Lapses by death or insanity

An offer lapses by the death or insanity of the offeror or the offeree before acceptance. If the offeror dies or becomes insane before acceptance, the offer lapsed provided that the fact of his death or insanity comes to the knowledge of the acceptor before acceptance [sec. 6 (4)]. From the language of the section, it may be inferred that an acceptance in ignorance of the death or insanity of the offeror, is a valid acceptance, and gives rise to a contract. Thus the fact of death or insanity of the offeror would not put an end to the offer until it comes to the notice of the acceptor before
acceptance. An offeree’s death or insanity before accepting the offer puts an end to offer and his heirs cannot accept for him (Reynolds vs. Atherton).

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Posted by MbaNotesWorld - January 20, 2018 at 7:04 am

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An offer lapses by revocation

An offer lapses by revocation. An offer is revoked when it is retracted back by the communication of notice of revocation by the offerer to the other party [sec. 6(1). For example, at an auction sale, A makes the highest bid. But he withdraws the bid before the fall of the hammer. There cannot be a concluded contract because the offer has been revoked before acceptance;

Further, an offer, agreed to be kept open for a definite period, may be revoked even before the expiry of that period, unless there is some consideration for so keeping it open. The effect of facing a time for acceptance is merely to fix a tie beyond which the offer cannot be accepted. Where no time limit is set, the offer open for a definite period, unsupported by consideration, is regarded as a ‘bare pact,’ and hence not offer open, supported by consideration, is called an ‘option’ an ‘option’ is in effect a separate contract making the promisor liable for breach if he revokes the offer before the expiry o f agreed time.

Example: M. offers to sell his house to N for Rs. 1,40,000. N says to M that if he agree the offer open for 10 days he (N) will pay him Rs. 1,000, M agrees. M cannot revoke the offer before the expiry of 10 days, as N has obtained an option to purchase the house within 10 days. If M revokes the offer before the expiry of 10 days. He can be sued for breach of option contract.

Revocation of an offer must be communicated or made known to the offeree, otherwise the revocation does not prevent acceptance. Revocation of a ‘general offer’ must be made through the same channel by which the original offer was made. Again, revocation must always be express and must be communicated by the offerer himself or his duly authorized agent to the other party.

Revocation of standing offer or tender. Where a person offers to another to supply specific goods, up to a stated quality or in any quality which may be required, at a certain rate, during a fixed period, he makes a standing offer. A standing offer is in the nature of an open or continuing offer. An acceptance of such an offer merely amounts to an intimation that the offer will be accepted from time to time by placing order for specified, quantities. Each successive order given, while the offer remains in force, is an acceptance of the standing offer as to the quantity ordered, and creates a separate contract. In view of this legal position, the offeror is free to revoke the standing offer with regard to further supply, at any time, by giving a notice to the offeree, except where consideration is given for it.

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Posted by MbaNotesWorld - January 19, 2018 at 6:40 am

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Revocation by non- fulfillment

Revocation by non- fulfilment of a condition precedent to acceptance. An offer stand revoked if the offeree fails to fulfill a condition precedent to acceptance [sec. 6 (3)]. Thus, where A, offers to sell his scooter to B for Rs. 4,000. if B joins the lions club within a week the offer stands revoked and cannot be accepted be B if B fails to join the lions club. (in default of payment of earnest money.)

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Posted by MbaNotesWorld - January 18, 2018 at 6:24 am

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Lapse and Revocation of offer – Illegality

An offer lapses by subsequent illegality or destruction of subject matter. An offer lapses if it becomes illegal after it is made, and before it is accepted. Thus, where an offer is made to sell 10 bags of wheat for Rs. 6,500 and before it is accepted, a law prohibiting the sale of wheat by private
individuals is enacted, the offer comes to an end. In the same manner, an offer may lapse if the thing, which is the subject matter of the offer, is destroyed or substantially impaired before acceptance.

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Posted by MbaNotesWorld - January 17, 2018 at 6:17 am

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Kinds of contracts from the point of view of Enforceability

From the point of view of enforceability a contract may be valid, voidable, void, unenforceable or illegal.

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Posted by MbaNotesWorld - January 16, 2018 at 6:08 am

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Valid contract

According to section 2(i), it is”an agreement enforceable by law”, an agreement becomes enforceable by law when all the essential elements of a valid contract as were enumerated in the last lesson are present.

If one or more of these elements is/are missing the contract is either void, voidable, illegal or unenforceable.

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Posted by MbaNotesWorld - January 15, 2018 at 6:05 am

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Voidable contract

According to section 2(i), “an agreement which” is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.” Thus, a voidable contract is one which is enforceable by law at the option of one of the parties only. Until it is avoided or rescinded by the party entitled to do so by exercising his option in that behalf, it is a valid contract.

Usually a contract becomes voidable when the consent of one of the parties to the contract is obtained by coercion, undue influence, misrepresentation or fraud. Such a contract is voidable at the option of the aggrieved party i.e., the party whose consent was so caused (secs. 19 and 19A). but the aggrieved party must exercise his option of rejecting the contract (i) within a reasonable time, and (ii) before the rights of third parties intervene, otherwise the contract cannot be repudiated.

Illustration.
(a) A : threatens to shoot B if he does not sell his new Bajaj scooter to A for Rs. 2,000. B agrees. The contract has been brought about by coercion and is voidable at the option of B.
(b) A. intending to deceive B. falsely represents that five hundred quintals of indigo are made annually at A’s factory, and thereby induces B to buy the factory. The contract has been caused by fraud and is voidable at the option of B.

The Indian contract act has laid down certain other situations also under which a contract becomes voidable. For example.

(i) When a contract contains reciprocal promises, and one party to the contract prevents the other from performing his promises, then the contract becomes voidable at the option at the party so prevented (sec. 53).

Illustration.

A. Contracts with B that A shall whitewash B’s house for Rs. 100. A is ready and willing to execute the work accordingly, but B prevents him from doing so. The contract becomes voidable at the option of A.

(ii) When a party to the contract promises to do a certain thing within a specified time, but fails to do it, then the contract becomes voidable at the option of the promisee. If the intention of the parties was that time should be of the essence of the contract. (sec.55)

Illustration.

X Agrees to sell and deliver 10 bags of wheat to Y for Rs. 2,5000 within one week. But X does not supply the wheat within the specified time. The contract becomes voidable at the option of Y.

Consequences of rescission of voidable contract. Section 64 lays down the rights and obligations of the parties to a voidable contract after it is rescinded. The section states that when a person at whose option a contract has become has received any benefit from another party to such contract, he must restore such benefit. If an amount has been received as a security for the due performance of the contract, such earnest money deposit is not to be returned if the contract becomes voidable under section 55 on account of the promisor’s failure to complete the contract at the time agreed and has been rescinded by the promisee because it is not a benefit received under the contract.

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Posted by MbaNotesWorld - January 14, 2018 at 5:44 am

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Void agreement

“An agreement not enforceable by law is said to be void” [sec.2 (g)]. Thus, a void agreement does not give rise to any legal consequences and is void agreement does not give rise to any legal consequences and is void ab-initio. In the eye of law such an agreement is no agreement at all from its very inception. There is absence of one or more essential elements of a valid contract, except that of ‘free consent,’ in the case of a void agreement. Thus, an agreement with a minor is void abinitio as against him, because a minor lacks the capacity to contract. Similarly, an agreement without consideration is void ab-initio, of course with certain exceptions as laid down in section 25. Certain agreements have been expressly declared void in the contract act e.g., agreements which are in restraint of trade or of marriage or of legal proceedings or which are by way or wager.

A ‘void’ agreement should be distinguished from a ‘void contract’. A ‘void agreement ‘ never amounts to a contract as it is void ab-initio. A ‘void contract’ is valid when it is entered into, but subsequent to its formation something happens which makes it unenforceable by law, notice that a contract cannot be void ab-initio and only an agreement can be void abinitio.

Obligation of person who has received advantage under void agreement or contract that becomes void. In this connection section 65 lays down that when an agreement is discovered to
be void or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it. Thus, this section provides for restitution of the benefit received. Thus both parties may stand uneffected by the transaction in the following two cases.

(a) When an agreement is discovered to be void. In other words, when an agreement is void being discovered at a later stage. For example, A pays B Rs. 1,000 for B’s agreeing to sell his horse to him. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. In this case the agreement is discovered to be void and B must repay to A Rs. 1,000. it should, however, be noted that agreements which are known to be
void or illegal, when they are entered into, are excluded from the purview of this section. Thus, if L pays Rs. 10,000 to M to murder Z, the money cannot be recovered. Similarly, nothing can be recovered in the case of expressly declared void agreements, of course, subject to the following exceptions.

  • (i) In the case of an agreement caused by bilateral mistake of essential fact (although it is expressly declared void under section 20) restitution is allowed as it comes under the category of ‘an agreement discovered to be void.’
  • (ii) In the case of an agreement with a minor who commits fraud by misrepresenting his age (although agreement with a minor is known to be void.) restoration is allowed in specie on equitable grounds because a minor cannot be allowed to cheat people, and also because the other party has not lost his title to the thing in question.

(b) When a contract becomes void, restitution is also allowed in the case of a void contract. For example, A agrees to sell B after one month 10 quintals of wheat at Rs. 625 per quintal and receives Rs. 500 as advance. Soon after the contract, private sales of wheat becomes void but A must return the sum of Rs. 500 to B. Similarly, where after accepting Rs. 1,000 as advance for singing at a convert for B, A is too ill to sing. A is not bound to make compensation to B for the loss of the profits which B would have made if A would have been able to sing, but A must refund to B the 1,000 rupees paid in advance.

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Posted by MbaNotesWorld - January 13, 2018 at 5:34 am

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Void contract

Literally the word ‘void’ means ‘not binding in law’. Accordingly the term. ‘void contract’ implies a
useless contract which has no legal effect at all. Such a contract is a nullity, as for there has been no contract at all. Section 2(j) defines:

“A contract which ceases to be enforceable by law becomes void, when it ceases to be enforceable.”

It follows form the definition that a void contract is not void from its inception and that it is valid
and binding on the parties when originally entered but subsequent to its formation it becomes invalid and destitute of legal effect because of certain reasons

The reasons which transform a valid contract into a void contract, as given in the contract Act. Are as follows.

(a) Supervening impossibility (sec. 56) – A contract becomes void by impossibility of performance after the formation of the of contract for example; A and B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract to marry becomes void.

(b) Subsequent illegality (sec, 56) – A contract also becomes void by subsequent illegality. For example, A agrees to sell B 100 bags of wheat at Rs. 650 per bag. Before delivery the government bans private trading in wheat. The contract becomes void.

(c) Repudiation of a voidable contract. A voidable contract becomes void, when the party, whose consent is not free, repudiates the contract. For example, M by threatening to murder B’s son, makes B agree to sell his car worth Rs.30,000 for a sum of Rs. 10,000 only. The contract, being the result or coercion, is voidable at the option of B. B may either affirm or reject the contract. In case B decides to rescind the contract, it becomes void.

(d) In the case of a contract contingent on the happening of an uncertain future event, if that event becomes impossible. A contingent contract to do or not to do something on the happening of an uncertain future event, becomes void, when the event becomes impossible
(sec.32).” for example, A contracts to give Rs. 1,000 as loan to B marries C. C dies without being married to B. the contract becomes void.

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Posted by MbaNotesWorld - January 12, 2018 at 5:22 am

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Unenforceable contract

An unenforceable contract is one which is valid in itself, but is not capable of being enforced in a court of law because of some technical defect such as absence of writing, registration, requisite stamp, etc., or time barred by the law of limitation. For example, an oral arbitration agreement is unenforceable because the law requires an arbitration agreement to be in writing. Similarly, a bill of exchange or promissory note, though valid in itself, becomes unenforceable after three years from the date the bill or note falls due, being time barred under the limitation act.

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Posted by MbaNotesWorld - January 11, 2018 at 5:09 am

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