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I. ACCEPTANCE
1. Section 2(b) When the person to whom the proposal is made signifies his assent thereto, the
proposal is said to be accepted. A proposal, when accepted, becomes a promise.
Proposal + acceptance=agreement
A contract is formed only after the proposal/offer is accepted. Once the proposal is accepted,
it becomes promise which, if other conditions of a valid contract are satisfied results into a
valid contract.
2. VALID ACCEPTANCE
Acceptance should be absolute and unqualified [Section 7(1)]
Section 7. Acceptance must be absolute.—In order to convert a proposal into a promise,
the acceptance must—
(1) be absolute and unqualified;
(2) be expressed in some usual and reasonable manner, unless the proposal prescribes the
manner in which it is to be accepted. If the proposal prescribes a manner in which it
is to be accepted, and the acceptance is not made in such manner, the proposer may,
within a reasonable time after the acceptance is communicated to him, insist that his
proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails
to do so, he accepts the acceptance.
a. It should not be conditional
Conditional acceptance is counter proposal
Counter proposal Case: Hyde v. Wrench 1840
Counter proposal case: U.P. Rajkiya Nirman Nigam Ltd. V. Indure pvt. Ltd. 1996
b. It should not be partial
Partial acceptance is also counter proposal
Counter proposal case: Ramanbha v. Ghasiram 1918
A proposal can be conditional but acceptance cannot be.
Notes by Diksha Pundir
Mobile no. 8146697792
Email: diksha1083@gmail.com
(Mobile no. 9463112962)
Where the acceptance of a proposal is not absolute and qualified i.e. either is
conditional or partial, then the contract may be formed and proposer may be bound,
where by his subsequent conduct he indicates that he has accepted the counter offer.
However it would be a contract on counter proposal not on original proposal. Case:
Hargopal v. People’s bank of Northern India 1935
c. It should not be provisional case:
Union of India v. Narain Singh 1953
Acceptance should be communication by the propose/offeree to the
proposer/offeror [Section 3,4,8,9]
Where a proposee decides to accept the offer, he must communicate it according to the law a.
Section 3- communication of acceptance
Section 3. Communication, acceptance and revocation of proposals.—The communication
of proposals, the acceptance of proposals, and the revocation of proposals and acceptances,
respectively, are deemed to be made by any act or omission of the party proposing, accepting
or revoking by which he intends to communicate such proposal, acceptance or revocation,
or which has the effect of communicating it.
Act or ommission
Intends to communicate such proposal
Which has effect of communcating the proposal
Case: Brogden v. Metropolital Railway Co. 1877
b. Communication may be expressed or implied
Section 9. Promises, express and implied.—In so far as the proposal or acceptance of any
promise is made in words, the promise is said to be express. In so far as such proposal or
acceptance is made otherwise than in words, the promise is said to be implied.
Notes by Diksha Pundir
Mobile no. 8146697792
Email: diksha1083@gmail.com
(Mobile no. 9463112962)
Acceptance two types-
a. Expressed acceptance: by using words- oral or written
b. Implied acceptance- otherwise than in words, conduct of party seen
c. Acceptance by conduct
Section 8. Acceptance by performing conditions, or receiving consideration.—Performance
of the conditions of a proposal, or the acceptance of any consideration for a reciprocal
promise which may be offered with a proposal, is an acceptance of the proposal.
Case: M/s Bhagwati Prasad Pawan Kumar v. union of India 2006
Case: Carlill v. Carbolic Smoke Ball Company 1892
Acceptance by silence and conduct- general principle: silence of offeree does not
amount to acceptance. However, under certain circumstances silence coupled
with offeree’s conduct amount to acceptance as was held by SC in the case of
Bharat Petroleum Corpn. Ltd v. Great Eadten Shipping Co. Ltd. 2008.
Case: LIC of India v. Vasireddy 1984
In insurance proposal, silence does not convey acceptance
d. Acceptance must be communicated to the proposer or his authorized agent
Case: Felthouse v. Bindley 1863
e. Communication must be made by the proposee/offeree or his authorized agent (only
proposee/offeree can accept the proposal)
Case: Powell v. Lee 1908
f. When is communication of acceptance complete
4. Communication when complete.—The communication of a proposal is complete when it
comes to the knowledge of the person to whom it is made.
Notes by Diksha Pundir
Mobile no. 8146697792
Email: diksha1083@gmail.com
(Mobile no. 9463112962)
The communication of an acceptance is complete,— as against the proposer, when it is put
in a course of transmission to him, so as to be out of the power of the acceptor; as against
the acceptor, when it comes to the knowledge of the proposer.
The communication of a revocation is complete,— as against the person who makes it, when
it is put into a course of transmission to the person to whom it is made, so as to be out of the
power of the person who makes it; as against the person to whom it is made, when it comes
to his knowledge.
The communication of an acceptance is complete,—
as against the proposer, when it is put in a course of transmission to him, so as to be out of
the power of the acceptor;
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.
Position under English Law: Acc. to Anson, when a letter of acceptance is posted both offeror
and acceptor becomes irrevocably bound and offeree is not permitted to withdraw his
consent.
Position under Indian Law: In India the two parties are bound by contract at two different
times.
Case: Ramdas Chakerbarti v. Cotton Ginning Co. Ltd.
(letter lost in transit- proposer already bound)
TIME AND PLACE OF FORMATION OF CONTRACT
Same for both English and Indian law
Notes by Diksha Pundir
Mobile no. 8146697792
Email: diksha1083@gmail.com
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The place of dispatching the acceptance letter i.e. the contract is concluded at the place from
where the proposal is accepted and communication of acceptance is dispatched
This is called as “postal rule”
Acceptance by instant mode of communication i.e. telephone, telex, email etc.
“Receipt rule”- acceptance occurs where the message of acceptance is read or heard.
Case: Entores Ltd. v. Miles for East Corporation 1955
Bhagwandas Goverdhandas Kedia v. Gridharilal Parshottamdas & Co. 1966
Acceptance should be made in some usual and reasonable manner, unless the
proposal prescribes the manner of acceptance [Section 7(2)]
Section 7(2) be expressed in some usual and reasonable manner, unless the proposal
prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in
which it is to be accepted, and the acceptance is not made in such manner, the proposer may,
within a reasonable time after the acceptance is communicated to him, insist that his proposal
shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he
accepts the acceptance.
a. If the proposal prescribes a manner in which it is to be accepted
If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made
in such manner, the proposer may, within a reasonable time after the acceptance is
communicated to him, insist that his proposal shall be accepted in the prescribed manner, and
not otherwise; but if he fails to do so, he accepts the acceptance. b. if not prescribed- same or
superior mode
Acceptance should be made while the proposal is still subsisting
Notes by Diksha Pundir
Mobile no. 8146697792
Email: diksha1083@gmail.com
(Mobile no. 9463112962)
II. REVOCATION
1. Revocation means withdrawal
2. Revocation of proposal [Section 5 para 1]
Section 5. Revocation of proposals and acceptances.—A proposal may be revoked at any
time before the communication of its acceptance is complete as against the proposer, but not
afterwards.
An acceptance may be revoked at any time before the communication of the acceptance is
complete as against the acceptor, but not afterwards.
Illustration
A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter
sent by post.
A may revoke his proposal at any time before or at the moment when B posts his letter
of acceptance, but not afterwards.
B may revoke his acceptance at any time before or at the moment when the letter
communicating it reaches A, but not afterwards.
A proposal may be revoked at any time before the communication of its acceptance is
complete as against the proposer, but not afterwards.
Who can revoke: proposer or his authorized agent
Time of revocation id before the acceptance is put into transmission
Case: Henthron v. Eraser
Mode or mothod of communication of revocation could be any
Communication of revocation of proposal [Section 3]
any act or omission of the party revoking
by which he intends to communicate such revocation, or which has the effect
of communicating it.
The communication of revocation of proposal is complete [Section 4 para 3]
Notes by Diksha Pundir
Mobile no. 8146697792
Email: diksha1083@gmail.com
(Mobile no. 9463112962)
The communication of a revocation is complete,—
as against the person who makes it, when it is put into a course of transmission
to the person to whom it is made, so as to be out of the power of the person who
makes it;
as against the person to whom it is made, when it comes to his knowledge.
Illustration:
A revokes his proposal by telegram. The revocation is complete as against A when the telegram
is despatched. It is complete as against B when B receives it.
Standing offer can also be revoked like ordinary offer
Case: Re London and Northern bank 1900
Case: Rontledge v. Grant 1928
Withdrawal of tender or bid is revocation
Case: Rajendra Kumar Verma v. State of Madhya Pradesh
Unilateral Contract-
A unilateral contract is an agreement in which one party, known as the offeror, makes
a promise in exchange for the performance of a specific act by the other party, known
as the offeree.
Case: Errington v. Errington 1952
Mode of revocation [Section 6]
Section 6. Revocation how made.—A proposal is revoked—
(1) by the communication of notice of revocation by the proposer to the other party;
Case: Dickinson v. Dodds 1876
(implied revocation is valid under English law)
Implied revocation is not valid under Indian law.
(2) by the lapse of the 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;
Notes by Diksha Pundir
Mobile no. 8146697792
Email: diksha1083@gmail.com
(Mobile no. 9463112962)
(3) by the failure of the acceptor to fulfil a condition precedent to acceptance; or
(4) by the death or insanity of the proposer, if the fact of his death or insanity comes to
the knowledge of the acceptor before acceptance.
English law does not have this aspect- the fact of his death or insanity comes to the
knowledge of the acceptor before acceptance.
Addtional grounds:
a. By the non-acceptance of the offer according to the prescribed or usual mode b.
By counter offer
c. by subsequent impossibilty or illegality 3.
Revocation of acceptance [Section 5 para 2]
An acceptance may be revoked at any time before the communication of the acceptance
is complete as against the acceptor, but not afterwards. The communication of an
acceptance is complete as against the acceptor, when it comes to the knowledge of the
proposer.
Illustration
A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal
by a letter sent by post. A may revoke his proposal at any time before or at the moment
when B posts his letter of acceptance, but not afterwards.
B may revoke his acceptance at any time before or at the moment when the letter
communicating it reaches A, but not afterwards.
Who can revoke- acceptor or his authorized agent
The communication of revocation of acceptance according to Section 3 can be made by-
any act or omission of the party revoking;
by which he intends to communicate such revocation, or which has the effect
of communicating it.
Communication of revocation is complete [Section 4 para 3] The
communication of a revocation is complete
Notes by Diksha Pundir
Mobile no. 8146697792
Email: diksha1083@gmail.com
(Mobile no. 9463112962)
as against the person who makes it, when it is put into a course of transmission
to the person to whom it is made, so as to be out of the power of the person who
makes it;
as against the person to whom it is made, when it comes to his knowledge.
B revokes his acceptance by telegram. B’s revocation is complete as against B when the
telegram is despatched, and as against A when it reaches him.
English law- acceptance once given cannot be revoked
Jurist Anson says: “Acceptance is to offer what a lighted match is to a train of
gunpowder, both do something which cannot be undone.”
III. ESSENTIAL TO A CONTRACT
10. What agreements are contracts.—All agreements are contracts if they are made by the
free consent of parties competent to contract, for a lawful consideration and with a lawful
object, and are not hereby expressly declared to be void.
Nothing herein contained shall affect any law in force in India and not hereby expressly
repealed by which any contract is required to be made in writing or in the presence of
witnesses, or any law relating to the registration of documents.
1. COMPETENT TO CONTRACT [SECTION 11]
Section 11. Who are competent to contract- Every person is competent to contract who
is of the age of majority according to the law to which he is subject, and who is of sound
mind, and is not disqualified from contracting by any law to which he is subject.
Following categories of persons are competent to contract
Major, acc. to law to which he is subject;
Sound mind;
Not disqualified from contracting by law to which he is subject Major
Notes by Diksha Pundir
Mobile no. 8146697792
Email: diksha1083@gmail.com
(Mobile no. 9463112962)
Minor and law
Nature of minor’s agreement- Case: Mohori Bibee and another v.
Void an initio Dharodas Ghose 1903
Void ab initio
Minor and Doctrine of Estoppel Case: Khan Gul v. Lakha Singh 1928
Not applicable on minor
Minor and Doctrine of restitution Case: Leslie v. Sheill 1914
Restitution means to restore back i.e to {English position}
maintain status quo Case: Ajudhia Prasad v. Chandan Lal
Present position in India is – where a 1937
fradulent minor has taken some benefit
from the other party and he comes to a
court either as plaintiff or defendant he can
be asked by the ocurt to return the benefit
or to give compensation under Section 33
of specific releif act, 1963. It does not
amount to enforcement but amounts to
restitution. Rule of english law Leslie v.
Sheil are not applicable in india
Ratification of minor’s agreement Case: Suraj Narain v. Sukhu Aheer 1928
Ratification=conferring validity
Consideration in minority= no contract
Fresh consideration after attaining majority
Minor and beneficial contract
Such contracts are valid
e.g. insurance, position inpartnership etc
Notes by Diksha Pundir
Mobile no. 8146697792
Email: diksha1083@gmail.com
(Mobile no. 9463112962)
Soundness of mind [Section 12]
Section 12. What is a sound mind for the purposes of contracting.—A person is said to
be of sound mind for the purpose of making a contract, if, at the time when he makes it,
he is capable of understanding it and of forming a rational judgment as to its effect upon
his interests. A person who is usually of unsound mind, but occasionally of sound mind,
may make a contract when he is of sound mind. A person who is usually of sound mind,
but occasionally of unsound mind, may not make a contract when he is of unsound mind.
Case: Chacko v. Mahadevan 2007
Case: Nilima Ghosh v. Harjeet kaur 2011
Case: Kinstu v. Lachhi Devi 1999
Illustrations
(a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract during
those intervals.
(b) A sane man, who is delirious from fever or who is so drunk that he cannot understand
the terms of a contract, or form a rational judgment as to its effect on his interests, cannot
contract whilst such delirium or drunkenness lasts.
2. FREE CONSENT
Section 13. “Consent” defined.—Two or more persons are said to consent when they
agree upon the same thing in the same sense.
Section 14. “Free consent” defined.—Consent is said to be free when it is not caused
by—
(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16, or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
Notes by Diksha Pundir
Mobile no. 8146697792
Email: diksha1083@gmail.com
(Mobile no. 9463112962)
(5) mistake, subject to the provisions of sections 20, 21 and 22.
Consent is said to be so caused when it would not have been given but for the existence
of such coercion, undue influence, fraud, misrepresentation or mistake.
Free consent means consensus-ad-idem i.e. meeting of minds
Essential of consent:-
Two or more persons
Same subject
Same sense
Case: Cundy v. Lindsay 1877-78
Free consent
Five factors affect the validity of consent
(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16, or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of sections 20, 21 and 22.
Notes by Diksha Pundir
Mobile no. 8146697792
Email: diksha1083@gmail.com
