Basic Elements of Contract

CONTRACT:

According to Section 2(h) of the Indian Contract Act,1872, “An agreement enforceable by law is a contract”.

 

BASIC ELEMENTS OF CONTRACT:

1. Offer
2. Acceptance
3. Consideration
4. Contractual Capability

 OFFER:

As per sec 2(a), an offer or proposal has the subsequent ingredients:

1. One person signifies to another,
2. His willingness to do or abstain from doing anything,
3. With a view to obtaining the assent of that other.

CASES:

Pharmaceutical Society of G.B. V. Boots Cash Chemists Ltd.¹

It was held that the display of goods in a shop with price tags connected is not an offer even if there is a “self- service” system in the shop. The customer by picking up makes an offer to buy which is subject to acceptance by the shopkeeper. Likewise, an inducement of special discount by a shop keeper is a “commercial puff” or an invitation to treat and not an offer.

 

R.V. Clarke²

It was held that even if the acceptor had once known of the offer but had wholly forgotten about it at the time of acceptance, he would be in no better position than a person who had not heard of the offer at all.

 

Upton Rural District Council V. Powell³

A fire broke out in the defendant’s farm. Believing that he was entitled to the free service of Upton Fire Brigade (which he was not), he summoned it. Upton claimed compensation for its services. Held, the services was rendered on an implied promise to pay for them.

ACCEPTANCE:

As per sec 2(b), acceptance have two valid essential requirements:

Firstly, acceptance ought to be communicated by the offeree to the offeror.

Secondly, acceptance ought to be absolute and unqualified.

 

COMMUNICATION OF ACCEPTANCE:

It merely suggest, that in one or the other way the acceptance of an offer ought to be punctually delievered to the opposite party. It will be communicated within the kind of categorical words or could be signification through conduct.

Also, section 8 provides that performance of the conditions of a proposal is associate in nursing an acceptance of proposal.

 

CASES:

 Felthouse V. Bindley⁴

The nephew intended his uncle to have the horse, but had not communicated this to the uncle, instead he told the auctioneer not to sell the horse as it was already sold to his uncle. Held, a communication to a stranger, like the auctioneer in this case, will not do. An offer can’t obligate upon the offeree the burden of refusal or ‘duty to reply’.

 

Powell V. Lee⁵

The plaintiff’s appointment as a teacher was communicated to him unofficially; later, the managers of school by a resolution cancelled his appointment. The plaintiff sued for breach of contract, but failed.

 

ABSOLUTE AND UNQUALIFIED ACCEPTANCE:

Section 7 provides that so as to convert a proposal into a promise, the acceptance should be absolute and unqualified, i.e. without any qualification or condition. For a sound acceptance , there should be an ad idem “concurrence of mind” i.e. agreeing on a similar issue within the same course at the same time.

CONSIDERATION:

It constitutes the very foundation of the contract. An agreement not supported by consideration is void (Sec 25, Contract Act). As per sec2(d) of the Indian Contract Act, the most ingredients of the definition of consideration are:

1. That the act or abstinence, which is to be a consideration for the promises, should be done at the desire of the promisor.
2. That it should be done by promisee or any other person.
3. That the act or abstinence may have been already executed or is in the process of being done or may still be executory i.e. is promised to be done.

AT THE DESIRE OF THE PROMISOR:

An act shall not be a descent consideration for a promise unless it‘s done at the will of the promisor.

 

PROMISEE OR ANY OTHER PERSON:

A promise is enforceable if there’s some consideration for it and it’s quite immaterial that it move from the promisee or any other person. This is often typically referred as  Doctrine of Constructive Consideration.

 

HAS DONE OR ABSTAINED FROM DOING:

Under section 2(d), consideration is an act, that has already been done at the will of the promisor (past consideration), or is in progress (executed or present consideration i.e. consideration is provided simultaneously with the making of the contract) or is promised to be done in future (executory or future consideration i.e. a simple exchange of promises). Therefore, consideration may consist of a past, present or future act.

 

SUCH ACT, ABSTINENCE OR PROMISE IS CALLED CONSIDERATION:

Consideration should be real and not illusion and want not be adequate. Forbearance to sue(or compromise of a unfinished suit) has perpetually been considered as valuable consideration.

 

EXCEPTIONS TO CONSIDERATION:

1. Natural love and affection
2. Past voluntary service
3. Time barred debt

 

CASES:

 

Kedar Nath V. Gorie Mohd.⁶

On the faith of the promised agreement the plaintiff entered into a contract with a contractor for the purpose of building a town hall. Held that the plaintiff’s act in entering into contract with the contractor was done ‘at the desire of the defendant (the promisor)’ so as to constitute consideration.

 

Kastoori Devi V. Chiranji Lal⁷

The removal of a pending suit by a wife against her husband was held to be a good consideration for his promise to pay her maintenance.

 

CAPACITY TO CONTRACT:

Section 10 of the contract act needs that the parties should competent to contract.

Section11 defines who are competent to contract: “ Every person is competent to contract who is 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.”

 

NATURE OF MINOR’S AGREEMENT:

Neither sec 10 nor sec 11 makes it clear whether or not, if a minor enters into associate agreement, it’d be revocable at his selection or altogether void. However, after the decision in Mohoribibi case, it’s presently well settled that a minor’s agreement is completely void. A minor cannot produce a promise enforceable by law. The ‘specific performance’ of a contract (actual carrying out of the contract as agreed) isn’t attainable within the case of an agreement by a minor. Law acts due to the guardian of minors and defend their rights, because their mental faculties are not mature.

It is vital to notice that the parents or guardian of a minor can contract on behalf of the minor. If the contract is within the competency of the guardian and it is for the welfare of the minor it’s specifically enforceable. The minor will be bound with such contract and could adopt such specific performance of the contract as stated therein.

CASES:

 

 Mohoribibi V. Dharmodas Ghose⁸

In this case, a minor dead a mortgage for Rs. 20,000 and received Rs. 8,000 from the mortgagee. The mortgagee filed a suit for the recovery of his mortgage wealth and for the sale of property just in case of default. The Privy Council held that an agreement by a minor was utterly void as against him, thus the mortgagee could not retrieve the mortgage money nor could he have the minor’s property sold under his mortgage. The court observed that sec64 and 65 of the Contract Act starts from the ground of there being a contract between competent parties, while in a minor’s case there never was and never could’ve been any contract.

 

Raj Rani V. Prem Abid⁹

The father of Raj Rani, who was a minor, entered into a contract on her behalf with Prem Adib, a film producer. According to the contract, Raj Rani was to act as a film actress on cost of a certain amount. Raj Rani was not given any work. She sued the producer for the breach of contract. The Bombay High Court held that neither she nor her father could have sued on the promise. If it was a contract with the plaintiff, she being a minor, it was a nullity. If it was a contract with her father it was void for being without consideration.

(1953) 1 All ER

²(1927) 40 CLR 227

³(1942) 1 All ER 220

⁴(1863) 7 LT 835

⁵(1908) 24 TLR 606

⁶(1886) ILR 14 Cal 64

⁷(AIR 1960 All 446)

⁸(1903) 30 Cal 539

⁹(AIR 1949 Bom 215)

Author: AKANKSHA CHHABRA,
School of Law, IIMT