SECTION 2

This is the Interpretation clause.

In this Act the following words and expressions are used in the following senses, unless a
contrary intention appears from the context :(a) When one person signifies to another hiswillingness to do or to abstain from doing
anything,with a view to obtaining the assent of that other tosuch act or abstinence, he is
said to make a proposal.
(b) When the person to whom the proposal is madesignifies his assent hereto, the proposal is said
to beaccepted. A proposal, when accepted, becomes a promise.
(c) The person making the proposal is called the "promisor and the person accepting the proposal
is called the promise."
(d) When, at the desire of the promisor, the promisee or any other person has clone or abstained
from doing,or does or abstains from doing, or promises to do or to abstain from doing,
something, such Act or abstinence or promise is called a consideration for the promise.
Price paid by the one party for the promise of the other Technical word meaning QUIDPRO-QUO i.e. something in return.
(e) Every promise and every set of promises, forming the consideration for each other, is an
agreement.
(f) Promises, which form the consideration or part, of the consideration for each other are called
reciprocal promises.
(g) An agreement not enforceable by law is said to be void.
(h) An agreement enforceable by law is a contract.
(i) An agreement which is enforceable by law at the option of one or more of the parties- thereto,
but not at the option of the other or others, is a voidable contract.
(j) A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable.

What is Law?
A rule or set of rules, usually made by a government, that is used to order the way in which a
society behaves
The principles and regulations established in a community by some authority and applicable to
its people, whether in the form of legislation or of custom and policies recognized and enforced
by judicial decision.
Mercantile means relating to trade or commerce; commercial.
Business Law Broader Aspect- covers both Mercantile Law as well as Commercial Laws.
Mercantile Law covers The Indian Contract Act, 1872
Sale of Goods Act, 1930
The Partnership Act, 1932
The Companies Act, 1956 now replaced by the
Companies act, 2013.
Commercial Laws : Like the Factories Act, 1948, The Custom Act, 1962, FEMA, IDRA etc.

Sources of Mercantile Law in

English Mercantile
Law or English
Common Law

Indian
statute

Judicial
Decisions

Customs and
Usages

Before 1930, the Act contained provisions relating to contracts of sale of goods and partnership.
Then section 76-123 containing provisions relating to sale of goods were deleted from Indian
contract Act, 1872 and enacted in another act i.e . The Sale of Goods Act, 1930.
Similarly section 239-266 relating to partnership were repealed in 1932 and separate act, The
Indian Partnership Act, 1932 was passed.
INTRODUCTION

We enter into contracts so many times in a day that the word contract has become an
indespensible part of our life.

Its so much infused in our daily lives that it affects all of us , for every purchase one does,
or take a ride in a bus , or a company purchasing a whole business etc, all are examples of
such contracts.

Any Business is, in essence, a series of contracts made on regular basis.

The Indian Contract Act, seeks to regulate the behavior of the persons who make such
contracts.

It determines the circumstances under which the agreement or promise shall be legally
binding on the persons making it.

It Also provides remedies, available in the court of Law against the person who fails to
fulfill his contract.

Thus this Law is ubi jus, ibi remedium i.e where there is a right there is a remedy.

OFFER & ACCEPTANCE

Expression of willingness

To do Something: Renault offers Kwid for Rs 4,00,000 on road price. This is the offer given
by Renault in the open market that the Company/ their dealers will sell the car for that
amount..
Not to do Something: Bank offers not to file a suit if the borrower pay the outstanding
amount.
With a view to obtaining the assent of that other person

KINDS OF OFFER:
How is it made: (1) Express Offer (2) Implied Offer
To whom it is made : (1) General (2) Specific
Other Types: (1) Cross Offer (2) Counter Offer (3) Standing Offer

General Offer - Case Law: Carlill vs. Carbolic Smoke Ball Co.
Legal Rules to Offer :

1. Offer must be capable of creating legal relations

(CASE: BALFOUR VS. BALFOUR)
2. Offer must be certain definite and not vague.
a. An offer must be distinguished from:
b. A mere statement of intention .
c. An invitation to offer .
d. A mere communication of information in the course of negotiations.
e. A casual enquiry .
f. A prospectus inviting the public to subscribe to the shares or debentures of a
company .
g. Advertisement for the tenders.
3. Offer must be communicated to the offeree
(Case : Lalman Shukla Vs Gauri Dutt(1913) 11 All.l.j.489.)
4. Offer must be made with a view to obtaining the assent of the other party.
5. Offer should not contain a term the non-compliance of which would amount to
acceptance.
6. A statement of price is not an offer.
7. An Offer may be conditional.

Acceptance
Types of Acceptance: (1) Express (2) Implied
Legal Rules to Acceptance:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Unconditional
Must be given in prescribed mode.
Must be communicated to the offeror.
Given in a reasonable time.
It cannot precede the offer
It must show an intention on the part of acceptor to fulfill the terms of promise.
It must be given by the parties to whom the offer is made.
It must be given before the offer lapses or is revoked.
It cannot be implied from silence.

Agreement 2(e) :- Every promise and set of promises forming the consideration for each
other.

AGREEMENT = OFFER + ACCEPTANCE.

Contract 2(h) :- An agreement enforceable by Law is a contract

All contracts are agreements but all agreements are not contracts.
CONTRACT = AGREEMENT + ENFORCIBILITY BEFORE LAW

OFFER & ACCEPTANCE

Proposal and offer mean one and the same thing and thus these words can be used
interchangeably.