Unit I — Formation of Contract & Consideration

“Acceptance is to a proposal what a lighted match is to a train of gunpowder.” — Sir William Anson

What is a Contract?

The Indian Contract Act, 1872 builds a contract in two steps: an agreement (Section 2(e) — “every promise and every set of promises forming the consideration for each other”) that is enforceable by law (Section 2(h)). The parties must reach the same understanding — consensus ad idem [meeting of minds].

Essentials of a valid contract (Section 10): (1) free consent of (2) parties competent to contract, for a (3) lawful consideration and a (4) lawful object, (5) not expressly declared void — plus an intention to create legal relations, certainty of terms (S.29), and possibility of performance (S.56). By enforceability, agreements are valid, void (2(g)), voidable (2(i)), illegal, or unenforceable.

Offer & Acceptance

flowchart LR
    A["Proposal / Offer<br/>S.2(a) — communicated"]:::leaf
    A --> B["Acceptance<br/>S.2(b) — absolute &<br/>unqualified (S.7)"]:::leaf
    B --> C["Promise<br/>(agreement)"]:::leaf
    C --> D["+ S.10 essentials<br/>= Contract"]:::ok

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An offer (S.2(a)) is a communicated willingness to be bound on fixed terms; it must intend legal relations, be certain (S.29), be communicated (S.4), and be distinguished from an invitation to offer (a price list, display of goods, auction catalogue, tender). It may be specific or general (to the world — Carlill v. Carbolic Smoke Ball Co., 1893). Acceptance (S.2(b)) must be absolute and unqualified (S.7) — a counter-offer kills the original offer (Hyde v. Wrench, 1840); it must be communicated (mere mental assent will not do — Brogden v. Metropolitan Railway), and silence is not acceptance (Felthouse v. Bindley, 1862).

How an offer ends — Section 6: (1) communication of revocation before acceptance, (2) lapse of time, (3) failure of a condition precedent, (4) death or insanity of the offeror known to the offeree; plus, from the general law, rejection/counter-offer and supervening illegality.

Consideration & Privity

Consideration (S.2(d)) — “something in return” done at the desire of the promisor; quid pro quo. Its rules: it must move at the promisor’s desire, may move from the promisee or any other person (Chinnaya v. Ramayya, 1882 — unlike English law), may be past, present or future, and need not be adequate but must be real (Explanation 2, S.25). The maxim “no consideration, no contract” (S.25) yields to three exceptions: natural love and affection (registered, between near relations — S.25(1)), past voluntary service (S.25(2)), and a time-barred debt promise (S.25(3)).

Privity of contract — only a party to a contract can sue on it; a stranger cannot (Dunlop v. Selfridge, 1915). India recognises exceptions (a trust/beneficiary, a family arrangement — Khwaja Muhammad v. Husaini Begum, marriage settlement, estoppel). Note the difference: privity of consideration (a stranger to consideration can sue in India) is distinct from privity of contract (a stranger to the contract cannot).

✏️ Sample Solved Problem (IRAC Method)

Problem: A’s son goes missing; A announces a reward for anyone who finds him. A servant, unaware of the reward, finds and returns the boy, and then claims the reward. Can he claim?

I — Issue

Whether a person who performs the act required by a general offer, in ignorance of the offer, can claim the reward.

R — Rule

A general offer (S.8) is accepted by performing its terms — but acceptance presupposes knowledge of the offer; one cannot accept an offer one does not know of (S.2(b) read with S.4).
Lalman Shukla v. Gauri Datt (1913): a servant who traced his master’s missing nephew before learning of the reward could not recover it — an act done in ignorance of the proposal is not acceptance of it.

A — Analysis

The decoy is that the servant did exactly what the reward asked — found and returned the boy. But matching the offer’s terms by coincidence is not the same as accepting the offer: there can be no consensus ad idem when one mind is wholly unaware the offer exists. Because the servant acted before knowing of the reward, his act was performance of his ordinary duty, not consideration furnished in response to A’s promise.

C — Conclusion

The servant cannot claim the reward — acceptance of a general offer requires knowledge of it, and he acted in ignorance (Lalman Shukla). (Had he known of the reward first, he could have recovered.)

📄 The full bundle (₹199) has the complete Unit I — offer/acceptance, consideration & privity, unlawful object, e-contracts and tenders with blueprints — plus the Question Bank’s 40+ model answers, including the postal-revocation, self-service-store and inadequate-consideration problems. Get Notes + Question Bank — ₹199