Académique Documents
Professionnel Documents
Culture Documents
2 Contact Hr
Formation of Contract
An Offer
“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.” – Sec 2(a)
Offer/proposal is an expression by one party of his assent
to certain terms, provided that the other party involved in
the bargaining transaction will likewise express his assent
to the identically same terms.
Offer looks forward to an agreement to mutual expression
of assent.
Two concepts of Offer
a) Promise
b) Request
Example: If A makes an offer to sell his horse to B for
Rs.3,000/- there is promise to sell the horse to B and
also a request for the payment of Rs.3,000/-
If A were to say to B “I will give my car to you” and B
were to say “I will give Rs.500,000/- there is no contract.
In such cases there is only a promise, a mere expression
of intention
Promise
“When a person to whom the proposal is made signifies
his assent thereto, the proposal is said to be accepted.” –
Sec 2(b)
Promise in law is an accepted offer
If enforceable by law, is a contract, but if not, is a void
agreement
An offer which is not accepted cannot bind the offeror
especially when the contract was intended to be reduced
into writing
Promisor and Promisee
The person making the proposal is called the “promisor”
and the person accepting the proposal is called the
“promisee”.
The word person includes governments also.
Promisor and promisee must be different person
There cannot be an agreement by the same person acting
in different capacities
Example: Mortgagee put up the mortgage property for sale
under a power given him by his mortgage deed, he cannot
sell it to himself.
Consideration
“When at the desire of the promisor, the promisee or any other
person has done 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 the
consideration for the promise.”
Consideration must be conducive to contract
“at the desire of the promisor” imply a promise which has a real
effect in conducing the contract.
A promise without consideration is no contract in law and is
therefore not enforceable.
Consideration need not be to be benefit of the promisor (if the
promisee does some act by which a third person is benefited
which he would not have done but for the promise, the
consideration is sufficient).
Consideration for a promise need not necessarily move from
the promisee but may move from a third party
Agreement
Every promise or every set or promises, forming the
consideration for each other, is an agreement.
The acceptance of proposal may bring into existence a
promise but to have an agreement it is very essential that
there should be consideration for the promise.
Executed agreements: where one party has already
perform his part of agreement, while the other party has
to perform his part.
Executory: both the parties have to perform their mutual
promises.
Once the contract has passed the executory stage and
become a completed transaction, non-payment of price
no longer remains a ground for avoiding the contract
itself. The only remedy for the seller is to recover the price
Reciprocal promises
Promises which form the consideration or part of the
consideration for each other are called reciprocal
promises.
Void agreement
An agreement not enforceable by law is said to be void.
Contract
An agreement enforceable by law is a contract
Voidable contract
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.
A contract is said to be void in which a contract fails to be
made when it seems to have been made.
A contract is said to be voidable when it could be avoided
and which is not absolutely void.
Void contract
A contract which ceases to be enforceable by law becomes
void when it ceases to be enforceable.
RIGHT IN PERSONAM AND NOT RIGHT IN
REM
“Right in Rem” means a right available against the whole
world or world at large. Example, A is a owner of a flat in
Lahore. He has a right to possess and enjoy the flat
against the whole world.
“Right in Personam” means a right against a particular
person. Example, A owes a sum of Rs. 25,000/- to B. Here
B has a right to recover Rs. 25,000/- from A only. This
right of B is called Right in Personam.
The Contract creates obligations between the parties to
the contract and not against the whole world. It is,
therefore, rightly said that the law of contract creates
right in personam and not right in rem.
Communication, Acceptance and
Revocation of Proposals
Thus, a proposal may be made by any way, which has the effect of laying
before another person his willingness to do or not do something.
The acceptance can be signified similarly.
Haji Mohd Ishaq vs Mohd Iqbal SCC 1978,
The defendants accepted the goods supplied by the plaintiff through a go
between man and also paid part of the price. It was held that the defendants
were liable to pay the remaining balance because the proposal and its
acceptance were signified by their actions.
Role of Communication
For the proposal and acceptance communication
plays the central role. without communication
proposal and acceptance is not possible without
bringing proposal in the notice of the acceptor,
proposal cannot be completed. On the other
hand if the acceptance is not communicated to
the proposer, it cannot be completed. So we can
say that without communication agreement is
not possible between the two parties.
Communication of an Offer
The communication of an offer is completed when it comes the
knowledge of the person to whom it is made.
Example :- Suppose Mr. Warn proposes by letter to sell his factory to
Mr. Anderson for Rs. 10 million. When Mr. Anderson receives the
letter, the communication is completed.
In the above example this proposal is not completed as long as Mr .
Anderson does not receive the letter of Mr. Warn containing the above
proposal. If a proposer makes the proposal face to face to the acceptor
it completes, as the acceptors hears it.
Held: She could recover the reward as she had accepted the
offer by complying with the terms of the offer.)
Essential requirements of valid offer
An offer must have certain essentials in order to
constitute it a valid offer. These are:
The offer must be made with a view to obtain
acceptance.
The offer must be made with the intention of
creating legal relations. [Balfour v. Balfour (1919) 2
K.B.57Il
The terms of offer must be definite, unambiguous
and certain or capable of being made certain. The
terms of the offer must not be loose, vague or
ambiguous.
Invitation to offer
An offer must be distinguished from (a) a mere
declaration of intention or (b) an invitation to offer or to
treat.
An auctioneer, at the time of auction, invites offers from
the would-be-bidders. He is not making a proposal.
A display of goods with a price on them in a shop window
is construed an invitation to offer and not an offer to sell.
A prospectus issued by a company for subscription of its
shares by the members of the public, is an invitation to
offer. The Letter of Offer issued by a company to its
existing shareholders is an offer.
The offer must be communicated to the offeree. An offer
must be communicated to the offeree before it can be
accepted.
The offer must not contain a term the non-compliance of
which may be assumed to amount to acceptance.
Cross Offers