Every day we enter into a plethora of contractual relations. Contracts are one of the oldest modes of obligations we are cognizant of. The barter system that was rife in the days of yore too is a branch of contracts. This article is an endeavour by the writer to introduce the readers to the concept of contracts so that they install a basic understanding of the contract law of the land.
The Indian contract act:
WHAT IS A CONTRACT?
An agreement between two private parties which creates legal obligations for each other. A contract can be either written or oral. Oral contracts are more difficult to execute, however, and should be avoided whenever possible.
First and foremost, an offer is made by one party to another, which leads to the agreement upon acceptance by the party to which it is made.
If the agreement is enforceable in a court of law, it is referred to as a contract.
The Indian Contract Act, 1872, describes the term “Contract” as “An agreement enforceable by statute” under section 2(h).
ESSENTIALS OF CONTRACT
Section 10 of the act addresses which agreements are contracts. This says that all agreements are contracts if they include-:
- By the free consent of the parties (i.e. their freewill) liable for contracting,
- For lawful consideration and
- For a lawful object, and
- Are not expressly declared void
The section also mentions that nothing mentioned herein affects any law that is in effect in India and is not specifically repealed hereby requiring any contract to be signed in writing or in the presence of witnesses, or any law concerning the registration of records.
The agreement of a minor is a collection of commitments or a contractual arrangement that has one party as a minor. Under the Indian Contract Act , 1872, Minor is considered unfit to contract. It is so because minors are not mature enough to be responsible for legal matters.
Accordingly, one of the essential elements of a valid contract specified in the Indian Contract Act, 1872, is that the contracting parties should be competent to conclude the contract.
The following contracting authorities are qualified to:
- Persons that are of a majority age
- A person with a sound mind
- A person not disqualified from any legislation
A minor is therefore not eligible to enter into an agreement with another party and any agreement he makes would be void ab initio (from the beginning).
Nature of Indian contract act: this law is different from other laws in India because rather than laying down rights and duties like other laws, it consists of a no. of limiting principles that may create rights and duties themselves.
• Section 10 defines a contract as all agreements made with free consent (section 13-22) of parties competent to contract (section 11 & 12) with a lawful object (sec 23-30) and a lawful consideration (sec-2d) which are enforceable in law are contracts.
• In addition to this, for a contract to be valid, there must be a valid offer and a valid acceptance.
• The parties must have the intent to embark upon a legal relation and enter into a legal obligation based on certain terms, the non-compliance of which may invite unfavorable ramifications.
In the case of Balfour vs Balfour, the defendant and his wife were on a vacation in England. When time came to return to Ceylon, wife (plaintiff) developed some health issues and in consequence of which she was advised by doctors to stay in England. The husband said that if she decides to stay, he would give her 30 pounds as a monthly expense, which he indeed did for quiet some time but later on, he stopped the expense. Wife sued him for breach and it was held that mere casual conversation coupled with no intention to contract would not consummate a contract.
• The first step towards forming a contract is making an offer or a proposal. Section 2a of the Indian contract act deals with proposals.
When a person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other person to such act or abstinence, he is said to make a proposal.
• The offer must be clear and unabmigous.
In carlill vs carbolic smoke ball company , the topic of general offers was discussed in detail. The area was plagued and the defendant company had issued an advertisement claiming that its medicine can cure the disease provided that its consumed in accordance with the method’s prescribed on the box if anyone consumes so and still suffers from the disease the defendant company would pay him 100 pounds. To substantiate the claim, the company also announced that they had already deposited certain money in the bank. The plaintiff did the same still suffered from the disease. The defendant company argued that since the offer was not directed to a specific person and to the public at large, it cannot be treated to be binding on them. Judgment was delivered against them and the validity of general offers was upheld.
• Section 2b deals with acceptance of the offer.
When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. An accepted proposal becomes a promise.
• In the case of Lalman vs Gauri dutt , the defendant who was the master of the plaintiff had sent the plaintiff to look for his nephew who was lost. Master thought of making more efforts for finding the nephew and thus after the departure of the plaintiff servant made an offer in general that whoever may bring his nephew back to him will get a certain sum by him. The plaintiff servant got to know about this offer after he had traced the nephew. He brought the nephew and claimed his money. It was held that since the offer was made after his departure and he got to know of it after he had traced the child, he cannot claim the money.
An acceptance cannot come before the proposal is made. Since in this case the acceptance which was in the form of finding the kid, was done before he got to know about the offer, contract cannot be said to have effectuated.
Section 3 and 4 deals with communication of offer, acceptance and revocation.
Another interesting area that we must understand is the concept of invitation of an offer. An offer must be the final expression of willingness to do something in order to gain the assent of the other party. A relevant case law is Harvey vs facey, in this case, the plaintiff sent a telegraph to the defendant saying “will you sell to me the bumper ball pen, send the lowest price”, to this the defendant replied “the lowest price is 900 pounds.” The plaintiff was exuberant on seeing such a low selling price and immediately sent a telegraph saying “I agree to buy the bumper ball pen for 900 pounds”, however the defendant refused to sell. It was held that the defendant’s telegram was not an offer but merely an invitation to make an offer.
Every expression of willingness to enter into a contract may not amount to an offer but may only amount to an invitation to offer, and thence maybe a preliminary step to an offer.
Test of an offer:
1- Offer must show an intent to be binding
2- The offeror must make the offer with the intent to gain the assent of the offeree.
3- Offer must be definite
4- Offer must be communicated
5- Offer must be capable in law to be accepted and give rise to a legal relationship.
Section 6 deals with the lapse of an offer.
Offer may be lapsed on the following grounds:
1- By its revocation
2- By its rejection
3- By expiry of time
4- By change in law
5- By subsequent impossibility
6- By failure to accept the conditions precedent.
Section 7 defines acceptance.
According to Anson, “it is to an offer, what a lighted matchstick is to a train of gunpowder. It produces something which cannot be recalled or undone.”
Acceptance must be communicated and unqualified.
For acceptance to be binding, it must be expressed in some reasonable manner. The manner must be so clear that a person of ordinary mental intellect can make out the acceptance and not much must be left to the brainstorming of the offeror.
The acceptance must be within a reasonable time.
• In the case of powell vs lee, the plaintiff had gone in an interview for the post of headmaster. His interview had gone well and the consortium discussed that he will be appointed, and this information was relayed to the plaintiff by one of the members of the bench who was an accomplice to the plaintiff. However, the consortium changed its mind and the plaintiff was not chosen for the post, in consequence thereof, he sued the school. The judgment was delivered in favor of the defendant. The information was not forwarded on behalf of the consortium, but the person who forwarded it, did on his personal behalf, this communication of acceptance was thus not held to be binding on the school.
In the case of elison vs Henshaw, “a” offered to sell to “b” his flour mill. Along with that, he said that if “b” accepts the offer then he must send the acceptance with the wagon that brought the offer. The acceptor believed that his servant would reach the offeror faster than the wagon would hence be sent the acceptance through his servant. The servant, ergo, reached later than the wagon and hence the contract was not concluded since the acceptance was not done in the mode it was required.
Section 8 deals with acceptance by performing the conditions or receiving the consideration.
In the above-discussed case of carlill vs carbolic smoke ball co. the acceptance of the offer was done by performing the conditions requisite to it, i.e. consuming the medicine in the desired manner of consumption. Such acceptance is held to be a valid form of acceptance since if the offeror dovetails a condition on the fulfillment of which the offer is deemed to be accepted, the mere performance of such condition may act as an acceptance.