Gradable Assignment 30 marks Feb 2019

PART 1
Define a contract and describe the essentials of a valid contract. (15 marks
)

PART 1
Define a contract and describe the essentials of a valid contract. (15 marks)
Answer:
Definition of Contract
A contract is an agreement made between two or more parties which the law will
enforce. Sec 2 (h) defines contract as an agreement enforced by law. As per Pollock “Every
agreement and promise enforceable at law is contract”
Contract essentially consists of two elements
1) Agreement and
2) Its enforceability by law
An agreement is defined as “Every promise and every set of promises, forming consideration
for each other”[Sec. 2(e)]. A promise is defined thus: “when the person to whom the proposal
is made signifies his assent thereto, the proposal is said to be accepted. A proposal when
accepted becomes a promise”[Sec. 2(b)]. This is other words, means that an agreement is as
accepted proposal. In order, therefore, to form an agreement, there must be proposal or offer
by one party and its acceptance by the other.

Agreement = Offer + Acceptance

Consensus Ad idem
The essence of an agreement is the meeting of the mind of the parties in full and final
agreement, there must, be consensusAd idem. i.e. before there can be an agreement between
two parties, there must be consensusAd idem. This means that the parties to the agreement
must have agreed about the subject-matter of the agreement in the same sense and at the same
time. Unless there is consensus as idem, there can be no contract.

Essentials of a Contract
According to Sec 10, all agreements are contracts if they are made by free consent of parties
competent to contract, for a lawful consideration and with lawful object and are not expressly
declared to be void. In order to become a contact,an agreement must have the following
essential elements:
1. Offer and acceptance. There must be two parties to andagreement ,i.e one partly
making the offer and other party accepting it. The t3erms of the offer must be defined
and the acceptance of the offer must be absolute and unconditional. The acceptance
must also be according to the mode prescribed and must be communicated to the
offeror.
2. Intention to create legal relationship.When the two parties enter into an agreement,
their intention must be to create legal relationship between them. If there is no such
intention in the part of the parties, there is no contract between them. Agreements of a
social or domestic nature do not contemplate legal relationship.
3. Lawful consideration. An agreement to be enforceable by law must be supported by
consideration. Consideration means an advantage or benefit moving from one party to
the other. It is the essence of a bargain. In simple words, it means ‘something in
return’. The agreement is legally enforceable only when both the parties gives
something and get something in return A promise to do something, getting nothing in
return is usually not enforceable by law.
4. Capacities of parties – Competency.The parties to the agreement must be capable of
entering into valid contract. Every person is competent to contract if he (a)is of the
age of majority, (b) is of sound mind, and (c) is not disqualified from contracting by
any law to which he is subject. Flaw in capacity to contract may arise from minority,
lunacy, idiocy, drunkenness, etc and status.
5. Free and genuine consent. It is essential to the creation of every contract that there
must be free and genuine consent of the parties to the agreement. The consent of the
parties is said to be free when there are of the same mind on all the material terms of
the contract. The parties are said to be of the same mind when they agree about of the
free consent if the agreement is induced by coercion, undue influence, fraud,
misrepresentation,etc.
6. Lawful object. The object of the agreement must be lawful. In other words. It means
that the object must not be (a) illegal, (b) immoral, or (c) opposed to public policy
(Sec. 23). If an agreement suffers from any legal flaw, it would not be enforced by
law.
7. Agreement not declared void. The agreement must not have been expressly declared
void by law in force in the country (Secs. 24 to 30 and 56).
8. Certainty and possibility of performance. The agreement must be certain and not
vague or indefinite (Sec.29). If it is vague and it is not possible to ascertain its
meaning, it cannot be enforced.
9. Legal formalities. A contract may be made by words spoken or written. As regards
the legal effects, there is no difference between a contract in writing and contract
made by word of mouth. It is however, in the interest of the parties that the contract
should be in writing. there are however some other formalities which have to be
compiled with in order to make an agreement legally enforceable. In some cases, the
document in which the contract is incorporated is to be stamped. In some other cases,
a contract, besides being a written one ,has to be registered. Thus where there is a
statutory requirement that a contract should be made in writing or in the presence of
witness or registered ,the required statutory formalities must be compiled with (Sec.
10, para 2)
PART 2
What is an ‘offer’? When is it complete? State the rules a valid offer.( 15 marks)

Offer
An offer is an undertaking by the offeror to be contractually bound in the event of a paper acceptance
of the offer, by the offeree.
It may be express word spoken or written, or it may be implied when it is inferred from the conduct of
the offeror or from the circumstances of the case. It is specific when it is made to a particular person
and general when it is made to the world at large. In the former case, it is called a specific offer, in the
latter case, it is called general offer. Type of offer listed below.
(i). Express offer: – It is an offer that is done through words that can be either oral or written. The
oral offer can be made face to face or via telephone. The written offer can be made via text messages,
advertisements, letters or e-mail.
(ii). Implied Offer: – It is an offer conveyed through acting or signs. But if a party observes a silence
over the offer then that offer cannot be valid.
(iii). Specific Offer: -It is the offer made to a specific person or group of persons and can be accepted
by the same, not anyone else.
(iv). General Offer: -It is the offer made to public at large and not to any particular person. it can be
accepted by anyone by abiding by the terms of it.
(v). Cross Offer: -When both the parties involved makes a similar offer to one another without
knowing the each other’s offer then it is called Cross offer.
(vi). Standing or Open Offer: The offer that is continuous in nature is the standing offer.

When is it complete
An offer may come to an end by revocation or lapse or rejection
Revocation or lapse of offer. Deal with various modes of revocation of offer. According to it an
offer is revoked.
1. By communication of notice of revocation by the offeror at any time before its acceptance is
complete as against him.
2. By lapse of the time if it is not accepted within the prescribed time,if however, no time is
prescribed, it lapse by the expiry of a reasonable time.
3. By non-fulfilment by the offeree of a condition precedent to acceptance
4. By death or instantly of the offeror provided the offeree comes to know of it before
acceptance, if he accepts an offer in ignorance of the death or instantly of the offeror,the
acceptance is valid
5. If a counter- offer is made to it, where an offer id accepted with some modification in the
terms of the offer, such qualified acceptance amounts to a counter – offer.
6. If an of offer is not accepted according to the prescribed or usual mode, provided the offeror
gives notice to the offeree within reasonable time the acceptance is not according to the
prescribed or usual mode.

Rejection of offer. An offeree may reject the offer . once he does that he cannot subsequently
accept it. rejection of the offer may be express or implied.
Rules for a valid Offer
1. Expectation to Create Legal Relationship: – An offer must mean to make lawful relations. An
offer should be such that when the other party will accept it then it will make the legal
relationship among the parties.
2. Certain and Clear Terms: – The terms of the offer must be certain and clear and not ambiguous.
If the terms of the offer made are unclear, then no agreement can be gone into because it is not
clear regarding what precisely the parties expected to do.
3. Differ from Declaration of Intention: -Offer and intention are different. Intention to offer
indicates the offer will be made.The case of Farine v Ficker.
4. Proper Communication: – The offer should be properly communicated as to whom the offer is
made. The offer stands completely only when the offeree is communicated about the same. If
offer accepted without any proper communication and information is not valid.
5. Presumption of the offer: – The offeror cannot pressure the offer is accepted if the offeree does
not accept for a certain period. Till the offeree replies back with the acceptance of the offer, then
only the offer stands to be a valid offer.