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Parties agree to a set of rights and obligations in a Contract Barter system (you have one kg of weed and I have one kg of rice - we exchange. such a system creates rights and obligations e.g. one of them has the right to take one sack of weed and the obligation to deliver one sack of rice). The idea behind an agreement is therefore this - mutually agreed set of rights and obligations. The phrase is not 'corresponding set of rights and obligations' because all agreements will not be as simple as this one (1 kg weed = 1 kg rice). But through these agreements, we cannot create any right/obligation that we want. Should agreements such as that of a marriage/civil union be governed by Contract law - because a Hindu marriage is a sacrament, but in Muslim Law marriage is a Contract. So can we reduce this relationship and squarely apply the principles of Contract (because contracts are rudimentarily instruments of transaction). Marriage comes to us in a contractual light in a common law jurisdiction because when, in earlier times in Europe etc. , people used to approach the courts with their marriages based on customs and traditions, the courts only had one type of law governing the personal sphere- Contract law. But in India, personal law played a bigger role with marriages having their own laws from much before. Thus even if you look at previous Indian court judgements relating to marriages, principles of contract law are rarely applied (not applicable to Muslim law). Laws relating to homosexual relationships are interesting in this sense - as of now, we do not have any law governing this (be it personal or formal). Thats why courts are doing the same thing they were doing in past times. Societal norms are not as important as what is illegal. A liquor agreement, while possibly frowned upon in society, is still possible. A weed agreement is not. Idea of certainty is essential for contract, and taking into account societal considerations will impinge on this very basic necessity. Market is the primary consideration, then comes law. In fact, when the laws were formed, those principles considered to be good market practices were incorporated as law itself. Courts choose the interpretation (in case of a conflict in interpreting a legal principle) that furthers the idea of certainty and necessity because that is what furthers market efficiency. e.g. you have a kirana shop. You procure goods from the wholesalers and sell it to the people in the market. Customer comes and asks if basmati rice there or not. Rice not there as of now, but I will give it in 5 days. You approach wholesaler and ask him for that rice in 4 days. Now this whole, very simple, agreement is based on certainty. (ki bhai agar ye 4 din mai nahi dega toh mai uss bande ko 5 din mai kaise doonga and apna agreement kaise uphold hoga)
The idea of Contract law is you can do anything by way of mutually agreed private things, EXCEPT some particular things. These are the exceptions. You can explore a lot of shit in this world, except these these things or these these things by these these means. So these prohibitions and exceptions are important in contract law. ● We can enter into a contract to completely vitiate a previous contract as well. ● And what if one party says he will not perform his obligations? what to do? Thus, these general principles of contract law govern only two aspects - ● the creation of mutually agreed obligations ● discharge of those obligations Creation - e.g. law says you can enter into a sale of marijuana if you are not licensed. suppose you enter into such an agreement. now criminal law will apply here and have its own consequences, but what will contract law do? contract law has nothing to say here. Now suppose the dealer gave mint leaves instead and you were fooled. NOW you do not have a remedy against the dealer. The only impediment it creates is that if you enter in an arrangement which either should not have been created or should not have been created in that particular manner - that agreement cannot be enforced. But what about agreement on apples? okay on so and so date i will give you certain type of apples fit for further sale. You deliver it late, okay fine no issues. But because it was late, the apples have perished and cannot be sold further. I can now go to the court and ask for a remedy. [thus, a big difference b/w apple e.g. and ganja example]. Creation is directly related to the enforcement of contracts - agreement is only enforceable if it is properly created. this is where Section 2 elaborated by Section 10 comes in.
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. Consent - Mutually agreed set of rights and obligations - here, the idea of 'mutually agreed' is as important as 'set of rights and obligations'. here, the idea of free consent comes in. If parties are to be allowed to make mutually agreed private arrangements, and further be bound by them, there has to be free consent. Competence - the person should be able to judge his best interests. If you enter into an agreement with a person who is not able to do so (minor, unsound mind and disqualified by law from contracting), you can possibly take advantage of that. These agreements also should
CREATION
[now the discussion is only on the creation of contracts] Building blocks of a contract - how is an agreement made? This is more fundamental than the enforceability of the contract. The most basic thing is proposal - Section 2 (a) "When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal;" 3 main parts of this are -
- Signifying willingness - if I am making an offer to you, it should be manifested in a way that it should be made known to the other party. the external manifestation of your thought has to made understandable to the other party. Its not necessary that this external manifestation is by words - expressions or non-verbal communication is possible. e.g. you and I are good friends. We go out and play small team games. While we were walking, we saw a poster for a TT competition. I raise my eyebrow after seeing the poster, I look at you and you wink at me. The raise of the eyebrow is enough to signify that I am willing to participate in this competition - the wink means yeah sure. And the usual practice is that you divide the winnings equally. The raise and the wink signifies that also. Explicit or Express - oral or written words Implicit or Implied - signs, gestures or expressions An offer can be made in a fashion where the other party understands the intention of the offeror, who is making the offer either expressly or impliedly.
Upton-on-Severn RDC v. Powell Case of implied offer A person owned a farm. Fire on farm. Fire brigade services he called. While calling them, he assumed that his farm lies in the free services zone of the fire brigade services. So after extinguishing the fire, they asked for money. The man refused to pay. Question - the person never intended to pay for the services and that is why he ordered the fire brigade services. So is he liable to pay up? If in terms of offer, you have not mentioned what will be given to the person in return for his services, if he agrees to the terms of your offer, you are required to do whatever is reasonably due to that person. It is not firemen's fault that you did not know that your farm is not in the free service zone. In this offer, in requesting the fire men to come, he expressly mentioned that they should come and do their job. Thus, whatever are the reasonable charges, they would be paid by the man. When is communication of offer complete? - when the person to whom the offer is made gets the knowledge of the offer. The signification of willingness is complete when this 'message' reaches the other person. Agent is someone who has been the granted the authority by the Principal to manage affairs. But here, the firemen cannot be called an agent in these cases, because agency requires a delegation of authority by someone who has the ownership of the property in question. Steven v. Bromley and Sons - similar- Fresh agreement can be implied to overrule original one and it was stated in Steven –v- Bromley [1919], S carried steel at agreed rate, and was able to claim more when delivery included extra goods. There possible to claim for work done after other party wrongfully considers the contract discharged or prevents performance Lalman Shukla v. Gauri Datt Gauri's nephew ran away. She asked Lalman, servant, to go and look for her. Servant could not find him. In the meanwhile, lady issued an advertisment saying whoever found my
VM was called to teach in hurried manner by Balakista since BKR does not have very good contract law teacher. VM teaches. BKR fucks him up. Does VM get his money? While there was no contract or employment agreement, since you were in a relationship with VM and he serviced you for 15 days, you must repay him. And the court will say the repayment is 50% of the average monthly teacher's salary.
- Act/Abstinence
- Seeking Assent - assent is something which is non-negotiable. Rest is open ended. Offer can be express or implied, contract can be to do something or to not do something...but offer in a contract is always made with the intention of receiving assent. This technicality plays a role in the Lalman's case as well. I mean if you want a denial then why would you, logically even, ask that shit in the first place? So this technicality is fundamental for contract law. Proctor v Gamble - technicality discussed above does not apply in this case- doubt not able to find summary GENERAL OFFER It was the case that an offer has to made by one person to another; individually – Weeks v. Tybald Father makes an advertisement that whoever marries my daughter with my consent and her consent, will be given 100 Pounds. One man did it. The marriage was solemnised. Man asked for reward Reward never paid by son-in-law. Man goes to court. Court rejected the man's contention, because an offer thrown out to the public at large has no weight. Offer has to be made individually. This decision prevailed for a very long time, until this badass decision. Carlill v. Carbolic Smoke Ball Co. (1893) There was a company. This case concerns an influenza epidemic. The company comes up with a product called Carbolic Smoke Ball, and still contract influenza, we will give you 100 pounds. They said to show our intent, we have made a bank account and already deposited
the money for this very purpose. They also said that this worked in the last epidemic. Ms. Carlil contracted the disease despite using the Smoke Ball. Back to basics - Offer when Accepted forms a Promise A Promise with Consideration forms an Agreement An Agreement with Enforceability of Law forms a Contract Company's arguments
- it was a mere puff (a statement made to create hype - we have no intent to come through). But their advertisement of a bank account rules that out
- it is not a possibility that we can make an offer to the world at large (because that was the position then), and we have not made a specific offer with Ms. Carlill. Acceptance of General Offer - Any person who performs the terms of the offer and fulfils the terms, that person would be in a binding arrangement with the offeror. (reasoning behind this type acceptance - each individual seeing the Ad cannot write letters to you saying they accept the offer) This case is also dealing with the creation of contract in cases of general offers. The communication of the acceptance is for the benefit of the offeror. In this case, if you are not telling any modes of acceptance, meaning you don't want individual acceptances *Nothing in Contract Act bars the validity of a General Offer, even though the Act was passed before Carlil and the regime of specific offer was more prominent. Harbajan Lal v. Harcharan Lal case is different from Lalman Shukla A boy was lost. Father made advertisement for money in return for finding boy. A person standing in a station overheard the conversation of some people and realised that the boy in front of him was the same boy in an Ad. He took the boy to the Police, borrowed a phone and called the Dad. After being aware of the offer, he accepted the offer by performing the terms and making him reach his father. Court said the man is entitled to the promised amount. RETRACTING A GENERAL OFFER
Harvey v. Facey A particular person owned a certain piece of land - Bumper Hall Pen. The owner got a letter saying what is the minimum price, and do you want to sell. The owner said the minimum price is 950 Pounds through a telegraph. The person said I am willing to buy for 950 Pounds. Owner said I won't buy. Person filed case against owner. Person argued that owner made an offer, and I accepted it. So what's the problem. The statement in itself is complete - minimum price is so and so. The question here is whether this statement in the telegraph is an offer or an invitation to offer. The term 'minimum' price is the most important. When I am saying the minimum price is this, that means there is a possibility of a bargain for a higher price. Therefore, the very use of the word 'minimum' implied an intention to bargain, rather than to seek acceptance. So it is an invitation to offer. Owner merely rejected an offer, so no breach. Case is an example of how the court applies a settled principle to the circumstances. Example of an Express Invitation to Offer - you ask bhaiya for cooler. He said I bought it 5000, and and I am not willing to sell for less than 1500, you tell how much can you pay over and above this. This 'you tell me' is the invitation part, and is implied in most cases. Pharmaceutical Society of Great Britain v. Boots Cash Chemists There was an act in England which mandated that certain drugs cannot be sold without the inspection by the pharmacist. Now these Chemists had a shop wherein certain non- prescription drugs were kept on display. The arrangement of the shop was such that a person has to choose the drug he wants, take it to the counter where the chemist will have a look, and purchase it. The Pharma Society files a case against the Chemists for violating Act. They contented that the mere display of goods on the shelves is an offer. So say a person takes a drug to the counter; if the shopkeeper accepts it then he is violating the Act and if he rejects the offer, he is violating a contract. The courts reasoning - suppose a person enters a shop, looks at the goods, and keeps it back... will that classify as a breach of contract since picking up meant accepting it? And suppose if you pick the goods and take it to the counter and the billing machine is not working so it can't be sold as of now, is the shop in breach, or is it just that they did not accept an offer. If we start considering the display of goods as an offer, and someone who comes and picks it up as an acceptance, then you are saying that no party can retract from their will. Therefore, the court said that considering a display as an offer will lead to unnatural results in the market.
Court is backtracing. - it is looking first at the result - what happens usually in situations such as these in the market - and then deducing (instead of applying) a principle that would justify these market practices. therefore, case is an example of how court backtraces to arrive at a principle. GENERAL INVITATION TO OFFER Auction or a Tender Example- you have a land. you put it up for auction, putting in a base lowest price at so and so. The very understanding of an auction is to signify a willingness to bargain. Same goes for tender - whoever bids the least will get the good. The entire purpose of an auction is to bargain for a higher price and for a tender, a lower price. Even after the auction or tender, the owner of good (auction) or desirer of services (tender) can always reject the outcome of the said auction or tender. Every bid is an offer and you can reject every good. The Government, or any public entity, has to realise the best price for anything that it is planning to sell. So, the entire branch of public law comes into the picture when we are talking about auctions/tenders involving sale of public goods.
Motive behind acceptance is immaterial only if terms of offer are known Williams v carwardine- woman gives info abt the murderer of her hubby to assuage her feelings and not so much for the reward, still she was allowed to recover R v Clarke Aussi Govt - reward of 1000 pound to anyone who gave info about murderers and if accomplice gives info they will be given pardon - accomplice comes forward due to the pardon but forgot about the reward - he could not recover reward Entire law of acceptance in a single sentence- an acceptance should be made in an absolute and unqualified fashion, through an external manifestation, by the offeree to the offeror.
- By the offeree to the offeror Felthouse v. Bindley There was a person who wrote a letter to his nephew stating that that he wanted to purchase a horse of the nephew at a price of 33 Pounds. Another term was that, if you don't say anything about this in the next communication with me, I will consider it sold to me at this price. The nephew was okay with this, so he told his auctioneer that he must not sell that particular horse to anyone else. But the auctioneer sold it by mistake Question - is there a breach Court - no breach of contract, because no contract was created. Acceptance is always communicated to the offeror. In this case, the acceptance was communicated by the offeree( nephew) to the auctioneer and not to the offeror (Uncle). Court also said that an offeror cannot impose a burden of refusal on the offeree and then extract the acceptance. Silence cannot be assumed to be a 'yes'. An assent can never be deemed... it is has to be communicated. Powell v. Lee
There was an advertisement to appoint a person as a headmaster of a school. There was a selection process by a Board. A person was chosen. That person knew someone on the Board, and that very person, in his personal capacity, informed the Headmaster that he is selected. But then the Board retracted their decision. Court said no breach of contract, acceptance not there. Communication is made by a particular member in his personal capacity. The Board in its professional capacity never informed the person that he is selected. Thus, acceptance is communicated by the offeree to the offeror. Exceptional Cases - where contract is binding without communication of acceptance...performing the terms of the offer is necessary then. All cases of general offers fall under this. (Carlil, Harbajan Lal etc.). MODE OF ACCEPTANCE If the offeree deviates from the prescribes mode of acceptance, what is the validity? Remember one thing - Intention of the parties, and the heart of the contract; they are understood together. Then there are technicalities of performance and technicalities of other forms of contract. We have to see how these technicalities related to the intention and the heart of the contract. If the technicality is so important that it targets the heart of the contract, then the court will uphold. But if the technicality is merely a peripheral one, then the court can let it go and still enforce the contract. A literal compliance will follow the contract to the tea. But a substantial adherence would ensure that a contract is performed sufficiently so that the intention of the parties behind forming the contract is met. [ So slight deviations from peripheral technicalities won't make a difference] This distinction affects the discussion on the mode of acceptance. Eliason v Henshaw A person sent an offer to a potato merchant through his driver (riding an empty wagon), which he sent to the merchant The offer said, if you accept the terms of this offer, then load the required quantity of potatos and send them to me. But while the merchant accepted the offer, he sent the potatoes back empty, and told the driver that he would sent the potatoes by post as that would be faster. But the potatoes reached after the wagon, and the offeror did not accept that.
Court - the acceptance becomes binding on the offeror the moments the offeree puts into course of transmission so as to be out of the control of the offeree. The fact that the offeror know of the acceptance is immaterial. Justification - if you say that the acceptance will be binding only when the offeror receive it, then we can also say that the offeree must receive an acknowledgment of the fact that the offeror has received the acceptance, resulting in an ad infinitum situation. ‘ What is meant by ad infinitum? VM - it won't be ad infinitum bro. What do you think, the parties will keep exchanging letters forever? They will perform the contract na. Rule: contract arises when letter of acceptance posted in due course However this rule is based on uncertainty which goes against commercial world’s practice and principles {could lead to unnatural results Regardless, this rule is incorporated in Section 4 of the Indian Contract Act. Household Accident and Fire Insurance Company v. Grant A applied for purchasing shares of a company, which he was granted. The letter of allotment was posted by the company and sent to A. But the postal dept. lost the letter, and it never reached A. Question - is the acceptance binding? Court - If both parties are transacting through post, and consider post as an agent of the parties, then the moment the acceptance is put into the course of transmission it is binding, even though it never reached the offeror. So, finally, the entire idea of when a letter of acceptance is binding on the offeror rests on these 2 pillars and their interplay depending on the facts.
- Rule of Adams v. Lindsell
- Post being considered as agents of the parties (notice to agent is as good as to the person himself) Say you add a provision on the contract w.r.t to when the acceptance should be made (like a timeline), it does not matter because acceptance is binding on the offeror when it is put in course of transmission. VM - This rule is outdated because when these decisions came out, postal mode was the only way of communicating over great distances.
Why is it that it is so important for us to ascertain when the acceptance is binding? This is a pure question of law. This is a procedural thing. e.g. of CPC - case will be filed where the cause of action has arisen. In contract law, the cause of action can arise where the contract was formed, or where it was breached. So it is important to ascertain when and where a contract is formed (when and where the offer letter is accepted and transmitted). So having a formula for finding out when an acceptance is binding is important to find out where the cause of action has arisen and which court has jurisdiction. [When is an acceptance complete?] INSTANTANEOUS MODE OF COMMUNICATION - Acceptance is binding on the parties when it reaches the offeror (different from postal mode) Entores v. Miles for East Corp. A, resident of London, sent an offer to B, who lives in Amsterdam. The offer was made by way of Fax and acceptance was made in similar fashion. Offer reaches in Amsterdam and Acceptance reaches London. Question - laws of which country will govern this contract...jurisdiction? [As it is important to ascertain where the contract was made] Court - what is material is that the offeror is that he should be aware that his offer is accepted (e.g. of Airplane going over and phone being cut, so can't hear acceptance). Time is different from Adam v. Lindsell, and postal mode of communication is a bit archaic. So courts changed the rule, in light of the newer times, from acceptance being binding when it is put in the course of transmission to it being binding when it reaches the offeror. Thus, in this case, the contract is completed when the acceptance is received i.e. London. *International contracts - topic of research Bhagwandas Goverdhandas Kedia v. Girdharilal Purshottamdas and Co. A (Ahmedabad) sent an offer by fax to B (Khamgaon). B accepted it by tellex itself, and acceptance received in Ahmedabad. Same question of jurisdiction as before. Now, there is an established precedent in the form of Entores. Complexity was that we have a codified statute. The SC said that when the ICA was drafted, the legislators could not have
Court - yes. The offeree has accepted the contract bro. He is not qualifying any term of the offer. This is just an inquiry into the terms of the offer. [Sometimes the contract does not explain how both the parties are meant to perform the terms of the contract. Haan bhai 100 Bale cotton dena hai 100 Rupay mai. Agreed. But kaise dena hai kaha likha hai? Do I give 1 bale/ day or 100 Bales tomorrow? This is an example of an inquiry into the terms of the offer to see how the consideration is to be performed.] SD Katherine Stiffles v MP Carr Mackeritch - condition subsequent to offer not amounting to a counter offer A said 25000 mai le doonga. Seller B accepted 25000, but after acceptance B said remit 25000 by 5th of February. Counter- offer is an idea of qualifying the already existing terms of an offer. But here you are not qualifying but adding an additional term. Therefore, it is not a counter-offer. This is a case of a condition subsequent to the existing offer. Here, there is an introduction of a new term (remit it by 5th of Feb) which you can accept, reject or make a counter-offer. Counter- offer arises from the pre-existing terms of the contract. Hargopal v. Peoples Bank of Northern India (1935) {COunter-offer accepted} A applied for shares of a bank and said that if you allot me these shares I also want a seat at the Board of the bank. Other party just allotted the shares (partial acceptance), and A gladly took it and started receiving dividends. He sued in case of a dispute, and contended that them not giving him a seat at the Board was tantamount to an invalid acceptance. Court - no express negotiation b/w parties, but the fact that the terms were not accepted in their entirety but A still enjoyed the dividends of the shares means that the allottment of shares was a counter-offer (because this acceptance was not absolute or qualified). PROVISIONAL ACCEPTANCE PA is absolute and unqualified, but in these cases the person making these acceptances is not tha final authority. e.g. Auction. There can be a condition that the goods will be sold only after the consent of the Secretary of MCD, Delhi. So, while in usual cases bids are offers and the bang of the hammer is an acceptance, here, the bang of the hammer is a provisional acceptance here. e.g. VM going to negotiate some shit for NALSAR, and cannot finally sign on the document because only the VC has that power.
The parties can retract from the offer anytime b/w the provisional acceptance and the final acceptance. REVOCATION OF OFFER Section 6 - A proposal is revoked— (1) by the communication of notice of revocation by the proposer to the other party; (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; (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.
- Notice - I can revoke my offer by giving a notice to you. e.g. if a time span is given for the acceptance of the offer by the offeror, then can the offer be revoked before the lapse of that? e.g. if A offers B bales of cotton and asks to accept it within 7 days. But then A says fuck off I already sold it within 3 days. So can he do that? Yes, because B did not provide any consideration. A is merely providing B exclusivity, but it cannot be said that A has to wait for B for 7 days as there is no valid agreement b/w them in that regard...thus, the notice is no impediment here. Alfred Scholank v. Muthunaya Chetti A offered to sell B indigo. Offer is open for 8 days. On 4th day, A says to B please don't accept I have already sold it to someone else. B still accepts on 5th^ day Court - the exclusivity which was afforded to the offeree for the 8 days was not against any consideration, it is mere nudum pactum. So, revocation stands Mountford v Scott A intended to sell land to B. He said would wait for B to accept for a certain time, provided that B pays 1 Pound for that exclusivity. B paid. But before that time period elapsed, A revoked the offer by sending notice. B says that we were exclusive. Question - is the revocation valid?
