LECTURE 2
INTRODUCTION TO
LAW OF CONTRACT
©
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Sources
Contract Act
1950 (Act 136)
Common law &
local cases
⮚S 3 & 5 CLA
1956.
Decisions of
Indian Ct
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CONTRACT
ACT 1950
▪ closer to Indian
Contract Act 1872,
which was modeled
on English Law but
varied in several
provisions.
▪ originated from
England.
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⮚Principle of
law/Common Law &
Rules of equity applied
where there is a lacuna
in local statutes.
▪ English law on contracts may
be used to fill the gaps in the
Acts subject to the restrictions
imposed by S 3 & 5 CLA 1956
▪ Where there is a conflict
between the Act & English
law, the former will prevail.
COMMON
LAW &
LOCAL
CASES
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DECISION OF
INDIAN COURT
Decisions by
Indian Ct also
can be used as
reference but
not binding
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❑DEFINITION: CONTRACT
What is
contract?
⮚S 2(h) – contract is an agreement
ENFORCEABLE by law.
⮚S 2 (g) – an agreement which is
not enforceable by law is
considered void.
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⮚Not all agreement can be
enforced by law.
Examples:Agreement which does not
intent to be bound by law i.e
domestic/social agreement.
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WHEN AN AGREEMENT
CAN BE A CONTRACT?
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✔made by free
consent of
parties
competent to
contract
✔for a lawful
consideration
S. 10(1) – an agreement is a
contract IF:-
✔with a lawful
object
✔not expressly stated
as void by the Act.
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✔agreement –
offer &
acceptance
✔consideration
✔intention to
create legal
relation
✔required
formality
ELEMENT OF
CONTRACT
✔legal capacity
✔legality of the
objects
✔Free
consent
✔certainty
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TYPES OF CONTRACT
✔Bilateral contract
✔Unilateral
contract
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FORMS OF
CONTRACT
✔ORAL
✔IN WRITING
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❑OFFER:
⮚DEFINITION
⮚S 2(a) CA 1950 – when a
person signifies to another his
willingness to do or to abstain
from doing anything, with a
view to obtaining the ascent of
that other to the act or abstinence,
he is said to make a
proposal/offer.
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‘An offer is an intimation of willingness
by an offeror to enter into a legally
binding contract. Its terms, either
expressly or impliedly must indicate that
it is to become binding on the offeror as
soon as it has been accepted by the
offeree.’
FEDERAL COURT
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FORMS OF OFFER
Express –
✔in writing/verbal
Implied –
act/manner
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person who makes offer is called
’offeror/promisor’.
S 2(c)
Person who accept the offer is
called ‘offeree/promisee’.
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To Whom Offer Can Be Made?
a) Particular
person – i.e
only that
person can
accept the offer
c)general public – i.e
any person who meets
b) Group of
all the terms of the
people – i.e any
offer can accept. –
person from
CASE: CARLILL
that group can
V. CARBOLIC
accept the offer
SMOKE BALL CO.
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✔An attempt
to induce
another party
to make an
offer.
✔NOT an offer.
❑INVITATION TO TREAT
✔Not capable of
acceptance
✔An
invitation
to attract offer
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• Buyer – making offer
• No contract yet
• Seller – not responsible to
sell & has no Legal duty
Display of goods by
owner/seller
(invite)
•
•
•
•
•
Invitation to treat – by owner
Promoting products/goods
Provoking/inducing buyer to buy
NOT OFFER
CANNOT be accepted
Owner/seller
agreed to sell
(acceptance)
Customer/buyer
wanted to buy
(offer)
• Contract concluded
•
Seller must sell to buyer
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Examples of ITT
a. Display of
goods on the shelf
b. An auctioneer
inviting bids for a
particular article
c.
Advertisement
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Display of goods on the
shelf
i.e shop-owner displays the goods
with price tag in a self service
supermarket.
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Defendant Boots
Pharmacy
Displayed medicine contained drug on the rack.
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CLAIMED: Boots offered to
sell by medicine contained
drug
Pharmaceutical Society of
Great Britain
Charged Boots under the
Pharmacy & Poison Act 1933
(U.K) which forbids the sales of
such medicine without pharmacist
supervision.
The display of goods was an offer to sell. When
the customer places the drugs (medicine) in the
basket, he has accepted the offer.
Thus, violating the Act by selling the "poison"
without supervision.
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❖Issue: whether a sale had
occurred when a customer selected
the medicine which he wanted to
purchase & placed them in a
basket?
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The display was only an ITT,
NOT AN OFFER.
An offer was made - when the
customer placed the medicine
in the basket.
Thus, Boots had not made an
unlawful sale.
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OFFER
(WRONG
INTERPRETATION)
PHARCEUTICAL SOCIETY OF
GREAT BRITAIN CLAIMED…
CONTRACT
ACCEPTANCE
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ITT
ACCEPTA
NCE
CONTRACT
(CORRECT
INTERPRETATION)
OFFER
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http://www.youtube.com/watch?v=
anNaoXMAgWY
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Display of jack knife was
not in contravention of
Controlled Dangerous
Weapon Act as it was an
ITT to customers.
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▪ b. An auctioneer inviting bids for
a particular article
Auctioneer – only
making an ITT.
Bidder – makes a bid –
making an offer.
CASE: SPENCER V.
HARDING (1870)
Ct: Announcement for
tender is ITT.
S 10 Auction Sale Act, Cap. 81 of the
Federated Malay States:‘a sale by public auction shall be complete when
the auctioneer announces its completion by the
fall of the hammer…’
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AUCTION SALE VIDEO
http://www.youtube.com/watch?v=
yJacNUKWr8M
http://www.youtube.com/watch?v=
rngz1EV-3Wk
https://www.youtube.com/watch?v=El
54fPUYif0
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❖c. Advertisement
Ct: An advertisement for a job vacancy
made by the PSC in the Malay Mail was
an ITT and an offer came from the
applicant for that advertisement.
Similar situation:
MAJUNDER V. ATTORNEY GENERAL OF
SARAWAK [1967] 1 MLJ 101 FC
PARTRIDGE V. CRITTENDEN [1968]1 WLR
1204
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EXCEPTION:
CARLILL V
CARBOLIC
SMOKE BALL CO
[1893] 1 QB 256
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Source: https://www.jack-the-rippertour.com/generalnews/the-carbolic-smokeball/
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CARBOLIC SMOKE BALL
WILL POSITIVELY CURE
As all the Diseases mentioned above proceed from one cause,
they can be Cured by this Remedy.
£100 REWARD
WILL BE PAID BY THE
CARBOLIC SMOKE BALL CO.
to any Person who contracts the Increasing Epidemic,
INFLUENZA,
Cold, or any Diseases caused by taking Cold, after having used the
CARBOLIC SMOKE BALL according to the printed directions
supplied with each Ball.
£1000 IS DEPOSITED
with the ALLIANCE BANK, Regent Street, showing our sincerity in the matter.
During the last epidemic of INFLUENZA many thousand CARBOLIC SMOKE BALLS
were sold as preventives against this disease, and in no ascertained case was the
disease contracted by those using the CARBOLIC SMOKE BALL.
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Mrs. Louisa Elizabeth Carlill, 87
Source: http://www.directly2u.co.uk/carbolic/carlill.htm
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Source: https://mini-ielts.com/1095/viewsolution/reading/mrs-carlill-and-the-carbolic-smoke-ball
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Source:
https://www.theguardian.com/law/2020/jun/25/landmark
s-in-law-louisa-carlill-and-the-fake-flu-cure
Source: https://www.alamy.com/carbolic-smoke-ball19th-century-artist-unknown-image262727747.html
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Flue became worse, Mrs Carlil claimed 100pounds
Sterling from Carbolic Smoke Ball Co.
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CSB hade made an
offer through their
advertisement.
i.e an offer made to
the world at large.
✔Gen
rule
–
advertisement is an
ITT, but this case is
an exception.
✔Any person can accept
the offer by following
the terms stated in that
advertisement & the
acceptance need not be
communicated
to
offeror.
✔The deposit of 1000
pounds sterling is
considered as the
intention of the CSB
to be bound by their
offer.
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http://www.youtube.com/watch
?v=ABZeKvAIyEc&feature=pl
ayer_detailpage
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❑COMMUNICATION OF OFFER
⮚S. 4(1) – communication of offer is
complete when it comes
knowledge of the offeree.
to
the
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❑REVOCATION OF OFFER
⮚S. 5(1) – an offer can be revoked at any
time BEFORE the communication of
acceptance completed to the offeror, but
not afterwards.
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▪ How offer can be revoked?
✔b. by lapse of time
✔a. Offeror
communicates
notice of
revocation to
offeree;
prescribed in the offer,
if no prescribed time,
by lapse of reasonable
time;
RAMSGATE
VICTORIA HOTEL
V. MONTEFIORE
✔d. By the death
or mental disorder
of the offeror, if
the fact of his death
or mental disorder
comes to the
knowledge of the
offeree before
acceptance.
❖BRADBURY V.
MORGAN (1862)
✔c. failure of offeree to
fullfil a condition
precedent to acceptance;
S6
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8 June - Sent letter of offer to buy
shares from co.
Defendant
Nov - Accepted the def’s offer
& shares allotted to def
Ptf
company
Refused to accept the shares
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The refusal justified because
such offer should have been
accepted within a reasonable
time. The period between
June & November was clearly
not reasonable.
Ct
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Acceptance without prior
knowledge of the death or
mental disorder of the offeror
is a good acceptance and
enforceable.
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❑COUNTER-OFFER
Any modification or
variation of the offer
does not constitute an
acceptance but amount
to counter-offer by the
offeree.
Treated as rejection
of the original
proposer.
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(1)I want to sell
my estate for
£1000 pounds
sterling.
(2)Agreed to buy
but for £950 only.
plaintiff
Few days later…
defendant
(4)Sorry, I don’t
want to sell
anymore.
(3)Ok, Agreed to
buy at the original
price i.e £1000.
(5)Ok, will apply
sue in court!
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No acceptance occurred
because ptf had rejected the
original offer.
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• http://www.youtube.com/watch?v=ABZe
KvAIyEc&feature=player_detailpage#t=
2s
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