THE INDIAN CONTRACT ACT 1872
1
Section 2 (h) defines a contract as ³ an agreement enforceable by law´ thus to make a contract there must be 1.
An agreement
2.
The agreement shall be enforceable by law.
3.
All agreements are not enforceable by law
4.
and therefore, all agreements are not
5.
contracts.
2
Agreement According to Section 2(e) an agreement is defined as ³ every promise and every set of promises forming the consideration for each other´. A promise is defined as an accepted proposal as Section 2(b) says ³ a proposal when accepted becomes a promise promise ³ Therefore it can be said that an agreement is an accepted proposal. In an agreement there is a promise from both the sides. sides. For example, example, A promises promises to deliver deliver his radio radio to B and and in return return B promis promises es to pay pay a sum of Rs. 500 to A , there is said to be an agreement betw betwee een n A and and B 3
An agreement is regarded as a contract when it is enforceable by law. In other other words words,, an agreement agreement that the law will will enforce enforce is a contract. contract. The conditions conditions of enforceability enforceability are stated st ated in Sectio Section n 10. 10. Accord Accordin ing g to this this sectio section n ³ all all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration consideration and with a lawful object, and are not hereby expressly declared to be void.´
4
Essentials
of a valid contract
1.
The agreement should be between two parties. An agreement is the result of a proposal or offer by one party followed by its acceptance by the other.
2.
The The agre agreem emen entt shou should ld be betw betwee een n the the parties who are competent to contract.
3.
There should be a lawfu wful consideration ion and lawfu lawfull obje object ct in respect of that agreement.
4.
Ther There e shou should ld be free consent of the parties, when they enter into the agreement.
5.
The agreement must not be one, which has been declared to be void. 5
Proposal
of offer
The term proposal has been defined in section 2(a) as follows:
³ When
one person signifies to another his willingness to do or 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.´
6
The
willingness to do or abstain from doing something, i.e. the proposal or offer must be made with a view to obtain the assent of the other party thereto. For example, A¶s willi illing ngne ness ss to to sel selll his his rad radio io set set to to B for for Rs. Rs. 500 if if B accepts to to pu purchase th the sa same, amoun amounts ts to propos proposal al by A for the sale sale of the radio radio set. set. But if if a stateme statement nt is made made with without out any intention to obtain the assent of the other party thereto that cannot be termed as proposal.
7
Offer
and invitation to treat di stinguished
A proposal or an offer has to be distinguished from an invitation to treat. Sometimes a person may not offer to sell his goods, but may make some statements or give some information with a view to invite others to make offers on that basis. For example, example, a booksell bookseller er sends a catalogue of books indicating prices of various books to many persons. This catalogue is not an offer to sell those books at prices indicated against those books. This is an µInvitation to treat.¶ If any person is interested in purchas purchasing ing those those books books mentione mentioned d in the catalogu catalogue e he may make make an offer. offer. Similar Similarly, ly, inviti inviting ng persons persons to an auction where goods, which are to be auctioned, are displayed is not an offer for the sale of goods. The intending buyers, who make the bid make an offer. Such an offer, when accepted, by the fall of hammer or in some other customary way, will result in a contract. 8
Intention
to create legal relation ship
In order that an offer, after acceptance, can result in a valid contract it is necessary that the offer should be made with an intent intention ion to create create legal relati relations onship hip.. Promis Promise e in the case of a social engagements is generally without an intention to create legal relationship, such an agreement cannot be considered to be a cont contra rac ct. Thus Thus an agree agreeme ment nt to go for for a walk, alk, to go to movie, to play some game, or entertain another person with a dinn dinner, er, canno cannott be enfor enforce ced d in a cour courtt of law. law. Some Someti time mes s the the part party y may may expr expres essl sly y ment mentio ion n that that it is not not a form formal al or lega legall agreement, whereas in some other cases such an intention could be presumed from their agreement. The test to know the intention of the parties is objective and not subjec subjectiv tive. e. Merely erely because because the promiso promisorr conten contends ds that there there was no intention intention to create create obligation obligation would would not exempt him from liability
9
In Rose and Frank Co. Vs. Crompton & Brothers Ltd. the agreement between the parties provided ; ³ This arrange arrangement ment is not entered entered into into «««. «««. as a formal or legal jurisdiction in the Law Courts««. that it (the agreement) will be carried through by parties with mutual loyalty and friendly cooperation.´ One of the parties made a breach of this agreement. In an action by the other party to enforce the agre agreem emen ent, t, it was held held that that sinc since e the the agre agreem emen entt had provided that it was not a formal or legal agreement the same was not enforceable..
10
In the case of Meritt Vs. Meritt, (1970) the husband and wife were the joint owners of a building which was subject to a mortgage to a building society. The husband left the matrimonial home to live with another woman woman.. At that that time, time, at the insi insiste stence nce of the the wife, the husband signed a note saying that the wife will pay all outstanding amounts in resp respe ect of the hous house e and in retu return rn ³I will agree to transfer the property into your sole ownership´. It was held that in this case it was clear that the parties intended to create legal relationship and, therefore, the husband was was bound by the contract 11
Communication of offer An
offer when accepted results in a contract. An offer can be accepted only after the same has come to the knowledge of the offeree. It means that the offer has to be communicated to the offeree in order that the offeree can accept it. According to section 4, ³ the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.´ 12
If an offer has not yet been communicated, even if somebody acts according to the terms of the offer, he cannot be deemed to be the acceptor of the offer. Acting in ignorance of an offer does not amount to the acceptance of the same. This point may be explained by referring to the case of L of Lalman Shukla Vs. Gauri Dutt. Dutt. (191 (1913) 3) In this case the defendant¶s defendant¶s nephew absconded from home. The plaintiff, who was defendant¶s servant, was sent to search the missing missing boy. boy. After the the plaintiff plaintiff had left left in search of of the boy, the defendant issued handbills announcing a reward of Rs. 501 /- to anyone who might find the boy. The plaintiff who was ignorant of this this rew reward, ard, was succ succes essf sful ul in sear search chin ing g the the boy boy. When When he came to know of the reward, which had been announced in his absence, he brought an action against the defendant to claim this reward reward.. It was held that that since since the plaint plaintif ifff was was ignoran ignorantt of the offer of reward, his act of bringing the lost boy did not amount to the acceptance of the offer, and therefore, he was not entitled to claim the reward.
13
If
the plaintiff has the knowledge of the offer, his acting in accordance with the terms thereof amounts to the acceptance of the same. In such a case it is immaterial that at the time of accepting the offer the acceptor does not intend to claim the reward mentioned in the offer. In William Williams s Vs. Carwardi Carwardine ne (1833) the plaintiff who knew that the reward had been announced to be given to anyone who gave information leading to the conviction of an ass assailant for for mur murder, gav gave the the nece necessa ssary ry infor informat mation ion.. While While givi giving ng the info informa rmati tion on the plaintiff mentioned that she hadgiven the information µto ease her conscience¶. At that that time time she did not intend intend to claim claim the reward. reward. It was held held that since the offer had been accepted with its knowledge, ther there e was a valid alid cont contra ract ct and, and, ther theref efor ore, e, she she was entitled to claim the reward. 14
Cross Offers When the offers made by two persons to each other containing containing similar terms of bargain cross each other in post they are known as cross offers. For example, on 1st 1st Januar January y A offer offers s to sell sell his his radi radio o set set to B for Rs. Rs. 500/500/- through through a letter letter sent sent by post. post. On the same date date B also also writ writes es to A maki making ng an offe offerr to purc purcha hase se A¶s A¶s radio set for Rs. 500 /- When A or B send their letters they do not know about the offer which is being made made by the othe otherr side. side. In these these cross cross offer offers, s, even even though both the parties intend the same bargain, there arises arises no contract. contract. A contract contract could arise only only if either either A or B , after having th the knowledge of the offer, had accepted the same.
15
In
(T inn inn Vs. Vs. Hoff offmann mann 1873 1873), ), A wrote to B indicating his willingness to sell 800 tons of iron at 69 s. per per ton. ton. On the the same same day day B also also wrote rote to A offering to buy 800 tons of iron at the same rate of 69 s. per ton. ton. The two two letters letters crossed crossed each each other other in post post.. B brou brough ghtt an an acti action on agai agains nstt A for for the the supp supply ly of iron contending that a valid contract had been created created betwee between n the two two parties parties.. It was held held that that in this case there were only two cross offers and the offer of neither of the parties having been accepted by the other, there was no contract which could be enforced
16
Specific
and General Offers
When the offer is made to a specific or an ascertained pers person on itit is is know known n as a spec specif ific ic off offer , but when the same is not made to any particular person but to the public at large it is known as general offer. er. For instance, an offer to give reward to anybody who finds a lost dog is a gener general al offer offer This general general agreemen agreementt will be deemed to be accepted by anyone who actually finds finds the lost lost dog. dog. The perso person, n, who who accepts accepts this offer, generally by performing the condition of the proposal, can bind the person mak making the offer. According to Section 8, ³Performance of the conditions of a proposal «.. is an acceptance of the proposal.´ Thus although a general offer is made to the public at large, the contract is conclud4d only with that person who acts upon the terms of the offer.
17
The The case case of Carlil Vs. Carbonic Smoke Ball Co. ( 1893) is an illustration of a contract contract arising out of a general offer. offer. The facts of the thecase are are : The The defe defen ndants adv advertis tised the their pro product ³Carbo ³Carbonic nic Smoke Smoke Ball´, Ball´, a preven preventiv tive e remedy remedy agains againstt influ influenz enza. a. In the the adve adverti rtise seme ment nt they they offer offered ed to pay pay a sum sum of 100 100 poun pounds ds as rew reward ard to any any one one who cont contra racte cted d influ influen enza za,, col colds ds or any any disease disease cause caused d by by taking taking cold, after having having used used the Smoke Smoke Ball three times a day for two weeks, in accordance with the prin printe ted d dire direct ctio ions ns.. The They also also anno announ unce ced d that that a sum sum of 100 1000 poun pounds ds had had been been dep deposit osited ed with ith the the Alli Allian anc ce Bank Bank to show show sincer sincerity ity in in the matt matter. er. The plain plaintif tifff ( Mrs. Mrs. Carlil Carlil ) rely relying ing on the the advertisement purchased a Smoke Ball from a chemist, used the same in accordance accordance with with the directions of the defendants, defendants, but still still caught influenza. influenza. She sued sued the defendants defendants to claim the the reward of 100 100 poun pounds ds adver adverti tise sed d by them. them. It was held held that that this bein being g a general offer addressed to all the world had ripened into a contract with ith the the plai plaint ntiiff by her her act of perfo erforrmance ance of the the requ requiired red cond condit itio ions ns and and thus thus acc ccep epti tin ng the the offe offer. r. She She was ther there efore fore,, entitled to claim the reward. r eward.
18
R evocation evocation
Of Offer
It is only after the acceptance of an offer that there arises a cont contra ract ct and and then then both oth the the part partie ies s beco become mes s boun bound d by thei their r respectiv respective e promises. promises. Before the the offer has has been accepted accepted itit can be revoked. After the offer has been accepted it ripens into a contract contract and and then then it cannot cannot be be revoked. revoked. Accordi According ng to Section Section 5 : ³ A proposal may be revoked at any time before the comm commun unic icat atio ion n of its its acce accept ptan ance ce is comp comple lete te as agai agains nstt the the proposer, but not afterwards.´ In case of sale by auction the bids made at the auction are offers, and and the the high highes estt offe offerr may may be accept accepted ed by the the aucti auction onee eer. r. In such a case the t he sale is complete when the auctioneer announces its completion by the fal fall of the hammer or in any other customary manner ; and , until such announcement is made, any bidder may retract his bid.
19
Submission of a tender to supply or purchase goods at a stated price is making an offer. offer. Person submitti submitting ng the tender may withdraw withdraw his tender before before the same has has been approved. approved. Even after after the tender tender has been approved that remains only a standing offer, which is capable of being revo revoked ked before before a contra contract ct arises arises by placi placing ng of orders. orders. In Rajendra Kumar Verma Vs. State of Madhy adhya a Prad Prades esh h AIR 1972 The respondents advertised for receiving tenders for sale of Tendu Patta Patta (leaves). The petitioner petitioner submitted submitted his his tender. Before the date of the openi pening ng of the tende nders the petit titione ionerr mad made an appli pplica cati tion on with withdr draw awin ing g his his tend tender er and and also also requ reques esti ting ng that that his his tend tender er be not not opened. One of the conditions conditions in the tender tender notice was that that a tenderer may withdraw his tender before the tender are open provided that there should be at least one other valid tender when the tenders are opened. Peti Petiti tion oner er¶s ¶s tend tender er was was the the only only tend tender er subm submit itte ted. d. In spit spite e of his his request to withdraw the tender the Government accepted his tender. Since the petitioner did not execute the purchaser¶s agreement , Tendu leaves were sold to somebody else at a lower rate, and then an action was brought against the petitioner to claim compensation for the loss suffered by the Government.
20
The conten tentioner of the petitio tioner was tha that since he had withdrawn his tender before the same had been opened and acc ccep epte ted d, the there was no offer ffer in exi existen stence ce which hich coul could d be accepted. accepted. The responde respondents, nts, howeve however, r, contended contended that the offer offer could not be withdrawn in accordance with the tender notice and, therefore, the petitioner¶s offer was still alive and had ripened into contract by acceptance. It was held that in spite of the clause in the tender notice against the withdrawal of the offer, the petitioner had a right to withdraw his offer offer before the same same was accepted accepted.. In this case case there was was no offer which could be accepted, there had arisen no contract between the petitioner and the respondents and, as such, the respondents had no right to claim any compensation.
21
R evocation evocation
in contracts by post
We have already seen earlier that as per Section 5, a proposal may be revoked at any time before the communication of its acceptance is complete as against the propos proposer, er, but but not afterw afterward ards. s. In contra contracts cts by post post it has has to be seen, seen, as to what hat time time the comm commun unic icat atio ion n of acceptance is complete against the offeror, because no revocation is possible after such communication has been completed.
22
When
is the communication of acceptance complete against the offeror (proposer) ?
According to section section 4 : ³The communication communication of an acceptance acceptance is complete 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.´ For instance in response to my offer sent by post to you, you post post the letter letter of accep acceptan tance ce to me. As soon soon you have have posted posted the the lette letterr my powe powerr to revoke revoke come comes s to an end. end. This This may may be made further clear by referring to the following illustration ; A propos proposes es,, by a lett letter er sent sent by post, post, to sell sell his house house to B . B accepts accepts the proposal proposal by by a letter letter sent sent by post. A may revoke revoke his proposal proposal at any time time before before or at the moment moment when when B posts his his letter of acceptance, but not afterwards.
23
R evocation evocation how
made?
Section 6, mentions the various modes of revocation, which are as under : A proposal is revoked ± (1) by the communication of notice of revocation by the proposer to the other party ; (2) by the lapse of time prescribed in such proposal for its acceptance or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance : (3) by the failure of the acceptor to fulfil a condition precedent to acceptance : (4) by the death or insanity of the t he proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance:
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By notice of revocation offer ripens ripens into a contract after it is accepted. accepted. Before it has been accepted it creates no legal obligation and, therefore, it may be revoked at any time before it is accepted. To be effective the notice of revocation has to be communicated by the proposer and not by any body else. 2. By lapse of time A proposal is revoked by the lapse of time t ime prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance. 1.
An
25
3.
By the failure to fulfil a condition precedent
When the offer is subject to some condition precedent, such a condition has got to be fulfilled before the acceptance acceptance is made. made. If there is failure of the acceptor to fulfil a condition precedent to acceptance acceptance,, the offer stands stands revoked. revoked. For example example,, if the offer requires the deposit of some earnest money, or the execution of some document document etc. these conditions must be fulfilled. Failure to fulfil these conditions may make an offer to lapse.
26
4. By
the death or insanity of the offeror
An offer is revoked by the death or insanity of the proposer, if the fact of death or insanity comes to the knowledge of the acceptor before before accept acceptanc ance. e. In India India the death death or insan insanit ity y of the offeror offeror does not not automatical automatically ly make the offer offer to lapse. lapse. The offer stands stands revoked if the fact of death or insanity comes to the knowledge of the acceptor before before acceptance. acceptance. It means that if the fact of death or insanity has not come to the knowledge of the offeree while he accepts the offe ffer, it is valid acceptan tance giv giving rise to a contractual obligation. In Engl Englan and d the the posi positi tion on is diffe differe rent nt.. There There,, afte afterr the the offer offeree ee knows about the offeror¶s death, the offer lapses and cannot be accepted.
27
Standing,
Open or continuing offer
An offer which is allowed to remain open for acceptance over a period of time is known as a sanding, open or a continuing offer. For example, an offer to supply 1,000 bags of wheat from 1st January to 31st December, in accordance with the orders which may be placed placed from from time time to time to time, time, is a standing standing offer. offer. As and when the orders are placed that amounts to acceptance of the offer to that extent. In the above above stated illustration illustration if an order order for the supply of 100 bags of wheat is placed on 15th January, there is acceptance of the offer to that extent and the offeror become becomes s bound bound to supp supply ly those those 100 bags bags of wheat wheat.. So far as the remaining quantity is concerned this offer can be revoked just like any other offer. Tend Tende er for for sup supply ply of good goods s is a kin kind of sta standing ding offe ffer. An advertisement inviting tenders is merely invitation for quotations. When the tender is approved it becomes a standing offer.
28
I n
Beng Bengal al Coa Coall Co. Co. Vs. Vs. Homi Homie e Wadi Wadia a & Co. Co.,, the defendants (Bengal (Bengal Coal Co.) Co.) agreed agreed to supply supply coal to the plainti plaintiff ff (Homie Wadia Wadia & Co. ) up to a certain certain quan quantit tity y at an agreed agreed price price for a period of 12 months, as may be required by the plaintiffs from time to time. The plaintiffs placed orders for the supply of coal and the same were complied with. Before the expiry of 12 months, the defendants withdrew their offer to supply further coal, and refused to comply with the orders to supply further coal, and refu refuse sed d to compl comply y with with the orde orders rs placed placed ther therea eafter fter.. They They were sued for breach of of contract. There was simply a continuing offer offer to supp supply ly coal. coal. They They were were boun bound d to suppl supply y coal coal only as regards orders which had already been placed, but were free to revoke their offer for supply of coal thereafter. thereaf ter.
29
A CCEPT CCEPT ANCE
proposal when accepted, results in an agreement. It is only after the acceptance of the proposal that a contract between the two parties can arise. Acco Accord rdin ing g to Secti Section on 2 (b) : ³ when when the the perso person n to whom hom the the prop propo osal sal is mad made sign signiifie fies his ass sse ent the thereto, to, the the proposa osal is said to be accepted. ed. A proposal, proposal, when when accepted, becomes a promise promise ³ The person making the proposal does not become boun bound d ther thereb eby y unti untill acce accept ptan ance ce.. As soon soon as his his proposal sal is accepted ted tha that is know nown as promis mise whereby whereby both the parties become bound. A
30
Effect of A cceptance cceptance A contract contract is created created only after an offer offer is accepted accepted.. Before the the acceptance is made made neither party is bound thereby. At that stage stage the offeror is free to revoke or withdraw his offer, and the offeree is free not to accept accept the offer offer or reject reject the same. same. After the the offer has been accepted ted it becomes a prom romise which, if other conditions of a valid contract is satisfied, binds both the parties to the the pro promise mise.. Afte fter acce accept ptan ance ce each each part party y becom ecomes es lega legall lly y bound by the promise made by him through the medium of offer or acceptance of it.
31
Essentials of a valid acceptance
In
order that acceptance of an offer can result in a contract the acceptance must satisfy the following requirements. 1. Acceptance should be communicated by the offeree to the offeror. 2. Acceptance must be made in the prescribed manner, and if no manner is prescribed, in some usual and reasonable manner. 3. Acceptance should be absolute and unqualified. 4. Acceptance should be made while the offer is still subsisting. 32
1.
A cceptance cceptance should
be communicated
We have seen above that when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accept accepted. ed. It means means tha thatt the offere offeree e must must signif signify y his asse assent, nt, or communicate the acceptance. When the parties are face to face, communication could be oral. When they are at a distant place communication could be made by post post,, by tel telegram gram,, by a messa essage ge on pho phone, thro throu ugh a messenger, or in any other reasonable manner. Sometimes the cond conduc uctt of a pers person on migh mightt indi indica cate te his his asse assent nt.. For For exam exampl ple, e, when a passenger ger boards a bus and travels thereby, he impliedly assents to pay the necessary fare.
33
Communication must be made by t he offeree or his authorised agent I n
order that the acceptance can be treated as valid it is necessary that the same must be communicated to the offeror either by the offeree, or by some duly authorised person on his behalf. I f the communication is made by an unauthorised person it does not result in a contract. In Powell Vs. Lee, (1908) Powell was one of the candidates candidates for the post of head mas master of a school hool.. The The Board oard of man managers passed sed a reso resolu lutio tion n selec selecti ting ng him for the the post. post. No commu communi nica cati tion on about about this decision was made to Powell by the Board. one of the members of the Board Board who had not been autho authoris rised ed to communi communica cate te this decisio decision, n, acting in his his individual capacity, capacity, informed informed Powell about about his selection selection for the post. post. Subsequently Subsequently,, the Board of managers managers met again again and decided to cancel the appointment of Powell and appoint another candidate, Parker, in Powell¶s Powell¶s place. Powell sued sued Lee, the chairman chairman of the Board Board of manag manager ers s for for the the brea breach ch of contr contrac act. t. It was held held that that since since the the resolution passed by the Board was not communicated to Powell by the Board, or any authorised pereson on its behalf, it could not give rise to a contract. Powell¶s action therefore therefore failed.
34
When
is communication of acceptance complete ?
As soon as the communication of acceptance is complete that results in a contract whereby both both the part parties ies beco become me bound bound.. In case case the the parties to the con contract are present at the same place, one making the offer and the othe otherr comm commun unic icat atin ing g the the acce accept ptan ance ce,, both both parties become bound imme mmediately. ly. The problem arises ses when the parties are at a distant place and the contract is concluded through post 35
A cceptance cceptance
by post
Section 4 of the Act mentions the followin f ollowing g rules when the communication of acceptance is made by post : 1. The communication of acceptance is complete 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. 2. The communication of acceptance is complete as against the acceptor, when it comes to the knowledge of the proposer. Illustration
B accepts A¶s proposal by a letter sent by post. The communication of the acceptance is complete, - As against A , when the letter is posted ; As against B, when the letter is received by A.
36
Offeror bound w hen letter of acceptance posted to him It has been noted that the communication of acceptance is complete as against the propo ropose serr when hen the let letter of acce accept ptan ance ce is posted to him. Once the letter of acceptance is posted the offeror becom comes bound. He becomes bound immediately on the posting of the letter to him and it makes no difference that the receipt of the lette tter is delaye ayed in transit, or even if the letter is lost in the post and the offeror never receives it. 37
I n
Dunlop lop Vs. Higgins ( 1848), 1848), Dunlop & Co. offered to sell 200 tons of pig iron at 65 sh. Per ton to Higg Higgin ins s & Co. Co. throu through gh their their lette letters rs dated dated 22nd 22nd and 28th January, Higgins & Co. received the letters on 28th 28th and and 30th January January and and replie replied d on the same same indicating their acceptance to purchase the pig iron in accord accordan ance ce with the offer offer.. Due Due to frosty weath weather er there was disruption in the train services and the lett letter er of acce accept ptan ance ce inst instea ead d of reac reachi hing ng on 31st 31st Janu Januar ary y reac reache hed d Dunl Dunlop op & Co. Co. on 1st Febru Februar ary y. Dunlop & Co. refus fused to supply pig iron on the the ground that the receipt of the letter of acceptance by them had been delayed. It was held that Dunlop & Co. had become bound by the contract as soon as the letter of acceptance was posted to them.
38
Communication of acceptance to a wrong person It has already been seen that the offeror becomes bound as soon as the letter letter of acceptance acceptance is posted to him. If the letter letter of acceptance acceptance is posted posted at the wrong address or to a wrong person, that will not bind the offeror. In this this connection connection reference may be made to the decision decision of the court court in the case of K of Karan Singh Vs. The Coll Collec ecto tor, r, Chha Chhata tarp rpur ur to to explain the point. point. In that case in an auction auction of the quarry lease lease the petitioner¶s petitioner¶s bid of Rs. 1,800 1,800 was the highest highest bid. In accordance accordance with the auction auction conditions conditions the the peti petiti tion oner er depo deposi site ted d the the secu securi rity ty depo deposi sitt and and earn earnes estt mone money y of Rs. 540. The The bid bid was not acc cce epted at the aucti ction. on. The The bid was subs subseq eque uent ntly ly acce accept pted ed by the the coll collec ecto tor, r, but but inst instea ead d of send sendin ing g the the communication of acceptance to the petitioner the same was wrongly sent to somebody somebody else. else. The officer officer concerned concerned realised realised the mistake after after the expi expiry ry of the period period of lease. lease. Then Then a deman demand d noti notice ce was sent sent to the petitioner petitioner asking him him to pay the lease money. money. The petitioner, petitioner, on the other hand, demanded the refund of the security deposit of Rs. 540. It was held that the petitioner¶s bid, which was an offer, although accepted on file, did not result in a contract as no intimation was sent to the petitioner which was received by him. The demand notice for recovering the lease money was quashed and the respondents were directed to refund the security deposit.
39
A cceptor cceptor
Bound w hen his letter reaches the offeror It has been noted above that though the offer ffero or beco become mes s bou bound when hen the the lett etter of acce accept ptan ance ce is post posted ed to him, him, the the acce accept ptor or himself does not become bound thereby. by. Acceptor becomes bound by his acceptance when his letter of acceptance comes to the knowledge of the offeror.
40
R evocation evocation
of acceptance (India)
In India ndia,,
since ince the acceptor does not become bound immediately on post postin ing g his his lett letter er of acce accept ptan ance ce,, he is fre free to revo revoke ke the the acc ccep epta tan nce by adop dopting ting spee speedi dier er mode ode of comm commu unica nicati tio on, where hereby by his his comm commun unic icat atio ion n of revo revoca cati tion on of acce accept ptan ance ce may may reach reach earli earlier er than than his his letter letter of of accepta acceptance nce.. Sectio Section n 5 expres expressly sly perm permit its s the the rev revocat ocatio ion n of acce accept ptan ance ce thro throug ugh h the the foll follow owin ing g provision : ³An acceptance may be revoked at any time before the comm commun unic icat atio ion n of the the acce accept ptan ance ce is comp comple lete te as agai agains nstt the the acceptor, but not afterwards.´ Illustration
A prop propos oses es,, by a lette letterr sent sent by post post,, to sell sell his his house house to B. B accept accepts s the prop proposa osall by a lette letterr sent sent by post. post. B may revoke revoke his his acceptance at any time before or at the moment when the letter communic communicating ating it reaches reaches A, but not afterwards. afterwards.
41
R evocation evocation
of acceptance (England)
Under
the English law, once the letter of acceptance is posted it binds both the parties and there appears to be no scope of revocation of acceptance by sending a telegram or through a phone call. Although there are no English cases on the subject are of the view that the posting of the letter of acceptance once posted cannot be revoked.
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A cceptance cceptance
by Telephone or Telex
Section 4 and 5, which makes provisions about the communication of offer and acceptance and revocation thereof, do not not make make a menti ention on wheth hether er thes these e provi rovisi sion ons s rela relate te to communications through letters and telegrams only or they also incl includ ude e comm commun unic icati ation on made made with with the the help help of telep telepho hone ne and and telex also. In Bhagwandas Vs. Girdhari Lal & Co. (1966) the Supreme Court has has held held that that in case case of tele teleph phon onic ic conv onversa ersati tion on the the position is the same as in the case where the parties are in the presence of each other, and the rule of contract through post does not apply apply to such such contracts. contracts. In case of of acceptance acceptance sent by post the contract is concluded when the letter of acceptance is poste osted, d, where herea as in the the case ase of acc ccep epta tanc nce e by phon hone, the the contract is deemed to be complete when the offeror hears the acceptance at his end rather than when the acceptor speaks the words of acceptance.
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Communication of acceptance not needed in acceptance by conduct
It has been noted above that as a general rule no contract can arise unless and until the acceptance has been communicated to the offeror. In exceptional cases the terms of the offer may be such which waive the necessity of communication of acceptance, or a certain kind of conduct on the part of the offeree may be treated sufficient to create a contract. contract. If that that is so, the contract contract could be created created even without communication of acceptance. According to Section 8, ³Performance of the conditions of the proposal«««««. Is an acce accept ptan ance ce of the propo proposal sal.´ .´ ( case case of Mrs. Carl Carlilil Vs. Carbonic Smoke Ball Co.) 44
2.
A cceptance cceptance
should be in the prescribed manner
If the the propo roposa sall presc rescri ribe bes s any any manne annerr of acc ccep epta tan nce, ce, the the acceptance must be made in that manner. When the manner of acceptance has not been prescribed, it must be made in some usual and reasonable manner. Acceptance by post, telegram, telephone or through personal messenger ger may be considered red to be a usual manner of acceptance. If no manner of acceptance is prescribed, acceptance in some usual usual and reasonable reasonable manner manner will will suffice. If, how however ever,, the the pro proposa posall pres prescr crib ibes es any any part partic icul ular ar mann manner er of acceptance, the acceptance must be made in that manner. manner. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, then, according to Secti Section on 7 (2), (2), of the India Indian n Cont Contra ract ct Act, ³the ³the propo propose serr may, may, within a reasonable time after acceptance is communicated to him, him, insi insist st that that his his prop propos osal al shal shalll be acce accept pted ed in pres prescri cribe bed d manner, and not otherwise ; but if he fails to do so, he accepts the acceptance.´
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3.
A cceptance cceptance should
be absolute and unqualified: It lapses by rejection or counter-offer
Anot Anothe herr esse essent ntia iall of vali valid d acce accept ptan ance ce,, whic which h can convert a proposal into a contract, is that the acceptan tance mus must be absolut lute and unqualifie fied. Conditional or qualified acceptance is no acceptance which could result in a contract. By such an acceptance the offer is deemed to be rejected. By such an acceptance the offer is deemed to be reje rejecte cted. d. The The effe effect ct of suc such h a cou count nter er-o -offe fferr in in the the eyes of law is to destroy the original offer. And an offer once refused is dead and cannot be accepted unless renewed. 46
4.
A cceptance cceptance
should be made w hile the offer is still subsisting
We have seen earl arlier tha that the the offe fferor ror is fre free to withd ithdra raw w the the offe offer, r, or the the offe offerr is revo revoke ked d unde under r various circumstances mentioned in section 6. Afte fter the offer has been withdrawn or has lapsed there is nothin thing g which hich can can be acc ccep epte ted d. It is, the therefo refore re,, necess cessar ary y tha that the the acc cce eptan tance shou should ld be mad made while the offer is still alive and subsisting. Acceptance after the lapse of the offer cannot give rise rise to a contract contract.. Simila Similarly rly,, the offer is deeme deemed d to have ended by rejection of the original offer or a counter offer. 47
