Agreement

Agreement is fundamental to a contract. It is the result of offer and acceptance. Agreements are every promise and every set of promises forming consideration for each other. Section 2(e) Agreement=Offer + Acceptance

Offer/Proposal:
Section 2(a), defines a proposal as follows when one person signifies to another his willingness to do or to abstain from doing anything with a view to obtain the assent of that other to such act or abstinence, he is said to make a proposal The person making a proposal is called the promiser/the offerer. The person to whom the proposal is made is called the promisee/offeree. Example: A writes to B, I offer to sell you my house for Rs. 20 lacs, A is an offerer and B is an offeree

How is an offer made, Section 3 An offer can be made in the following ways: 1. By express words whether spoken or written 2. Implied offer an offer may also be made by conduct Example: When a public transport company runs buses on a particular route, there is an implied offer by it to take any person on the route in return for the prescribed fare.

Essentials of Valid Offer 1. It must intend to create legal relations: An offer to perform social, moral or religious acts is not aimed at creating any legal relations. For instance, A invited B for dinner. B failed to arrive. A sued him for the price of food. As suit must be dismissed because an invitation for dinner does not create any legal relationship [Kalai Haldar vs. Sheikh 23, W.R. 217] 2. The terms of the event must be definite and certain and not loose or ambiguous: In Tayor vs. Portington 1855, an agreement to take a lease of house for 3 years at 85 per annum if the house was put into thorough repair and the drawing rooms handsomely decorated according to present style could not be enforced as its terms were vague. 3. It maybe general or specific: A specific offer is made to a specific individual but when the offer is directed to public at large, it is said to be general. The principle underlined the general offer has been underscored in the case of Carllil vs. Carbolic Smoke Ball Co, 1893. 4. Offer must be communicated: The first part of the definition of the proposal requires it to be communicated to the person to whom it is made. Acceptance is not possible unless offer is brought to the knowledge of the offeree. Acceptance in ignorance of offer confers no right [Lalman Shukla vs. Gowri Dutt (1913) 11 All LJ 489] 5. An offer is different from the following: a. Answer to a question: In Harvey vs. Facey (1893) AC 522, H. telegraphed F; will you sell us Bumper Hall Penn? Telegraph lowest cash price. F replied by telegram saying lowest price for Bumper Hall Penn is for 900 H telegraphed: We agree to buy the Bumper Hall Penn for 900 asked by you. To this H received no reply. Held, there was no contract because F had simply quoted the lowest price. It has not made any offer.

b. Invitation to an offer: Price lists, Catalogues, display of goods in a shoe window, tenders, advertisements, prospectus of a company, auctioneers requests for bid etc are instance for invitation to offer. These are not actual offer. The person who responds to such invitation makes the offer. [Pharmaceutical Society of Great Britain vs. Boots Cash chemists (1953) 1Q.B.401] c. Statement of intention: Declaration of intention by a person does not give a right of action to another. For instance, an advertisement for a concert or an auction sale is a statement of intention. [Harris vs. Nickerson (1873) L.R.8.Q.B 286] 6. Special conditions attached to the offer must be communicated: If special terms attaching to the offer are not brought to the notice of other party the offeree will not be bound [Henderson vs. Stevenson (1875) 32.LT 709]. Some special points in relation to special condition attached to standard form are attached are described below: a. Notice of special conditions must be contemporaneous with the contracts [Olley vs. Marlborough Court Ltd. (1949) 1KB 532]. b. Despite sufficient notice of the terms and conditions, the party imposing them shall be liable for breach of the fundamental condition [Davis vs. Collins (1945) 1] c. Unreasonable terms are excluded from contracts [LIC vs. Customer education and Research Center AIR (1995) SC 1811] 7. Offer must not contain a term the non-complaints of which could lead to acceptance: [Felthouse vs. Bindley (1862) 142 ER 1037].

8. Offer differs from the following: a. Counter offer: It is a new offer in response to the original offer. It amounts to rejection of the original offer. [Hyde vs. Wrench (1840)] b. Cross offer: where identical offer made by parties in ignorance of each other, the offers are said to be cross offers [Tinn vs. Hoffman (1873) 29 I. T (271)].

Acceptance

Appendix
Taylor vs. Portington, (1855) A offered to take a house on lease for the three years at 285 pounds per annum if the house was put into through repair and drawing rooms handsomely decorated according to the present style. Verdict:-The offer was too vague to result in contractual relation. Pharmaceutical society of Great Britain vs. Boots cash chemists (1953) Boots Cash Chemists had just instituted a new method for its customers to buy certain medicines. The company would let shoppers pick drugs off the shelves in the chemist and then pay for them at the till. Before then, all medicines were stored behind a counter and an assistant had to get what was requested. The Pharmaceutical Society of Great Britain objected and argued that under the Pharmacy and Poisons Act 1933, that was an unlawful practice. Under s 18(1), a pharmacist needed to supervise at the point where "the sale is effected" when the product was one listed on the 1933 Act's schedule of poisons. The Society argued that displays of goods were an "offer" and when a shopper selected and put the drugs into their shopping basket that was an "acceptance". Therefore because no pharmacist had supervised the transaction at this point, Boots was in breach of the Act. Boots argued that the sale was affected only at the till. Harris vs. Nickerson (1873) The Defendant placed an advertisement in London papers that certain items, including brewing equipment and office furniture, would be placed up for auction over three days in Bury St. Edmunds. The Plaintiff obtained a commission to buy the office furniture and expended time and expense to travel to Bury St. Edmunds to bid for the office furniture. On the third day, the lots for the office furniture were withdrawn. The Plaintiff sued for loss of time and expense. The judge at first instance found in favour of the Plaintiff. Leave was given to appeal to the High Court. The Plaintiff submitted that the advertisement constituted a contract between themselves and the Defendant that the latter would sell the furniture according to the conditions stated in the advertisement, and that accordingly the withdrawal of the furniture was a breach of contract. The Defendant submitted

the advertisement of a sale did not constitute a contract that any particular lot or class of lots would actually be put up for sale. The court held unanimously that the advertisement did not constitute an offer, but rather was a mere declaration of intent. Blackburn, J. founded his judgment on public policy grounds, calling it a "startling proposition" that "any one who advertises a sale by publishing an advertisement [would become] responsible to everybody who attends the sale for his cab hire or travelling expenses". Quain and Archibald, JJ. Also drew public policy arguments, emphasising that there existed no authority on which to base a decision that the Defendant be liable to indemnify all those who attended his auction. The court upheld the appeal. Olley vs. Marlborough Court Ltd. Mrs Olley was a long staying resident of the Marlborough Court Hotel, Lancaster Gate, and London. As usual she left her room key on a rack behind the reception one day, but when she came back it was gone. Inside her room, her fur coat had been stolen. (A witness called Colonel Crerer, who was sitting in the lounge, saw a person go in and come out again with a parcel fifteen minutes later.) The porter had apparently been cleaning a bust of the Duke and failed to notice. Mrs Olley asked to be repaid for the cost of the coat. The Hotel pointed to an exclusion clause on a notice behind a door in the bedroom leading to a washbasin, which said, "The proprietors will not hold themselves responsible for articles lost or stolen, unless handed to the manageress for safe custody." Mrs Olley argued that the clause was not incorporated into the contract. Denning LJ, Singleton LJ and Bucknill LJ found, firstly, that the Hotel had failed to take reasonable care as they were required to do contractually and under Innkeepers' Liability Act 1863 s 1. Secondly, the disclaimer was not part of the contract and the hotel could not rely upon it. The contract for the storage of the coat was formed at the reception desk. There was no way that Mrs Olley could have been aware of the disclaimer at that point and so it could not be part of the contract. Felthouse vs. Bendley (1862) Paul the uncle and John the nephew were negotiating about the sale of farming stock. Following a misunderstanding about the price of a horse, the uncle wrote

to the nephew saying, "If I hear no more about him, I consider the horse mine at 30-15." The nephew did not reply but told the auctioneer that the horse had been sold. However, the auctioneer then went ahead and sold the horse by mistake. The uncle then sued the auctioneer in conversion - an action in which P claims that D had improperly dealt with his property. HELD Willes J Although the nephew intended the uncle to have the horse, he had done nothing to communicate this intention to the uncle, or to bind himself. Therefore there was no contract to pass the property in the horse to the uncle. NB. The case clearly indicates that a person, who makes an offer, cannot impose a bargain on the other merely by stating that silence indicates consent. But could the acceptance not be by conduct - taking the offeror at his word and doing nothing more to try to sell the horse? What if the horse had been held back at the auction, and then the uncle refused to pay? May not the person making the offer dispense with the necessity to communicate the acceptance? If one needs an overt act to indicate acceptance, why wasn't the instruction to the auctioneer sufficient? Tinn v Hoffman & Co (1873) 29 LT 271. Agreeing to take 200 tons of wheat is not an acceptance of an offer to sell 300. Agreeing to pay 35 is not an acceptance of an offer to sell at 40. It is a counter offer, the effect of which is to terminate the original offer. Care has to be taken here to avoid being overzealous in demanding exactness'. Boulton vs. Jones (1857) The defendant sent an order to the firm with whom he had past dealings and rights of set off. The plaintiff who had purchased the firm obtained a letter addressed to the firm and he accepted the order and sent the goods without informing that he was the purchaser of the firm. In a suit for the price it was held that he could not recover the price, as there was no contract. General offer can be accepted by any person who has the knowledge of the existence of such an offer.

Powell vs. Lee (1908) A was an applicant for headmaster. Appointing authority passed a resolution appointing him, but this was not communicated to him, one of the member communicate him but appointing authority cancelled his decision. A sued for breach. The court rejected his application because communication was not proper. According to section 8, performance of the conditions of the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is acceptance of the proposal. Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109 Ramsgate Victoria Hotel v Montefoire (1866) LR 1 Ex 109The defendant offered to purchase shares in the claimant company at a certain price. Six months later the claimant accepted this offer by which time the value of the shares had fallen. The defendant had not withdrawn the offer but refused to go through with the sale. The claimant brought an action for specific performance of the contract. Held: The offer was no longer open as due to the nature of the subject matter of the contract the offer lapsed after a reasonable period of time. Therefore there was no contract and the claimant's action for specific performance was unsuccessful. The Household Fire and Carriage Accident Insurance Company (Limited) v Grant (1878-79) Mr Grant applied for shares in the Household Fire and Carriage Accident Insurance Company. The company allotted the shares to the defendant, and duly addressed to him, posting a letter containing the notice of allotment. The letter was lost in the post and he never received the acceptance. Later the company went bankrupt, and asked Mr Grant for the outstanding payments on the shares, which he refused saying there was no binding contract. The liquidator sued. The question was whether Mr Grant's offer for shares had been validly accepted, and was he legally bound to pay? Thesiger LJ for the majority held that there was a valid contract, because the rule for the post is that acceptance is effective even if the letter never arrives. He noted that anyone can opt out of the rule, and that even if it sometimes causes hardship, it would cause even more hardship to not have the rule. Once someone posts acceptance, he argued, there is a meeting of minds, and by doing that decisive act a contract should come into effect.

Bhagwandas Goverdhandas Kedia vs. M/S. Girdharilal Parshottamdas The respondents entered into a contract with the appellants by long-distance telephone. The offer was spoken by the respondent at Ahmedabad and the acceptance was spoken by the appellants at Khamgaon. Alleging breach of the said contract the respondents Mod a suit at Ahmedabad. On the issue of jurisdiction raised by the appellants, the trial court found that the Ahmedabad Court had jurisdiction to try the suit. The High Court rejected the appellant's revision petition in limine whereupon by special leave, he came to this Court. Making of an offer at a place which has been accepted elsewhere does not form part of the cause of action in a suit for damage-, for breach of contract. Ordinarily it is the acceptance of offer and intimation of that acceptance which result in a contract. The intimation must be by same external manifestation which the law regards as sufficient. Baroda Oil Cakes Traders vs. Parshottam Narayandas Bagulia It is common ground between the parties that the contract in question was for sale of 200 tons of groundnut cakes and it had been entered into by telegrams. The plaintiff sent a telegram from Baroda offering to purchase the said groundnut-cakes from the defendants. The defendants conveyed their acceptance to the plaintiff by telegram despatched from Kanpur and the said acceptance reached the plaintiff at Baroda in due course. The plaintiff's case was that the proposal or offer had been sent from Baroda and so a part of the cause of action had arisen in Baroda. The plaintiff also pleaded that the acceptance had been received by him in Baroda and that again means in law that a part of the cause of action had arisen in Baroda. It is these two pleas that require consideration in the present appeal. The point thus raised prima facie appears to be short and simple; but it has led to conflict of judicial opinion amongst the Indian High Courts, and that is why Mr. Justice Shah, before whom this appeal was originally placed for final disposal, has referred it to a Division Bench. Mountford vs. Scott (1975) D offered to sell P his house for 10000, and P paid him 1 for an option to purchase at that price, exercisable within six months. Before the end of that time, and before the option was exercised, D purported to withdraw his offer. P then

exercised the option, and the Court of Appeal said he was entitled to specific performance. The token payment was valuable consideration, however small, and made the offer irrevocable until the option expired. Countess of Dunmore vs. Alexander 1830 This is a Scottish case, which on one reading appears to support the view that a posted acceptance can be retracted by speedier means. The case is not a strong authority; however, since it is not absolutely clear that the court considered that the communication which was withdrawn was an acceptance, rather than an offer.

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