Post Graduate Programme

1
in Management (PGPM)

LEGAL ASPECTS OF BUSINESS

(LAB)

Dr Parul V Gupta
PhD (Law), LL.M., PGDBM

Dr. Parul Gupta

 SESSION 2
2

Legal Insights to valid Offer

Legal Aspects of Acceptance
And
Legal Aspects Capacity of
Parties

Dr. Parul Gupta

 Legal Insights to Valid Offer
3
Section 2(a) of the Indian Contract Act defines a 'proposal' as,

“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".,

This definition reveals the following three essentials of a 'proposal':

(i) expression of the willingness to do or to abstain from doing

something.
(ii) must be to another person.
(iii) with a view to obtaining the assent of the other person to such
act or abstinence.

Offer + Acceptance = Agreement

Agreement +other essential elements = Contract

parulvishalgupta@yahoo.co.in
 Legal Insights to Valid Offer
Group Case Discussion 1
4

Specific and General offer

Case 1: Carlill v. Carbolic Smoke Ball Co

Arguments of the company

 Advertisement are not made with an intention to create legal
relationship.
 It is not possible to make an offer to the whole world.
 If it was an offer, when was the acceptance communicated?
 How to ensure that the medicine was consumed as instructed?

Dr. Parul Gupta

 General Offer
5

Judgment & Explanation

It was held that Mrs Carlill was entitled to the reward as the
advert constituted an offer of a unilateral contract which
she had accepted by performing the conditions stated in the
offer.
 The statement referring to the deposit of 1,000 Pounds
demonstrated intent and therefore it was not a mere sales
puff.
 It is quite possible to make an offer to the world which is
treated as general offer.
 In unilateral contracts there is no requirement that the
offeree communicates an intention to accept, since
acceptance is through full performance.

Dr. Parul Gupta

 Legal Insights to Valid Offer
6

In-class Case 1: Harris v Nickerson

Discussion Point
Did the advertisement constitute an offer?

Dr. Parul Gupta

 Legal Insights to Valid Offer
7

Judgment & Explanation

It was held that the advertisement did not constitute an
offer, but rather was a mere declaration of intent. It
was held in the judgment that it was a"startling
proposition" that "anyone who advertises a sale by
publishing an advertisement [would become]
responsible to everybody who attends the sale for his
cab hire or travelling expenses".
Take Away
There is difference in making an offer and inviting other
party to make an offer. Mere a declaration of intent
does not constitute an offer and does not bind the party.

Dr. Parul Gupta

 Legal Insights to Valid Offer
8

1. X proposes, by letter, to sell a house to Y at a

certain price/ X proposes, by making a call, to sell
a house to Y at a certain price.
2. A husband promises his wife to pay her a sum of
fixed amount for a definite period of time.
Subsequently he denies to pay the agreed amount.
3. A offers to sell his house to B at a certain price/ A
offers to sell his house by publishing an
advertisement in the local newspaper.
4. X offers to sell to Y one of his luxury cars.

Dr. Parul Gupta

 Legal Insights to Valid Offer
9

Case
 W offered to sell his farm to H for £1200. H declined this
offer.
 On June 6, W wrote to H's agent offering to sell the farm
for £1000, stating that it was the final offer and that he
would not alter from it.
 H offered £950 in his letter by June 8. After examining
the offer W refused to accept, and informed H of this on
June 27.
 On the June 29, H agreed to buy the farm for £1000
without any additional agreement from W.
 W refused to sell the farm to him.

Dr. Parul Gupta

 Legal Rules for Valid Offer
10

1. An offer may be Express or Implied

2. capable of creating legal relations
3. Terms must be certain
4. Invitation to offer is not an offer
5. May be specific or general
6. Must be communicated to the offeree
7. Should not contain a term the non
compliance of which would amount to
acceptance
8. Can be made subject to any terms and
conditions
9. To identical cross offers do not make a
contract

parulvishalgupta@yahoo.co.in
 Legal Insights to Valid
11
Acceptance
Section 2(b) states that

"A proposal when accepted becomes a

promise"

Acceptance

"when the person to whom the

proposal is made signifies his assent
thereto, the proposal is said to be
accepted."
parulvishalgupta@yahoo.co.in
 Legal Insights to Valid
Acceptance
12

 A made an offer to sell his car to B at a price of Rs. 5000/-. B

did not agree with price asked by A for the car and gave his
acceptance conditionally saying that he wanted to purchase
that car at Rs. 4500.

 Mr. A has made an offer and adds that if any person wants to
give any acceptance he has to raise his hand.

 Mr. A obtained a coal mine on lease. He wanted to supply the

extracted coal to a railway company. Therefore he wrote a
letter to the manager of Metropolitan Railway Company,
Communicating his willingness to Supply Coal. That letter
constituted an offer. The Manager of Railway Company gave
his acceptance on the letter, but got failed in communicating
his acceptance.
Dr. Parul Gupta
 Legal Insights to Valid
13
Acceptance
 X offers to the Y that he would like to sale his car in 80,000/-
rupees to Y. Later on X withdraws his offer, Thereafter Y gives
the consent and sends letter of acceptance to X that he would
like to buy the car from X in 80,000/- rupees.

 X offers to Y to sell his house for Rs. 1,00,000. Y accepts the

offer and communicates the same to X. Subsequently Y
changes his mind and communicated the same to X.

 A and B were traders and C was A’s Customer. On one day C

wrote a letter to A requesting A to send goods. It Constituted
C`s offer to A. By the time of receiving that letter, A has no
such business as it had already been sold to B, his fellow
delivery. B gave the acceptance for the offer. Later on C
denied to trade with B.
Dr. Parul Gupta
 Legal Rules for a Valid Acceptance
14

1. Must be given only by the person to

whom the offer was made
2. Must be absolute and unconditional
3. Must be in some usual and reasonable
manner
4. Must be communicated by the acceptor
5. Must be given within reasonable time
6. Must succeed the offer
7. Rejected offers can be accepted only if
renewed
parulvishalgupta@yahoo.co.in
 Legal Aspects of Capacity of Parties
15

Section 11,

"Every person is competent to contract who

has attained the age of majority according
to the law to which he is subject, and who
is of sound mind, and is not disqualified
from contracting by any law to which he is
subject."

Dr. Parul Gupta

 Legal Aspects of Capacity of Parties
16

Minor’s agreements under Indian Contract Act

Case 1: Mohoribibee v. Dharmodas

Ghose

Discussion Point
 Was the mortgage void on the grounds of
plaintiff being minor at the time of contract?

Dr. Parul Gupta

 Legal Aspects of Capacity of Parties
17

Judgment & Explanation

It was held that the mortgage was void agreement
and, therefore, it was cancelled. Further the
money lender’s request for the repayment of the
amount advanced to the minor as part of the
consideration for the mortgage was also not
accepted on the ground that as a minor’s contract
is void, any money advanced to a minor cannot be
recovered.

Take Away
Thus a principle was laid down that minor’s
agreement is absolutely void.
Dr. Parul Gupta
 Legal Aspects of Capacity of Parties
18

Minor’s Agreements under Indian Contract Act

A minor made a promissory note in favour of

another person and on attaining majority, he
made out a fresh promissory note in lieu of
the old one.
A minor had performed his part of the
agreement and delivered the goods. The
buyer denied the payment and minor sued
for the payment.

Dr. Parul Gupta

 Legal Aspects of Capacity of Parties
19

(I) Minor
Minor’s agreement inoperative
against him and is absolutely void /
case :Mohoribibee v. Dharmodas
Ghose
Ratification of minor’s contract is not
valid
Minor -a beneficiary

Dr. Parul Gupta

 Legal Aspects of Capacity of Parties
20

II. Person of Unsound Mind

The Soundness of mind of a person depends
on two facts:
 his capacity to understand the terms of the contract,
and
 his ability to form a rational judgment as to its effect
upon his interests.
 Lunatics
 Idiots
 Drunken or Intoxicated Persons – burden of proof
Contracts voidable at the option of unsound mind
Dr. Parul Gupta
person
 Legal Aspects of Capacity of Parties
21

III. Disqualified Persons by Status

1. Alien Enemies
2.Foreign sovereigns
3.Convict
4.Married Women – with qualified rights
5.Insolvent
6.Joint stock company

parulvishalgupta@yahoo.co.in
 NEXT SESSION
22

SESSION 3

Legal Insights to Consideration And

 Legal Aspects of Free Consent

Dr. Parul Gupta

 23

Dr. Parul Gupta