LOC- MS
LOC- MS
LOC- MS
Research objective
"To examine and analyze the essential elements and legal principles underpinning
the formation, enforceability, and validity of contracts, focusing on offer,
acceptance, consideration, and the meeting of minds (consensus ad idem), as well
as comparing the distinctions between offers and invitations to offer under the
Indian Contract Act and English law."
Research methodology
To explore the concept of contracts, this research will employ a doctrinal
methodology, which involves a detailed examination of legal doctrines,
principles, and case law. The methodology begins with an extensive literature
review, focusing on primary sources such as statutes, notably the Indian Contract
Act, and pertinent case law that elucidates the legal definitions and frameworks
of contracts. Key definitions provided by legal scholars, including Pollock and
Salmond, will be critically analyzed to understand the foundational elements of
contracts, such as agreements, enforceability, offers, acceptances, and
considerations.
Literature review
Abstract
Contracts are fundamental to the operation of modern society, governing
transactions ranging from simple purchases to complex business arrangements.
For a contract to be legally binding and enforceable, it must meet several essential
elements. Among these, offer, acceptance, and consideration are paramount.
Understanding these elements is crucial for grasping how contracts are formed
and enforced.
An offer is a clear proposal made by one party (the offeror) to another (the
offeree), signifying a willingness to enter into a binding agreement on certain
specified terms. An offer must be definite, communicated to the offeree, and
intended to create legal relations upon acceptance. The specificity of the offer
ensures that both parties understand the terms of the agreement, preventing
misunderstandings and disputes.
Acceptance is the unequivocal agreement to the terms of the offer by the offeree.
For acceptance to be valid, it must be unconditional and correspond exactly with
the terms of the offer, a principle known as the "mirror image rule." Any
modification or addition to the terms constitutes a counteroffer rather than
acceptance, which the original offeror may accept or reject.
Consideration is the value exchanged between the contracting parties, making the
agreement a bargain. It is what each party brings to the table, ensuring that the
contract is not merely a one-sided promise but a mutual exchange. Consideration
can take various forms, including money, goods, services, or a promise to do or
refrain from doing something.
The elements of offer, acceptance, and consideration are the bedrock of contract
law, ensuring that agreements are clear, mutual, and involve an exchange of value.
These elements work together to form a legally binding contract, protecting the
interests of all parties involved and providing a framework for resolving disputes.
Body
In simple terms, a contract means when two parties put into writing an agreement
which contains certain obligations (promises) which are to be performed by such
parties, and when such written agreement becomes enforceable by law, it
becomes a Contract. Enforceable by law means when the agreement has acquired
the force of law only for those who are a party to it and a violation of those
obligations would attract legal action, including repudiation of the entire contract.
• Offer: Firstly, there must be an offer from either party, without an Offer
a contract cannot arise. However, in some cases, this principle could not
be applied. For instance, Mulla talks about a situation in which offer and
acceptance could not be traced, for instance, a commercial agreement
reached after multiple rounds of negotiations.
E.g. A contracted with B to purchase rice. Now A wanted a special type of rice,
however, B thought of it to be normal rice. In this case, although there is a valid
acceptance but there lacks meeting of minds between the parties; meeting of
minds concerning the type or quality of rice.
Similarly, if A contracted with B to buy stocks. What A meant was stocks in a
company, whereas B understood it to be his livestock (farm animals). In this case,
the understanding was not in a similar sense.
• Parties must be competent to contract, under the laws they are subjected
to i.e. they must be legally capable to contract
Offer and Acceptance form the basis of a contract. There can be no contract unless
there is an offer and such an offer must be accepted. An Offer once accepted
becomes a Promise.
Offer and Proposal are used simultaneously. Offer is used in British law,
whereas Proposal is used in Indian law.
Offer
An offer is the first thing for the formation of a contract. A person making an
offer is called an “offeror”/“proposer” and a person to whom the offer is made
called an “Offeree” / “proposee”.
Pointers on Offer
Contract act defines an offeror as “Promisor” and the person who is accepting the
offer as “Promisee”.
Sometimes a person may not make an offer to sell his goods, but makes a
statement or conducts in such a way, to make other persons make an offer to him.
This is an invitation to offer.
Acceptance
As stated earlier, the second step in the formation of a contract is the acceptance
of the offer.
Acceptance means when the person to whom the offer was made, has given his
assent to such offer– Section 2(b) of Contract Act.
Once the offer is accepted and such acceptance has been communicated, to the
offeror, the parties are bound by their respective promises. Just like an offer, even
an acceptance can be revoked before the communication of acceptance reaches
the offeror.
In the case of Lalman Shukla v Gauri Dutt (1913), the defendant’s boy went
missing, accordingly, his servant-Plaintiff was sent to search for the boy, in the
meantime a missing poster was released by the defendant, promising to pay a
certain sum, to the person who finds the boy. The servant, unaware of such an
offer succeeded to find the boy. Once he discovered that such an offer existed he
asked for the consideration, but the same was denied. The court ruled in favour
of the Defendant, by holding that Plaintiff was ignorant of offer and thus the
performance of the promise does not amount to acceptance.
Pointers on acceptance
Consideration
A Contract is formed when a person, A, makes an offer to another person, B.
When such Offer is accepted by the other person, it becomes an agreement.
Consideration means value given for the performance of a promise. It need not
necessarily be money, however, it should be something which has been agreed
by the parties and has some value.
Privity of consideration
In India, consideration for a promise might flow from the promise or any third
person, who is not a party to the contract, as long as it is at the desire of the
promisor.
According to Section 2(d),” when at the desire of the promisor, the promisee or
any other person does something or abstains from doing something…” Thus
Indian law does not recognise privity of consideration, unlike under English Law,
in Twiddle v Atkinson it was held that consideration must flow from the
promisee, even if it was for the benefit of the Plaintiff. English Law recognises
privity of consideration.
Conclusion
These are the most basic and elementary principles of a contract, which are to be
fulfilled, however there may be other conditions which may be laid down by a
special law, or for specific types of contract. Eg. a contract dealing with IPR has
to abide by rules laid down by the laws dealing with IPR.
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