Week 2 Slides

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Contract Law I - Week 2
By: Nitin Gomber Esq.

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What is Acceptance?
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Revocation of an Offer
(what we know so far)
n  Section 5 of the ICA says, “A proposal may be revoked at any
time before the communication of its acceptance is complete as
against the proposer, but not afterwards…”
n  When does the communication of acceptance is complete as

against the proposer? When it is put in a course of transmission
to him, so as to be out of the power of the acceptor.
n  The communication of a revocation is complete (Section 4 ICA):
As against the person who makes it, when it is put in the course of
transmission to the person to whom it is made, so as to be out of
the power of the person who makes it;
As against the person to whom it is made, when it comes to his

knowledge;
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(what we know so far)
The crux of the foregoing is the following:
(1) A proposal may be revoked at any time before the offeree

puts his acceptance in the course of transmission.
(2) In order for the revocation to be effective, the revocation

must come to the knowledge of the offeree before he puts his
acceptance in the course of transmission.
Example: A offered B to sell his property for £750. B took the

offer letter and went home. He posted his letter of acceptance
the same day at 4pm, which reached A, the next day at 10am. A,
however, had posted a revocation letter to B at 3:50pm, which
reached him at 10am the next day. What if the revocation letter
would have reached B at 3:49pm the same day?
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Sadhoo Lal Motilal v. State of Madhya Pradesh (AIR 1972 All 137)
Facts
q  On 13/02/1969, Forest Department of MP issued a Tender Notice for

purchase of tendu leaves.
q  Under clause 9 of the Tender Notice, sealed tenders were to be

submitted by 5pm on 3/03/1969.
q  Under clause 10(a), tenders were to be opened on 6/03/1969.
q  Mr. Abdul Shakoor and Ms. Shyama Charan Gupta submitted their
tenders, however, on 31/03/1969 sent letters of revocation. These
letters were received by the Government on 02/04/1969.
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q  The
Government sent across their acceptance on 03/04/1969
and these were received by the petitioners on 09/04/1969.
q  The Government thereafter sent across notices to the

petitioners for claiming the price difference.
q  The
petitioners argued that they had revoked their offers
before its acceptance by the Government.
-------------------same case, but second set of facts-------------------
q  Now,
given that the Tender Notice dated 13/02/1969 did not
get an adequate response, a fresh Tender Notice (with the
same terms) was issued on 25/03/1969. The last date for
submitting tenders was on 5/4/1969 and the date of opening
tenders was 9/4/1969.
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q  Mr.
Sadhulal submitted a tender in time, but on 13/05/1969
withdrew the tender by way of a telegram.
q  The
Government, however, dispatched their acceptance to him on
28/04/1969. Sadhulal, however, denies receiving any such
communication.
q  Sadhulal
now denies the existence of a contract, whereas the
Government wants to claim the difference of sale price from him.
Arguments of the Government vis-à-vis Sadhulal
q  For
a communication to fall within the scope of Sections 4 and 5 of
the ICA, it should be shown that the letter sent was correctly
addressed to Sadhulal
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q  Mereposting of the letter would not place it ‘out of the power
of the acceptor’ within the meaning of Section 4 of ICA. The
post office is an agent of the sender.
Arguments of the Government vis-à-vis Mr. Abdul Shakoor and

Ms. Shyama Charan Gupta
q  Clause11 of the Tender Notice says, “The Tenderer whose

Tender has been opened shall be bound by his offer and by
the terms and conditions of this Tender Notice… Breach of
this condition shall entail forfeiture of the Earnest Money
Deposit required to be deposited.” The Government argues
that by way of this clause, the petitioners were bound by the
contract as soon as the tender was opened i.e. on 3/03/1969.
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Decision
q  Re: Sadhulal, the Court held in favor of the Government.
q  Re:
Mr. Abdul Shakoor and Ms. Shyama Charan Gupta, the
Court held against the Government.
Rationale
q  Court relied on plain readings of Sections 4 and 5 of the ICA.
q  TheCourt famously quoted a rule from another judgment

saying, “Even if the acceptance does not reach the proposer for
the reason that it is lost or misplaced in transit, a contract would
be complete and for its breach the proposer would be entitled
to sue in damages”. [Baroda Oil Cakes Traders v. Parshotam
Narayandass Bagulia, AIR 1954 Bom 491]
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Dickinson v. Dodds (1876) 2 Ch D 463
Facts:
q  On 10/06/1874, Mr. John Dodds signed and delivered to the

Plaintiff, Mr. George Dickinson, a memorandum.
q  Thematerial part of the said memorandum read, “I hereby agree

to sell to Mr. George Dickinson the whole of the dwelling –
house… belonging to me, for the sum of £800”
q  Inthe post-script it was also stated, “This offer to be left over
until Friday, 9 o’clock on 12/06/1874.”
q  On 11/06/1874, Mr. Berry, agent of Mr. George Dickinson,

informed him that Mr. John Dodds had been offering or agreeing
to sell the property to Mr. Thomas Allan, the 2nd defendant.
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q  Afterlearning of the same and intending to stop Mr. Dodds to

sell the property to someone else, on the same day, Mr. George
Dickinson went to the house of Mrs. Burgess, the mother-in-law
of Mr. Dodds (this is where Mr. Dodds was staying) and left with
her a formal acceptance in writing.
q  Mrs.
Burgess did not give the letter of acceptance to Mr. Dodds
as she forgot about it.
q  On
12/06/1874, at about 7am (the offer was lapsing at 9am!) Mr.
Berry and Mr. Dickinson met Mr. Dodds separately and handed
over a copy of the formal acceptance to him (Mr. Dickinson
agreed that the agent was purposefully stationed at Mr. Dodds
house)
q  Mr.
Dodds responded, “You are too late. I have sold the
property.” Apparently, on 11/06/1874, Mr. Dodds had signed a
formal contract for the sale of the said property to the 2nd
Defendant Mr. Allan for £800 and had received a deposit of £40
from him already.
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q  Mr.Dickinson has now approached the Court to stop Mr.

Dodds from selling the property to Mr. Alan and in fact sell
the property in question to him. He argues that he had until
9am on 12/06 to accept the offer and he in fact accepted the
same on 11/06 by dropping a note of acceptance to his
mother-in-law. He also argues that Mr. Dodds never revoked
his offer and that is why the acceptance to it was valid in law.
q  Mr.Dodds argues that the memorandum sent to Mr.

Dickinson was merely an offer and it is well established that
until acceptance, either party may revoke its offer. In fact,
after the sale of the property to Mr. Allan, the offer was
automatically revoked.
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Decision:
q  The Court held in favor of Mr. Dodds.
Rationale:
q  It is not true that the only mode in which Mr. Dodds could
revoke his offer was by distinctly saying to Mr. Dickinson,
“Now I withdraw my offer”.
q  Nudum Pactum: No Consideration given for the promise to

keep the property unsold till 9 o’clock on 12/06. Therefore, it
was a promise that is not legally enforceable for want of
consideration.
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q  “Thequestion which arises is this – If an offer has been made

for the sale of property, and before that offer is accepted, the
person who has made the offer enters into a binding
agreement to sell the property to somebody else, and the
person to whom the offer was first made receives notice in
some way that the property has been sold to another person,
can he after that make a binding contract by the acceptance
of the offer? I am of the opinion, that he cannot.”
q  Nomeeting of minds (Meeting of minds at the time of entering

into a contract. Meaning that there should have been a meeting
of minds at the time of acceptance.)
q  Impossibility
of Performance (Just as when a man who has
made an offer dies before it is accepted. In this case, the
property does not exist at the time of acceptance!)
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Revocation / Lapse of an Offer
q  The revocation need not be communicated by the offeror personally. It is

sufficient if it is done through a reliable third party.
Position in India:
q  Section 6 of the ICA says a proposal is revoked:
Ø  By the communication of notice of revocation by the proposer to the other

party;
Ø  By the lapse of time prescribed in such proposal or if no time is

prescribed, by the lapse of a reasonable time;
Ø  By the failure of the acceptor to fulfil a condition precedent to acceptance.
Ø  By the death or insanity of proposer (provided this comes to the

knowledge of acceptor before accepting)
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Example: During an auction, A bid for a property. His was the

highest bid. However, before the hammer could fall and the bid
accepted, A conveyed to the host that he is withdrawing his bid.
The host nonetheless went ahead and ‘knocked down’ the
property to A. Valid agreement?
[A successfully revoked the offer (by bringing it to the knowledge of

the host + notification by A himself) before it was accepted.]
Example: A sent a telegram to B asking, “Will you buy my pen for

Rs. 10? Please respond by 5pm today.” B sent the telegram to A at
4pm the same day, however, it reached A only at 6pm. Valid
agreement?
[The question is did A want to receive the telegram by 5pm or he

want only B to post it. Given that facts are limited in this hypothetical,
there is no one correct answer to this question. Figuring when the
offer lapsed is a matter of fact and will require a further analysis of
the circumstances.]
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Example: The last date in a University to apply for admission in

its LLB course was August 15, 2015. A, an aspirant posted the
application on August 15, 2015, but it reached the University on
August 16, 2015. Valid contract?
[The calling of applications by the University is likely an invitation

to offer. Therefore, when A applied for admission to the
University, it was merely an offer, which the University was free to
accept or reject.]
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n  What is ‘reasonable time’ under Section 6 of the ICA?
The definition of ‘reasonable time’ is a question of fact depending on the

surrounding circumstances in which the agreement was made.
Example: On Jan 1, 2015, A makes an offer to B saying, “You can buy all
my shares in Company X for Rs. 1 lakh.” B, on March 2, 2015 accepts A’s
offer. Did A’s offer lapse before B’s acceptance? What do you think will be
a reasonable time for B to accept A’s offer?
[The value of shares fluctuates rapidly. Therefore, it is unlikely that a period

of two months is considered reasonable for dealing in shares.]
Example: On Jan 1, 2015, A makes an offer to B saying, “You can buy my

Flat (No. A101 in DLF Pinnacle, Gurgaon) for Rs. 1 crore.” B, on Feb 2,
2015, accepts A’s offer. Did A’s offer lapse before B’s acceptance?
[The value of immovable property does not fluctuate rapidly and people
usually take some time before buying one. Therefore, depending on other
facts, it is likely that a period of two months is considered reasonable for
dealings in land.]
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n  Condition precedent to Acceptance
This sub-section suggests that if a condition is to be complied

with by the acceptor, before acceptance, its non-fulfilment will
prevent the formation of a contract.
Example: A writes to B, “I’m open to selling my X property for

Rs. 500 to you. We will sign the final agreement on 15 August,
2015. However, I would like you to deposit Rs. 250 in Y Bank in
my account no. 1234 by 13 August, 2015 if you are serious to
buy this property. B does not deposit this amount. However, on
15 August, 2015 B writes to A saying, “I accept your offer. Here
is a cheque for Rs. 500.”
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n  By the death or insanity of proposer (provided this comes to

the knowledge of acceptor before accepting)
Example: A takes part in an auction, where the sale of goods

was to be final only after court’s approval. A is the highest
bidder and the approval of his bid is to come up before the
court on Jan 1, 2016. A dies on Dec 01, 2015. Has the offer been
validly revoked by the death of A?
[Had it been mentioned in the facts above that the Court was
aware of the fact that A is dead, the offer would have been
deemed to have been revoked/lapsed. However, the facts above
are silent on this aspect.]
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Communication of Acceptance
(What we know so far)
n  Section 2 (b) of the ICA says, “When the person to whom the
proposal is made signifies his assent thereto, the proposal is
said to be accepted. A proposal, when accepted, becomes a
promise.” [Every promise is an agreement]
n  “Signifies” means communicating to another.
Now, the question is, how does one communicate acceptance?
Section 3 of the ICA says, “The communication of… acceptance of

proposals… are deemed to be made by any act or omission of the
party proposing… by which he intends to communicate such
proposal or which has the effect of communicating it.”
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n  Section 8 of the ICA says, “Performance of the conditions of a

proposal… is an acceptance of the proposal.”
n  Signification / communication of acceptance is as a general

rule required. However, such notification may not be required
when there is an agreement between the parties to that effect
or where the parties by their course of conduct make it
appear that such notification was not required or where the
usage of trade does not demand a notification of such
acceptance be given.
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n  Example: A offered to buy his nephew’s horse for Rs. 1000
and added, “if I hear no more from you, I shall consider the
horse mine at Rs. 1000”. The nephew did not communicate
his acceptance to A, but told B (an auctioneer) to remove the
horse out of the sale as he intended to reserve it for his uncle.
B (the auctioneer) sold the horse by mistake. Did the actions
of the nephew had the effect of communicating acceptance?
[This facts in this example have been borrowed from Felthouse v.

Bindley (1862) 11 CBNS 869. In the above example, the nephew
never communicated his acceptance to A. He did communicate it
to B (the auctioneer), but that did not have the effect of
communicating it to A. More so, the nephew had no obligation to
reply and his silence in all likelihood did not constitute
acceptance.]
+ Acceptance must be absolute / unqualified
According to Section 7 of the ICA:
q  In order to convert a proposal into a promise, the acceptance must:
(1) Be absolute and unqualified;
(2) Be expressed in some usual and reasonable manner, unless the

proposal prescribes the manner in which it is to be accepted. If the
proposal prescribes a manner in which it is to be accepted, and the
acceptance is not made in such manner, the proposer may, within a
reasonable time after the acceptance is communicated to him, insist
that the proposal shall be accepted in the prescribed manner, and not
otherwise; but, if he fails to do so, he accepts the acceptance.
q  Theforegoing section implies that any acceptance containing

additions, limitations or other modifications shall constitute a
counter-offer, which must be accepted by the original
proposer before a contract is made.
q  It
also means that unless there is an absolute and unqualified
acceptance, the stage of negotiations has not yet passed and
therefore, no legal obligation arises.
q  The issue whether negotiations between the parties is still

open to bargaining, or has resulted in the formation of a
contract, will depend on the facts and circumstances of each
case. The court will look at what the parties write, how they
act, infer weather parties are still negotiating etc.
q  The
rule in the first sub-section is based on the principle that
unless the parties have consensus ad idem i.e. are of one
mind, there cannot be an agreement between them. This is
also known as the “mirror rule” i.e. the acceptance must
match the terms of the offer.
q  Regarding the second clause of Section 7, the burden of

prescribing a mode of acceptance is on the offeror. i.e. If the
offeror does not prescribe a specific method, the acceptor
has to follow the usual and reasonable mode.
q  “Usual
and reasonable mode” includes what must have been
within the contemplation of the parties according to the
ordinary practice followed within a particular trade or
business or practice.
q  Example: A made an offer to B saying, “Will you buy my beloved

Maruti 800 for Rs. 1 lakh?” B responded, “Sure. I will definitely buy.
But, is it okay if I pay Rs. 90,000?” Valid contract? [B’s acceptance is
not absolute here.]
q  Example: A made an offer to B saying, “Will you buy my beloved

Maruti 800 for Rs. 1 lakh?” B responded, “Sure. I will definitely buy.
But, is it okay if I pay Rs. 90,000?” A responded, “I’m sorry, no.” B
responded, “That is ok. I’ll buy your car for 1 lakh only, as you
proposed.” A never responds. B sues for breach of contract. Is
there a valid contract? [A counter offer kills the original offer. B’s
counter-offer killed A’s original offer and now B cannot accept it.]
q  Example:A made an offer to B by telegram saying, “Will you buy

my beloved Maruti 800 for Rs. 1 lakh? Please telegram your
acceptance.” B responds by post, “I accept your offer.” A never
objects to this. Valid contract? [Here the offer prescribes a mode of
accepting. Given that acceptance was not made in the prescribed
manner, the onus is on A now as per Section 7 of the ICA]
n  Example: A made an offer to B asking, “Will you purchase my beloved

Maruti 800 for Rs. 1 lakh?” B responded, “What colour is your car?” Is B’s
statement a counter-offer? [B is merely asking for more information. Its
not a counter-offer]
n  Example: A held an auction for auctioneering B’s goods. However, given
the lien the goods carried, the sale was subject to the approval of the
court. C was the highest bidder at the auction and his bid accepted by
the fall of the hammer. However, before the court approved C’s bid, he
conveyed his withdrawal to A, as well as the court. Is C bound by the
acceptance of A and may not withdraw? [The acceptance was provisional
from A. Until final acceptance is put in the course of transmission to C, he
may withdraw.]
n  Example: A made an offer to B asking, “Will you purchase my beloved

house for Rs. 1 crore?” B responds, “Sure, but subject to the condition
that my lawyers are satisfied of your clear title.” [B’s acceptance merely
states the position of law on the subject i.e. the purchaser has the
obligation to check the title deeds of property that he buys.]
n  Example: A says to B, “If you will send me orders for coal, I shall
supply it to you for a period of twelve months at the rate of 1000 /
ton” B says, “I agree.” Is there a valid contract here? [A’s statement
was a mere invitation to offer. Apply quantity argument + No
consideration]
n  Example: A says to B, “If you will send me orders for coal, I shall
supply it to you for a period of twelve months at the rate of 1000 /
ton” B says, “I agree.” B then says to A, “Please send me 500 tons of
coal. Find attached the cheque of 500x1000 with this letter.” A says to
B, “Sorry, don’t have enough coal to supply.” Is A in breach of his
contract? [A’s second statement is an offer which A is free to accept or
reject. No breach]
n  Example: A says to B, “I will sell you my watch for Rs. 1000.” B says, “I
hate you for quoting such a high price! To be honest, I will not like to
eve r t a l k t o yo u a f t e r t h i s . I a c c e p t yo u r o f f e r
nevertheless.” [Immaterial phrases in the course of dealings may be
ignored if they do not affect the reasonableness of the contract.]
n  Example: A says to B, “I’m ready to sell my flat (A-101) in

Eden Heights, Gurgaon to you for Rs. 1 crore.” B responds, “I
accept. But, this agreement is subject to the preparation and
execution of a formal deed of conveyance.” Valid contract?
[B’s acceptance merely states the position of law on the
subject.]
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Acceptance - General
Brogden v. Metropolitan Railway Company (1877) 2 AC 666 (HL)
Facts:
q  M/s
Brogden & Co. had for some years supplied the Metropolitan
Railway Company with coal. All this while, there was no formal
agreement in place between the two.
q  At
last, it was suggested by M/s Brogden & Co. that a contract
should be entered into between them.
q  Agents
of both these parties met and finalized the terms of the
agreement, however, some parts of it were left blank.
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q  This draft agreement was first handed over to the agent of M/
s Brogden & Co. The senior partner in the firm Mr. Alexander
Brogden made a few changes to the draft, including: (1)
penning down his firm’s name, (2) inserting the name of the
Arbitrator, (3) adding the word ‘upper’ before the words
‘four-feet seam’, and, (4) changed the words ‘while they shall
fulfil’ to ‘during the period of’, so that the clause read, “The
company shall pay according to the direction of the
contractors every month during the period of this
agreement.”
q  Mr.
Alexander Brogden then wrote ‘approved’ at the foot of
the paper and signed his own name on the draft agreement.
q  Theagent of Mr. Alexander Brogde then handed over the

draft agreement to his agent to be sent to Metropolitan
Railway Company.
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q  On
receiving the said draft agreement, the proper custodian of
Metropolitan Railway Company put the agreement in his desk
and nothing further was done to it. The cover letter along with
the agreement stated, “If you have anything farther to
communicate… you will find me.”
q  Now,on the very next day, the custodian of contracts for the
Metropolitan Railway Company writes to M/s Brogden & Co.
saying, “We shall require 250 tons per week of locomotive coal,
commencing not later than 1st January next.” Note: He does not
talk about the contract in any way. He’s silent on it.
q  M/s
Brogden & Co. responded, “We have arranged to supply you
quantity you name, 250 tons weekly, from 1st January.”
q  The
foregoing process was in accordance with the contract + the
price charged was in accordance with the new contract + the
delivery date in the contract was 1st January + the upper limit of
the delivery of coal was not reached as per the agreement.
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q  After
a period of time, the Metropolitan Railway Company wrote
to M/s Brogden & Co. complaining of irregular supplies of coal.
To this, the response they got was, “We are sending you as much
as you are entitled to receive by contract.”
q  Now, MetropolitanRailway Company sues M/s Brogden & Co. for
breach of contract.
q  However, M/s Brogden & Co. argues that there was no such
contract and accordingly denies breaching it. They argue that
merely exchanging drafts would not lead to the conclusion of a
valid contract.
q  Onthe other hand, the Metropolitan Railway Company argues

that everything that is required of a valid contract has been
done. There were no new propositions that could change the
obligations of parties (except possibly the name of the arbitrator,
which clause could possibly be rescinded.)
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Issue:
Whether or not the dealings between Metropolitan Railway

Company and M/s Brogden & Co. were based upon the draft
contract signed between the two?
Decision:
The court answered this in the affirmative.
Rationale:
q  If
a draft having been prepared and agreed upon as the basis of
a contract to be executed between the two parties, the parties
without waiting for the execution of the more formal instrument,
proceed to act upon the draft, and treat it as binding upon them,
both parties will be bound by it. But, it must be clear that the
parties have both waived the execution of the formal
instrument and have agreed expressly or as shown by their
conduct, to act on the informal one.
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Entores Limited v. Miles Far East Corporation [1955] EWCA Civ 3
Facts:
q  Entores Limited is an English company, whereas Miles Far East

Corporation is an American corporation with agents all around the
world, including a Dutch company in Amsterdam.
q  Entores Limited (based in London) sent an offer (in response to their
invitation to bid) by telex for the purchase of some cathodes to Miles
Far East Corporation (based in Amsterdam).
q  Miles Far East Corporation sent their acceptance to Entores Limited
by telex, as well.
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q  Dispute
arose between the two and Entores Limited now wants
to sue Miles Far East Corporation in England.
q  Miles
Far East Corporation argues that the contract was made in
Amsterdam and therefore, English courts have no jurisdiction.
Issue: Whether the contract was formed in London or Amsterdam?
Decision:
The contract was formed in London.
Rationale:
q  The
postal rule does not apply in cases where communication
takes place through instantaneous modes.
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n  The Judge famously quoted, “Let me first consider a case

where two people make a contract by word of mouth in the
presence of one another. Suppose, for instance, that I shout an
offer to a man across a river, but I do not hear his reply
because it is drowned by an aircraft flying overhead. There is
no contract at that moment. If he wishes to make a contract,
he must wait till the aircraft is gone and then shout back his
acceptance so that I can hear what he says. Not until I have
his answer am I bound.”
n  Accordingly, in cases where instantaneous modes of

communication are used for the formation of a contract, the
contract is deemed to be made where the acceptance is
received.
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Bhagwandas Goverdhandas Kedia v. M/s Girdharilal

Parshottamdas & Co. 1966 AIR 543
q  The
respondents entered into a contract with the appellants
by telephone. The offer was spoken by the respondent at
Ahmedabad and the acceptance was spoken by the
appellants at Khamgaon.
q  Alleging breach of the said contract, the respondents

initiated a suit in Ahmedabad. The appellants challenged the
said court’s jurisdiction.
q  The SC referring to the Entores case held that in case of

instantaneous communications, a contract comes into effect
at a place where the acceptance is received.
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q  Justice
Hidayatullah appended a dissenting opinion to this
judgment. He made the following arguments:
Ø  TheCourt in Entores was not called upon to interpret a written law.
In India, we have the Indian Contract Act, 1872 that governs all
private contracts. And our Act does not talk of a separate rule of
phone, telegraph, post etc.
Ø  Moreso, in this case, it is obvious that the word of acceptance was
spoken at Khamgaon and the moment the acceptor spoke his
acceptance, he put it in the course of transmission to the proposer
beyond recall. The time gap was very short in this, however, if we are
to put new inventions into the frame of our statutory law, we are
bound to say that the acceptor by speaking into the telephone put
his acceptance in the course of transmission to the proposer. The
contact, was therefore made at Khamaon and not, Ahmedabad.
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Perala Krishnayyam Chettiar v. G. Paimanathan Chettiar, AIR

1917 Mad 63
Facts:
q  Defendant wrote to plaintiff on 17th October, 1909 to send 15 or 20 bags

of areca nuts ‘at once’. The letter also stated that the plaintiff should
attend to other business, only after sending this consignment.
q  On28th October, the plaintiff wrote to the defendant that he would send
the goods within 15 or 20 days. Defendant did not respond to this letter.
q  25 bags of nuts were finally sent by the plaintiff on 1st December.
q  The
Defendant refused to take delivery of these nuts. Hence, this suit for
breach of contract and damages.
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Issue:
Whether or not there existed a valid agreement between these

two parties so that the defendant is liable for damages?
Decision:
No valid agreement existed. Defendant not liable.
Rationale:
q  Theproposal of the defendant that there should be an

immediate consignment was not accepted by the plaintiff.
The letter of October 28th amounted to a counter – offer.
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q  Silencemay amount to acceptance only under exceptional

circumstances. In this case, the defendant was under no
obligation to respond to the counter-proposal.
q  Moreover,the acceptance letter sent by the plaintiff was

neither absolute nor unqualified as required by Section 7 of
ICA.
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Badrilal v. Indore Municipality, AIR 1973 SC 508
Facts:
q  Mr. Badrilal

was a lessee of a plot of land in Indore belonging
to the Municipal Corporation for a periof of 10 years in 1919.
q  This
lease was renewed from time to time and the last
renewal was in 1939 for a period of 10 years.
q  OnMay 24, 1949, the Municipal Corporation issued a notice

to Mr. Badrilal to vacate the land by September 30, 1949.
q  Mr.
Badrilal then applied to the Municipal Commissioner to
grant him a lease of 99 years or if that is not possible, for a
period of 10 years.
+
q  On
December 19, 1949, the Municipal Corporation passed a
resolution to the following effect:
“Opinion of the Lease Committee is accepted. The land… be

given to applicant Badrilal Bholaram only in case he is ready to
deposit Rs. 16, 212 of the lease rent and upset price as per
Schedule rate in accordance with letter No. 3239 sent to him by
the Municipal Commissioner. Otherwise the said land be taken
back into possession.”
q  OnDecember 31, 1949, the Municipal Commissioner wrote to

Mr. Badrilal informing him of the aforesaid resolution. He was
also asked to deposit the upset price within 15 days,
otherwise steps would be taken to take back the possession.
+
q  On January 09, 1950, Mr. Badrilal wrote back saying that the
upset price and rent claimed were too much and requested
that these be modified.
q  Mr. Badrilal

then filed a petition with the Minister in charge of
Municipalities which was dismissed in 1952.
q  In1956, Mr. Badrilal wrote to the Municipal Commissioner

requesting that an amount of Rs. 8212 be accepted and he
may be permitted to pay the balance in annual instalments of
Rs. 1000 each. The Commissioner accepted, but no such
amount was every deposited in spite of repeated notices.
q  This suit was filed in 1957.

+
q  OnMarch 17, 1959, Mr. Badrilal wrote to the Commissioner, “I

beg to say that it has been approved by you to give me the
plot of land… on permanent lease of 99 years after having
received an upset price from me. I agree to pay whatever
lease rent found due against me up to March 31, 1951
besides reasonable costs of the suit and I have deposited
today and I undertake to pay in cash any amount found due
against me at the time of execution of the lease deed.”
q  OnApril 23, 1959, the Commissioner wrote to Mr. Badrilal

asking him to deposit Rs. 16,212 after deducting the sum
already paid by him.
q  OnMay 31, 1960, the Municipal Council passed a resolution

refusing to grant the lease to the appellant and directing the
Municipal Commissioner to take back possession of the land.
+
q  It
is of utmost important to note here that the Commissioner
cannot enter into a contract with Mr. Badrilal all by himself
and can do so only if it is santioned by the Municipal
Corporation under Section 80 of the MPMC Act.
Issue:
Whether or not there is a valid contract between Mr. Badrilal

and Indore Municipal Corporation?
Decision:
No valid contract exists between the parties.

+
Rationale:
q  The
resolution / offer of the Municipal Corporation dated
December 09, 1949 was specific enough laying down the
conditions of acceptance.
q  Mr.
Badrilal instead of accepting the same by depositing the
amount requested in the offer, went on to make a counter
offer on January 09, 1950.
q  Theletter of Mr. Badrilal made on March 17, 1959 was a new
offer which was was rejected by the Municipal Corporation
on May 31, 1960.
+
R v. Clarke (1927) 40 CLR 227
q  OnMay 21, 1926, a reward of £1000 was publicly offered by

the Government of Western Australia “for such information as
shall lead to the arrest and conviction of the person or
persons who committed the murders” of two police officers.
q  The
same statement also stated that His Excellency the
Governor will be advised to extend a free pardon to any
accomplice not being the person who actually committed the
murders who shall first give the required information.
q  OnJune 10, 1926, the petitioner and another person were
arrested and charged in connection with the murder of one of
the police officer’s who was murdered.
+
q  On June 10, 1926, the petitioner, who had seen the proclamation
made a statement to the police about one “Coulter” and “Treffene”
to be the real murderers. At the trial of these two men, the
petitioner was presented as a crown witness and accordingly the
two murderers were convicted of murdering the two policemen.
q  The petitioner was thereafter released.
q  Now, the

petitioner claims the reward of £1000 as was offered in the
proclamation of May 21, 1926.
q  Rargued that petitioner’s statement: (1) was not made with a view
to obtaining the reward, (2) that he gave no information leading to
the arrest of the murderers; (3) R also argued that the mere fact that
the petitioner gave evidence at trial which led to the conviction of
the murderers does no entitle him to the award.
+
q  The
petitioner argues that he never stated that he did not act
upon the faith of the offer made in the proclamation and that
anyway his motive does not count.
Issue:
Whether or not a valid contract existed between R and Clarke?
Rationale:
q  The petitioner was acting with reference to a specific

criminal charge against himself, and not with reference to a
general request by the community for information against
other persons. The petitioner did not act on the faith of, in
reliance upon, the proclamation.
+
q  “Itis true that without his information and evidence, no

conviction was probable, but it is also abundantly clear that
he was not acting for the sake of justice or from any impulse
of conscience or because he was asked to do so, but simply
and solely on his own initiative, to secure his own safety from
the hand of the law.”
q  “Itis not true to say that since such an offer calls for
information of a certain description, then, provided only
information of that description is in fact given, the informant
is entitled to the reward. That is not true unless the word
‘given’ is interpreted as ‘given in exchange for the offer.’
Performance in that case is the implied method of
acceptance, and it simultaneously effects the double purpose
of acceptance and performance.”
+
q  “Theperformance of the conditions in the offer do lead to

acceptance in some cases. However, even in such cases, until
and unless the motivation of the acceptor is the offer itself, no
such contract is formed.”
q  “An offer of £100 to any person who should swim a hundred
yards in the harbour on the first day of the year, could not be
accepted by a person who accidentally was thrown
overboard on that date and swam the distance simply to save
his life, without any thought of the offer.”
Note: Clarke had made a statement that he in fact did not

intend to claim the reward at the time of making his
statement. He in fact also admitted that his real motive was
to clear himself of the charge of murder.
+
Butler Machine Tool Co. Ltd v. Ex-Cell-O Corporation (En-

Gland) Ltd [1979] 1 All ER 965
Facts:
q  Butler
Machine Tool Co. Ltd is a supplier of industrial
machinery (“Seller” from hereon), whereas Ex-Cell-O
Corporation (En-Gland) is a buyer of this machinery
(“Buyer” from hereon).
q  OnMay 23, 1969, the Seller offered to deliver a product for
the price of £75,535 with a promise of delivery in 10 months.
q  On
the front page of the offer itself, it stated, “Other terms
and conditions are on the reverse of this quotation.”
+
q  Onthe back, there were 16 conditions in small print starting

with the following general condition, “All orders are accepted
only upon and subject to the terms set out in our quotation and
the following conditions. These terms and conditions shall
prevail over any terms and conditions in the Buyer’s order.”
q  Clause 3 was the price variation clause. It said, “… Prices are
based on present day costs of manufacture and design and
having regard to the delivery quoted and uncertainty as to the
cost of labour, materials etc. during the period of manufacture,
we regret that we have no alternative but to make it a condition
of acceptance of order that goods will be charged at prices
ruling upon the date of delivery.”
+
q  On
May 27, 1969, the buyers placed an order with the list of
products to be supplied. However, the order read, “Please
supply on terms and conditions as below and overleaf.”
q  Some of the terms that had changed were, (a) an additional
clause was added for the cost of installation of the said
products, which was quoted as £3100, (b) the delivery date
read, “10 to 11 months”, (c) the goods were to be delivered to
the address of the buyer, whereas the seller’s quote was ex-
warehouse, (d) the price variation clause was no where to be
found, (e) an additional clause for rejection of delivery by
buyer was inserted in case delivery did not happen in time,
whereas the sellers t/c stated that such cancellation will not
be accepted.
+
q  On the foot of the buyers’ order there was a tear-off slip,
which read, “ACKNOWLEDGEMENT: Please sign and return to
buyer. We accept your order on the Terms and Conditions
stated thereon… and undertake to deliver by…Date… Signed”
q  OnJune 5, 1969, the sellers wrote to the buyers, “We have
pleasure in acknowledging receipt of your official order dated
May 27 covering the supply of products… This is being entered
in accordance with our revised quotation of May 23 of delivery
in 10/11 months, i.e. March / April, 1970. We return herewith,
duly completed, your acknowledgment of order form.” The
acknowledgement was duly signed, torn off and attached
with this letter.
+
q  Thesellers did not keep their promise of delivering the
product by March / April, 1970. The machine was in fact only
ready for delivery by September, 1970. However, the buyers
could only have taken delivery in November, 1970 given their
production schedule.
q  At
the time of delivery, the Seller invoked the price variation
clause for the rise in costs between May 27, 1969 (when the
order was given) and April 1, 1970 (when the products ought
to have been delivered). It came out to £2892. The Buyer
rejected this claim. Hence this suit.
Issue:
On whose terms and conditions did the Seller and the Buyer
entered into this contract for the supply of products?
+
Decision:
The Court held in favour of the Buyer.
Rationale:
q  Wherever there is a ‘battle of forms’ there is a contract as soon

as the last of the forms is sent and received without objection
being taken to it.
q  Thisletter of June 5, where it refers to the quotation of May 23

was a reference to the price and the identity of the machine only
and it does not import all the small print conditions on the back
of the quotation.
+
q  TheJudges also pointed out that had the letter of June 5
clearly stated that the acceptance of this order is on the terms
and conditions earlier specified, then it would have
amounted to a counter offer.
q  Theletter of June 5 in its wording is not effective to over-ride

the unequivocal terms printed on the acknowledgment of the
order.
*****
+
Revocation of Acceptance
What we know so far?
q  Communication of an acceptance is complete (as against the

acceptor), when it comes to the knowledge of the proposer.
[Section 4 of the ICA]
q  Section
5 of the ICA says, “… An acceptance may be revoked at
any time before the communication of the acceptance is
complete as against the acceptor, but not afterwards.” i.e. an
acceptance may be revoked at any time before it comes to the
knowledge of the proposer.
q  Communication of revocation is complete (as against the person

to whom it is sent), as soon it comes to the knowledge of that
person.
When the foregoing rules are read together, it implies that when a
revocation is sent across after an acceptance of an offer is sent
across, the one that reaches first will have effect.
+
Revocation of Acceptance
Example: A says to B, “Will you buy my car for Rs. 1 lakh?” B

responds, “Yes, I would love to. Attached is the cheque for the same.
Let me know when can I take delivery of the car.” This letter hasn’t
reached A yet. In the meanwhile, B has a change of heart and he
writes to A again, “I revoke my acceptance. Please do not deposit the
cheque.” The letter of revocation reaches A first, whereas the
acceptance letter reaches on the next day. Valid revocation of
acceptance? [Revocation reached before acceptance. Therefore,
revocation rules.]
Example: A says to B, “Will you buy my car for Rs. 1 lakh?” B

responds, “Yes, I would love to. Attached is the cheque for the same.
Let me know when can I take delivery of the car.” This letter hasn’t
reached A yet. In the meanwhile, B has a change of heart and he
writes to A again, “I revoke my acceptance. Please do not deposit the
cheque.” Now, A receives these two letters at the same time. Is there a
valid revocation of the acceptance? [When acceptance and revocation
reach together, revocation is likely to take effect]
+
Thank you!

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Contract Law I - Week 2

By: Nitin Gomber Esq.

n When does the communication of acceptance is complete as

n The communication of a revocation is complete (Section 4 ICA):

As against the person to whom it is made, when it comes to his

(1) A proposal may be revoked at any time before the offeree

(2) In order for the revocation to be effective, the revocation

Example: A offered B to sell his property for £750. B took the

q On 13/02/1969, Forest Department of MP issued a Tender Notice for

q Under clause 9 of the Tender Notice, sealed tenders were to be

q Under clause 10(a), tenders were to be opened on 6/03/1969.

q The Government thereafter sent across notices to the

-------------------same case, but second set of facts-------------------

Arguments of the Government vis-à-vis Sadhulal

Arguments of the Government vis-à-vis Mr. Abdul Shakoor and

q Clause11 of the Tender Notice says, “The Tenderer whose

q Re: Sadhulal, the Court held in favor of the Government.

q Court relied on plain readings of Sections 4 and 5 of the ICA.

q TheCourt famously quoted a rule from another judgment

Dickinson v. Dodds (1876) 2 Ch D 463

q On 10/06/1874, Mr. John Dodds signed and delivered to the

q Thematerial part of the said memorandum read, “I hereby agree

q On 11/06/1874, Mr. Berry, agent of Mr. George Dickinson,

q Afterlearning of the same and intending to stop Mr. Dodds to

q Mr.Dickinson has now approached the Court to stop Mr.

q Mr.Dodds argues that the memorandum sent to Mr.

q The Court held in favor of Mr. Dodds.

q Nudum Pactum: No Consideration given for the promise to

q “Thequestion which arises is this – If an offer has been made

q Nomeeting of minds (Meeting of minds at the time of entering

q The revocation need not be communicated by the offeror personally. It is

q Section 6 of the ICA says a proposal is revoked:

Ø By the communication of notice of revocation by the proposer to the other

Ø By the lapse of time prescribed in such proposal or if no time is

Ø By the failure of the acceptor to fulfil a condition precedent to acceptance.

Ø By the death or insanity of proposer (provided this comes to the

Example: During an auction, A bid for a property. His was the

[A successfully revoked the offer (by bringing it to the knowledge of

Example: A sent a telegram to B asking, “Will you buy my pen for

[The question is did A want to receive the telegram by 5pm or he

Example: The last date in a University to apply for admission in

[The calling of applications by the University is likely an invitation

The definition of ‘reasonable time’ is a question of fact depending on the

[The value of shares fluctuates rapidly. Therefore, it is unlikely that a period

Example: On Jan 1, 2015, A makes an offer to B saying, “You can buy my

n Condition precedent to Acceptance

This sub-section suggests that if a condition is to be complied

Example: A writes to B, “I’m open to selling my X property for

n By the death or insanity of proposer (provided this comes to

Example: A takes part in an auction, where the sale of goods

n “Signifies” means communicating to another.

Now, the question is, how does one communicate acceptance?

Section 3 of the ICA says, “The communication of… acceptance of

n Section 8 of the ICA says, “Performance of the conditions of a

n Signification / communication of acceptance is as a general

[This facts in this example have been borrowed from Felthouse v.

According to Section 7 of the ICA:

q In order to convert a proposal into a promise, the acceptance must:

(1) Be absolute and unqualified;

(2) Be expressed in some usual and reasonable manner, unless the

q Theforegoing section implies that any acceptance containing

q The issue whether negotiations between the parties is still

n  When does the communication of acceptance is complete as

n  The communication of a revocation is complete (Section 4 ICA):

q  On 13/02/1969, Forest Department of MP issued a Tender Notice for

q  Under clause 9 of the Tender Notice, sealed tenders were to be

q  Under clause 10(a), tenders were to be opened on 6/03/1969.

q  The Government thereafter sent across notices to the

q  Clause11 of the Tender Notice says, “The Tenderer whose

q  Re: Sadhulal, the Court held in favor of the Government.

q  Court relied on plain readings of Sections 4 and 5 of the ICA.

q  TheCourt famously quoted a rule from another judgment

q  On 10/06/1874, Mr. John Dodds signed and delivered to the

q  Thematerial part of the said memorandum read, “I hereby agree

q  On 11/06/1874, Mr. Berry, agent of Mr. George Dickinson,

q  Afterlearning of the same and intending to stop Mr. Dodds to

q  Mr.Dickinson has now approached the Court to stop Mr.

q  Mr.Dodds argues that the memorandum sent to Mr.

q  The Court held in favor of Mr. Dodds.

q  Nudum Pactum: No Consideration given for the promise to

q  “Thequestion which arises is this – If an offer has been made

q  Nomeeting of minds (Meeting of minds at the time of entering

q  The revocation need not be communicated by the offeror personally. It is

q  Section 6 of the ICA says a proposal is revoked:

Ø  By the communication of notice of revocation by the proposer to the other

Ø  By the lapse of time prescribed in such proposal or if no time is

Ø  By the failure of the acceptor to fulfil a condition precedent to acceptance.

Ø  By the death or insanity of proposer (provided this comes to the

n  Condition precedent to Acceptance

n  By the death or insanity of proposer (provided this comes to

n  “Signifies” means communicating to another.

n  Section 8 of the ICA says, “Performance of the conditions of a

n  Signification / communication of acceptance is as a general

q  In order to convert a proposal into a promise, the acceptance must:

q  Theforegoing section implies that any acceptance containing

q  The issue whether negotiations between the parties is still

q  Regarding the second clause of Section 7, the burden of

q  Example: A made an offer to B saying, “Will you buy my beloved

q  Example: A made an offer to B saying, “Will you buy my beloved

q  Example:A made an offer to B by telegram saying, “Will you buy

n  Example: A made an offer to B asking, “Will you purchase my beloved

n  Example: A made an offer to B asking, “Will you purchase my beloved

n  Example: A says to B, “I’m ready to sell my flat (A-101) in

q  Theagent of Mr. Alexander Brogde then handed over the

q  Onthe other hand, the Metropolitan Railway Company argues

q  Entores Limited is an English company, whereas Miles Far East

n  The Judge famously quoted, “Let me first consider a case

n  Accordingly, in cases where instantaneous modes of

q  Alleging breach of the said contract, the respondents

q  The SC referring to the Entores case held that in case of

q  Defendant wrote to plaintiff on 17th October, 1909 to send 15 or 20 bags

q  Theproposal of the defendant that there should be an

q  Silencemay amount to acceptance only under exceptional

q  Moreover,the acceptance letter sent by the plaintiff was

q  Mr. Badrilal

q  OnMay 24, 1949, the Municipal Corporation issued a notice

q  OnDecember 31, 1949, the Municipal Commissioner wrote to

q  Mr. Badrilal

q  In1956, Mr. Badrilal wrote to the Municipal Commissioner

q  This suit was filed in 1957.

q  OnMarch 17, 1959, Mr. Badrilal wrote to the Commissioner, “I

q  OnApril 23, 1959, the Commissioner wrote to Mr. Badrilal

q  OnMay 31, 1960, the Municipal Council passed a resolution

q  OnMay 21, 1926, a reward of £1000 was publicly offered by

q  The petitioner was thereafter released.

q  Now, the

q  The petitioner was acting with reference to a specific

q  “Itis true that without his information and evidence, no

q  “Theperformance of the conditions in the offer do lead to

q  Onthe back, there were 16 conditions in small print starting

q  Wherever there is a ‘battle of forms’ there is a contract as soon

q  Thisletter of June 5, where it refers to the quotation of May 23

q  Theletter of June 5 in its wording is not effective to over-ride

q  Communication of an acceptance is complete (as against the

q  Communication of revocation is complete (as against the person