Unit – 1 , Contract

1. By Agreement and Contract

 Contracts are usually formed through mutual
agreement.
 This happens when one party makes an offer, and the
other party accepts it.
 Once accepted, it becomes a legally binding agreement.
2. Standard Form Contracts
 These are pre-prepared contracts commonly used by
large institutions (like banks, insurance companies, or
manufacturers).
 Because of the large number of transactions,
individuals cannot negotiate every detail of the contract.
 Instead, they agree to pre-drafted terms provided by the
company.
 These contracts are valid even if there is no negotiation.
3. Promissory Estoppel
 Sometimes, there is no formal agreement or contract,
but if a person makes a promise and another person acts
based on that promise, the law may still enforce it.
 This is done to ensure fairness and avoid injustice.
In simple terms:
 A contract can arise through mutual agreement, pre-
drafted forms (standard contracts), or legal enforcement
of promises (promissory estoppel).
This text explains key terms related to contracts under the
Indian Contract Act, 1872, in easy language:
What is a Contract?
  A contract is an agreement that is enforceable by law.
 It is formed when two or more parties make promises to
each other and agree to perform certain obligations.
Important Concepts:
1. Agreement
o An agreement happens when one party makes an
offer (proposal) and the other party accepts it.
o Example: A offers to sell a car for ₹50,000, and B
accepts it. This becomes an agreement.
2. Proposal (or Offer):
o A proposal means one party shows a willingness to
do or not do something.
o When the other party accepts the proposal, it
becomes a promise.
3. Promise:
o A promise is created when an offer is accepted.
o Example: A says, “I will sell you my car for ₹50,000,”
and B agrees. This becomes a promise.
4. Consideration:
o Consideration means something of value
exchanged between the parties.
o Example: A gives a car, and B gives ₹50,000 in
return. This exchange is consideration.
5. Competent Parties:
o A contract can only happen between parties who are
legally capable of entering into a contract.
o This means they should be of legal age (18+),
sound mind, and not disqualified by law.
6. Legal Enforceability:
 o The agreement must be enforceable by law, meaning
it should not be illegal or against public policy.
In Simple Words:
 A contract = Offer + Acceptance + Consideration +
Legal Enforceability.
 Example: A offers to sell a bike, B agrees to buy it for
₹40,000. Since both parties agree and something is
exchanged, it becomes a contract.
Types of Contracts
1. Express Contract
o An express contract is when all the terms and
conditions are clearly stated.
o This can be done in written form or spoken words.
o Example: You sign a written agreement to buy a
house, or you verbally agree to sell your car.
2. Implied Contract
o An implied contract is not written or spoken, but it
is assumed based on actions or behavior.
o The law considers these contracts valid because the
actions clearly show the agreement.
o Example: When you go to a restaurant and order
food, it is implied that you will pay for the food after
eating, even though no formal contract is discussed.
Definition of Agreement
An agreement is formed when one person makes an offer
(proposal), and the other person accepts it.
 Offer + Acceptance = Agreement.
Example: A says to B, “I will sell my car for ₹50,000,” and B
accepts it. This is an agreement.
5 Important Points for a Valid Contract
1. There should be a lawful consideration and lawful
object:
o The subject of the contract must be legal and
something of value must be exchanged.
o Example: Selling a bike for money is valid, but selling
stolen goods is illegal and void.
2. There should be free consent of the parties:
o Both parties must agree to the contract willingly,
without force, fraud, undue influence, or mistake.
o Example: If someone forces you to sign a contract, it
is not valid.
3. The agreement must not be declared void:
o The contract must not involve anything illegal or
something already declared invalid by law.
o Example: A contract to do an illegal activity like
smuggling is void.
4. Competent parties:
o The people entering into the contract must be
legally capable.
 They must be 18 years old or above.
 They must be of sound mind.
 They must not be disqualified by law.
o Example: A minor (under 18) cannot enter into a
valid contract.
5. Offer and acceptance:
o One party must make an offer, and the other party
must accept it.
o This creates an agreement.
 o Example: A offers to sell a book for ₹100, and B
agrees to buy it.
Definition of Contract (Section 2(h))
 A contract is an agreement enforceable by law.
 If an agreement cannot be enforced, it becomes void.
Example: If A agrees to sell a bike to B for ₹20,000 and B
agrees, this is a contract. If B refuses to pay, A can go to court
because it is legally enforceable.
Essentials of a Valid Contract (Section 10):
For a contract to be valid, it must satisfy these conditions:
1. Free consent of the parties involved.
2. Competent parties (legally able to make a contract).
3. Lawful consideration (something legal and valuable
being exchanged).
4. Lawful object (the purpose of the contract must be
legal).
5. The agreement must not be declared void by law.
Classification of Contracts
Contracts can be classified based on four categories:
1. By Subject Matter:
o Depending on what the contract is about (e.g., sale,
service, lease).
2. By Their Parties:
o Contracts can involve two parties or more.
3. By Their Form:
Contracts can be:
Written or Oral.
Express (clearly stated) or Implied (understood through
actions).
4. By Their Effect:
o Valid: Legally enforceable.
o Void: Cannot be enforced by law.
o Voidable: One party can cancel it due to issues like
fraud or coercion.
o Unenforceable: A contract that cannot be enforced
because of technical issues like improper
documentation.
Example:
 If you agree to buy a house, sign a written agreement, and
both parties willingly agree, it is a valid contract.
 If someone forces you to sign the agreement, it becomes
voidable because of lack of free consent.
In short:
A contract = Agreement + Legal Enforceability.
It must satisfy the conditions of Section 10 and can be
classified based on subject, form, parties, and effect.
Agreement for Sale – Valid or Not
An agreement to sell property (land or goods) will be valid
only if it is:
1. Signed by both parties, and
2. Executed properly according to the legal requirements.
What Makes an Agreement Valid?
1. Proper Signing and Execution:
o The agreement must be signed by both parties.
o It should also meet the legal conditions like
registration or stamping if required.
 2. Clear Terms:
o The terms of the agreement (e.g., price, delivery,
possession) should be clearly stated.
3. Compliance with the Law:
o Any agreement must follow the legal procedures and
not violate the law.
o Example: If the law requires the agreement to be
registered, failure to do so can make it invalid.
Effect of Failure to Fulfill Legal Requirements:
 If a property agreement is not signed properly or
registered as required, it can be declared invalid or
unenforceable in court.
 Example: A sale agreement without signatures or
registration cannot be used as evidence in court.
Important Notes:
 An agreement for sale is not the same as the final sale
deed.
 Sale deeds transfer ownership, but agreements for sale
are just promises to sell in the future.
 Both parties must comply with the terms in the agreement
for it to remain valid.

Example in Simple Terms:

 If A agrees to sell a house to B and they write and sign an
agreement, it is valid.
 But if they only make an oral promise without proper
signing or registration, the agreement might not be
enforceable in court.
Void Agreements (Section 2(g))
  A void agreement is an agreement that cannot be
enforced by law.
 It is invalid from the start (no legal effect).
Examples of Void Agreements:
1. Without Consideration: If there is no exchange of value.
2. Restraint of Marriage: An agreement stopping someone
from marrying.
3. Restraint of Trade: An agreement preventing someone
from doing business.
Voidable Contracts (Section 2(i))
 A voidable contract is valid and enforceable at first,
but one party has the right to cancel it.
 The contract remains valid unless the party chooses to
avoid it.
When Does a Contract Become Voidable?
 If the consent of one party was not free due to:
1. Coercion (forcing someone).
2. Undue Influence (excessive pressure).
3. Fraud (deception).
4. Misrepresentation (false information).
Example:
 If A forces B to sign a contract, B has the right to cancel it
(voidable).
 If B does not cancel, the contract remains valid.
Illegal Agreements
 An illegal agreement is an agreement that the law
forbids because it goes against public policy or involves
something illegal.
  These agreements are not enforceable in court.
Examples of Illegal Agreements:
1. An agreement to commit a crime.
2. An agreement to defraud public revenue.
3. Agreements that corrupt public life.
Illegal Agreements
 An illegal agreement is one that is forbidden by law.
 It is not only void but also considered against public
policy.
Difference Between Illegal Agreements and Void
Agreements
1. Void Agreement:
o A void agreement is not valid, but it does not
involve illegal activities.
o Example: An agreement without consideration (A
promises to give B ₹100 for free).
2. Illegal Agreement:
o An illegal agreement involves something forbidden
by law like a crime or fraud.
o Any related transaction (called a collateral
transaction) is also considered void.
Collateral Transactions
 A collateral transaction is a transaction related to the
main agreement.
 If the main agreement is illegal, the collateral transaction
is also invalid.
Example
1. Void Agreement:
 o A promises to give B money without anything in
return. This agreement is void, but any other related
transactions remain valid.
2. Illegal Agreement:
o A gives money to B to help him pay a wagering
debt (betting). The main transaction is illegal, and
any money loaned for it is also void.
o Another example: A gives B money to smuggle
goods. Both the smuggling transaction and the loan
are illegal. A cannot recover his money.
Key Points:
 An illegal agreement is void and involves unlawful
activities.
 Any transaction connected to an illegal agreement
(collateral transaction) is also invalid.
 Courts will not help enforce illegal agreements or recover
money tied to them.
Proposal or Offer (Section 2(a))
A proposal (also called an offer) happens when:
 One person shows their willingness to do something or
not do something.
 This is done with the intention of getting the other
person’s agreement.
Example of an Offer:
 A says to B: "I will sell you my bike for ₹10,000."
 This is an offer because A wants B to accept it. If B
accepts, it becomes an agreement.
Offer vs. Invitation to Treat
An invitation to treat is not an offer but an invitation for
others to make an offer. It is more like saying:
“I am open to negotiations, and you can make me an offer.”
Examples of Invitation to Treat:
1. Price Catalogues:
o A seller sends a catalogue of books with prices listed.
This is not an offer.
o If someone says, “I will buy the book for ₹200,” they
are making the offer. The seller can accept or reject
it.
2. Advertisements:
o An ad for a product is not an offer. It is an invitation
for people to make an offer to buy.
o Example: An auctioneer advertises goods for sale.
This does not force the auctioneer to sell to the
highest bidder.
3. Goods Displayed in a Shop Window:
o Goods with price tags displayed in a shop are not an
offer. It is an invitation for customers to offer to buy.
o Example: In Boots Cash Chemists Case, a self-
service store displayed medicines. Picking up items
was not an offer; it became a contract only when the
shop accepted the payment.

Key Differences
Offer Invitation to Treat
An offer shows willingness
It invites others to make an offer.
to contract.
If accepted, it creates a The person can accept or reject
contract. the offer.
Offer Invitation to Treat
Example: “I will sell my car Example: A shop displays a price
for ₹1 lakh.” tag on goods.

Example to Understand:
 A shop displays a pen priced at ₹10. This is an invitation
to treat. If you go to the counter and say, “I will buy this
pen for ₹10,” you are making an offer. The shopkeeper
can choose to accept or reject it.
Assurance by a Company Official – In Very Simple
Language
What It Means
 If an employee or official of a company gives a promise
or assurance, it cannot be treated as a legal offer
unless:
1. The official has the right or authority to make that
promise on behalf of the company.
2. The promise or assurance is clear and specific.
Example
 Suppose a manager at Company A tells you, “I promise to
give you a job next month.”
o If the manager does not have the authority to make
such a promise, then this promise cannot be
enforced.
o The company will not be legally responsible for it.
 However, if the company’s authorized HR head (someone
who has authority) gives you a written promise for the
job, then this assurance can be treated as legally binding.
The Court’s Decision
In the case mentioned:
  A company official gave a verbal assurance that someone
would be employed.
 The court ruled that this promise was not valid because
the official:
o Did not have the right (authority) to make that
promise.
o The promise was not part of a proper agreement.
Simple Rule to Remember
 A company is only legally bound by promises made by
officials with proper authority.
 Verbal or unclear promises without proper authority do
not create a contract.
Intention to Create Legal Relationship
To form a valid contract, it is important that:
1. An offer is made.
2. The acceptance of the offer happens.
3. There is a clear intention to create legal obligations
between the parties.
What Does Intention to Create Legal Relationship Mean?
 It means the people involved intended to make a promise
that can be enforced in a court of law.
 Social or domestic agreements usually do not have
this intention because they are based on trust, family, or
friendship.
Example 1: Social Agreements
 If two friends agree to go for a walk or dinner, this is a
social agreement.
 If one friend does not show up, the other cannot sue
because there was no intention to create legal obligations.
Key Points to Remember
1. Social and domestic agreements are not usually
contracts because they lack intention to be legally
binding.
2. Commercial agreements (business-related) are
assumed to have legal intentions unless clearly stated
otherwise.
3. Test to Decide: Courts check if the agreement looks like
a legal promise or just a friendly arrangement.
Offer Must Be Communicated (Section 4)
 For an offer to be valid, it must be communicated to the
other party.
 The other person (offeree) must know about the offer. If
they don’t know about it, the offer doesn’t exist.
Example:
 A puts a reward of ₹500 for finding his lost dog, but B finds
the dog without knowing about the reward.
o Since B did not know about the offer, he cannot
claim the reward.
How an Offer Can Be Communicated
1. By Words (written or spoken):
o Example: A says, “I will sell my car to you for
₹50,000.”
2. By Actions (conduct):
o Example: A places goods in a shop window with a
price tag. This shows he is offering to sell them.
Types of Offers
1. Express Offer
o An express offer is made clearly by using spoken
words or writing.
 o Example: A sends B a text message, “I will sell you
my bike for ₹10,000.”
2. Implied Offer
o An implied offer is made through actions or
conduct, not words.
o Example: A taxi driver stops his car in front of you,
signaling he is offering to take you as a passenger.
Key Point About Offers
 An offer can be made in any way (words or actions), but
it must be communicated clearly to the other party.
 If the other party does not know about the offer, they
cannot accept it.
Communication of Offer (Section 4 of the Indian Contract
Act)
 An offer is only valid if it is communicated to the person
it is made to.
 The offer is complete when the person receiving it
(offeree) knows about it.
Example:
 A announces a reward for finding his lost dog. If B finds
the dog without knowing about the reward, B cannot
claim the money.
Cross Offers
 Cross Offers happen when two people make the same
offer to each other at the same time, without knowing
about the other’s offer.
 In such cases, there is no contract because there is no
acceptance of the other’s offer.
Example:
  A writes to B offering to sell his car for ₹10,000. At the
same time, B writes to A offering to buy the car for
₹10,000.
o Both offers cross each other, but there is no
acceptance, so no contract is formed.
Specific and General Offers
1. Specific Offer:
o Made to a specific person or group of people.
o Only the person to whom the offer is made can
accept it.
o Example: A offers to sell his car to B. Only B can
accept this offer.
2. General Offer:
o Made to the public at large. Anyone who fulfills the
conditions can accept the offer.
o Example: A puts up an advertisement for a ₹500
reward to anyone who finds his lost dog.
If someone finds the dog and fulfills the conditions, they can
claim the reward.
Standing, Open, or Continuing Offer
1. What is a Standing or Open Offer?
o A standing offer is an offer that remains open for a
specific period of time or for multiple transactions.
o It can be accepted repeatedly until it is withdrawn
(cancelled).
Example of a Standing Offer
 A supplier agrees to supply goods to a company
whenever the company needs them for the next 6 months.
o The supplier’s offer to supply goods stays open
during the 6 months.
 o Each time the company places an order, it is like a
new acceptance of the offer.
Key Points
1. A standing offer does not mean the supplier is bound to
supply all the goods at once.
2. The supplier will only supply goods each time the
company places an order (accepts the offer).
3. The supplier can withdraw the standing offer before it
is accepted, but they must inform the company.
Simple Rule
 A standing offer is like an open promise that can be
accepted multiple times.
 Each acceptance creates a new contract.
 The offer can be withdrawn before acceptance if the
supplier informs the other party.
What is a Letter of Intent?
A Letter of Intent is a document that shows one party’s
intention to enter into a contract or agreement with another
party in the future.
Key Points:
1. A Letter of Intent is not a final contract.
2. It is just a preliminary step that shows a party is willing
to negotiate or enter into a contract.
3. It may include terms and conditions that need to be
finalized before an actual contract is formed.
When is it Useful?
 A Letter of Intent is used when both parties agree to work
together but still need to settle the final details of the
contract.
Does it Create a Contract?
  A Letter of Intent does not always create a legally
binding contract.
 It only shows the party’s intention to agree in the future.
 However, in some cases, if a party starts performing work
based on the Letter of Intent, it can sometimes be treated
as a contract depending on the situation.
What is Acceptance?
When one person makes an offer (proposal) and the other
person says “yes” to it, that “yes” is called acceptance.
For example:
 A says to B: "I will sell my bicycle to you for ₹5,000."
 B replies: "Yes, I agree."
Here, B has accepted the offer.
Legal Meaning
According to law (Section 2(b) of the Indian Contract Act):
When the person to whom the offer is made agrees to it, the
offer becomes accepted.
Once the offer is accepted, it turns into a promise, and now
both people must follow the agreement.
Types of Acceptance
(a) Express Acceptance
When the acceptance is spoken or written in words.
 Example: “I accept your offer to sell the bicycle.”
(b) Implied Acceptance
When the acceptance is shown through actions, not words.
 Example: You offer me a bus ticket, and I take it and pay
for it. I didn’t say anything, but my action shows I
accepted.
Effect of Acceptance
Before and After Acceptance
 Before Acceptance:
o The person who made the offer can cancel or
change it.
o The other person can accept or reject the offer.
o No one is bound by any promise.
 After Acceptance:
o A contract is formed.
o Both people must follow the promises they made.
o If someone breaks the promise, legal action can be
taken.
If There is No Acceptance
If the other person does not accept the offer:
1. The offer ends after some time (called lapse).
2. The person who made the offer is free to take it back or
change it.
Rights of the Person Receiving the Offer
The person who gets the offer (offeree) can:
1. Accept it – This creates a contract.
2. Reject it – The offer ends.
3. Do Nothing – The offer will end after some time.
Special Rules for Tenders (Bids)
If someone invites tenders (bids for a contract), they have the
right to reject any or all bids.
Example:
 If 10 people give tenders, even the highest tender (best
offer) can be rejected.
  The person giving the tender cannot force anyone to
accept it.
Essentials of a valid acceptance
1. Acceptance should be communicated
2. Acceptance should be absolute and unqualified
3. Acceptance should be made in some usual and reasonable
manner
4. Acceptance should be made while the offer is still
subsisting.

1. Acceptance Should Be Communicated

When a person receives an offer (proposal), they need to
clearly communicate their acceptance to the person who
made the offer. Without communication, there is no
acceptance.
 If two people are face-to-face:
o Acceptance can be communicated verbally (by
speaking).
o Example: A says, “Will you buy my phone for
₹5,000?” and B replies, “Yes, I agree.”
 If the people are far away:
o Acceptance can be communicated using:
1. Post (letter)
2. Telegram
3. Email, or
4. Any other method that reaches the offeror.
Why is communication important?
Without communication, the person making the offer will not
know if the other person has accepted.
Silence is Not Acceptance
  If someone does not say “yes” or “no” to an offer, their
silence is not considered as acceptance.
 A famous case for this is Felthouse v. Bindley:
o In this case, an uncle offered to buy his nephew’s
horse and said, “If I don’t hear from you, I’ll assume
the horse is mine.”
o The nephew did not respond, so the court decided
that silence cannot mean acceptance.
Important Point:
For a valid acceptance, the person must communicate it to the
offeror. Silence or no response is not enough.
Acceptance by Conduct
Sometimes acceptance can be shown through actions instead
of words. This is called acceptance by conduct.
Example:
 A shopkeeper offers you a product, and instead of saying
“yes,” you pay for it.
 Your action of paying shows that you accepted the offer.
Who Can Accept an Offer?
Only the person to whom the offer was made can accept it.
 If an offer is made to A, then only A can accept it.
 Someone else (like A’s friend) cannot accept the offer on
behalf of A unless they are authorized to do so.
Communication of Acceptance
Where the Offer is Made to a Distant Person
When people are far apart (not face-to-face):
1. Acceptance by Post:
o The acceptance is valid as soon as the letter is
posted (not when it is received).
 o Example: A sends an offer letter to B. B writes back
saying “Yes” and posts the letter. The acceptance is
valid from the moment the letter is sent, even if it
reaches late.
2. Acceptance by Other Means (like email):
o Acceptance is valid when the message is sent or
communicated.
Acceptance by a Mistake (Wrong Person)
If acceptance is accidentally sent to the wrong person, it does
not count as proper communication.
Example:
 A sends an offer to B.
 B mistakenly sends the acceptance letter to C.
 This is not valid because the acceptance did not reach A.
Communication of Acceptance Not Always Needed
Usually, for a contract to be valid, the acceptance must be
communicated to the person who made the offer (offeror).
But sometimes, in exceptional cases, communication of
acceptance is not required.
When is Communication Not Needed?
 If the terms of the offer make it clear that
communication of acceptance is not necessary.
 In some situations, the acceptance is understood by
actions or conduct.
 This means that by doing something, the person has
already accepted the offer without having to say or write
anything.
Example of Acceptance by Conduct
If a passenger boards a bus and pays the fare, they do not need
to verbally say they accept the offer. By taking a seat and
paying the fare, their actions show acceptance.
Another example:
 A shopkeeper places an item on sale.
 You pick up the item, pay the money, and leave.
 Here, your actions (picking and paying) are your
acceptance of the shopkeeper's offer.
Acceptance of an Offer by Conduct
Sometimes, an offer can be accepted without speaking or
writing anything. If a person’s actions or behavior clearly
show that they have accepted the offer, it is called acceptance
by conduct.
1. What is Acceptance by Conduct?
 If a person does something that shows they agree to an
offer, this counts as acceptance.
 The law says that acceptance does not always need to be
communicated through words.
. Key Point to Remember
 Acceptance by conduct happens when a person acts in a
way that clearly shows they agree to the offer.
 There must be an intention to accept.
 Each case depends on the facts and circumstances.
Implied Acceptance
Implied acceptance means that a person accepts an offer not
by words (spoken or written) but through actions or conduct.
This type of acceptance is not directly said but is understood
from what the person does.
What is Implied Acceptance?
 Express acceptance: Saying “yes” or signing a contract.
  Implied acceptance: Doing something that shows you
agree to the offer.
Agreement in Sub Silentio
What does it mean?
The term Sub Silentio is a Latin phrase that means “under
silence” or “without speaking about it directly”.
How does it happen?
 Sometimes, an agreement or decision is accepted
silently, without anyone talking about it or challenging it.
 It is not openly agreed upon, but because no one objects
or questions it, the law assumes that it is accepted
silently.
Example:
 Suppose a company allows employees to take an extra
day off every year without any written rule.
 Over time, if no one objects to this practice, it becomes a
silent agreement or Sub Silentio agreement.
Key Point:
 In Sub Silentio, actions or silence are taken as
agreement, even though nothing is directly said.
Phishing
What is Phishing?
Phishing is a type of fraud where someone pretends to be a
trustworthy person or organization to steal your personal
information.
How does Phishing happen?
 Scammers send fake emails, messages, or calls that
look like they are from a bank, company, or government
office.
 They trick you into sharing:
 o Your passwords
o Bank account numbers
o Other private information
Example of Phishing:
 You get an email that says:
“Your bank account will be locked if you don’t verify it.
Click here to log in and update your details.”
 If you click the link and enter your details, the scammer
steals your information and may take money from your
account.
Why is Phishing illegal?
 Phishing is a crime because it involves cheating and
fraud.
 The scammer misleads you by pretending to be someone
they are not.
When is Communication of Acceptance Complete?
 What does this mean?
Communication of acceptance is complete when both
parties are aware of it, and the contract is formed.
o At this point, both parties (the person making the
offer and the person accepting it) become legally
bound to follow the contract.
Two Stages of Completion:
1. Against the Offeror (person making the offer):
o Acceptance is complete as soon as it is sent (e.g.,
when the letter or telegram is posted).
2. Against the Offeree (person accepting the offer):
o Acceptance is complete only when the offeror
receives the acceptance.
Illustration:
  A sends a letter offering to sell his car to B.
 B writes back, “I accept,” and posts the letter.
o Acceptance is complete against A when B posts the
letter.
o Acceptance is complete against B when A receives
the letter.
Communication by Post or Telegram
Acceptance by Post:
 When acceptance is sent through a letter:
o Acceptance is valid from the moment the letter is
posted, even if the letter reaches late or gets lost.
Example:
 If A posts a letter of acceptance on Monday and it reaches
B on Thursday, the acceptance is valid from Monday
(when it was posted).
Acceptance by Telephone
When communication happens through a telephone or similar
instant methods (e.g., emails, chats), the acceptance is
complete immediately.
What does this mean?
 Both the offeror and offeree can hear and understand the
acceptance in real-time.
 There is no delay, like with postal letters.
Case Example:
 If A calls B and says, “I accept your offer,” the acceptance
is complete at the same time both hear it.
Delay or Non-Delivery of Acceptance
 If acceptance is sent but delayed or not delivered (e.g.,
lost in the mail), the offeror is still bound.
  This applies only if the offeree has done their part
(e.g., posted the letter).
Case Example:
 A sent acceptance through a letter, but it got lost.
 The court decided that acceptance was valid because A
had already posted the letter.
Acceptance by Conduct
Sometimes, acceptance can be shown through actions instead
of words. This is called acceptance by conduct.
Example:
 A offers to sell goods to B.
 B starts using the goods without saying anything.
 B’s actions show that they accepted the offer.
Communication of Acceptance by Telex/Fax
What does it mean?
 Telex and Fax are fast communication methods, similar to
telephone or email.
 When acceptance is communicated through these
methods, it happens instantly.
Rule for Acceptance by Telex/Fax
 The acceptance is complete only when it is received by
the offeror (the person who made the offer).
 It is similar to the rule for communication by telephone.
Contract through Email
What does it mean?
 Email is another form of instant communication.
 When someone accepts an offer by email, the acceptance
is complete when the email reaches the offeror.
 Acceptance must be absolute and unqualified:
For a valid acceptance, it is essential that the acceptance
should not have any conditions or changes to the original
offer.
1. Effect of conditional or qualified acceptance:
o If the acceptance adds conditions or terms, it is not a
proper acceptance and does not create a valid
contract.
o Example: If you offer to sell a radio for ₹500, but the
other party says they will pay only ₹400, there is no
contract because the acceptance is conditional.
2. Counter-offer:
o If the other party changes the terms of the offer (like
proposing to pay ₹400 instead of ₹500), it becomes a
counter-offer.
o A counter-offer rejects the original offer.
3. Effect of a counter-offer:
o Once the original offer is rejected by a counter-offer,
it becomes a dead offer.
o A dead offer cannot be accepted later unless it is
renewed by the person who made the original offer.
Acceptance or rejection of tender must be within
reasonable time
1. Reasonable Time for Acceptance:
After receiving an offer, the person receiving it (offeree)
must accept or reject the offer within a reasonable
time. If they delay, the offer might expire.
2. What Constitutes Reasonable Time?
o The time should be fair and practical, depending on
the circumstances of the offer.
 o If the offeree makes an inquiry (asking questions), it
is not automatically a rejection of the offer unless
they clearly refuse it.
3. Rejection Does Not Always Mean the End:
If the offeree clarifies their questions and shows they are
still considering the offer, it does not count as a rejection.
4. Section 2(b) of the Contract Act, 1872:
o It defines "acceptance" as agreeing to the exact
terms of the offer.
o The person who makes the offer (offeror) invites
acceptance, and both parties must agree for a
contract to exist.
5. Mutual Agreement:
o A valid contract requires "meeting of the minds"—
both parties must agree on the same terms.
o If either party delays or communicates rejection, the
offer can no longer be accepted.
6. Duty of the Offeree:
o The offeree has a duty to respond to the offer (accept
or reject) within a reasonable time. If they fail to
respond, the offer lapses.
3. Acceptance should be expressed in usual/prescribed
manner
1. What the Law Says:
o According to Section 7(2) of the Indian Contract Act,
the acceptance of an offer must be in the manner
prescribed by the offeror (person making the offer).
o If no manner is prescribed, it must be in a usual and
reasonable manner.
2. Prescribed Manner:
 o If the offer specifies how acceptance should be
communicated (e.g., by post, email, etc.), the
acceptance must follow that method.
o If this is not done, the offeror can reject the
acceptance unless they accept it anyway.
3. Usual and Reasonable Manner:
o If no specific method is mentioned, acceptance can
be communicated in a way that is usual for that type
of transaction, such as by post, telephone, or email.
4. Court Decision Example – LIC of India v. R.
Vasireddy:
o In this case, the Supreme Court ruled that a cheque's
encashment did not mean automatic acceptance of
the insurance proposal.
o The acceptance process was incomplete because the
formal approval from the insurance company was
still pending.
Prescribed Manner
1. What is a Prescribed Manner?
o When the offeror (person making the offer) states a
specific way in which acceptance must be
communicated, it is called a prescribed manner.
2. Following the Prescribed Manner:
o Acceptance must be done in the way mentioned in
the offer. If the offeree (person accepting the offer)
fails to do this, it may lead to issues.
3. Effect of Not Following the Prescribed Manner:
o If acceptance is not communicated in the prescribed
manner, the offeror has the right to reject it.
o However, if the offeror still accepts the
acceptance, a valid contract is formed.
4. Acceptance should be made while the offer is still
subsisting
1. What Does It Mean?
o An offer can be withdrawn or lapse after a certain
period. Therefore, acceptance must be given while
the offer is still valid and has not ended.
2. When Can an Offer End?
o The offeror (person making the offer) can withdraw
the offer before it is accepted.
o If the offer is not accepted within the time limit,
it lapses or becomes invalid.
o If the offeree (person receiving the offer) rejects the
offer or makes a counter-offer, the original offer
ends.
3. Effect of Delay in Acceptance:
o If the offer is no longer valid (because it lapsed, was
withdrawn, or rejected), any attempt to accept it will
have no legal effect.
o Example: If you wait too long to accept an offer, and
the offeror withdraws it, you cannot later claim to
have accepted the offer.
When the Contract Completes:
A contract is formed as soon as acceptance is made while the
offer is still valid.
In some cases, the offeror may require special methods for
acceptance (e.g., by post, email, or verbally). The contract is
completed when acceptance is received in the prescribed way.
Revocation of Offer (Taking Back an Offer)
 What is revocation? It means taking back an offer.
 Rule:
 o You can take back (revoke) an offer before the other
person accepts it.
o Once the person accepts the offer, it becomes a
contract. After that, you cannot take it back.
o Example: If you offer to sell your bike and the other
person accepts, you cannot change your mind after
their acceptance.
Prospective Resignation (Resigning in Future)
 What is it? A prospective resignation is when you decide
to leave a job but set a future date for it to take effect.
 Rule:
o You can cancel (take back) your resignation before
your employer accepts it.
 Example Case:
o In a case, a secretary submitted a resignation on 9th
July 1980 but later changed his mind and sent
another letter to cancel it.
o The managing committee had not yet accepted the
resignation.
o Since the resignation was withdrawn before
acceptance, it was considered invalid.
Withdrawal of Bids (Taking Back a Bid at Auction)
 What is it? At an auction, when you make a bid (an offer
to buy something), you can take it back before the
auctioneer accepts it.
 Rule:
o The sale is complete only when the auctioneer
accepts your offer (like dropping the hammer).
o Before this acceptance, you can withdraw your bid.
Taking Back a Bid After It Is Accepted
 1. What does it mean?
o When you make a bid (offer a price) and it gets
accepted, you cannot take it back.
o Once the bid is accepted, it becomes a contract
under Section 5 of the Indian Contract Act.
2. Bid Security:
o Some bids require a deposit called "Bid Security" to
show you are serious.
o If you take back your bid before the acceptance,
you may get your deposit back.
o But if you withdraw your bid after acceptance or
during a valid period (like 90 days), you may lose
the deposit.
Simple Rules to Remember:
1. You can take back a bid before it is accepted.
2. Once the bid is accepted, it becomes a contract, and you
cannot withdraw it.
3. If there are special rules (like a security deposit), you may
lose the deposit if you take back the bid after acceptance.

Withdrawal of Tender
A tender is like an offer made by a contractor or bidder to do a
job or provide goods at a specific price. Before the tender is
accepted, the person who submitted it has the right to
withdraw it. However, once the tender is accepted, it cannot be
taken back. If someone tries to withdraw the tender after
acceptance, it may lead to penalties, like forfeiting the earnest
money or bank guarantee.
Bank Guarantee and Forfeiture
Sometimes, a tender includes a Bank Guarantee or Earnest
Money (a deposit to show seriousness and commitment). If a
person withdraws their tender after it has been accepted,
the bank guarantee or earnest money can be forfeited (taken
by the other party). Courts usually do not interfere with such
forfeiture if the terms of the tender and guarantee are clear
and fair. If the guarantee was rightfully invoked, the bidder
cannot argue against it.
Blacklisting and Forfeiture of Earnest Money
In some cases, a contractor may face blacklisting (being
banned from future contracts) and forfeiture of earnest money.
Blacklisting is a serious action and must be done fairly. The
government or authority must give the person a chance to
explain their side before taking such strict action. If this
process is not followed, the action can be considered unfair or
arbitrary (unreasonable). Courts have emphasized that
decisions must follow the rules of natural justice to ensure
fairness.
Revocation in Contracts by Post
Revocation means taking back an offer before it is accepted.
According to Section 5 of the Indian Contract Act, an offer can
be revoked at any time before the acceptance is communicated
to the proposer (the one who made the offer). However, once
the acceptance is communicated, the offer becomes a
contract, and the offeror loses the right to revoke it.
In contracts made by post, the rule regarding communication
is very clear. The acceptance of an offer is complete as soon
as the letter of acceptance is posted by the acceptor. At this
point, the contract becomes binding on both parties, and the
offeror can no longer take back or cancel the offer.
For example, if you send an offer to someone by post and they
respond by posting a letter of acceptance, the moment they
post that letter, the acceptance is considered complete. From
that moment, you cannot revoke or withdraw your offer. The
law considers the letter to be out of the acceptor's control, and
the contract is valid.
Mode of revocation of offer
1. By notice of revocation
A proposal can be revoked if the proposer informs the other
party (offeree) before the acceptance is completed. The notice
of revocation must reach the offeree. In the famous case
Dickinson v. Dodds, Dodds made an offer to sell his property,
which was open till 12th June. However, Dickinson got to know
through another source that Dodds had already sold the
property to someone else. The court held that the offer was
revoked indirectly because Dickinson was aware of the
revocation.
2. By lapse of time
If the offeree does not accept the offer within the time frame
fixed by the proposer, the offer ends. If no time is mentioned,
the offer must be accepted within a reasonable time. In
Ramsgate Victoria Hotel Co. v. Montefiore, Montefiore
offered to purchase shares, but after 6 months, the offer was
not accepted. The court ruled that 6 months was too long, so
the offer lapsed.
3. By failure to fulfill a condition precedent
Sometimes an offer has conditions attached. If the offeree does
not fulfill these conditions, the offer cannot be accepted. For
example, if someone makes an offer to sell a car but asks the
offeree to first show a valid driving license, the offeree cannot
accept the offer without fulfilling this condition.
4. By death or insanity of the offeror
If the proposer (offeror) dies or becomes insane, the offer ends.
However, if the offeree accepts the offer without knowing about
the death or insanity, the acceptance remains valid. For
instance, if someone accepts an offer before knowing about the
proposer’s death, the contract is valid.
Here is the simplified explanation for the content regarding
Revocation of Acceptance:
Revocation of Acceptance in England
In England, once the letter of acceptance is posted, the
contract is formed. This means the acceptance becomes final
and cannot be revoked, even if the proposer has not yet
received the letter. The contract is binding on both parties as
soon as the letter of acceptance is sent.
Revocation of Acceptance in India
In India, the rules are slightly different. According to the Indian
Contract Act:
1. The proposer becomes bound when the letter of
acceptance is posted.
2. The acceptor (the person accepting the offer) becomes
bound only when the letter of acceptance reaches the
proposer.
Important Rule:
 Acceptance can be revoked at any time before the
acceptance reaches the proposer. Once the proposer
receives the letter of acceptance, it cannot be revoked.
Example
A offers to sell his house to B. B sends a letter of acceptance by
post. However, B later changes his mind and sends another
letter revoking the acceptance. If the second letter (revoking
acceptance) reaches A before the first letter of acceptance, the
acceptance is canceled, and no contract is formed.