LAB ASSIGNMENT (30 Marks)

PART 1:
Q1: Define a contract and describe the essentials of a valid contract.
Ans: All Contracts are agreements but all agreements are not contracts.
Definition: Only that agreements which are enforceable by law is a contract.
 According to Sec. 10, “All agreements are contract 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
expressly declared to be void.”
 Sections 2(h) and 10 of the Act state that there are some essential elements of a valid
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contract. If any of these elements is not satisfied by an agreement, it will affect the validity
and will not form a valid contract. was .
As per the contents of Sec. 10. It is revealed that the following are the essentials of
a valid contract:-

1. Offer and Acceptance

2. Legal relationship
3. Consensus-ad-idem CourseHero
4. Competency of parties
5. Free consent
6. Lawful consideration
7. Lawful object
8. Not declared to be void
9. Certainty and possibility of performanceresource
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10. Legal formalities.

1. Offer and acceptance:

In a contract there mu be at least two via prties one of them making the offer and the

other accepting This it.There must thus be an offer by one party and its acceptance by
the other. The offer when acceptedsharedbecomesagreement.
2. Legal relationship: Pa ti to a contract must intend to constitute legal relationship. It arises
when the parties know th t if any one of them fails to fulfil his part of the promise, he would be
liable for the failure of the contract.

If there is no intention to create legal relationship, there is no contract between parties. Agreements
of a social or domestic nature which do not contemplate a legal relationship are not contracts.
3. Consensus-ad-idem: The parties to an agreement must have the mutual consent i.e. they
must agree upon the same thing and in the same sense. This means that there must be consensus ad
idem (i.e. meeting of minds).

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 4. Competency of parties: The parties to an agreement must be competent to contract. In other
words, they must be capable of entering into a contract.
According to Sec 11 of the Act, “Every person is competent to contract who is of the age of majority
according to the law to which he is subject to and who is of sound mind and is not disqualified from
contracting by any law to which he is subject.”
Thus, according to Section 11, every person with the exception of the following is
competent to enter into a contract:-

(i) A Minor (ii) A person of unsound mind

(iii) A person expressly declared disqualified to enter into a contract under any Law.
in the same sense.” Under Sec. 14, the consent is said to be free, washenitisnot indu.comedbyanyofthe following :- (i) coercion, (ii)
misrepresentation, (iii) fraud (iv) undue influence, r (v) mistake.
5. Free consent: Another essential of a valid contract is the consent of parties, which should be
free. Under Sec. 13, “Two or more parties are said to consent, when they gree upon the same thing

Consideration need not be in cash or resourceinkind.Acontractwithout consideration is a

‘wagering contract’ or ‘betting’. Besides, the consid ration m st also be lawful.
6. Lawful consideration: Consideration is known as ‘something in turn’. It is also
essential for the validity of a contract. A promise to do something or to give something
without anything in return would not be enf rceable at law and therefore, won’t be valid.

7. Lawful objects: According to Sec. 10, an agreement may become a valid-contract only, if
it is for a lawful consideration and lawful object. According to Sec. 23, the following
considerations and objec are not l wful: -CourseHero
(i) If it is forbidden by law; (ii) If t s against the provisions of any other law;

(iii) If it fraudulent;
study (i ) If it damages somebody’s person or property; or

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(v) If Thisitisintsharedopinionofcourt, immoral or against the public policy.

Thus, any agreement, if it is illegal, immoral, or against the public policy, cannot become a
valid contract.
8. Agreement not expressly declared void: An agreement to become a contract should
not be an agreement which has been expressly declared void by any law in the country, as it
would not be enforceable at law.

Under different sections of the Contract Act, 1872, the following agreements have been said
to be expressly void, Viz:-

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(i) Agreements made with the parties having no contractual capacity, e.g. minor and person
of unsound mind (Sec. 11).
(ii) Agreements made under a mutual mistake of fact (Sec. 20).
(iii) Agreements with unlawful consideration or object (Sec. 23).
(iv) Agreements, whose consideration or object is unlawful in part (Sec. 24).
(v) Agreements having no consideration (Sec 25)
(vi) Agreements in restraint of marriage (Sec.26).
(vii) Agreements in restraint of trade (Sec. 27)
(viii) Agreements in restraint of legal proceedings (Sec. 28).
(ix) Agreements, the meaning of which is uncertain (Sec. 29).
(x) Agreements by way of wager (Sec. 30)
(xi) Agreements to do impossible acts (Sec. 56). was com

9. Certainty and possibility of performance: Agreements to form valid contracts must

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be certain, possible and they should not be uncertain, vague or impossible An agreement to
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do something impossible is void under Sec. 56.

10. Legal formalities:

The agreement may be oral or in writing. When the agreem nt is in writing it must comply
with all legal formalities as to attestation, registration. If the agreement does not comply
with the necessary legal formalities, it cannot be enfo ced by law.

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Q2: What is an ‘offer’? When is it complete? State the rules a valid offer.
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Definition of Offer / Proposal:
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"When one persharedonignifiestoanother 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 or offer."

The person making the proposal is called the 'offeror' or 'promisor'. The person to whom the offer is
made is called t e 'offeree' or 'promisee'.

Essential Requirements of valid Offer:

 It should be an expression of willingness to do or to abstain from doing

something.
 It must be made to another person, there can no proposal by a person to
himself.
 It must be made with a view to obtain the assent of that other to such an act
or abstinence.
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Legal Rules Regarding Offer:

The offer must be capable of creating legal relationship: If the offer does not intend to give
rise to legal consequences, it is not a valid offer in the eyes of law. Sometimes, offers are made
which are social in nature. Such social agreements do not make a valid contract because in these
cases the intention is not to form a legal relationship. It is very important for a valid offer to intend
to give rise to a legal relationship, otherwise the offer is not considered valid. In business
agreements, it is taken for granted that parties intend to create legal relationship.

The terms of the offer must be clear, definite and certain and not loose or vague: An offer must be
definite and certain. An indefinite or vague offer can’t be accepted because the courts, in such cases,
can’t tell what the parties are to do. The intention of the parties must be very clear, as to what they intend to
do.
An offer must be distinguished from a mere declaration of intention:
In the case of an ‘invitation to offer, the person making an invitation was invitesothers to make an offer to him. For example, quotations, catalogues of prices or display of goods with p ices marked thereon do not constitute an offer.
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Sometimes, there may be a preliminary discussion or an invitation by one party to the other to negotiate
terms or simply declaration of intention. Such declaration merely indicates that an ffer
will be made in future. .
An invitation to offer is not an offer: An offer must be distinguished from an invitation to offer.

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The offeror can’t say hat if the offeree
does not communicate

acceptance by a certain time offer

An offer must be communicated to the offeree:

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An offer must be communicated to the person to whom the same is addressed. Communication of
offer is important to conclude an agreement because acceptance can be given only after one knows
about the offer. This applies to both ‘sp cific’ as well as ‘general’ offer. Section 4 states that
communication of a proposal is compl te wh n it comes to the knowledge of the person to whom is made.
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An offer should not contain a term the non -compliance of which would amount to
acceptance:

have been deemed to be accepted. The burden of communication of rejection of offer can’t be
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imposed on the offeree. If the offeree sends no reply, there is no contract.

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1. Offer may be shared express or implied:

Two ident cal cross-offers o not make a contract: Where two parties make identical offers to
each ot er, in ignorance of ach other’s offer, the offers are known as cross-offers. ‘Cross-offers’
don’t constitute acceptance of one’s offer by the other and as such there is no completed agreement.

An offer to be valid must comply with the following rules:

An offer may be express or may be implied from the conduct of the parties or circumstances of the case.

Express Offer: An express offer is made by words spoken or written.

Examples:
(1) A says to B, "Will you purchase may car for Rs. 15,000? It is an oral offer.
 (2) A, through a letter asks B to buy his car for Rs. 15,000. It is a written offer.

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Implied Offer - An implied offer is not made by words spoken or written. It is implied from the conduct of
the parties or from the circumstances.

Example:

(1) Public Transport, like, Railways. DTC in Delhi or MEST in Mumbai offer to carry passengers for a
certain fare on a particular route.

(2) Public Telephones or Weighing Machines in public places like, Railway Stations or Cinema Houses
offer their services for a certain amount, say one rupee.

2. Offer may be specific or general:

A specific offer is one which is made to a particular person. It can be accepted by the person to whom it has
been made, no one else can accept such an offer.
Example:
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A offers to sell his watch to B for Rs. 200. This is a specific offer made to B. It is B alone who can accept
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this offer and no one else can accept this offer, i.e., C or D cannot accept this offer.
A general offer is made to the world at large. Therefore, it can be accepted by any person

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3. Offer must give rise to legal obligation:
An offer to be valid must create legal relationship between the parties. The v ry purpose of entering into
intention it will not become a contract even if it is accepted by the party to whom it was made.
an agreem ent is to make it enforc eable at a Court of law. If the offer has not been made with this

Example:

A promised to pay Rs. 30 to his wife eve y month. Later, A failed to pay the amount. The wife filed a suit
against the husband to recover the amount. The Court held that she could not recover as the promise
was not made with an intention to create any legal relationship.

4. Terms of an offer must be definite and certain: The terms of an offer shouldn’t be vague or indefinite.
Example:
A has two cars - Ambassador and Fiat. He agrees to sell one of his cars to B for Rs. 20,000.
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It is not clear as to which of the cars A has agreed to sell. A might be thinking to sell the Ambassador car
while B mig t be thinking to purchase the Fiat car. The offer is not definite.
5. Offer must be distinguished from an invitation to offer: An offer must be distinguished from an
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invitation to offer. T e shopkeepers generally display their goods in showcases with price tags. The

shopkeeper in shared
uchcasesisnotmaking an offer so that you can accept it. He is, on the other hand,
inviting you to make an offer which he may or may not accept. Thus you cannot compel a shopkeeper to
sell the goods displayed in the showcase at the marked price. However, if there is specific law to sell
goods at marked price then the seller will have to sell at marked price. For example, during National
Emergency essential commodities like sugar etc. have to be sold at marked price.

6. Offer must be distinguished from a mere declaration of intention:

A declaration of intention to make an offer is not an offer. It is regarded as an invitation to offer. An

advertisement for sale in a Newspaper or Magazine etc. is not an offer for sale.
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Example:

A advertised to sell certain furniture by auction, B reached A's house to purchase the furniture. However,
A changed his mind not to sell the furniture. B cannot compel A to sell the furniture or even to recover his
damages, i.e., conveyance charges and damages for inconvenience caused to him due to cancellation of
the sale.

It should be noted that a general offer can be made through advertisement if the terms are certain and
capable of being accepted.

Example:

A lost his camera in a DTC bus. He announced a reward of Rs. 100 to the finder who may return it to him.
B found the camera after reading the advertisement and returned it to him. B is entitled to the reward.

7. Offer must be communicated:

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An offer must be communicated to the person to whom it is made. A person can accept the offer only
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when he knows about it. If he does not know it, he cannot accept it.
Example:
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G sent his servant L to trace his lost nephew. Later on G, announc d a reward for tracing the boy. L
without knowing about the advertisement of the reward tra d the boy and resto ed him to G. When L
came to know of the reward, he claimed it. G refused to give the reward. The Court held that L was not
entitled to recover the reward as the offer was not comm nicated to L. He could not accept an offer
which he did not know.

8. Communication of Special Terms:

Example: CourseHero
Special terms of a contract must be communicated. Generally, s ch cases arise in respect of general
offers, like tickets or receipts for depositing luggage at the Railway Station or receipts for clothes given for

dry cleaning etc. The study

printed are properly communicated.
ruleinthesecases is that parties are not bound unless conditions

A passenger was traveling from Dublin via toWhte haven with his luggage. On the back of the ticket, a

special This conditionwas printed according to which the Shipping Co. would not be liable for the loss of

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luggage. However, thisconditionwas not communicated to the passenger in as much as no such
words as RT.O. or See Back were print on the face of the ticket to draw the attention of the passenger. The court
held that t e passenger was not bound by those conditions as those were not communicated to him.
Hence the company was liable to pay for the loss of the luggage.

It should be noted t at an acceptor is bound by the condition even if the conditions are printed in a
foreign language. He s ould ask for its translation.

Again, an acceptor cannot even plead that he was illiterate or blind, provided the notice is reasonably
sufficient for the class of persons to which he belongs.

Again, it should be noted that the special terms of the contract should be brought to the notice of the
offeree at the time of offer was made. If the special terms are brought to the notice of the offeree after
the contract was made, the offeree will not be bound by them.
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Example:

A and his wife took a room on hire in a hotel. After booking the room, they entered the room and saw a
notice on the wall of the room. The proprietors not responsible for articles lost or stolen unless handed
over to the manager for safe custody."

Due to the negligence of the hotel staff, their property was stolen. Held, the proprietor of the hotel was
liable as the notice was not binding, because it came to the knowledge of the client only after the
contract to take the hotel on hire had already been made.

9. Offer must be made with a view to obtaining the consent of the other party to do or to abstain from
doing the act:

The offer must be made with an intention to get the consent of the other party to do or to abstain from
doing the act and not simply with a view to making known the intention of making an offer.
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A tells B, "I may sell my Television if I can get Rs. 2,000 for it. It is not an offer s it has not been ade with a
view to get the consent of B. It is a mere declaration of intention. Therefore, B cann t accept it by saying.
"I can pay you Rs. 2,000 for it." B is not accepting A's offer but is making his offer whi h A may or may not
accept.

10. Offer should not impose an unnecessary obligation to ommunicate non-acceptance:

Thus an offeror cannot say that if acceptance is not comm nicated by Sunday next, the offer would be

considered as accepted.
Example: resource
the above example, if he acceptor does not ccept CourseHerothe offer he will be put to an
unnecessary burden of
A offers his car to B for Rs. 20,000 saying, "If you do not reply by Sunday next, I shall presume, you have
accepted the offer."

A continuous offer is called a stan ing offer. For example, in our daily life we do not ask the newspaper vendor

daily to supply the n wspaper or the grocer to supply bread and butter. In such cases, we do not

In this case, no contract will be created even if the acceptor does not reply as the law does not permit a
Tender: study
party to impose an unnecessary obligation of the acceptor if he does not want to accept the offer. Thus in
informing the offeror via
hat he does not w nt to ccept the offer.

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 repeat the offer to the supplier of the above articles every day. We make such offer once for all. If we do not want the supply of such article in future, we ask the supplier to stop the supply of such goods. A tender is a
standing offer. It may be specific or continuous.

Continuous or Standing offer:

Very often, tenders are invited for the supply of goods as and when required. In such a case, the tender is
a standing offer. When such a tender is accepted it does not become a contract. It simply indicates that as
and when goods are required and order will be placed, both the parties are free to revoke the tender.

Example:

A agreed to supply coal to B up to 1,000 tons at Rs. 500 per ton as and when required for the year 1978. B
placed an order for 10 tons in the month of January, 1978. However, if before any order is placed by B, A

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revokes his offer as to future supply, A is not bound to supply any coal. Similarly, B is not under an
obligation to place the order for the supply of coal with A. B can place an order with any other coal
supplier also. B is not prevented from placing an order with any other supplier.

Thus a standing offer does not create a binding contract between the parties. A binding contract is
created only when an order according to the terms of the tender is placed with the party accepting the
tender.

Specific Tender:

Sometimes tenders are invited for the supply of specific quantity of goods or service. In such a case, when
a tender is accepted it becomes a contract.

Cross Offers:

Sometimes two parties make similar offers to each other without knowing the offer made by the other.
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These are called cross offers. In such a case, no binding contract will be created as no one has accepted
the offer made by the other. was .
Example:

D of Delhi by a letter makes an offer to M of Mumbai to sell his car for Rs. 10,000. At the same time M of
Mumbai makes a similar offer to D of Delhi to buy his (D's) car for Rs. 10,000. Offers f b th D and M cross
each other in the post. These offers are called cross offers. Such offers do not constitute acceptance
of one's offer by another. For example, it will not mean a eptan e of D's off r by M or M's offer by D.
Both are making the offer and none of them is accepting the offer. Hence, there is no contract.

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