What conditions are necessary for converting a proposal into a promise; a promise into an agreement and an agreement into a contract? Illustrate your answer.

Question: What conditions are necessary for converting a proposal into a promise; a promise into an agreement and an agreement into a contract? Illustrate your answer. [HJS 1996]

Find the answer to the mains question of the Law of Contract only on Legal Bites. [What conditions are necessary for converting a proposal into a promise; a promise into an agreement and an agreement into a contract? Illustrate your answer.]

Answer

A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. A contract consists of an actionable promise or promises. Every such promise involves at least two parties, a promisor and a promisee, and an outward expression of common intention and of expectation as to the declaration or assurance contained in the promise. This outward expression of a common intention and of expectation normally takes the form of an agreement. In most cases, therefore, it will be necessary to ascertain at the outset whether or not an agreement has been concluded.

Section 2(h) of the Indian Contract Act says

“An agreement enforceable by law is a contract.”

Thus, it means that

all agreements don’t form contract, but a contract only arises as a result of a lawful agreement between the parties which seeks to create and define rights and obligations of the parties towards each other. An agreement is however formed by an 'offer’ or 'proposal’ made by one party and the 'acceptance of such proposal’ by the other party.

Section 2(a) of the Contract Act defines “Proposal” as:

“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 provision clarifies that unless the proposal is accepted by the other party, the maker of the proposal doesn’t get bound by his offer. It is only after the proposal has been accepted it becomes a promise where now both the parties to the contract become bound by such promise to each other.

Section 2(b) of the act states what constitutes a promise:

“When the person to whom proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.”

Section 7 of the Indian Contract Act, 1872 clearly states that in order to convert a proposal into a promise, the acceptance must:

• be absolute and unqualified;
• be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted.

For example, A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. Thus, after the offer has been accepted in clear terms and in a reasonable manner, the parties to the contract become legally bound by such promise which is made after the proper course of offer and acceptance of the terms of an agreement between them.

Section 2(e) of the Contract Act states: “Every promise and every set of promises forming the consideration for each other is an agreement.” So promises made by the parties’ acts as consideration for each other and they are now said to have entered into an agreement.

Let’s understand the aforesaid course of entering into an agreement through an illustration:

X expresses his willingness to pay for Y’s car. (Proposal)

Y accepts X’s proposal to pay through the word ‘Now X has promised to pay’. (Proposal of X has been accepted)

In return for X’s promise to pay, Y promises to sell him his car. (Y’s promise to sell the car is a consideration). Here, Y’s promise to supply sets the agreement in place between both X and Y

As aforesaid that as per section 2(h) of the act an agreement enforceable by law is a contract, not all agreements see the light of becoming a contract. For agreements to become a contract, it necessarily has to satisfy the conditions mentioned in Section 10 of the Act which states: “All agreements are contract if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.”

So following essentials are needed for an agreement to become a valid contract:

• An agreement between the two parties. An agreement is the result of a ‘Proposal’ by one party followed by “Acceptance” by the other.
• The agreement should be between parties who are competent to contract.
• There should be a lawful consideration and lawful object of that agreement.
• There should be free consent of the parties, when they enter into the agreement.
• The agreement must not be one, which has been expressly declared to be void.

Illustration: A sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts. Or a contract entered by a minor person will not be a valid contract.

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Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
2. Law of Contract Mains Questions Series Part-II
3. Law of Contract Mains Questions Series Part-III
4. Law of Contract Mains Questions Series Part-IV
5. Law of Contract Mains Questions Series Part-V
6. Law of Contract Mains Questions Series Part-VI
7. Law of Contract Mains Questions Series Part-VII
8. Law of Contract Mains Questions Series Part-VIII
9. Law of Contract Mains Questions Series Part-IX
10. Law of Contract Mains Questions Series Part-X