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THE CONTRACT ACT, 1872


PRELIMINARY.

CHAPTER I. Of The Communication, Acceptance And Revocation Of Proposals.


CHAPTER II. Of The Contracts, Voidable Contracts Ad Void Agreements.
CHAPTER III. Of Contingent Contracts.
CHAPTER IV. Of The Performance Of Contracts.
CHAPTER V. Of Certain Relations Resembling Those Created By Contract.
CHAPTER VI. Of The Consequences Of Breach Of Contracts.
CHAPTER VII. Sale Of Goods.
CHAPTER VIII. Of Indemnity And Gurantee.
CHAPTER IX. Of Bailment.
CHAPTER X. Agency.
CHAPTER XI. Of Partnership.
SCHEDULE.

CHAPTER I
OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS

CHAPTER I
OF THE COMMUNICATION, ACCEPTANCE AND
REVOCATION OF PROPOSALS

3. Communication, acceptance and revocation of proposals. The communication of proposals, the


acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made
by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such
proposal, acceptance or revocation, or which has the effect of communicating it.

COMMENTS

What is communication?---As the words of this section stand it would seem that some sort of communication
of a proposal, etc., is made by an act which is intended to communicate it, but in fact has not that effect, and that
such an inchoate communication fails to have legal effect only because the specific provisions of S. 4 prevent it
from being complete. It would seem both simpler and more rational to say that an act intended to communicate a
proposal, etc., but failing to do so, is not a communication at all. To get this sense from the section before us we
should have to read "and" for "or" in the last clause. There are not any corresponding words in the
Commissioners’ draft.

It is matter of the commonest experience that the communication of intentions may be effectually made in many
other ways besides written, spoken, or signalled words. For example, delivery of goods by their owner to a man
who has offered to buy them for a certain price will be understood by every one, unless there be some indication
to the contrary, to signify acceptance of that offer. No words are needed, again, to explain the intent with which
a man steps into a ferryboat or a tramcar, or drops a coin into an automatic machine. It is also possible for
parties to hold communication by means of prearranged signs not being any form of cipher or secret writing,
and not having in themselves any commonly understood meaning. This does not often occur in matters of
business. Means of communication which a man has prescribed or authorised are generally taken as against him
to be sufficient. Otherwise an unexecuted intention to communicate something, or even an unsuccessful attempt,
cannot be treated as amounting to a communication; much less can a mere mental act of assent have such an
effect in any case.

Communication of special conditions.---In recent times there has been a series of cases in which the first
question is whether the proposal of special terms has been effectually communicated. This arises where a
contract for the conveyance of a passenger, or for the carriage or custody of goods, for reward, is made by the
delivery to the passenger or owner of a ticket containing or referring to special conditions limiting the
undertaker's liability, and nothing more is done to call attention to those conditions.

If the defendant has established that the document was contractual, he must further prove that he did what was
reasonably sufficient to give the plaintiff notice of the conditions. This is a question of fact. It has been held that
there is sufficient notice if the face of railway ticket refers to conditions on the back, which are not expressly
reproduced, but incorporated by a reference to the time-tables of the railway company; But the passenger is not
bound by a purported exemption from liability, if the ticket is printed in such a way, or delivered to him in such
a state, as not to give reasonable notice on the face of it that it does embody some special conditions.

In determining these questions the class of persons to whom the special conditions are offered, and the degree of
intelligence to be expected of them, may properly be taken into account.

The plaintiff in one case purchased of the defendant company a ticket by steamer, which was in the French
language. Towards the top of the ticket were words to the effect that "this ticket in order to be available, must be
signed by the passenger to whom it is delivered." At the foot of the ticket there was an intimation in red letters
that the ticket was issued subject to the conditions printed on the back. One of those conditions was that the
company incurred no liability for any damage which the luggage might sustain. The vessel was wrecked by the
fault of the company's servants, and the plaintiff's baggage was lost. The plaintiff sued the defendant company
for damages. The ticket was not signed by him, and he stated that he did not understand the French language,
and that the conditions of the ticket had not been explained to him. It was held that the plaintiff had reasonable
notice of the conditions, and that it was his own fault if he did not make himself acquainted with them.

Incorporation of prospectus in a policy of assurance.--.The question of the effect to be given to the


prospectus of a company which was incorporated by reference in a policy of life assurance arose some time ago
in a Madras case in connection with the onus of proof of age of the assured. In the course of the judgment,
Bhashyam Ayyangar J., said: "As regards the effect to be given to the prospectus as a part of the contract of
insurance, I think it will have the same effect as if it had been reproduced in the policy itself, and it is quite
unnecessary to prove that the prospectus had been read by the assured or that it was specially brought to his
notice by the company apart from the reference made to it in the policy itself. A policy of insurance being a
contract entered into between the insurers and the assured, and the terms of such contract resting entirely upon
the contract itself, and not in the main or even in part upon the common law or upon the statute, the assured,
who makes the proposal, enters into the contract, and signs the policy, has in the very nature of things notice
that the policy contains all the terms and conditions of the contract." The learned Judge proceeded to cite and
rely on Watkins v. Rymull. Ayyangar J. concluded that the signatory was bound. Although it would not affect
the decision, as the signatory was in any case held liable, a situation such as this, where the defendant has signed
a document, should have been sharply distinguished from the ticket cases; a signatory is bound, unless there has
been some misrepresentation, or it is a case of non est factum; L' Estrange v. Graucob.

Contract---Acceptance---Communications referred to not equivalent to acceptance---No reliance in absence of


written communication, held, can be placed on oral testimony---Plaintiff failing to establish contract for sale---
Judgment and decree of trial Court holding that there existed a binding contract between parties set aside.

Formation of contract---Bidder giving lowest bid but same not accepted---Authority having reserved right under
clause 9 of invitation of Tender to accept lowest or any other tender---Bidder, acquired held, no vested right to
contract in circumstances---Provisional Constitution Order (P.O.I. of 1981), Art. 9.

Terms and conditions on the back of the contract---Referred to in the contract as binding---If binding on
the parties. Terms and conditions were printed at the back of the contract and it was provided that they were
binding on the parties.

Held: That the contention that the terms and conditions printed at the back of the contract were not binding is
untenable because reference to them was unmistakably made on the face of the document.
Acceptance of tender not communicated to promisor---Acceptance subsequently revoked---Contract
cannot be enforced---Negligence of promisee or his employees in not communicating acceptance
immaterial. A Municipal Committee invited tenders for leasing out certain premises. The Chairman allegedly
accepted the offer of the plaintiff being the highest offer and passed orders on the file for delivery of possession
to him. Such acceptance, however, was not communicated by the Municipal Committee to the plaintiff and was
subsequently revoked. Held: There is no legal basis for the proposition that communication of acceptance is not
communicated due to the negligence of the promisee, or his employee or agents.

Proposal made on basis of certain representations---Facts changing before acceptance of proposal---Such


facts suppressed--Party accepting proposal not bound by contract. If a person makes a representation by
which he induces another to take a particular course and the circumstances are afterwards altered to the
knowledge of the party making the representation, but not to the knowledge of the party to whom the
representation is made, and are so altered that the alteration of the circumstances may affect the course of
conduct which may be pursued by the party to whom the representation is made, it is the imperative duty of the
party who had made the representation to communicate to the party to whom the representation has been made,
the alternation of those circumstances and the Court will not hold the party to whom the representation has been
made, bound, unless such communication has been made.

Insurance policy accepted by Company on representation that assured has not suffered any injury---
Injury suffered by assured after proposal but before its acceptance not disclosed to insurance company---
Insurance Company not bound by contract of insurance. An insurance company issued a letter of acceptance
and a risk receipt accepting the proposed insurance policy covering the life of a person. The Insurance Company
in the said letter specifically stated in accepting the proposal that it retained the right of declining the proposal
and any policy which may be issued on the premium being paid would be invalid if the person insured in the
meantime had suffered from any illness or injury unless the Company was informed of the same. The person
insured had in the meantime, in fact, suffered an accident and injured one of the toes of his left foot which
subsequently became gangrenous. He, however, failed to inform the Company about the injury suffered and
died soon afterwards. In these circumstances, it was held that the contract of insurance concluded had become
void and ineffective and no amount could be recovered from the insurance company.

4. Communication when complete. The communication of a proposal is complete when it comes to the
knowledge of the person to whom it is made.

The Communication of an acceptance is complete, as against the proposer, when it is put in a course of
transmission to him, so as to be out of the power of the acceptor; as against the acceptor, when it comes to the
knowledge of the proposer.

The communication of a revocation is complete, as against the person who makes it, when it is put into a course
of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as
against the person to whom it is made, when it comes to his knowledge.

Illustrations

(a) A. proposes, by letter, to sell a house to B. at a certain price. The communication of the proposal is complete
when B. receives the letter.

(b) B. accepts A.'s proposal by a letter sent by post. The communication of the acceptance is complete; as
against A., when the letter is posted; as against B., when the letter is received by A.

(c) A revokes his proposal by telegram. The revocation is complete as against A., when the telegram is
despatched.

It is complete as against B. when B. receives it.

B. revokes his acceptance by telegram. B.'s revocation is complete as against B. when the telegram is
dispatched, and as against A. when it reaches him.

COMMENTS
Agreement between parties at a distance. No difficulty arises on the first paragraph. Whether a proposal has or
has not come to the knowledge of the person to whom it was made is purely a question of fact. The rest of the
section is intended, as shown by the illustrations to meet the questions raised by the formation of agreements
between parties at a distance. It has done this, as regards acceptance by enacting (in combination with S. 5) that
for a certain time, namely, while the acceptance is on its way, the receiver shall be bound and the sender not.
The proposal becomes a promise before it is certain that there is any consideration for it. This can be regarded
only as a deliberate and rather large departure, for reasons of convenience, from the common law rule which
requires the promise and the consideration to be simultaneous. No such departure has been found necessary in
England. The case of an acceptance being "put in a course of transmission to" the proposer, but failing to reach
him, is not expressly dealt with. It seems to result from the language of the second paragraph that the proposer
must be deemed to have received the acceptance at the moment when it was despatched so as to be "out of the
power of the acceptor", and that accordingly it becomes a promise on which the acceptor can sue, unless some
further reasons can be found why it should not. If the consideration on the acceptor's part was not promise but
performance, for example, the sale of goods despatched at the proposer's request without previous negotiation,
the failure of consideration may supply such a reason in the case proposed. The Act certainly does not say that
the intending purchaser must be deemed to have received goods which have never arrived; it says at most that
he must be deemed to have been aware of their despatch. But if the consideration on the acceptor's part was a
promise, it would seem that the proposer cannot say he has not received that consideration; for he cannot say
that the acceptance has not been communicated to him and there is no difference between having the
communication of a promise and having the promise itself. Consequently, where the agreement is to consist in
mutual promises, a binding contract appears to be formed by a letter of acceptance despatched in the usual way,
even if it does not arrive at all, unless the proposal was expressly made conditional on the actual receipt of an
acceptance within a prescribed time, or in due course, or unless the acceptor sends a revocation as provided for
by the latter part of the section and explained by illustration (c). This last qualification is probably, though not
certainly, a departure from English law. Apart from the question of a possible revocation, the total result, on the
words of the Act, is in accordance with the existing English authorities. Those authorities, however, are of later
date than or Act, and in 1872 The current of opinion was rather the other way. It seems uncertain whether the
framers of the Act really omitted to consider the case of an acceptance not arriving at all, or meant it to be an
implied exception, on the ground that the want of any final consent between the parties (see S. 10) would
prevent the formation of a contract, or how otherwise.

Statutory consents.---The validity of consents required by special statutory provisions, and revocations thereof,
is governed by the terms of the statute, and, in case of difference, not by this or the following section.

Acceptor sent through post its acceptance of bids of proposer but proposer did not receive acceptance and not
paid balance amount so as to face cancellation of concluded sale---Whether acceptance of offer transmitted to
proposer through post created a binding contract---Late-receipt or non-receipt of acceptance by proposer and its
failure to pay balance payment---Effect---Contract relating to immovable property---Time not essence of
contract.

Contract---Offer---Acceptance of---Communication of---Appellant signifying its acceptance to offer made by


respondents---Such acceptance, though never revoked, not reaching respondents---Held: Mere transmission of
acceptance to result in binding contract---Held further: Contract would be complete and binding on respondents
immediately after posting of acceptance.

Contract of service with public servant---Direction of Government to appoint sufficient for completion of
contract---Determination of pay and conditions of service irrelevant. Where the Governor decided to
appoint a certain person to a particular post on the basis of contract, the contract of service is complete and it
cannot be said that the determination of his salary and conditions of service is necessary before the contract can
be said to be complete, because the latter can be ascertained later on.

Jurisdiction---Case of breach of contract---Where may be tried. The suit on a breach of contract can be filed
at any place where the contract should have been performed in the whole or in part, and even in so far as the
price of the goods in the present case was payable at Karachi, the Karachi Courts would have jurisdiction to
entertain the suit.

Jurisdiction---Case of breach of contract---Where may be tried. The suit on a breach of contract can be filed
at any place where the contract should have been performed in the Whole or in part, and even in so far as the
price of the goods in the present case was payable at Karachi, the Karachi Courts would have jurisdiction to
entertain the suit.
5. Revocation of proposals and acceptances. A proposal may be revoked at any time before the
communication of its acceptance is complete as against the proposer, but not afterwards.

An acceptance may be revoked at any time before the communication of the acceptance is complete as against
the acceptor, but not afterwards.

Illustrations

A proposes, by a letter sent by post, to sell his house to B.


B accepts the proposal by a letter sent by post.
A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not
afterwards.
B. may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A
but not afterwards.

COMMENTS

Revocation of Offers.--- It is implied in this section that the proposer of a contact cannot bind himself (unless
by a distinct contract made for a distinct consideration) to keep Iris offer open for any definite time, and that any
words of promise to that effect can operate only for the benefit of the proposer and as a warning that an
acceptance after the specified time will be too late (S. 6, sub-s. 2). Such is undoubtedly the rule of the Common
Law. The reason is that an undertaking to keep the offer open for a certain time is a promise without
consideration, and such a promise is unenforceable. A gives an undertaking to B to guarantee, for twelve
months, the due payment of M.'s bills, which may be discounted by B at A's request. This is not a binding
promise, but a standing proposal which becomes a promise or series of promises as and when B discounts bills
on the faith of it. A may revoke it at any time, subject to his obligations as to any bills already discounted. "The
promise" or rather offer" to repay for twelve months creates no additional liability on the guarantor, but, on the
contrary, fixes a limit in time beyond which his liability cannot extend" Z offers to take A's house on certain
terms, an answer to be given within six weeks. A within that time writes Z a letter purporting to accept, but in
fact containing a material variation of the terms (see S. 7 sub-s. 1, below); Z then withdraws his offer; A writes
again, still within the six weeks correcting the error in his first letter and accepting the terms originally proposed
by Z. No contract is formed between Z and A, since A's first acceptance was insufficient, and the proposal was
no longer open at the date of the second. Similarly a proposal to sell goods allowing eight days' time for
acceptance may be revoked within the eight days unless the promise to keep the offer open was supported by
consideration. A statutory power to make rules for the conduct of departmental business will, however, justify a
local government in prescribing, among the conditions of tenders for public service, that a tender shall not be
withdrawn before acceptance or refusal.

Sale by Auction, etc.---The liberty of revoking an offer before acceptance is well shown in the case of a sale by
auction. Here the owner of each lot put up for sale makes the auctioneer his agent to invite offers for it, and
"every bidding is nothing more than an offer on one side, which is not binding on either side till it is assented
to." Hence a bidder may withdraw his bid at any moment before the fall of the hammer. It is common to insert in
conditions of sale a proviso that biddings shall not be retracted, but it seems that such a condition is inoperative
in law for a one-sided declaration cannot alter the bidder's rights under the general law, nor is there any
consideration for his assenting to it, even if he could be supposed to assent by attending the sale with notice of
the conditions.

In two Madras cases, it has been held that where a bid has, to the knowledge of the bidder, been conditionally
accepted, the agreement is complete once the condition has been fulfilled, and no communication to the offerer
of the absolute acceptance is necessary. In a bench decision, D, a bidder for a piece of land, was notified of X's
acceptance of his bid 'subject to the approval and orders of the special agent V'. V did approve, and a document
embodying his approval was drawn up, but was not communicated to D, and the land was sold by X to P. P
sought to eject D, relying on S. 4, but the Court held for D, on the ground that the contract was complete on the
fulfillment of the condition subsequent. The decision was followed and property was knocked down to P, the
highest bidder at an auction, 'subject to the approval of the C.D. bank'. The bank passed a resolution accepting
the bid, but rescinded it before it was communicated to P. The Court nevertheless gave specific performance in
favour of P, on the ground that communication of acceptance twice was not needed, once when the conditional
acceptance was given and again when the condition was fulfilled.
It is submitted that these two cases were wrongly decided. In the 1916 bench decision, the Court misunderstood
the nature of a condition subsequent. A condition subsequent predicates a pre-existing obligation, which is to
terminate upon the occurrence of some event. It is a resolutive condition, as distinct from a suspensive condition
or condition precedent, which prevents the existence of any obligation until the condition is satisfied. Yet the
court clearly decided that there was no binding agreement at any rate until V, the special agent, approved. In
other words, their lordships held that the condition was a condition precedent, for had the condition been a
condition subsequent, there would have been a binding contract the moment D's bid was accepted, liable to be
defeated by V's failure to approve. Appropriate wording to impose a condition subsequent would have been to
the effect that the bid was accepted, but if V should not approve the contract was to be at an end.

It is submitted that in both cases there was a condition precedent, and that the bidder could have retracted his
offer before the final acceptance by V and the C.D. bank respectively. An acceptance, in his opinion, is
provisional where the offeree has no authority to accept the bid; he is a mere conduit-pipe. In the meantime, the
offeror can withdraw his bid. But where the offeree has full power to accept the offer, yet gives only a qualified
acceptance, although the offeree is not finally bound, the offeror cannot withdraw. This reasoning is, with
respect, erroneous. An acceptance is either absolute or conditional. There is no halfway house between the two.
If an acceptance is conditional, the offeror can withdraw at any moment until absolute acceptance has taken
place.

Once it is established that there is no agreement binding on either party, at any rate until V or the C.D. bank
respectively gives its approval, the only question remaining for determination is whether communication of this
approval to the offeror is necessary before the agreement becomes binding. The general rule under S. 4 is that
communication is required. S. 8 provides an exception, but this applies where the offeror expressly or implicity
dispenses with the requirement of express communication. It seems that the offeror gave no such express or
implied dispensation in either of the two Madras cases, and that there was no contract concluded until the
approval of V and the C.D. bank respectively had been communicated.

Standing offers.--- A writing whereby A agrees to supply coal to B at certain prices and up to a stated quantity,
or in any quantity which may be required, for a period of twelve months, is not a contract unless B binds himself
to take some certain quantity, but a mere continuing offer which may be accepted by B from time to time by
ordering goods upon the terms of the offer. In such a case, each order given by B is tin acceptance of the offer;
and A can withdraw the offer, or, to use the phraseology of the Act, revoke the proposal, at any time before its
acceptance by an order from B. Such a transaction may be reduced to a statement by the intending vendor in this
form: "If you will send me orders for coal, I shall supply it to you for a period of twelve months at a particular
rate." This is merely a proposal from A to B If, in reply to such a proposal, B says to A, "I agree," it does not
constitute an acceptance of the proposal. An acceptance can take place only by B sending an order to A. If,
however, there is an undertaking on the part of B not to send orders for coal (or whatever the goods in question
may be) to any other person than A during a specified time, there is a good consideration for a promise by A to
supply such coal as B may order on the specified terms and up to the specified extent. The same principle was
affirmed by the Privy Council on an appeal from the Province of Quebec, where French-Canadian law, now
codified, is in force. A printer covenanted to execute for the Government of the Province, during a term of eight
years, the printing and binding of certain public documents on certain terms expressed in a schedule. In the
course of the same year the Lieutenant-Governor cancelled the agreement. The printer sued the Crown by
petition of right, and it was ultimately held, reversing the judgment below, that he had no ground of action.

"The contract" does not purport to contain any covenant or obligation of any sort on the part of the Crown. The
respondent undertakes to print certain public documents at certain specified rates. For all work given to him on
the footing of the contract the Government was undoubtedly bound to pay according to the agreed tariff. But the
contract imposes no obligation on the Crown to pay the respondent for work not given to him for execution.
There is nothing in the contract binding the Government to give to the respondent all or any of the printing work
referred to in the contract, nor is there anything in it to prevent the Government from giving the whole of the
work, or such part as they think fit to any other printer."

Advertisements of rewards and other so-called "general offers" have also raised questions whether particular
acts were proposals of a contract capable of being promises by acceptance, or merely the invitation of proposals.
This will be more conveniently dealt with under S. 8.

Oaths Act.---It has been held that if A offers to be bound by a special oath taken by B, and B accepts the offer,
A cannot resile from the agreement Having regard, however, to the provisions of the Oaths Act, B may be
allowed by the Court to resile from the agreement.

Revocation of proposal---When permissible---Governed by conditions of contract. Under section 5 of


Contract Act a proposal may be revoked at any time before the communication of its acceptance is complete as
against the proposer, and under section 7 the acceptance of a proposal must be absolute and unqualified. The
manner of revoking a proposal and of communicating acceptance might be controlled by the terms of
agreement, yet it was necessary that the offer should have been accepted at least ultimately in an absolute and
unqualified manner.

6. Revocation how made. A proposal is revoked:---

(1) by the communication of notice of revocation by the proposer to the other party;

(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the
lapse of a reasonable time, without communication of the acceptance;

(3) by the failure of the acceptor to fulfill a condition precedent to acceptance; or

(4) by the death, or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the
acceptor before acceptance.

COMMENTS

Notice of Revocation.--- Here sub-s. (1) appears to make it a condition of revocation being effectual that it shall
be communicated by the proposer or (which is the same thing) by his authority. This was probably intended to
correspond with the law of England, but a few years after the Act was passed the Lords Justices James and
Mellish used language apparently involving a different rule, though that case actually decided only that if an
owner of immovable property makes a proposal to sell it to one man, and before that proposal is answered
agrees to sell it to another, and the first, with the knowledge of this fact, then formally tenders an acceptance, the
purchaser who first actually accepts has the better right to specific performance. It was not decided (though the
Judges seem to have thought) that knowledge, not communicated by the proposer, that the property was sold to
some one else was such a revocation of the first proposal as in itself made acceptance by the person to whom it
was made impossible. Acceptance of a proposal which the proposer has made it impossible to fulfill is not
necessarily unmeaning or inoperative ; the fact that an obligation cannot be specifically performed is consistent
with the promisor being bound to pay damages for his default. Many obligations are from the first incapable of
specific performance so far as any power of the Court is concerned. It would be absurd to hold that a promisor is
to go scot-free because by his own action he has reduced the possibilities of his obligation from a higher to a
lower level. The reasons given for the decision have been freely criticized in England; but, as the decision itself
is not of positive authority in India in a matter covered by the terms of the Contract Act, it does not seem useful
to pursue the discussion here.

Revocation not presumed.--- As Lord Justice James said "prima facie every contract is permanent and
irrevocable, and it lies upon a person who says that it is revocable or determinable to show either some
expression in the contract itself, or something in the nature of the contract, from which it is reasonably to be
implied that it was not intended to be permanent and perpetual, but was to be in some way or other subject to
determination". This dictum, and the case cited in our note, realy belong to the subject of interpretation, in cases
where it is alleged that an option to determine a completed contract is conferred by the terms of the contract
itself. But the principle that an intent to revoke what has once been deliberately uttered will not be lightly
presumed or too readily inferred appears to be equally applicable to proposals. Moreover, the Act does not
explicitly deal with interpretation anywhere. The Lord Justice went on to point out that many contracts, those of
employment, agency, and the like, are by their nature not expected to be of indefinite duration. The agreement
before him was an agreement for running powers between two railway companies.

Condition precedent to acceptance.--- As to sub-s. 3, it is not very easy to see what a condition precedent to
acceptance means. The words (like several other of the less felicitious phrases in the Act) appear to have been
borrowed without much reflection from the draft Civil Code of the State of New York, completed in 1865 and
never adopted in its own State. There is nothing in the original context to throw light on them. A man proposing
a contract may request either a single act, or several acts, or a promise or set of promises, or both acts and
promises, as the consideration for a promise which he offers. The other party may do something obviously
inconsistent with performing some or one of the things requested. This amounts to a tacit refusal, and
accordingly the proposal is at an end (see notes on S. 5, "Revocation of offers," above)., and the parties can form
a contract only by starting afresh. If the fact amounts to a refusal, there is no manifest reason for calling it
failure to fulfill a condition precedent. The term is not used in this connection in English books. Everything
required on the acceptor’s part to complete an acceptance would rather seem to be part of the acceptance itself.
This sub-section does not appear to have been judicially interpreted or indeed to have any very material effect.

Death or insanity of proposer.--- The provision made by sub-s. 4 is quite clear. It is a variation from English
law, where on the one hand it is understood that "the death of either party before acceptance causes an offer to
lapse," without any qualification as to notice, and on the other hand it does not seem that supervening insanity of
the proposer operates as a revocation at all, since the contract of a lunatic is only voidable and not void. If an
offer is addressed to a man who dies without having accepted or refused it, his executors have no power to
accept it either in England or in India. For the proposer cannot be presumed to have intended to contract with a
deceased person’s estate. This is very different from the case of one who accepts a proposal without knowing
that the proposer is dead.

Refusal.--- The rejection of a proposal by the person to whom it is made is wholly distinct from revocation, and
is not within this section. A counter-offer proposing different terms has the same effect as a merely negative
refusal; it is no less a rejection of the original offer, and a party who, having made it, changes his mind, cannot
treat the first offer as still open.

7. Acceptance must be absolute. In order to convert a proposal into a promise, the acceptance must:---

(1) be absolute and unqualified;

(2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is
to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made
in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist
that his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he
accepts the acceptance.

COMMENTS

Certainty of acceptance.--- The rule of the first sub-section is in itself obviously necessary, for words of
acceptance which do not correspond to the proposal actually made arc not realy an acceptance of anything, and,
therefore, can amount to nothing more than a new proposal, or, as it is frequently called, a counter-offer. The
difficulties which occur under this head are difficulties not of principle but of construction. the question being in
every case whether a particular communication is to be understood as a real and absolute acceptance, or as
introducing a condition or qualification which makes it only a stage in a course of negotiation capable of
leading, but not necessarily leading, to a concluded contract. Sometimes additional words that seem at first sight
to make the acceptance conditional arc m, more than the expression of what the law implies.

A Bench decision from Calcutta is a clear, though tacit, rejection of the view of Lord Cairns. There P, who
claimed that D had agreed to lease certain property to him, had his solicitor write a letter to D, purporting to
confirm the agreement, and reciting the terms, one of which was that the lessor would make out a good title to
the property free from all incumbrances. The Court held that this term, coupled with a final paragraph asking for
the documents of title to be sent for investigation, indicated that no binding contract had yet been arrived at
between the parties. Again, the offer of a new contract may be annexed to an absolute acceptance so that there is
a concluded contract whether the new offer is accepted or not. On the other hand reference to special conditions
not known to the other party, as distinguished from terms already made part of the proposal, will prevent an
acceptance from being final. So will a reference to future unspecified terms "to be arranged," or the like,
between the parties or their agents. But an acceptance on condition, coupled with an admission that the
condition has been satisfied, may be in effect unconditional. An acceptance which is in form conditional may
also be considered in fact absolute, on the ground that the parties did not really envisage the incorporation in the
contract of any terms other than those already agreed, an offer was accepted "subject to the usual conditions of
acceptance." It was held that there was a binding contract, as these words were on the facts quite meaningless:
the offeree had not in mind that any further terms were to be agreed, but was using a high-sounding phrase to
which he attached no particular meaning. In another case, also before the Court of Appeal, D entered into a
written agreement to buy P's mushroom farm. The agreement concluded with these words: "This is a provisional
agreement until a fully legalised agreement drawn up by a solicitor and embodying all the conditions herewith
stated is signed." No "fully legalised agreement" was ever prepared, but the Court held the parties bound, one of
the points being that no other condition was to be incorporated in the agreement to be drawn up by the solicitor.

Although there can be no contract without a complete acceptance of the proposal, it is not universally true that
complete acceptance of the proposal makes a binding contract; for one may agree to all the terms of a proposal,
and yet decline to be bound until a formal agreement is signed, or some other act is done. This is really a case of
acceptance with an added condition, but of such special importance as to call for separate mention. There may
be an express reservation in such words as these: "This agreement is made subject to the preparation and
execution of a formal contract". Or a proposal for insurance may be accepted in ail its terms, but with the
statement that there shall be no assurance till the first premium is paid. Here again there is no contract, but only
a counter-offer, and the intending insurer may refuse a tender of the premium if there has meanwhile been any
material change in the facts constituting the risk to be insured against. Where there is no precise clause of
reservation, but the acceptance is not obviously unqualified, it becomes a question of construction whether the
parties intended that the terms agreed on should merely be put into form, or whether they should be subject to a
new agreement the terms of which are not expressed in detail, and this must be determined by examination of
the whole of a continuous correspondence or negotiation. It will not do to pick out this or that portion which, if
it stood alone, might be sufficient evidence of a contract. But where it appears that a complete contract was
formed by unqualified acceptance of an offer at a certain date, subsequent negotiations will have no effect
unless they amount to a new agreement.

In India it has been laid down, in accordance with English law as well as with the terms of the Act, that an
acceptance with a variation is no acceptance; it is simply a counter-proposal, which must be accepted by the
original promisor before a contract is made. Thus where an offer was made for the purchase of certain goods
which were to be ordered out from Europe, an acceptance "free Bombay Harbour and interest," being a term not
contained in the offer, was held to be no acceptance within the meaning of this section. In such a case the
acceptance with a qualification is in its nature a counter-proposal which, if accepted by the proposer, would
constitute an agreement.

Apparent without real acceptance.-- In exceptional circumstances there may be an unconditional acceptance
in terms of a proposal which in fact the parties do not understand in the same sense, and which neither party is
estopped from understanding in his own sense. Here the acceptance is merely apparent, and no contract is
formed. Such cases are better postponed till we come to S. 13.

Manner of acceptance [sub-s. 2].--- A proposal must be accepted according to its terms. Therefore, if the
proposer chooses to require that goods shall be delivered at a particular place, he is not bound to accept delivery
tendered at any other place. It is not for the acceptor to say that some other mode of acceptance which is not
according to the terms of the proposal will do as well. In a Calcutta case an offer was made in the following
terms :---"I intend to sell my house for Rs.7,000. If you are willing to have it, write to F at his address." Instead
of writing to F the purchaser sent an agent in :person to F and agreed to purchase the property for Rs. 7,000. It
was contended that this was not a valid acceptance, as the only manner in which the acceptance of the offer
could be made was by writing to F at his address. It was held that the letter had to be read in a reasonable
manner and that it did not preclude the purchaser from putting himself into direct communication with F. This
decision may perhaps be doubted, and a safer ground would have been that on the oral acceptance being
communicated to the vendor he did not insist upon the proposal being accepted in writing.

The present sub-section, however, throws on the proposer the burden of notifying to the acceptor that an
acceptance not in the prescribed manner and form is insufficient, and he remains bound if he fails to insist on an
acceptance such as he required. No previous or subsequent authority for this has been found in the Common
Law, nor does analogy seem to favour it.

At all events, one party to a negotiation cannot impose on the other the burden of expressly refusing, either an
original offer or a counter-offer by saying that he will assume acceptance unless he hears to the contrary. Assent
to his terms is a positive act within the other party's discretion, and he has no right to presume it. Neglect to
answer a business offer is certainly not, as a rule, prudent or laudable; still there is no legal duty to answer at all.

8. Acceptance by performing conditions, or receiving consideration. Performance of the conditions of a


proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal,
is an acceptance of the proposal.
COMMENTS

General Offers.---The terms of this section are very wide. Nothing like them occurs in the original draft of the
Indian Law Commissioners, nor, so far as known to us, in any authoritative statement of English law. They
appear to have been taken from the draft Civil Code of New York, with slight verbal alteration. In the absence
of illustrations, their intended scope is not very clear. It seems, however, fairly certain that the division of the
subject-matter of the section into two branches, "performance of the conditions of proposal" and "acceptance of
any consideration for a reciprocal promise which may be offered with a proposal," corresponds to the general
division of proposals into those which offer a promise in exchange for an act or acts and those which offer a
promise in exchange for a promise. We have already noted on S. 2 (a) and (b), above, that the word proposal, as
defined by the Act, seems to be limited to the offer of a promise. Accordingly "performance of the conditions of
a proposal' seems to be nothing else than doing the act requested by the proposer as the consideration for the
promise offered by him, as when a tradesman sends goods on receiving an order from a customer. The only
previous definition of acceptance in the Act is that a proposal is said to be accepted when the person to whom it
is made "signifies his assent thereto" [S. 2(b)]. This has to be read with the provisions as to communication in
ss. 4 and 7. So far there might have been doubt whether acceptance can ever be binding without
communication ; and, indeed, the present section does not expressly dispense with communication in any case.
Nevertheless it appears, in its first branch, to recognise the fact that in the cases in which the offeror invites
acceptance by the doing of an act "it is sometimes impossible for the offeree to express his acceptance otherwise
than by performance of his part of the contract." The most obvious example is where a reward is publicly
offered to any person, or to the first person, who will recover a lost object, .procure certain evidence, or the like.
Here the party claiming the reward has not to prove anything more than that he performed the conditions on
which the reward was offered, which conditions may or may not include communication by him to the proposer.
In the simple case of a reward proposed for something in which the proposer has an obvious interest, there is not
likely to be any other question than what the terms were, and whether they have been satisfied by the claimant.
There is some authority for construing the terms liberally in favour of a finder. But analogous or seemingly
analogous cases may be less simple. There may be questions, whether the offer was sufficiently certain or
whether it was intended, or could reasonably be taken, as the offer of a contract at all. So where brokers in
Bombay wrote to merchants in Ghaziabad stating their terms of business and the merchants afterwards placed
orders with the brokers which were executed by them, it was held that the first letter was only an invitation to do
business; no contract was made until the orders given by the brokers were accepted by the merchants and hence
the cause of action arose wholly in Bombay. A bank's letter with quotations as to particulars of interest on
deposits in answer to an enquiry is not an offer but only a quotation of business terms. Where the owner of a
property says that he will not accept less than Rs.6,000/-, he does not make an offer, but merely invites offers.

As to the objection that to complete the plaintiff's acceptance of the offer there must either be communication to
the defendant or some act of a public nature, Bowen L.J. said "One cannot doubt that, as an ordinary rule of law,
an acceptance of an offer made ought to be notified to the person who makes the offer, in order that the two
minds may come together .. But there is this clear gloss to be made upon that doctrine, that, as notification of
acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may
dispense with notice to himself if he thinks it desirable to do so, and I suppose that there can be no doubt that
where a person, in an offer made by him to another person, expressly or impliedly intimates a particular mode of
acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such
offer is made to follow the indicated method of acceptance; and if the person making the offer expressly or
impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating
acceptance of it to himself, performance of the condition is a sufficient acceptance without notification." Cp. S.
7(2), above. This principle was followed in case where A. signed a proposal form of insurance on his life and
handed it to N, an organiser of the defendant insurance company, with a cheque for the premium. N had no
authority to receive the cheque as premium, but after A had been twice medically examined the company cashed
the cheque. Two weeks later the company wrote to N asking him to make further enquiries regarding A's
proposal, but the next day A died of pneumonia. The company denied liability, but the Court held that the
contract was complete from the moment the cheque was cashed, as A had dispensed with express
communication of acceptance.

Perhaps it would now be a safe and more elegant way of stating the law to say that a proposal is in every case
accepted by performance of its conditions (or perhaps, more accurately, by compliance with its terms); that
communication by the acceptor to the proposer or his authorised agent is necessary when the terms consist of or
include a counter-promise (for there is no promise at all without communication); but that when only acts are
required the communication of their performance may or may not be added as a term of the offer at the will of
the proposer, which may be either express or inferred from the nature and circumstances of the proposal. From
this point of view, the present section of the Act would be logically prior to S. 7.

There has been another somewhat peculiar case before the Privy Council. The plaintiff was a grandniece of
Papamma, a wealthy Hindu widow, and was brought up by her from early age. At the age of fourteen the
plaintiff was married to an ex-zamindar who owned property of considerable value. Papamma was anxious that
the plaintiff, although married, should continue to live with her, and she promised that if the plaintiff and her
husband would reside with her, she would make provision for her on a fairly ample scale by the purchase of
immovable property for her. The plaintiff and her husband accordingly lived with Papamma. In 1893 Papamma
bought a village in her own name, but, as she stated, for the appellant. Dissatisfaction arose because it was not
transferred to the plaintiff, and the husband consequently ceased to reside with Papamma. Papamma sent
messages to the husband asking him to return, but he did not return. In October, 1893, Papamma wrote a letter
in her own hand to the plaintiff herself stating that the village had been purchased for the appellant and would be
transferred to her upon the writer's death. The plaintiff and her husband thereafter resided with Papamma until
Papamma's death ,in 1899. After Papamma’s death the plaintiff instituted a suit for a declaration that she was
entitled to the village and for possession thereof. Their lordships held that the letter of October, 1893,
constituted a promise which was accepted by the plaintiff, and that there was a completed contract which
entitled the plaintiff to possession of the village: "The Board is of the opinion accordingly that there has been a
completed contract. Papamma accomplished her desire, and she obtained the consideration which she had so
much at heart. Acceptance of her terms and compliance with her stipulation were made.

Acceptance by receiving consideration.--- The second branch of the section as to "acceptance of any
consideration," etc., is rather obscure. It is hard to say with any certainty what particular class or classes of
transactions it covers, and the words seem more appropriate to gifts or transfers of property than to contracts. It
is generally sound principle, no doubt, that what is offered on conditions must be taken as it is offered. The use
of the word "reciprocal’ is curious, for it hardly fits the most obvious class of cases, as where goods are sent on
approval, and the receiver keeps them with the intention of buying them. Here the seller need not and commonly
does not offer any promise, and there is therefore no question of a reciprocal promise as defined in the Act IS.
2(t)]. No doubt the acceptance of an offered consideration, as such, amounts to giving the promise (whether
reciprocal or not) for which it was offered, or else raises an equivalent obligation. But a thing which is offered in
one right and for one purpose may be taken under a different claim of right and with a different intent; and in
that case (which is exceptional but of some importance) the legal result will not be a contract between the
parties, whatever else it is capable of being, unless indeed the party receiving the thing so conducts himself as to
lead the proposer reasonably to conclude that there is an acceptance according to the offer; and then the
proposer can hold him liable on the universal principle that a man's reasonably apparent intent is taken in law to
be his real intent. We cannot suppose that the present section is intended to preclude all inquiries of this kind by
making every receipt in fact of a thing offered by way of consideration a conclusive acceptance of the proposal.
It has been applied however to the case of a bank's customer receiving notice, which he did not answer, of an
increase in the rate of interest on overdrafts, and afterwards obtaining a further advance; held that he accepted a
consideration offered by the bank within the terms of this section.

Acceptance sub silentio---When offeree's silence constitutes acceptance---Where contract is in part, there
must be consensus ad idem and in its absence, even after parties have signed the contract, a counter offer can be
made suggesting an amendment or novatio and the offeree's silence coupled with subsequent conduct in this
regard would amount to acceptance of counter offer.

Tender for sale of property---Only an offer---No contract unless tender accepted---Even highest tender
may be refused. An advertisement inviting tenders for the sale of property is not an offer but an invitation of an
offer. The tender in law is only an offer for the purchase of the property and if the tender of a person, even if it
is the highest, is not accepted, he cannot make a grievance of the fact. The offer for the sale of the property does
not give a right to the offerer for its purchase. A tender only when accepted constitutes a binding contract; and
unless the contract comes into existence mutual rights and obligations of the parties do not arise.

9. Promises, express and implied. In so far as the proposal or acceptance of any promise is made in words, the
promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the
promise is said to be implied.

COMMENTS
Express and tacit promises.--- This section assumes rather than lays down that which we have already found it
needful to mention in the course of the commentary, namely, that both proposals and acceptances may take
place without express words. An implied promise, in the sense of the Act, is a real promise, though not
conveyed in words. It must be distinguished from the promises frequently said in English books to be implied
by law, which were fictions required by the old system of pleading to bring cases of "relations resembling those
created by contract" (Ss. 68-72, below) within the recognised forms of action, and sometimes to give the
plaintiff the choice of a better form of action. Thus, if the plaintiff desired to sue for a liquidated sum in the
general form of assumpsit instead of in the less convenient form of debt, the law conclusively "implied" a
promise to pay the debt, though there might not have been any promise in fact. The actual promise "made
otherwise than in words" is a matter of fact which in common law practice would be established by the verdict
of a jury; whereas in the case of the fictitious promise a jury might have to find the facts on which the law
proceeded, but would not have been allowed to find that there was no real promise.

A tacit promise may be implied from a continuing course of conduct as well as from particular acts. Thus an
agreement between partners to vary the terms of the partnership contract may "either be express or be implied
from a uniform course of dealing" (s. 11 (1)of the Partnership Act, 1932, which reproduces well-settled English
law). Where parties have acted on the terms of an informal document which has passed between them, but has
never been executed as a written agreement or expressly assented to by both, it is a question of fact whether
their conduct establishes an implied agreement to be bound by those terms. Questions may arise whether all the
terms of another document are incorporated in a contract, when the contract refers to that document. The terms
of a document can be incorporated by reference, when they are not inconsistent with the express terms of the
incorporating document, and are not repugnant to the transaction which that document represents.

The language of the section appears to assume that the terms of a contract may be(as undoubtedly they may, by
familiar law and practice) partly express and partly implied. A term which, in the opinion of the Court, results
from the true construction of the language used by the parties may be said to be implicit in that language, but in
the sense of the present section it is not implied; for it is contained in the words of the agreement, though not
apparent on the face of them. But there is a class of cases, of considerable importance in England, where the
parties are presumed to have contracted with tacit reference to some usage well known in the district or in the
trade, and whatever is prescribed by that usage becomes an additional term of the contract, if not contrary to the
general law or excluded by express agreement. Such terms are certainly implied, as resulting not from the words
used, but from a general interpretation of the transaction with reference to the usual understanding of persons
entering on like transactions in like circumstances. In India most of the cases of this kind which have been
reported in the High Courts appear to be on implied contracts to pay interest. Such a contract may exist by
reason of mercantile usage. The ground on which usages of this kind are enforced is not that they have any
intrinsic authority, but that the parties are deemed to have contracted with reference to them. They need not,
accordingly, be ancient or universal. It is enough that they are in fact generally observed by persons in the
circumstances and condition of the parties.

Sale of immovable property---No price specified---Not enforceable contract. As a general rule, in the case
of immovable properties price is of the essence of a contract of sale and unless the price is fixed there is no
enforceable contract, because if no price is named the law does not imply, as in case of a sale of goods, a
contract at a reasonable price