Legal rules as to acceptance

 Must be absolute and unqualified (inline with the offer)

 A say to S, I will purchase your phone for Rs. 10,000. B replies, I
will sell it for Rs. 12,000.
 Must be communicated to the offeror
 Must be according to the mode prescribed or usual and
reasonable mode
 Must be within a given time
 It cannot precede an offer
 It cannot be implied from silence
 It must happen before revocation
 Communication of Offer
2

 Communication of offer is complete when it comes

to the knowledge of the person to whom it is made

A proposes by a letter, to sell a house to B to a certain

price. The letter is posted on 09 th July. It reaches B on 11th
July
 Communication of offer is complete on 11 th July
 Communication of Acceptance
3

 B accepts A’s proposal, by a letter sent by post on 13th July.

The letter reaches A on 15th July.
 As against the proposer when it is put into a course
of transmission to him, so ass to be out of the power
of acceptor
 Communication is complete on 13th July as against A
 As against the acceptor when it comes to the
knowledge of the proposer
 Communication is complete as against B when the letter is
received by A (on 15th July)
 Communication of Revocation
4

 As against the person who makes it (offeror), when

it is put into a course of transmission to the person
to whom it is made
 As against the person to whom it is made (offeree),
when it comes to his knowledge
A revokes the proposal by 10th July and it reaches B on 12th
July.
 Time for revocation
5

 A proposal may be revoked at any time before the

communication of its acceptance is complete as against
the proposer, but not afterwards.
 A may revoke the offer anytime before B posts the letter of
acceptance i.e., 13th July

 An acceptance may be revoked at any time before the

communication of the acceptance is complete against the
acceptor, but not afterwards.
 B may revoke the acceptance anytime before it reaches A i.e., 15 th
July
 Consideration
6

A agrees to sell his house to X for 1lakh

 Quid Pro Quo – Something in return

 An act of doing something, or abstinence or

forbearance from doing something.
 Legal rules as to consideration
7

 It must move at the desire of the promisor

 It may move from the promise or any other person
 It need not be adequate
 It may be past, present or future
 It must be real and not illusory
 It must be something which the promisor is not
already bound to do
 It must not be illegal, immoral or opposed to public
policy
 Exceptions for contract without considerations
8

 Love and affection

 Compensation for someone who has already
voluntarily done something for the promisor
 Any gift actually made
 Promise to pay a time-bared debt
 Capacity to contract
9

 Every person is competent to contract who

a) is of the age of majority according to the law to which he
is subject
b) is of sound mind and
c) is not disqualified from contracting by any law to which
he is subject
 Capacity to contract
10

 Incompetent to contract:
 Minors (not completed age of 18 years + certain special
cases)
 Persons of unsound mind
 Persons disqualified by any law to which they are subject
 Flaw in consent
11

 Coercion
 Undue influence
 Misrepresentation/Fraud
 Mistake
 Contract Performance
12

 A contract need not be performed –

 when its performance becomes impossible
 when the parties involved, agrees to substitute a new
contract or to rescind
 when it is illegal
 when the person at whose option it is voidable, rescinds it
 Discharge of Contract
13

 Performance
 Agreement or consent
 Impossibility of performance
 Lapse of time
 Operation of law
 Breach of contract
 Contract of Indemnity
14

 Indemnity - Security against loss

 A contract by which one party promises to save the
other from loss caused to him by the conduct of the
promisor himself, or by the conduct of any other
person, is called a contract of indemnity
 The person who promises to make good the loss is called
indemnifier – promisor
 The person whose loss is to be made good is called the
indemnity holder - promisee
 Contract of Indemnity
15

X and Y go into a restaurant, Y says to the waiter,

“Let X have the food, I will see you paid”

A, on the instruction of T, sold certain cattle

belonging to O. O held A liable for it and recovered
damages from him for selling it. Held, A could
recover the loss from T as a promise by T to A for
any such loss would be implied from his conduct in
asking A to sell the cattle (Adamson V. Jarvis, 1927)
 Contract of Guarantee
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 Contract to perform the promise, or discharge the

liability, of a third person in case of his default.
 Surety – person who provides guarantee
 Principal debtor – person in respect of whose response
guarantee is given
 Creditor – person to whom the guarantee is given

S requests C to lend Rs. 5 lakh to P and guarantees that if P fails

to pay the amount, he will pay
 Contract of Guarantee
17

 Tripartite agreement – triangular relationship in

which the following three collateral contracts may
be distinguished:
 As between C and P, there is a contract out of which the guaranteed
debt arises
 As between S and C, there is a contract by which S guarantees to C,
P’s debt in case of his (P’s) default
 As between S and P, there is a contract that P shall indemnify S in
case S pays in the event of a default by P. (It is always implied)
Contract of Guarantee
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Essentials of Contract of Guarantee

 Concurrence
 Primary liability in some person
 Essentials of a valid contract
Guarantee is not a contract of uberrimae fidei
 One requiring full disclosure of all material facts by
the principal debtor or creditor to the surety before the
contract is entered into
 Contract of Indemnity Contract of Guarantee
 Two parties involved  Three parties involved
 The liability of the  The liability of the surety to
indemnifier to the creditor is secondary, the
indemnified is primary and primary liability being that
independent of the principal debtor
 There exists only one contract  There are three contracts
 It is not necessary for the  It necessary that the surety
indemnifier to act at the should give the guarantee at
request of the indemnified the request of the debtor
 Liability of the indemnifier  There is usually an existing
arises only on the happening debt or duty, the performance
of a contingency of which is guaranteed by the
surety
19
 Kinds of Guarantee
20

 Fidelity guarantee – guarantee for the good conduct

or honesty of a person employed
 Retrospective guarantee – for an existing debt
 Prospective guarantee – for an future debt
 Specific guarantee – for a single transaction
 Continuing guarantee – extends for a series of
transaction
 Contract of Guarantee
21

 Rights of surety
 Rights against creditor
 Rights against principal debtor
 Rights against co-sureties

 Discharge of surety
 By revocation
 By conduct of the creditor
 By invalidation of contract