Express

contract Implied contract

 Where

both offer and acceptance constituting a contract are made in words ,spoken or written, the contract is said to be express contract. Example: A writes a letter to B for purchase of certain goods at a certain price. This is an express contract.

Where both offer and acceptance constituting contract are made otherwise than in words, the contract is said to be implied contract. Thus an implied contract is that contract which is inferred from act or conduct of the parties. It is not formed by words, written or spoken. Exp: where a person boards a public transport bus, an implied contract is entered into between him and the public transport bus owner because by his act it is implied that he undertakes to pay the relevant fare even though he makes no express promise to do so.

 Valid

contract Voidable contract Void agreement A contract which has become void or Void Contract Illegal or unlawful agreement Unenforceable contract

valid contract is an agreement enforceable by law. Thus an agreement which satisfies all the legal requirements laid down in sec 10 of the Act, is known as a contract or a valid contract.

voidable contract is one which is enforceable at the option of one of the parties to it, but not that of the other. The party entitled either to affirm it or reject it, is naturally the aggrieved party.

 Coercion:

using physical force such as obtaining consent on gun point. Undue influence: using psychological pressure. Fraud: deceiving or misleading the other person by intentionally providing wrong information. Misrepresentation: providing wrong information without having knowledge that it is wrong. Mistake: misconception as to a matter of fact, or as to a matter of law.

 Acc

to sec 2(g), An agreement not enforceable by law is said to be void. A void agreement is a nullity in the eyes of law, devoid of any legal effect since it is as good as no agreement subsisting between the parties. Such an agreement does not create any legal rights, and nor does impose any legal obligations on the parties to it.

 Sec

2(j), A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. Exp: A agrees to sell 100 bags of rice at Rs. 2000 per bag to B. Before delivering, the Government bans private trading in rice. The contract becomes void.

Acc to sec 23 the consideration or object of an agreement is unlawful if it is forbidden by law; or is of such a nature that if permitted, it would defeat the provisions of law, or is fraudulent or involves or implies injury to the persons or property of another or the courts regard it as immoral, or opposed to public policy. Exp: A agrees with B that they will share the decoity money fifty-fifty, and later on refuses to do so, B cannot have any claim in the court of law for his share, because this illegal contract which is a nullity in the eyes of law.

 An

illegal contract is necessarily void, while a void contract may be void because of a reason other than illegality.

contract which cannot be enforced in a court of law because of some technical defect is known as unenforceable contract. In certain cases there are special provisions of law which require certain formalities to be fulfilled for formation of a contract like the contract must be registered, or it must be attested by notary, or it must be stamped etc. If such formalities are not observed, the contract cannot be enforced by law.

Enforceability- An agreement may or may not be enforceable at law. For exp, social agreements are generally not enforceable while business agreements are enforceable at law. Effect- An agreement is not always a binding on the concerned parties. Scope- All agreements are not contracts.

A contract is an agreement which is enforceable at law.

A contract is always concluded and binding on the concerned parties. All contracts are agreements.

Scope-These agreements are narrower in scope. All illegal agreements are void. Effect on collateral transaction- collateral transaction of an illegal contract also becomes illegal and cannot be enforced. Punishment- Parties may be punished for making illegal agreement.

These agreements are wider in scope. An agreement may be void because of a reason other than illegality. Collateral transactions of an agreement which is void for a reason other than illegality are enforceable at law. Being void does not make a contract punishable.

Nature- A void contract is valid when it is made. But subsequently it becomes void due to one reason or the other. Rights- A void contract does not provide any legal right to the parties to the contract. Effect- When a contract is void because of illegality, its collateral transactions also become void.

A contract may be voidable since very beginning, or may subsequently become void.

A voidable contract gives rights to the aggrieved party to rescind the contract, and claim the damages, etc. in certain cases. A voidable contract does not effect the collateral transactions.

 It

is an agreement. It never takes form of a contract. It is a nullity since very beginning.

It

is a contract. When it is formed it is perfectly valid. Subsequently it becomes a nullity.

 In

a quasi-contract rights and obligations arise not by any agreement between the parties but by operation of law. These obligations are imposed by law because of existence of some special circumstances between the parties. Such contracts are based on the principle that none should be allowed to enrich himself unjustly at the expense of another

 As

a matter of fact, these are not contracts, instead these are relations resembling contracts. But Contract Law views such relations as contracts. Exp: A, a tradesman, leaves goods at Bs house by mistake. B treats the goods as his own. B is therefore bound to pay for them.

 Executed

contract Executory contract An executory contract may be: Bilateral, or Unilateral.

 Where

all the parties to a contract have performed their obligations under the contract, it is known as executed contract.

 Where

all the parties to a contract have still to perform their respective obligations in a contract, the contract is known as executory contract. Exp: A paints a picture for B, but B is yet to make the payment for it, the contract is executed on the part of A while it is executory on the part of B.

 This

is a contract in which both the parties have obligations to perform at the time of its formation because both have made promises for the future.

 Such

a contract is one in which only one party has the obligation at the time of its formation. This may be there because one party has performed his part of the obligation before or at the time of making the contract or did not have any obligation at all.

Acc to Section 2 (a) 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.

Offeror/ Proposer/ Promisor Offeree/Proposee/Promisee/Acceptor

 1.

When one person signifies 2. his willingness to do or to abstain from doing( not to do) something, 3. to the other person 4. in order to obtain the assent of that other person to such act or abstinence, a proposal is said to be made.

1.Offer must be communicated to the offereeAn offer does not become operative until it has been communicated to the person to whom the same is addressed.(sec 4 of the Contract Act lays down that , the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.) There can be no acceptance of a proposal which is not communicated because a person cannot assent to something which he is not aware of.[Lalman Shukla Vs. Gauri Dutt (1913)]

 Exp:

C published an advertisement announcing a reward of 20 pounds for information leading to the discovery of the murderer of his brother. M, sister of the culprit gave a statement against him in order to release her conscience and the culprit was caught. Later on she claimed the reward. C contended that since M got the culprit caught to release her conscience and not for the reward, she is not entitled to it.

 It

was held that she was entitled to the

reward as she acted after having knowledge of the offer. The motive of doing certain thing is irrelevant, if the act is done with the knowledge of the offer.

Comment- So long as the acceptor knows the offer exists, the reason for accepting it are of no importance in deciding whether a contract has come into being.

 2.An

offer may be express or implied- if the offer is made by words, spoken or written, it is called an express offer. If an offer is inferred from the conduct of the party, it is called an implied offer. Exp: 1. A asks to B, Will you purchase my white car for Rs.2,00,000? 2. A writes to B in a letter, I want to sell my bike for Rs.40,000. 3. A advertises in a newspaper that, I will pay Rs. 5,000 to anyone who traces my missing dog.

4.The D.T.C. runs buses on different routes to carry passengers at the scheduled fares.

 5.A

weighing machine kept at a cinema hall. 6. A self service restaurant open for customers.

Specific offer to a person

Specific offer to a Group of Persons

General offer

 4.Offer

must be capable of creating legal relationship-

valid offer must intend to create legal relations. If the parties to the agreement have no intention to create legal relationships, it is not an offer in the eyes of law.
[It is generally presumed that with business transactions, there is an intention to create legal relationship, and in social and domestic transactions there is no intention to create such relationship.]

contract may fail to come into existence, even though there is an offer and acceptance, because of uncertainty as to what has been agreed. A vague offer does not convey what it exactly means.
Exp: 1. A promised to buy the horse from B if it proved lucky. This is a vague and loose offer. Thus it cannot give rise to any contract. 2.When a person states that he is prepared to property for a reasonable sum. 3. A offered to sell B 100 tonnes of oil. 4. An option to renew a lease at such rental as may be agreed upon between the parties was held void (i.e. not enforceable at law)

The offeror is free to include any terms and conditions in his offer. The offeree may accept or reject these terms and conditions. It is the duty of the offeror to communicate all the terms of the offer(complete offer) to the offeree. If the offeror is responsible for noncommunication of the disputed terms, these do not form part of the agreement and offeree is not bound by them.(Henderson Vs. Stevenson) If the offeror has made reasonable efforts to communicate such terms, the offeree is bound by such terms although he might be ignorant of them.(Parker Vs. South Eastern Railway Co)

 7.An

offer must be distinguished from (i) an invitation to make an offer (ii) declaration of intention to offer When a person makes an invitation to offer, the purpose is not to obtain the assent of the other person but merely to circulate the information that he is willing to deal with anybody who on such information is willing to open the negotiations with him.

House for sale

 An

offer must be addressed to another person in order to obtain his assent to the proposal. It must be distinguished from an expression of intention or enquiry.
Thus a casual enquiry- Do you intend to sell your car?- is not a proposal. Similarly a mere statement of intentionI may sell my car if I can get Rs.50,000 for it- is not a proposal. But if A says to B, will you buy my car for Rs.50,000, we have a proposal as it has been made with the object of obtaining the assent of B.

 The

offeror cannot say that if the acceptance is not communicated within a fixed period of time, the offer would be considered as accepted. The offer should not impose on the offeree, an obligation to reply.

 The

offer cannot say that if the acceptance is not communicated within a fixed period of time, the offer would be considered as accepted.

Offer

CrossOffer

Two offers meeting two cross purposes, made by two parties to each other, in ignorance of each others offer are termed as cross offers. Cross offers do not amount to acceptance of ones offer by the other and do not constitute a completed agreement. Exp: A wrote a letter to B, a firm of furniture dealers to supply him 5000 chairs of a particular type and at a certain price. The same firm on the same day posted a letter to A offering to sell 5000 chairs of the same quality at the same price. The letters crossed each other in the post. Held, that the letters were cross offers, and neither was acceptance of the other because each side was ignorant of the proposal of the other party at the time of writing the letter. [Tinn Vs. Hoffman & Co.]

Offer

Counter -Offer

 Acceptance

to an offer with a variation is no acceptance. It is simply a counter offer. A counter offer amounts to the rejection of the original offer and has the effect of cancelling the original offer. Exp: A offered B to sell his horse for Rs.1000. B replied that he can pay Rs.800 for the horse. Bs reply is a counter offer.

 1.An

offer lapses after stipulated or reasonable time. An offer lapses if acceptance is not communicated within the time prescribed in the offer, or if no time is prescribed, within a reasonable time. [sec 6(2)]. (Ramsgate Victoria Hotel Co. Vs. Montefiore)

 2.

An offer lapses by not being accepted in the mode prescribed, or if no mode is prescribed, in some usual or reasonable manner.

 3.

An offer lapses by rejection. An offer lapses if it has been rejected by the offeree. The rejection may be express or implied i.e., by words spoken or written or implied. Implied rejection is one : (a) where either the offeree makes a counter offer, or (b) where the offeree gives a conditional acceptance.
Vs. Wrench)

(Hyde

 4.

An offer lapses by the death or insanity of the offeror or the offeree before acceptance. If the offeror dies or becomes insane before acceptance, the offer lapses provided that the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. [sec. 6(4)]

 5.

An offer lapses by revocation. An offer is revoked when it is retracted back by the offeror. An offer may be revoked any time before acceptance, by the communication of notice of revocation by the offeror to the other party. [sec. 6(1)]

 6.

Revocation by non-fulfillment of a condition precedent to acceptance.

 7.

An offer lapses by subsequent illegality or destruction of subject matter.

 Sec

2 (b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.

 1.

Acceptance must be given only by the person to whom the offer is made- When an offer is made to a particular person, it can be accepted only by that person, when an offer is made to a class of persons, it can be accepted only by a member of that class, and when an offer is made to the public at large, it can be accepted by any member of the public.

 Exp:

P applied for the post of headmaster of a school. The board of managers of passed a resolution appointing him, but did not communicate this to him. D, one of the managers, in his individual capacity, told P that he had been appointed. Later the matter was reopened and K, another candidate was appointed in place of P. P sued L, the chairman of BOD, for breach of contract. The court held that in absence of authorised communication by the entire board there would be no contract.

 2.

Acceptance must be absolute and unqualified. (Hyde Vs.Wrench)

 3.

Acceptance must be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted.

4. Acceptance must be communicated by the acceptor-Acceptance and communication of acceptance of offer, are both necessary for a concluded contract. Exp: A makes an offer to B for supply of certain goods at a certain price. B accepts the offer and puts the offer of acceptance in the drawer of his table and forgets all about it. Here putting the letter of acceptance in the drawer does not amount to communication of acceptance without external manifestation of the intention to accept the offer. [Brogden vs. Metropolitan Rly Co.]

 5.

Acceptance must be given within a reasonable time and before the offer lapses and/or is revoked.

 6.

Acceptance must succeed the offer.

 7.

Rejected offers can be accepted only, if renewed. (Hyde vs. Wrench)

 Acceptance

is the act of assenting by the Offeree to the offeror Acceptance may be express OR implied Who can accept? (only the Offeree) Acceptance must be legal & unqualified It must be communicated to the offeror It must be according to the mode prescribed It must be given within a reasonable time Showing intention to fulfill the terms of promise It cannot be implied by silence (mere mental acceptance is no acceptance) Must be given before the offer lapses

 By

Communication of Revocation Death of insanity of either party before acceptance By lapse of time (if not accepted within the prescribed time) Non fulfillment of specific condition If a counter offer is made If the acceptance is not according to the prescribed mode and the Offeree is informed Revocation & Rejection

Offer or Acceptance OFFER : when it comes to the knowledge of the Offeree ACCEPTANCE : (i) As against the offeror : when putted into course of transmission (out of acceptors power) (ii) As against the acceptor : when it comes to the knowledge of the offeror

Revocation of Offer or Acceptance (i) As against the person who makes it -when putted into course of transmission. (ii) As against the person to whom it is made -- when it comes to his knowledge

 When

A promises to do something A must get something in return this something is known as consideration (Affirmative Act / Abstinence /
Promise)

It

must move at the desire of the promisor It may move from promisee or any other person It may be act, abstinence, forbearance or promise It may be past, present, future Need not be adequate It must be real and not illusory It must not be something which the promisor is not already bound to do It must not be illegal / immoral Stranger to the Contract