditional
acceptance is a counter proposal and has to be accepted by the proposer, if the original
proposal has to materialize into a contract. Further when a proposal is accepted, the offeree
must have the knowledge of the offer made to him. If he does not have the knowledge, there
can be no acceptance. The acceptance must relate specifically to the offer made. Then only it
can materialize into a contract.
Brogden vs. Metropolitan Railway Co. (1877)
Facts: B a supplier, sent a draft agreement relating to the supply of coal to the manager of
railway Co. viz, Metropolitan railway for his acceptance The manager wrote the word “Approved”
on the same and put the draft agreement in the drawer of the table intending to send it to the
company’s solicitors for a formal contract to be drawn up. By an oversight the draft agreement
remained in drawer. Held, that there was no contract as the manager had not communicated his
acceptance to the supplier, B.
Where an offer made by the intended offeree without the knowledge that an offer has been made to
him cannot be deemed as an acceptance thereto. (Bhagwandas v. Girdharilal)
A mere variation in the language not involving any difference in substance would not make the
acceptance ineffective. [Heyworth vs. Knight [1864].
Example 47: Mr. Mayur offers Mr. Nandu to sell his old fridge. Mr. Nandu informed Mr. Mayur’s
brother that he is ready to purchase it. But his brother didn’t inform Mr. Mayur about the
acceptance of proposal. There is no contract as acceptance was not communicated to Mr.
Mayur.
4. Acceptance must be in the prescribed mode: Where the mode of acceptance is
prescribed in the proposal, it must be accepted in that manner. But if the proposer does not
insist on the proposal being accepted in the manner prescribed after it has been accepted
otherwise, i.e., not in the prescribed manner, the proposer is presumed to have consented
to the acceptance.
Example 48: If the offeror prescribes acceptance through e - mail and offeree sends acceptance by
whatsapp message, there is no acceptance of the offer if the offeror informs the offeree that the
acceptance is not according to the mode prescribed. But if the offeror fails to do so, it will be
presumed that he has accepted the acceptance and a valid contract will arise.
5. Time: Acceptance must be given within the specified time limit, if any, and if no time is
stipulated, acceptance must be given within the reasonable time and before the offer lapses.
What is reasonable time is nowhere defined in the law and thus would depend on facts and
circumstances of the particular case.
Example 49: Mr. Nikhil offered to sell Mr. Manish 50 kgs of oranges at Rs. 1000. Mr. Manish
communicated the acceptance after one week. Such is not a valid contract as oranges being
perishable items could not stay for a period of week. One week is not a reasonable time in
this case.
Example 50: Mr. Nikhil offers Mr. Manish to sell his house at Rs. 30, 00,000. Mr. Manish
accepted the offer and communicated to Mr. Nikhil after one week. Held the contract is valid as
one week can be considered as reasonable time in case of sell of house.
6. Mere silence is not acceptance: The acceptance of an offer cannot be implied from the
silence of the offeree or his failure to answer, unless the offeree has in any previous conduct
indicated that his silence is the evidence of acceptance.
Case Law: Felthouse vs. Bindley (1862)
Facts: F (Uncle) offered to buy his nephew’s horse for £30 saying “If I hear no more about it I
shall consider the horse mine at £30.” The nephew did not reply to F at all. He told his
auctioneer, B to keep the particular horse out of sale of his farm stock as he intended to
reserve it for his uncle. By mistake the auctioneer sold the horse. F sued him for conversion of
his property. Held, F could not succeed as his nephew had not communicated the
acceptance to him.
Example 51: Mr. Rakesh offered to sell his white writing board to Mr. Suresh, along with
offer price & other terms, one clause was mentioned in offer that if Mr. Suresh will not
reply within next two days after getting the offer it will be assumed that he has accepted
the offer to purchase white board at mentioned price.
Example 52: ’A’ subscribed for the weekly magazine for one year. Even after expiry of his
subscription, the magazine company continued to send him magazine for five years and also ‘A’
continued to use the magazine but denied to pay the bills sent to him. ’A’ would be liable to pay
as his continued use of the magazine was his acceptance of the offer.
7. Acceptance by conduct/Implied Acceptance: Section 8 of the Act lays down that “the
performance of the conditions of a proposal, or the acceptance of any consideration for a
reciprocal promise which may be offered with a proposal, constitutes an acceptance of the
proposal. This section provides the acceptance of the proposal by conduct as against other
modes of acceptance i.e. verbal or written communication.
Therefore, when a person performs the act intended by the proposer as the consideration for the
promise offered by him, the performance of the act constitutes acceptance.
Example 53: When a cobbler sits with a brush and polish, a person giving his shoes for
polishing constitutes as acceptance by conduct.
1.6 COMMUNICATION OF OFFER AND ACCEPTANCE
The importance of ‘offer’ and ‘acceptance’ in giving effect to a valid contract, one important
common requirement for both ‘offer’ and ‘acceptance’ is their effective communication.
Effective and proper communication prevents avoidable revocation and misunderstanding
between parties.
When the contracting parties are face-to-face, there is no problem of communication because
there is instantaneous communication of offer and acceptance. In such a case the question of
revocation does not arise since the offer and its acceptance are made instantly.
The difficulty arises when the contracting parties are at a distance from one another and they
utilize the services of the post office or telephone or email (internet). In such cases, it is very
much relevant for us to know the exact time when the offer or acceptance is made or
complete.
The Indian Contract Act, 1872 gives a lot of importance to “time” element in deciding when the
offer and acceptance is complete.
Communication of offer: In terms of Section 4 of the Act, “the communication of offer is
complete when it comes to the knowledge of the person to whom it is made”
Example 54: Where ‘A’ makes a proposal to ‘B’ by post to sell his Garage for Rs. 80 lakhs and
if the letter containing the offer is posted on 10th March and if that letter reaches ‘B’ on 15th
March the offer is said to have been communicated on 15th March when B received the
letter.
Thus, it can be summed up that when a proposal is made by post, its communication will be
complete when the letter containing the proposal reaches the person to whom it is made.
Mere receiving of the letter is not sufficient, he must receive or read the message contained in
the letter.
He receives the letter on 15th March, but he reads it on 16th of March. In this case offer is
communicated on 16th of March, and not 15th of March.
Communication of acceptance: There are two issues for discussion and understanding. They
are: The modes of acceptance and when is acceptance complete?
Let us, first consider the modes of acceptance. Section 3 of the Act prescribes in general
terms two modes of communication namely, (a) by any act and (b) by omission.
a) Communication by act would include any expression of words whether written or oral. Written
words will include letters, telegrams, faxes, emails and even advertisements. Oral words will
include telephone messages.
b) Communication of acceptance by ‘omission’ to do something. Such omission is
conveyed by a conduct or by forbearance on the part of one person to convey his willingness
or assent. However, silence would not be treated as communication by ‘omission’.
Example 55: A offers Rs. 5,000 to B if he does not file a case in court of law as cheque given
by Mr. A was dishonored. Mr. B agreed & omit to file a case. Here omission of doing an act
amounts to acceptance.
c) Communication of acceptance by conduct. For instance, delivery of goods at a price by a
seller to a willing buyer will be understood as a communication by conduct to convey
acceptance. Similarly, one need not explain why one boards a public bus or drop a coin in a
weighing machine. The first act is a conduct of acceptance against its communication to the
offer by the public transport authority to carry any passenger. The second act is again a
conduct conveying acceptance to use the weighing machine kept by the vending company as an
offer to render that service for a consideration.
The other issue in communication of acceptance is about the effect of act or omission or
conduct. These indirect efforts must result in effectively communicating its acceptance or non-
acceptance. If it has no such effect, there is no communication regardless of which the acceptor
thinks about the offer within himself. Thus, a mere mental unilateral assent in one’s own mind
would not amount to communication. Where a resolution passed by a bank to sell land to ‘A’
remained uncommunicated to ‘A’, it was held that there was no communication and hence no
contract. [Central Bank Yeotmal vs. Vyankatesh (1949)].
Let us now come to the issue of when communication of acceptance is complete. In terms of
Section 4 of the Act, it is complete,
i) As against the proposer, when it is put in the course of transmission to him so as to be out of
the power of the acceptor to withdraw the same;
ii) As against the acceptor, when it comes to the knowledge of the proposer.
d) Where a proposal is accepted by a letter sent by the post, the communication of
acceptance will be complete as against the proposer when the letter of acceptance is posted
and as against the acceptor when the letter reaches the proposer.
For instance in the above example, if ‘B’ accepts, A’s proposal and sends his acceptance by
post on 14th, the communication of acceptance as against ‘A’ is complete on 14th, i.e. when the
letter is posted. As against ‘B’ acceptance will be complete, when the letter reaches ‘A’.
Here ‘A’ the proposer will be bound by B’s acceptance, even if the letter of acceptance is
delayed in post or lost in transit. The golden rule is proposer becomes bound by the contract,
the moment acceptor has posted the letter of acceptance. But it is necessary that the letter is
correctly addressed, adequately stamped and duly posted. In such an event the loss of letter in
transit, wrong delivery, non-delivery etc., will not affect the validity of the contract.
However, from the view point of acceptor, he will be bound by his acceptance only when the
letter of acceptance has reached the proposer. So it is crucial in this case that the letter
reaches the proposer. If there is no delivery of the letter, the acceptance could be treated as
having been completed from the viewpoint of proposer but not from the viewpoint of acceptor.
Of course this will give rise to an awkward situation of only one party to the contract, being
treated as bound by the contract though no one would be sure as to where the letter of
acceptance had gone.
e) Acceptance over telephone or telex or fax: When an offer is made of instantaneous
communication like telex, telephone, fax or through e-mail, the contract is only complete when
the acceptance is received by the offeree, and the contract is made at the place where the
acceptance is received (Entores Ltd. v. Miles Far East Corporation). However, in case of a
call drops and disturbances in the line, there may not be a valid contract.
f) Communication of special conditions: Sometimes there are situations where there are contracts
with special conditions. These special conditions are conveyed tacitly (silently) and the
acceptance of these conditions are also conveyed by the offeree again tacitly or without him
even realizing it.
Example 56: Where a passenger undertakes a travel, the conditions of travel are printed at the
back of the tickets, sometimes these special conditions are brought to the notice of the
passenger, sometimes not. In any event, the passenger is treated as having accepted the
special condition the moment he bought his ticket.
When someone travels from one place to another by air, it could be seen that special
conditions are printed at the back of the air ticket in small letters [in a non-computerized train
ticket even these are not printed] Sometimes these conditions are found to have been displayed
at the notice board of the Airlines office, which passengers may not have cared to read. The
question here is whether these conditions can be considered to have been communicated to
the passengers of the Airlines and can the passengers be treated as having accepted the
conditions. The answer to the question is in the affirmative and was so held in Mukul Datta vs.
Indian Airlines [1962] where the plaintiff had travelled from Delhi to Kolkata by air and the
ticket bore conditions in fine print. But such terms and condition should be reasonable.
Example 57: Where a launderer gives his customer a receipt for clothes received for washing. The
receipt carries special conditions and are to be treated as having been duly communicated to the
customer and therein a tacit acceptance of these conditions is implied by the customer’s
acceptance of the receipt [Lily White vs. R. Mannuswamy [1966].
CASE LAW: Lilly White vs. Mannuswamy (1970)
Facts: P delivered some clothes to drycleaner for which she received a laundry receipt
containing a condition that in case of loss, customer would be entitled to claim 15% of the
market price of value of the article, P lost her new saree. Held, the terms were unreasonable
and P was entitled to recover full value of the saree from the drycleaner.
In the cases referred above, the respective documents have been accepted without a protest
and hence amounted to tacit acceptance.
g) Standard forms of contracts: It is well established that a standard form of contract may be
enforced on another who is subjectively unaware of the contents of the document, provided the
party wanting to enforce the contract has given notice which, in the circumstances of a case is
sufficiently reasonable but the acceptor will not incur any contractual obligation, if the document is
so printed and delivered to him in such a state that it does not give reasonable notice on its face
that it contains certain special conditions. In this connection, let us consider a converse situation.
A transport carrier accepted the goods for transport without any conditions. Subsequently, he issued
a circular to the owners of goods limiting his liability for the goods. In such a case, since the
special conditions were not communicated prior to the date of contract for transport, these were
not binding on the owners of goods [Raipur transport Co. vs. Ghanshyam [1956].
1.7 COMMUNICATION OF PERFORMANCE
We have already discussed that in terms of Section 4 of the Act, communication of a proposal is
complete when it comes to the knowledge of the person to whom it is meant. As regards
acceptance of the proposal, the same would be viewed from two angles. These are:
i) From the viewpoint of proposer and
ii) The other from the viewpoint of acceptor himself
From the viewpoint of proposer, when the acceptance is put into a course of transmission,
when it would be out of the power of acceptor. From the viewpoint of acceptor, it would be
complete when it comes to the knowledge of the proposer.
At times the offeree may be required to communicate the performance (or act) by way of
acceptance. In this case it is not enough if the offeree merely performs the act but he should
also communicate his performance unless the offer includes a term that a mere performance
will constitute acceptance. The position was clearly explained in the famous case of Carlill Vs
Carbolic & Smokeball Co. In this case the defendant a sole proprietary concern manufacturing a
medicine which was a carbolic ball whose smoke could be inhaled through the nose to cure
influenza, cold and other connected ailments issued an advertisement for sale of this medicine.
The advertisement also included a reward of $100 to any person who contracted influenza,
after using the medicine (which was described as ‘carbolic smoke ball’). Mrs. Carlill bought
these smoke balls and used them as directed but contracted influenza. It was held that Mrs.
Carlill was entitled to a reward of $100 as she had performed the condition for acceptance.
Further as the advertisement did not require any communication of compliance of the condition,
it was not necessary to communicate the same. The court thus in the process laid down the
following three important principles:
i) An offer, to be capable of acceptance, must contain a definite promise by the offeror that he
would be bound provided the terms specified by him are accepted;
ii) An offer may be made either to a particular person or to the public at large, and
iii) If an offer is made in the form of a promise in return for an act, the performance of that act,
even without any communication thereof, is to be treated as an acceptance of the offer
1.8 REVOCATION OF OFFER AND ACCEPTANCE
If there are specific requirements governing the making of an offer and the acceptance of that offer,
we also have specific law governing their revocation.
In term of Section 4, communication of revocation (of the proposal or its acceptance) is
complete.