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INCORPORATION OF TERMS
AGREEMENTS
BUNDLE OF OFFERS
•Undue Influence sec 16: A contract is said to be under undue influence where the
relationship subsisting between the parties are such that one of the parties is in a position to
dominate the will of the other, and uses that position to obtain an unfair advantage over the
other. Relationships where undue influence is presumed are (i) Parent and Child (ii)
Religious Guru and Disciple (iii) Doctor and Patient (iv) Solicitor and Client (v) Guardian &
Ward. When a person’s mental capacity is temporarily or permanently affected by reason of
age, illness, or mental or bodily distress. (Case of R S Lodha and Birla family)
•Presumption of Undue Influence: Pardanashin Woman contrary case Imail Mustafa and
Hafis boo.
•Threat To commit suicide
•However, undue influence is not presumed in case of (i) Husband and wife (ii) Landlord and
Tenant and (iii) Creditor and Debtor (iv) Mother and daughter (v) Landlord and tenant.
Impediments to free consent
• Misrepresentation : It is a mis-statement of a material fact made innocently with
an honest belief as to its truth or non-disclosure of a material fact, without any
intent to deceive the other party. (Mileage of vehicle)
• Mistake of fact may relate to (i) subject matter (ii) possibility of performance (iii)
unilateral mistake (iv) identity of person contracted with or (v) nature of
contract
Justice Denning in a case noted that
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REVOCATION IN CONTRACT ACT
The provisions on revocation in the Indian Contract Act, 1872, are as
follows:
5. Revocation of proposals and acceptances- A proposal may be
revoked (officially cancel a decree, decision, or promise) at any time
before the communication of its acceptance is complete as against the
proposer, but not afterwards.
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.27
PROVISIONAL ACCEPTANCE
Section 7(1) of the Indian Contract Act, 1872 states:
‘the acceptance must be absolute and unqualified’
28
CASE: UNION OF INDIA V. M/S.
BHIMSEN WALAITI RAM
In an auction to license a liquor shop in Delhi, Bhimsen Walaiti Ram
was the highest bidder.
He was required to pay one-sixth the bid value within seven days.
Clause 32 of the auction stated: ‘All final bids will be made subject to
the confirmation by the Chief Commissioner, who may reject any bid
without assigning any reasons.’
Bhimsen did not make the deposit. The Chief Commissioner did not
confirm the bid made by Bhimsen.
The Excise Department organised another auction to find a person to
license the shop.
The new bid, which was accepted and sanctioned, was Rs. 1,81,000
less than Bhimsen’s bid.
The Excise Department claimed this amount as damages for breach
of contract.
Bhimsen contested this. 29
JUDGEMENT: SUPREME COURT
“… the contract of sale was not complete till the bid was confirmed by
the Chief Commissioner and till such confirmation, the person whose
bid has been provisionally accepted is entitled to withdraw his bid.
When the bid is so withdrawn before the confirmation of the Chief
Commissioner, the bidder will not be liable for damages on account of
any breach of contract or for the shortfall on the resale. An acceptance
of an offer may be either absolute or conditional. If the acceptance is
conditional, the offer can be withdrawn at any moment until absolute
acceptance has taken place.”
30
REJECTION OF OFFER
31
CASE: SUPPLY OF KEYBOARDS
33
MIRROR IMAGE RULE
34
MODALITIES OF COMMUNICATION
Acceptance should be directed and communicated to the
person making the offer.
An offer can specify the modality of communication of
acceptance. An agreement can be formed by following the
prescribed modality.
Acceptance must be through the means of communication
indicated in the offer. However, the offeror can waive the
prescribed mode of communication.
If the offer does not prescribe the modality of communication
of acceptance, the acceptance should be made by a
reasonable means of communication. Reasonableness will be
with reference to the modality of communication employed for
making the offer.
Silence can only imply rejection, not acceptance.
35
CAR DEALER
36
Cont…
• A week later, however, Shanti Sales Ltd. wrote
to Pratap expressing their inability to supply
the car. They refunded the money by drawing a
cheque. In this while, the price of the cars went up.
To buy the same car, Pratap would have to pay
additional Rs. 25,000. Pratap insists an agreement
got formed between the parties when Shanti Sales
encashed the cheque.
• Decide. – If the offer doesn't provide the modality of
communication of acceptance, the acceptance should be made by
reasonable means of communication. Reasonableness will be
with reference to the modality of communication employed for
making the offer.
• Here the reasonable modality is that Pratap offered to buy the car
by filling a pre printed form and Shanti Sales wrote back to Pratap
expressing their inability to supply the car, therefore enchasing37
the cheque doesn't tantamount to acceptance
CASE: LIFE INSURANCE
38
ISSUES FOR EXPLORATION
• Who makes the offer? Sumit,
• Who has set the terms of offer? Insurance company
• To whom has the offer been communicated? LIC, by
filling up the Insurance proposal form
• To whom should the communication of offer be
made? LIC
• Who should communicate the acceptance of the
offer? LIC
• Has the acceptance of offer been communicated?
No
• Has the offer been accepted? No
• Has a contract been formed between the parties?
No 39
JUDGEMENT: SUPREME COURT
40
JUDGEMENT: SUPREME COURT
• …silence does not denote consent and no binding
contract arises until the person to whom an offer is made
says or does something to signify his acceptance. Mere
delay in giving an answer cannot be construed as an
acceptance, as, prima facie, acceptance must be
communicated to the offeror. The general rule is that the
contract of insurance will be concluded only when the
party to whom an offer has been made accepts it
unconditionally and communicates his acceptance to the
person making the offer.
• In the case of LIC of India Vs. Raja Vasireddy Komallavalli Kamba the
supreme court observed that “no contract is formed between parties
till the insurer communicates to the applicant.”
41
CASE: FELTHOUSE V. BINDLEY
John had a horse to sell. His uncle, Felthouse, was
interested in buying the horse. The two had talked about it.
Felthouse wrote to John, “If I hear no more about him, I
consider the horse is mine at £ 30 15s.”
John was settled on selling the horse to his uncle, but he
did not send any reply.
John got an auctioneer to sell his property. The auctioneer,
by mistake, sold the horse along with the other property.
Felthouse contested the authority of the auctioneer to sell
the horse. He argued that a sale contract had got formed
between the parties and as a result, he had become the
owner of the horse, even if it was in possession of John.
As the horse was not John’s property, the auctioneer was in
the wrong selling it.
42
JUDGEMENT
The court ruled:
43
Communication of Offer
• Indian contract Act, 1872: Section 4, The
communication of a proposal is complete when it
comes to the knowledge of the person to whom
it is made.
• However a contract will be formed when the
offeror would receive the acceptance.
• When parties are face to face, the contract
would be formed at the point of time at which the
offeror hears the acceptance but if the parties
are separated by a distance then the dimension
of place come into contract.
CONTRACT OVER THE PHONE
M/s Girdhalal Purshottamdas and Co., based in Ahmedabad,
made an offer to Kedia Ginning Factory and Oil Mills of
Khamgaon, to purchase cotton seed cake. Kedia Ginning Factory
accepted the offer in the same phone conversation. The contract
could not be performed and parties needed to go to a court to
work out the damages. The case could be filed only in the court of
the area where the contract was made.
Phone
Letter
Courier
Email
TIME AND PLACE OF CONTRACT
A makes an offer from New York and B in Delhi
accepts it. Where is the contract made in the
following modalities of communication (assuming
that the contract does not provide on it):
Letter
Courier
Email
TIME AND PLACE OF CONTRACT
A makes an offer from New York and B in Delhi
accepts it. Where is the contract made in the
following modalities of communication (assuming
that the contract does not provide on it):
Letter - Delhi
Courier
Email
TIME AND PLACE OF CONTRACT
A makes an offer from New York and B in Delhi
accepts it. Where is the contract made in the
following modalities of communication (assuming
that the contract does not provide on it):
Letter - Delhi
Courier - Delhi
Email
TIME AND PLACE OF CONTRACT
A makes an offer from New York and B in Delhi
accepts it. Where is the contract made in the
following modalities of communication (assuming
that the contract does not provide on it):
•Phone & Tele-conferencing – New York (face to
face, dialogic conversation, the logical rule would
apply)
•Letter – Delhi (Postal Rule)
•Courier – Delhi (Postal Rule)
•Email – Delhi (Postal Rule)
•SMS - Delhi (Postal Rule)
PLACE SPECIFIED
Ramesh signed the offer form for sending a courier
in Ahmedabad. The offer was accepted by the
courier company in Ahmedabad itself. The
consignment was being sent from Ahmedabad to
Pune. The courier company lost the consignment.