Business law: INDIAN CONTRACT ACT

Business Law

INDIAN CONTRACT ACT

British mercantile law, Indian culture and society. Leading cases Indian

decision in supreme court.

Contract Act 1972

Sec. 10 of Indian contract act defines the essential characteristics of a

contract. They are:

i) Offer and acceptance – The offer should be a legal one. only

then there will be acceptance.

ii) Consideration – Both parties should give something and get

something in return.

iii) Capacity of parties – Minor doesn’t have the power to enter a

contract, A person of unsound mind, a person under the

influence of alcohol drugs, Convicts

iv) Free consent – Willingness to perform is consent. There

should be no coercion. There should be no undue influence or

physical pressure.

v) Legality of objects – Object means purpose. The purpose for

getting into the contract should be a legal one.

vi) Possibility of performance – The offer in the agreement should

have the possibility of being performed.

vii) Intention to create legal relationship – The parties. should be

willing to create a legal and not a social relationship among

them.

viii) Legal formalities – The law says that a contract can be oral or

written. For the benefit of the parties, it is better for the

agreement to be written and registered.

Offer and Acceptance

Offer See 2 (a) – When a person signifies to another, his willingness to

do or not to do something with the intention of obtaining the other

party’s assent to it, it means he is making an offer. Person who makes

the offer in the offerer and the person to whom the offer is made is

the offeree Offer can be specific or general.

Types of Offer.

Express offer – Written or spoken

Implied offer – It is to be understood by the conduct of the other party

that an offer is being made.

Rules regarding offer

i) offer should be clear definite & free from ambiguity

ii) offer must be communicated to party for whom it is intended

(Lalman Vs Gauri Dutt)

iii) A declaration of intention doesn’t amount to offer (Executive

Engineer Sundargad vs. Mohan Prasad Sahoo).

iv) offer should not contain any such terms, the non-fulfilment of

which will be taken as acceptance.

v) Any terms regarding the offer should be communicated to

offeree when the offer is made

vi) An invitation to offer is not an offer. (Harvey vs Facey)

Sec 2(b) Acceptance – When the offeree gives his assent to the offer

made to him, it means he has accepted the offer. If the offer is

accepted offerer becomes promiser and offeree becomes Promisee.

Types of acceptance.

Express – When acceptance is written or spoken it is express.

Implied offer – When it is to be understood by the conduct of the party

it is an implied acceptance.

Rules regarding acceptance.

i) See 7(1) Acceptance must be absolute A unqualified.

ii) Sec 7(2) Acceptance must be according to the prescribed

mode.

iii) Acceptance must be communicated (Bhagian Das Kedigo vs

Girdhari Lal)

iv) Silence doesn’t amount to acceptance

v) Acceptance must be made within a reasonable time.

vi) Acceptance must be made by the party to whom the offer is

made

vii) Acceptance must be done before the offer is withdrawn or

cancelled.

*(Sec 4) – Communication of offer is completed when party for

whom it is intended comes to know of it.

-> Communication of letter of acceptance is complete against the

offerer when the letter of acceptance is sent by the acceptor

–> Communication of letter of acceptance is complete against the

acceptor when the letter of acceptance reaches the offerer.

Revocation of cancellation of offer (Sec 6).

i) The offerer by giving a notice to the offeree can withdraw the

offer but before the offer is accepted.

ii) The offer must be accepted within time limit given in the

offer. On the expiry of time limit offer lapses.

iii) On the death or insanity of offerer the offer comes to an end

but the news of death or insanity must be known to the