Expressions Use in Contract Act, 1872
Section 2. Interpretation clause
In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context.
Section 2 (a). Proposal/Offer
When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.
The word, ‘proposal’ is used in the same sense in which the term ‘offer is used in English Law. The proposal is merely an offer to be bound by a promise.
The word, ‘proposal used in the section is synonymous in English use with ‘offer.
The proposal should be adequate. It can be rejected on the ground of its not being adequate, but cannot be rejected on the ground that parties, who did not participate in the transaction, or were not eligible at that time, were subsequently ready to take the contract.
The terms of an offer must be certain and the offer should be such as in law is capable of being accepted and gives rise to a legal relationship. The vagueness of an offer would not carry any contractual relationship.
Till the offer is accepted, there is no contract between the parties and the offer can be withdrawn before it is accepted.
Professional service, rendered by a doctor, does not come under the expression “contract”. Liability based on negligence and utmost recklessness displayed by doctor is tortuous liability and not contractual.
A tender notice means only an invitation extended to the contracts for making offer. It does not amount to an offer or proposal.
Section 2 (b). Promise
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.
The word, ‘promise’ in the Act is used in a narrow sense to mean an accepted proposal.
The definition of ‘promise’ shows that there must not only be a proposal, but there must also be an acceptance of the proposal by other side Promise defined under Clause (b) is not the same thing as an agreement which is defined under Clause (e).
When the parties negotiate a contract orally in the presence of each other or over telephone and one of them makes an oral offer, in making the oral acceptance, the acceptor must ensure that his acceptance is audible, heard and understood by the offeror. The acceptance must be by such words which have the effect of communicating it.
An offer, unless accepted by the offeree, cannot bind him, with any obligation. Thus, the mere making of an offer at the first opportunity to buy a property in the event of its sale by the acceptor cannot compel the offeree, unless he accepts the offer to buy the property, when it is sold.
The acceptance of offer must be absolute and unconditional. A conditional offer lapses when the condition is not accepted by the offeree. An acceptance of offer by telegram is valid.
There came not be acceptance of offer which has not come to the knowledge of the offeree.
Section 2 (c). Promiser & Promisee
The person making the proposal is called the “promisor,” and the person accepting the proposal is called the “promisee”.
Section 2 (d). Consideration
When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.
The words “at the desire of the promisor” imply a promise, which has a real effect conducting to the contract.
This means that for a contract to be legally binding under the Contract Act, 1872, there must be something of value given or promised by one party in exchange for something else of value or promise given by the other party. This is known as consideration.
It must be lawful, possible, and adequate, and should not be past.
Consideration can be in the form of money, goods, services, or a promise to perform or refrain from performing a specific act. It is important to note that for consideration to be valid, it must be given or promised voluntarily and not under coercion or undue influence.
When there was promise to marry, but the man resile from it, it is a breach of promise, and this breach is actionable. It cannot be said that damages cannot be asked, as the man and woman who were party to the promise, were leading an immoral life. The woman, only after the promise of marriage, permitted the man to have sexual relations with her, and she is entitled to award of damages.
Section 2 (e). Agreement
Every promise and every set of promises, forming the consideration for each other, is an agreement.
Agreements are of two kinds, executed and executor agreements. In an executed agreement, one party has already performed his part of the agreement, while the other party has to perform his part. In an executor contract, both the parties have to perform their mutual promises and the fact that they have to perform their parts of the contract does not affect the validity of the contract.
There must be a proposal from one party and acceptance by the other in order to constitute an agreement.
Section 2 (f). Reciprocal promises
Promises which form the consideration or part of the consideration for each other are called reciprocal promises.
Where promise to repay with interest was a promise made by promise and against this promise, promisor agreed to pay advance, each set of promises formed consideration for the other and the two promises are known as “reciprocal promises.
Section 2 (g). Void agreement
An agreement not enforceable by law is said to be void.
The words, “not enforceable by law do not refer to a disability to sue arising under any procedural law, such as the Statutes of Limitation or Orders under the C.P.C. The unenforceability which is contemplated is one which arises under the provisions of substantive law.
Section 2 (h). Contract
An agreement enforceable by law is a contract.
In order to be a ‘contract, there should be an agreement, which is a bilateral transaction
Many contracts have three well defined stages, namely, the stage of negotiations, the stage when they have reached an agreement; and thirdly when the parties reduce their agreement into writing and have a formal document. In any case, where all these three stages are present, it is always a question of construction as to at what stage, both the parties intended to be bound by their contract.
A promise without consideration is unenforceable in a Court of Law and cannot amount to a contract between the parties
Contract is a bilateral transaction between two or more parties. It is not necessary under law that every contract must be in writing, oral agreements are also binding on parties and the proposal when accepted, gives rise to an agreement.
Section 2 (i). Voidable contract
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.
The word, ‘voidable’ in the Contract Act has been used to mean that the contract is binding on the parties, unless it is set aside on the ground that the transaction was vitiated by fraud, undue influence, misrepresentation or any other circumstances, which would entitle a party to a contract to avoid it.
Section 2 (j). Void contract
A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. The words “unenforceable by law” mean unenforceable by substantive law, and not by reason of some procedural law.
