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MERCANTILE LAW 315, intention may be more readily presumed in commercial matters 2. Absence of intent to create legal relations may be inferred where. a person who is asked to accept an offer intimates that he would. accept after the agreement is reduced to writing 3. Of course neither an offer nor an acceptance is required to be. express It can be implied as is clear from section 9 of the Act. Thus non repudiation of certain terms may be regarded as. acceptance thereof 4, The heart of the definition of proposal in section 2 a. Contract Act lies in the words willingness to do or to abstain. from doing something 5 Hence a mere invitation to another. person to indicate that person s terms is not a proposal or offer. Thus if in reply to an offer to purchase property for Rs 6 000. the agent of the offeree merely says won t accept less than. Rs 10 000 there is no offer by the agent 5, Acceptance of Offer. Section 2 b of the Act provides that a proposal when accepted. becomes a promise Section 2 e defines an agreement as a. promise or a set of promises forming the consideration for each. other Section 2 h defines a contract as an agreement enforce. able by law Thus the pyramid that forms a contract must have. at its base an accepted offer Section 5 of the Act provides that. an offer proposal may be revoked at any time before its. acceptance is complete as against offeror It is against the. background of these provisions in N Sesharatnam v Sub Collector. Land Acquisition Vijaywadaf the Supreme Court held that if a. person whose land is to be acquired shows his willingness. to accept the acquisition but withdraws the offer before it is. accepted by the Acquisition Officer then he can challenge the. acquisition proceedings if an adverse award is made after such. withdrawal, CWT v Abdul Hussain 1988 3 SCC 562 568 Cf Kle rort Benson v. Malaysia Mining Corporation 1988 1 All ER 714, Thawadas Pherumal v Union of India AIR 1955 SC 468.
Haji Mohd hhaq v Mohd labal 1978 2 SCC 493 500 Ramji. Dayawala Sons v Invest Import 1981 15 SCC 80, Mc Pherson v Appana AIR 1951 SC 184. AIR 1992 SC 13, 316 FIFTY YEARS OF THE SUPREME COURT. According to section 2 b the acceptance of an offer requires. that the person to whom the proposal is made should signify his. assent The court has elaborated this requirement by pointing out. that mere intent to accept or mere resolve to accept an offer does. not give rise to a contract There must be some external. manifestation of that intent by speech writing or other act 7. Acceptance must of course be communicated to the person who. made the offer This is the reason why it has been held that the. mere filing of a suit does not constitute a formal acceptance 8 As. regards such communication of an acceptance section 4 of the. Act is relevant, a Acceptance is complete as against the proposer when it is put. in the course of transmission to him so as to be out of the. power of the acceptor, b It is complete as against the acceptor when it comes to the. knowledge of the proposer, Acceptance can be by phone But difficult questions arise as.
to the place where the contract is made in such cases In England. it has been held that in such cases of instantaneous. communication the contract is made at the place where the. acceptance is received 9, This is also the view taken by the Supreme Court by a. majority judgement in Bhagwandas Goverdbandas 10, Acceptance of course must be total N o contract arises if only. a part of the offer is accepted 11 Acceptance should be unequivocal. and not provisional 12 There can be a series of contracts between. the parties At each stage there is a distinct offer and a distinct. acceptance 13, Bhagwandas Goverdhandas v Girdhari Lai Parshottamdas Co AIR. 1966 SC 593, Vtswesardas Gokuldas v B K Narayan Singh 1969 1 SCC 547 549. Brinki Bon Ltd v Stahag Stabi 1982 1 All ER 293 HL. Supm note 7, General Assurance Society Ltd v LIC AIR 1964 SC 692.
Lakhanlal v State ofCrissa 1976 4 SCC 660, Chathirbhuj Vtthalets v Moreshwar Pamshran AIR 1954 SC 236. MERCANTILE LAW 317, A clause in a tender authorising the party inviting tenders to. terminate the contract at any time for the future does not destroy. the very basis of the contract and the clause is valid 14. Consideration for a Contract, What is good consideration in law is one question that has come. up before the courts again and again Following propositions. seem to emerge from the decisions of the Supreme Court. a Consideration can be executed or executory5 In the former. case it is present consideration In the latter case the. consideration is a promise for a promise 15, b Reciprocal promises are sufficient to constitute a contract 16. c Consideration must17 be something which the law can regard. as having some value This does not of course mean that it. must be quantitatively equal to the thing promised 18. d Where an agreement is arrived at between certain members of. a family that is designed to promise grace and goodwill. This by itself is a good consideration in order to support the. transaction 19, Under section 2 d consideration can proceed from a person.
other than the promisee However the question whether a third. party can sue on a contract is a different one and in general a. third party cannot sue 20, A contract may contain provisions for revision of its own. terms such as a by providing for extension of time limits for. various acts or b by providing for review of prices say by. escalation clauses Such escalation clauses have been upheld even. in public law 21, Union of Indi v Maddata Thattiah AIR 1966 SC 1724. Uniott of India v Chaman Lal Loma Co AIR 1957 SC 652. Pinka Bhargava v Mahiner Nath 1991 SCC 566, Chidambara v PS Renga AIR 1965 SC 193 197. A Lakshmana Swami Mundatiar v LIC AIR 1963 SC 1185. CWT v Her Highness Vtjayaba AIR 1979 SC 982, M C Chachar v State Bank of Tmvancore AIR 1970 SC 504 PR. Subramania Iyer v Lakshmi Ammal 1973 2 SCC 54, Delhi Cloth General Milk v Rajasthan State Electricity Board 1986.
318 FIFTY YEARS OF THE SUPREME COURT, While dealing with insurance policies the court has laid down. two very important propositions, a Once the policy is issued the contract is concluded and its. existence cannot be questioned by the insurer, b It is the duty of the insurer particularly if it is a state. instrumentality to produce the policy in litigation 22. Under section 5 of the Act inter alia acceptance of an offer. can be revoked before its communication is complete as against. the acceptor In the case of auction sales where confirmation of the. bid is prescribed by the conditions of revocation acceptance by. bid can be revoked before such confirmation 23, The contract is conciliated only when confirmation is done. and communicated 24 Non deposit of 25 per cent of the bid as. required by rules means that no contract arose even if the bid is. accepted 2, Competence to Contract, By reason of the combined operation of sections 10 11 of the.
Act a minor is incompetent to contract 26 This incompetence. extends to release of proprietory rights 27 obviously because release. has also to be based on valid consent, Where there are several trustees one of them unless. authorised by the trust deed cannot contract on behalf of the. Consent in relation to contract may be vitiated by mistake or. other flaws Section 13 of the Act states that two or more. persons are said to consent when they agree upon the same thing. National Insurance Co Ltd v Jugal Kuhore AIR 1988 SC 719 723. Union of India v Walaiti Ram 1969 3 SCC 146, Ha dwar Singh v Begum Sumbrui AIR 1972 SC 1242. State ofAiP v Gopardhandas AIR 1973 SC 1164, Padma Vithopa Cbakkaya v Mohammad Multatn AIR 1963 SC 73 74. WaU Singh v Sohan Singh AIR 1954 SC 263 265, Shanri Vtjay Co v Princess Fatima 1994 SCC 602. MERCANTILE LAW 319, in the same sense Mistake of identity would thus prevent.
Mistake deliberately induced by another as to the character of. a document stands on a similar footing 30 and in such a case the. transaction is void not merely voidable This does not mean that. a person who is not deceived can plead that he did not read a. particular document containing legal terms or that he was. ignorant of its precise legal effect 31 Mistake of law e g mistake. as to the effect of registration upon the validity of a document. does not nullify the contract 32, Questions of undue influence section 16 of the Act as. vitiating the quality of consent have often arisen in the context. of illiterate women In Sethan v Bhana33 the following facts. showed that the purchaser of land was in a position to dominate. the will of the seller, a The sale deed was by a tribal woman who was old illiterate. b N o apparent evidence of the passing of consideration existed. c The woman was living with the purchaser till her death and. was dependent on him, It was held that the purchaser carried the burden of proving. that the sale deed was not executed under undue influence. It is clear that mere statutory compulsion is not to be regarded. as undue influence 34 Difficult questions however arise when one. member of the family is preferred in a testament to the total. exclusion of all others In such cases courts usually require proof. that undue advantage was taken of the situation that created. dominance of will Mere preference is not a proof of undue. Central National Bank v United Industrial Bank AIR 1954 SC 18. Dularia Devi v Janmardan Singh AIR 1990 SC 1173, Bihar State Electricity Board v Green Rubber Industries AIR 1990. Rolyanpur Time Works v State of Bihar AIR 1954 SC 165. AIR 1993 SC 956, Andhra Sugars Ltd v State of AP AIR 1968 SC 599.
Afiar Sheikh v Soleman Bibi 1976 2 SCC 142 Subhash Chandra v. Ganga Prasad AIR 1967 SC 878, 320 FIFTY YEARS OF THE SUPREME COURT. Of course the circumstances may be so outrageous that if one. may say so the thing speaks for itself For example where a. donor suffering from several ailments executed in the nursing. home a deed favouring one grandson and even almost totally. neglecting his wife and daughters the presumption of undue. influence would be justified 36 Further in the Indian context. transactions by pardanasheen women are very carefully scrutinised 37. Section 17 of the Act deals with fraud as vitiating consent The. classes of acts constituting fraud are enumerated in the five. clauses of the section but the mental element indicated by the. words with intent to deceive occurring in the opening part is. the most important Thus if a husband persuades his illiterate. wife to sign two documents telling her that her two lands were. being mortgaged to meet his debts when in fact four lands were. mortgaged deception was obvious 38, Negative or passive silence when there is no duty to speak or. disclose the facts is not fraud 39 Duty to speak may arise when. the contract is one of absolute good faith as for example. contracts for life insurance 40, Section 23 of the Act provides that every agreement of which. the object or consideration is unlawful is void The concept of. unlawful object or consideration is spelt out in five clauses of the. section The emphasis in some of these cases is on avoiding. agreements which are in conflict with the law or which are. immoral or opposed to public policy, Cases of conflict with the law do not present much difficulty. Sale of certain commodities without licence required by statute. is void 41 A condition in a contract of carriage which would be. against section 10 Carriers Act 1865 is similarly void 42. Statutory stage carriage permit granted to a State Road Transport. Corporation cannot be allotted to private operator 43 In all such. Lakshmi Ammo v T Narayana Bhalla AIR 1970 SC 1367, Kharbuja Kuer v Jang Bahadur AIR 1963 SC 1203.
Nyawwa v Byrappa AIR 1968 SC 956, Shn Krishnan v Kuruksbetra University AIR 1976 SC 376. Mithoo Lai Nayak v UC of India AIR 1962 SC 814, lKM Kamath v K Bsmgappa Baliga Co AIR 1959 SC 781. 2M G Brothers Lorry Service v Prasad Textiles AIR 1984 SC 15. 3Brij Mohan v Shiv Narayan AIR 1987 SC 291, MERCANTILE LAW 321. cases the court examines whether the language of the statute. yields a definite prohibition 44 Such a prohibition cannot be. changed by an agreement or compromise 45, The same approach is adopted where the agreement would. defeat the legal structure or policy of the law albeit indirectly. for example a benami transaction to evade taxes46 or to prevent. competitive bidding at court auctions 47, Where the attack on an agreement is based on morality or.
public policy the role of the court becomes a difficult one. because here the court takes leave of definite boundaries and has. to enter an area that is unbounded unaccepted and uncharted It. has thus been held that a wagering agreement is not immoral 48. Of course there are some situations where conflict with public. policy is writ large for example where the agreement is to. secure a favourable decision from the government by wielding. influence 49 It seems that prevailing social values would be the. criterion for the decision of the court in this regard 50. Section 23 of the Act last sentence provides that every. agreement of which the object or consideration is unlawful is. void The first sentence of the section provides that the

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