Law of Contract-I

*Prayag Kumar Paswan

Types of contracts
On the basis of the formation of the contract
 Express Contract
According to Section 9 of the Indian Contract Act, a proposal of any promise is made in words,
the promise is said to be express. Thus, an express contract is made in words, either verbally or
through written form.
Illustration
A asks B whether he would like to sell his house for an X amount. B agrees to the same by
saying yes. This is an example of an express contract.

 Implied contracts
According to sec 9 in so for as such proposed or acceptance is made otherwise than in words, the
promise is said to be implied.
Illustration
A stop a taxi by waving his hand and takes his seat. There is an implied contract that A will pay
the prescribed fare.

 Quasi-contracts
Sometimes, rights and obligations might arise not by contracts that the involved parties have
assented to, but rather by law. These create legal relations that resemble contracts and are called
quasi-contracts. Chapter V Section 68-72 of the Indian Contract Act talks about ‘Certain
relations resembling those created by contract’.
Illustration
A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be
reimbursed from B's property.

 E-contracts
An e-contract is a contract that is formed over the internet or through other electronic means,
such as email or electronic signatures. This type of contract is legally binding and enforceable.
A consumer using an ATM to withdraw money is an example of an electronic contract. When a
person orders goods through an online shopping website, this is an example of an e-contract.

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On the basis of validity of the contract

 Valid contracts
Section 10 provides for certain essentials as follows, which all contracts must fulfill to be
considered valid:
There must be free consent between the parties involved.
The parties must be competent to contract.
The consideration and object of the contract should be lawful.
The contract must not be declared void under the law.
These essentials when present make a valid contract.

 Void contract
Section 2(j):- a contract which ceases to be enforceable by law because void when of ceased to
be enforceable.
When both parties to an agreement are:-
 Under a mistake of facts (Section 20)
 Consideration or object of an agreement is unlawful (Section 23)
 Agreement void, if considerations and objects unlawful in part (Section 24)
 Agreement made without consideration (Section 25)
 Agreement in restrain of marriage (Section 26)
 Restraint of trade (Section 27)
 Restrain legal proceeding (Section 28)
 Agreement by wage of wager (Section 30)

 Voidable Contracts
According to Section 2(i) of the Indian Contract Act, 1872, a contract is voidable if it is
enforceable by law at the option of one or more parties. Generally, consent is not free and it is
obtained under coercion (Section 15), undue influence (Section 16), fraud (Section 17) and
misrepresentation (Section 18). Here, the party defrauded or unduly influenced has the option to
make the contract void.

 Illegal contract
It is a contract which the law forbids to be made. All illegal agreements are void but all void
agreements or contracts are not necessary illegal. Contract that is immoral or opposed to public

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policy are illegal in nature. Unlike illegal agreements there is no punishment to the parties to a
void agreement. Illegal agreements are void from the very beginning agreements are void from
the very beginning but sometimes valid contracts may subsequently becomes void.
Illustration
Contract killings facilitated by contracts for murder are illegal as murder is a crime under Section
302 of the Indian Penal Code.

On the basis of execution of the contract

 Executed contract
A contract in which both the parties have fulfilled their obligations under the contract.
Illustration
A contracts to buy a car from B by paying cash, B instantly delivers his car.

 Executory contract
A contract in which both the parties have still to fulfilled their obligations.
Illustration
D agrees to buy V’s cycle by promising to pay cash on 15th July. V agrees to deliver the cycle
on 20th July.

Offer
Offer(i.e. Proposal) [section 2(a)]:-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 person either to
such act or abstinence, he is said to make a proposal.
The person who makes an offer is called “Offeror” or “ Promisor” and the person to whom the
offer is made is called the Offeree” or “Promisee”.

Essentials elements of an offer

 Offer must be communicated to the offeree

The offer is completed only when it has been communicated to the offeree. Until the offer is
communicated, it cannot be accepted. Thus, an offer accepted without its knowledge, does not
confer any legal rights on the acceptor.
Example: A’s nephew has absconded from his home. He sent his servant to trace his missing
nephew. When he servant had left, A then announced that anybody who discovered the missing

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boy, would be given the reward of Rs.500. The servant discovered the missing boy without
knowing the reward. When the servant came to know about the reward, he brought an action
against A to recover the same. But his action failed. It was held that the servant was not entitled
to the reward because he did not know about the offer when the discovered the missing boy.
[Lalman Shukla v. Gauri Datt (1913) All LJ 489]

 The offer must be certain definite and not vague unambiguous and certain.
Example: A offered to sell to B. ‘a hundred tons of oil’. The offer is uncertain as there is nothing
to show what kind of oil is intended to be sold.

 Offer may be express and implied

The offer may be express or implied. An offer may be express as well as implied. An offer which
is expressed by words, written or spoken, is called an express offer. The offer which is expressed
by conduct is called an implied offer [Section 9].

What is the Invitation to make an Offer?

It means supply of information so that the negotiations can start and the other person can be
moved to make an offer. It is an indication that the inviter is willing to enter into negotiations but
is not yet prepared to be bound. A response to invitation to treat does not lead to an agreement.
In fact it generates an offer.
An invitation to offer is a statement made by a person with a view to elicit response and
negotiate a deal, without expressing final willingness to contract. An invitation to offer, when
responded generates an offer.
The following are few examples of invitation to make an offer:
 Catalogue of goods is not offer, but only an invitation for offer.
 Display of goods with price tags in a self-service shop is merely an invitation to offer.
 A tender notice does not amount to an offer; it is merely an invitation to contractors for
making offers.
 A prospectus issued by a company to purchase its shares or debentures is an invitation to
offer.
 A menu card in a hotel is an invitation to offer, etc.
Thus an offer is an expression of final willingness to do or not to do something, with a view to
obtain assent of the other person. Whereas invitation to an offer only indicates broad terms for

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negotiating business and while an offer results in generation of acceptance in its response, an
invitation to an offer results in generation of offers in its response.

What are the modes of revocation of an offer as per the Indian Contract Act,
1872?
As per the provisions of the Indian Contract Act, 1872, the following are the modes of revocation
of an offer:-

(i) By notice: - An offer may be revoked by communication of notice to the offeree by the
offeror before the communication of acceptance is completed as against him.
(ii) By Lapse of time: - A proposal stands revoked by the lapse of time prescribed for its
acceptance if communication of acceptance is not made.
(iii) By failure to fulfill condition precedent:- Sometimes the offer may impose certain
conditions, such as executing a certain document or depositing certain sum of money (earnest
money), which are required to be complied with prior to acceptance. If the acceptor fails to fulfil
the conditions precedent to acceptance, the offer is treated as revoked.
(iv) By death or insanity of offeror:- An offer stands revoked if the offeror dies or becomes of
unsound mind before acceptance and the fact of his death or insanity comes to the knowledge of
the offeree.

Kinds of offers
General Offer Specific Offer Express Offer Implied Offer Cross Offer

Counter Offer Standing Offer

Express offer - When the offeror expressly communication the offer the offer is said to be an
express offer the express communication of the offer may be made by Spoken word written
word.

Implied offer - An offer may be derived from the actions or circumstances of the parties. This is
known as Implied offer.

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General Offer- A general offer is not made by any specified party. It is one that is made by the
public at large. Any member of the public can, therefore, accept the offer and have the right to
the rewards/consideration.
Example: - Company advertised that a reward of Rs.100 would be given to any person who
would suffer from influenza after using the medicine (Smoke balls) made by the company
according to the printed directions. One lady, Mrs, Carlill, purchased and used the medicine
according to the printed directions of the company but suffered from influenza, she filed a suit to
recover the reward of Rs.100. The court held that there was a contract as she had accepted a
general offer by using the medicine in the prescribed manner and as such as entitled to recover
the reward from the company. (Carlill v Carbilic Smoke Ball Co. 1893)

Specific Offer: - It means an offer made in

(a) a particular person or
(b) a group of person: It can be accepted only by that person to whom it is made communication
of acceptance is necessary in case of specific offer.

Cross offer: - When two parties exchange identical offers in ignorance at the time of each
other’s offer the offer’s are called cross offer. Two cross offer does not conclude a contract. Two
offer are said to be cross offer if
1. They are made by the same parties to one another
2. Each offer made in ignorance of the offer made by them
3. The terms and conditions contained in both the offers’ are same.
Example: A offers by a letter to sell 100 tons of steel at Rs.1, 000 per ton. On the same day, B
also writes to A offering to buy 100 tons of steel at Rs.1, 000 per ton.

Counter offer: - when the offeree gives qualified acceptance of the offer subject to modified and
variations in the terms of original offer. Counter offer amounts to rejection of the original offer.
Legal effect of counter offer:-
(1) Rejection of original offer
(2) The original offer is lapsed
(3) A counter offer result is a new offer. In other words an offer made by the offeree in return of
the original offer is called as a counter offer.

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Example: A offered to sell his pen to B for Rs.1,000. B replied, “I am ready to pay Rs.950.” On
A’s refusal to sell at this price, B agreed to pay Rs.1,000. Held, there was not contract as the
acceptance to buy it for Rs.950 was a counter offer, i.e. rejection of the offer of A. Subsequent
acceptance to pay Rs.1,000 is a fresh offer from B to which A was not bound to give his
acceptance.
Standing offer: - An offer is allowed to remain open for acceptance over a period of time is
known as standing, open or continually offer. Tender for supply of goods is a kind of standing
offer.
Example: When we ask the newspaper vendor to supply the newspaper daily. In such case, we do
not repeat our offer daily and the newspaper vendor supplies the newspaper to us daily. The
offers of such types are called Standing Offer.