The law of contract is that branch of Law which determines the circumstances in which the promise made by the

parties to a contract is legally binding on them.

According to Sec 2(h) of the Indian Contact Act Every agreement enforceable by law is a Contract. ` Pollock: Every agreement and promise enforceable at law is a contract. So a Contract is an agreement made between two or more parties which the law will enforce.
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DEFINITIONS According to Section 2(e) an agreement is defined as Every promise and every set of promises forming the consideration for each other. A promise is defined as an accepted proposal as Section 2(b) says a proposal when accepted becomes a promise Therefore it can be said that an agreement is an accepted proposal. In an agreement there is a promise from both the sides. For example, A promises to deliver his radio to B and in return B promises to pay a sum of Rs. 500 to A , there is said to be an agreement between A and B

An agreement is regarded as a contract when it is enforceable by law. In other words, an agreement that the law will enforce is a contract. The conditions of enforceability are stated in Section 10. According to this section all agreements are contracts 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 hereby expressly declared to be void.

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Proposal or Offer Acceptance Consideration Capacity to contract Free consent Lawful Purpose

A contract is an agreement between two parties imposing rights and obligations which may be enforced by law.

Offer

Acceptance

Contract

An Offer Can be Defined as follows:

An expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed. PROPOSAL/OFFER [SECTION 2(a)]: A person is said to make a proposal when he signifies to another his willingness to do or to abstain from doing anything with a view to obtaining assent of that other to such act or abstinence

Offers can be of two types:

Specific made to one person or group of people. Then only that particular person or group of people can accept.

General made to the whole world (or people generally), particularly seen in the cases of rewards and other public advertisements.

The following involves a general offer, made to the whole world.

Carlill V Carbolic Smoke Ball Company (1893)

Mrs Carlill acquired a smoke ball from her chemist. The smoke ball failed to prevent her from getting influenza (despite its use as directed from November to January), Mrs Carlill claimed her 100. When the company refused to pay she sued them. It was held that Mrs Carlill could successfully recover the 100. An offer to the whole world was possible, becoming a contract with any person(s) who accepted the offer before its termination. Mrs Carlill had accepted by her actions, and had turned the offer to the world into a contract with her personally. The Carbolic Smoke Ball Company were therefore bound to give her the money promised in the advertisement.
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The Carbolic Smoke Ball Company, in defending its claim put forward various defences, and in rejecting them one by one the court laid down important legal principles:

1) The company claimed that promise was mere advertising puff, not intended to create legal relations. However, the Court of Appeal dismissed this argument because: a) The company had made a specific statement of fact, capable of forming part of a binding contract: If you use our product and catch flu, we will give you 100. b) The advert had also stated that 1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter. The court felt that people generally would interpret this as an offer to be acted on.
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2) The company argued that a contract with the whole world was not possible. Bowen LJ said that this was not a contract with the whole world but an offer made to all the world, which was to ripen into a contract with anybody who performed the necessary conditions. 3) The company claimed that as Carlill had not notified them of her intention to accept the offer there was no contract. The Court of Appeal held that the company had waived the need to communicate acceptance because the advert indicated that the action of using the smoke ball was what was required of the offeree, rather than an oral or written response. In this the court recognised the existence of unilateral contracts. 4) The company argued that there was no consideration to make the promise binding. The Court of Appeal said that Mrs Carlills use three times daily was consideration, also the benefit received in promoting sales.11

While most offers require verbal or written acceptance from both promisor and promisee (forming what are known as bilateral contracts), with the general offers the performance of some act may be valid acceptance (forming a unilateral contract) An offer may be: Express either verbal or written, or Implied from conduct or circumstances. Sometimes, nothing is said at all but an offer is obvious from the actions. This is probably the situation when making a journey on a bus. The case of Wilkie V London Passenger Transport Board (1947) involved a discussion as to how and where a contract was formed in a bus journey. Clearly there was a contract, but exactly where offer and acceptance took place was debatable. It was largely implied by the actions of the parties, rather than anything said specifically on each bus journey.
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Offers and non-offers Initial negotiations could amount to: An offer which is capable of acceptance, or An invitation to treat- which is an invitation to others to make or negotiate an offer and therefore not open to acceptance. Generally, displays in shop windows are not offers, but merely invitations to treat. This was established in the case of Timothy V Simpson, but confirmed in the following more recent case.

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Fisher V Bell (1961)

A seller was accused of offering for sale a flick knife, contrary to the Restriction of Offensive Weapons Act 1959. The knife was on display in his window, and the court held that this was an invitation to treat not an offer. Fisher v Bell [1961] is an contract law case concerning the requirements of offer and acceptance in the formation of a contract. The case established that, where goods are displayed in a shop together with a price label, such display is treated as an invitation to treat by the seller, and not an offer. The offer is instead made when the customer presents the item to the cashier together with payment. Acceptance occurs at the point the cashier takes payment. Facts The Defendant displayed a flick knife in the window of his shop next to a ticket bearing the words "Ejector knife - 4s." Under the Restriction of Offensive Weapons Act 1959, section 1(1),
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It was illegal to manufacture, sell, hire, or offer for sale or hire, or lend to any other person, amongst other things, any knife "which has a blade which opens automatically by hand pressure applied to a button, spring or other device in or attached to the handle of the knife". On 14 December 1959, the Claimant, a chief inspector of police force, brought forward information against the Defendant alleging the Defendant has contravened section 1(1) by offering the flick knife for sale. Judgment High Court At first instance, the Prosecutor submitted that the Defendant has displayed the knife and ticket in the window with the object of attracting a buyer, and that this constituted an offer of sale sufficient to create a criminal liability under section 1(1) of the Act
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The judges at first instance found that displaying the knife was merely an invitation to treat, not an offer, and thus no liability arose.

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Offer and invitation to treat distinguished

A proposal or an offer has to be distinguished from an invitation to treat. Sometimes a person may not offer to sell his goods, but may make some statements or give some information with a view to invite others to make offers on that basis. For example, a bookseller sends a catalogue of books indicating prices of various books to many persons. This catalogue is not an offer to sell those books at prices indicated against those books. This is an Invitation to treat. If any person is interested in purchasing those books mentioned in the catalogue he may make an offer. Similarly, inviting persons to an auction where goods, which are to be auctioned, are displayed is not an offer for the sale of goods. The intending buyers, who make the bid make an offer. Such an offer, when accepted, by the fall of hammer or in some other customary way, will result in a contract.
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Pharmaceutical Society of Great Britain V Boots Chemist Ltd (1953) Boots were accused of selling goods without the supervision of a pharmacist under the Pharmacy and Poisons Act 1933. Boots had opened a shop in supermarket style, the customer taking products from displays and paying for them at a cash point. It was established that there was a registered pharmacist at the cashier point. The court held that the display of goods amounted to an invitation to treat, the customer making an offer by taking them to a cashier, and the cashier accepting by some action which indicated willingness to sell. There was therefore no offence, since the sale, that is the offer and acceptance, took place at the cash point where a pharmacist was situated. In many situations the court has held that the advertisement of goods or services is an invitation to treat, the customer making the offer. These situations include the distribution of circulars, the posting of timetables, auctions, tenders and where goods are mentioned in the small advertisements section of newspapers.

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For displays of goods in shop windows, classified advertisements, catalogues, circulars and timetables, the following general shopping principles apply.

Shopping principles:

 

The display or advertisement is an invitation to treat. The customer offers to buy the goods at a particular price.

 This offer can then be accepted by the seller in some action, for example by a verbal statement or by entering the price in a cash register.

The offer and acceptance may then be a binding contract.

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Termination of an offer

The various ways in which an offer may terminate:

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Acceptance This will normally mean that the offer is no longer available to anyone else, as the stock may be exhausted, such as where a person has a bicycle for sale. Refusal An offeree may refuse an offer, in which case the offer ends, so it cannot be accepted later by the offeree (a person or entity to whom an offer to enter into a contract is made by another i.e. the offeror) Counter-offer Sometimes a reply from an offeree comes in the form of a new proposal, or counter-offer. It may simply be that the offeree is not happy with one or more of the terms and makes changes accordingly. Since this is not an agreement to all the terms of the offer, it is not acceptance, and is known as a counter-offer. It is really a new offer, which is then open to acceptance or termination in some other way. The effect of a counter-offer is to destroy the original offer.

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