Contract - Chapter 1
Contract - Chapter 1
Contract - Chapter 1
1.2. Proposal
A proposal is a declaration by the proposer of his intention to be bound by an obligation if the
offeree fulfills or undertakes to fulfill certain conditions.
A person makes a proposal when he evinces an intention to be bound by clearly ascertainable
terms, and to be so bound, as soon as the person to whom the proposal is addressed signifies his
acceptance.
An offer can be made to any number of persons, or indeed to the whole world with no
particular offeree in mind, as for example, in the case of newspaper advertisement of goods for sale.
When one person signifies to the other his willingness to do or 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.
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
When a person does not make any definite offer to purchase property for any specified
amount, but only states that he is prepared to purchase for a “reasonable sum”, the proposal cannot
be considered as an offer to purchase for any definite amount and when the sale finally takes place
and is confirmed, without any allegation of irregularities pointed out, he sale cannot be vitiated
simply on the ground of non-consideration of an indefinite offer.
A tender notice does not amount to an offer or proposal but merely an invitation to the
contractors for making an offer.
Where a person makes a bid at an auction, it is in the nature of an offer and when the
appropriate authority conveys acceptance thereof an agreement comes into being within the meaning
of section 2 of the Contract Act.
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
acceptance cannot create any contractual relationship and vagueness of the offer would not carry any
contractual force. It is for parties to make a contract in clear and unambiguous terms since the Court
cannot make a contract between the parties.
Where the parties understand the terms finally settled between them, one of them cannot later
on be heard to say that some of the terms remained unsettled and hence the contract was not a
concluded one. However, an agreement between two parties to enter into an agreement in which
some critical part of the contract matter is left undetermined is no contact at all.
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
promise when the acceptance is unqualified and absolute, and until there is such an acceptance, the
stage of negotiation has not passed and no legal obligation is imposed.
Both offer and acceptance must be absolute, unqualified and unconditional. If it is
conditional, parties can withdraw at any moment until absolute acceptance takes place.
An acceptance must be absolute and unqualified. There is no complete contract if the
acceptance is „subject to approval of terms of contract‟ or „subject to a formal contract being
prepared and signed by both parties as approved by their solicitors‟ or simply „subject to contract‟ or
where it otherwise appears that all the terms of the contract are not definitely settled or that
additional terms are to be agreed to and inserted in formal contract.
When there is variance between the offer and the acceptance even in respect of any material
term, acceptance cannot be said to be absolute and unqualified and the same will not result in the
formation of a legal contract.
Where one of the conditions was that “tenders not accompanied by security deposit are liable
to be rejected summarily” and the tender was accepted without the defendant having deposited the
security deposit, it was held that there was a concluded contract as by virtue of condition the plaintiff
had option to waive security deposit.
An absolute acceptance of an offer would not make a binding contract if, in fact, it does not
extend to all the terms of the contract under negotiations or it is only a provisional arrangement
subject to the condition that a further agreement would be executed.
The offeree must unreservedly assent to the exact terms of the offer to bring about a
concluded contract. If while, proposing to accept the offer as a whole, he introduces a new term
which the offeror has had no opportunity of examining, he is in fact merely making a counter offer.
The effect of such a counter offer in the eyes of law is to destroy the original offer.
When an offer containing certain conditions has been made to a party and that party by
adding to the conditions makes a counter offer, the counter offer amounts to rejection of the offer
made to him.
Acceptance under law should be absolute and unconditional. Where the defendant placed
order for a quantity lower than the one for which the plaintiff had quoted in the tender, it cannot be
said that acceptance was either absolute or unconditional because defendant accepted only a part of
the offer of the plaintiff.
If the terms of an offer were unsettled or indefinite, its acceptance cannot create any
contractual relationship and the vagueness of the offer would not carry any contractual force. The
parties must make their own contract, which means that they must agree as to its terms and if they do
not make any such contract in that way, the court cannot make a contract for them.
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
Where all the material terms as given in the tender were settled by the time of acceptance of
tender, the contract becomes concluded even if tender was required to execute an agreement after
acceptance of his tender.
When the letter of acceptance referred to a future negotiation for finalization of more terms of
contract then there is no concluded contract between the parties.
An absolute acceptance of an offer would not make a binding contract if, in fact, it does not
extend to all the terms of the contract under negotiation or if it is only a provisional arrangement
subject to the condition that a further agreement would be executed. It is also well settled that in
order to decide those matters, the entire negotiations and the correspondence on which the contract
depends must be considered.
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
unequivocal and it is specifically agreed upon then the earnest money deposit has to be dealt with in
the light of the principles which apply to such deposit and not in the light of those that generally
apply to restitution, penalty or liquidated damages.
1.5. Tenders
The submission of a tender normally amounts to an offer; and the effect of an “acceptance” of such a
tender turns on the construction of the acceptance and the tender in each case. Binding contract will
normally arise from acceptance of the tender, unless it is expressly stipulated and there is to be no
contract until certain formal documents have been executed.
It is not that the authority inviting tenders cannot deviate or relax the prescribed standard in
any situation. But any deviation, if made, should not result in arbitrariness and discrimination.
When tenderers were required to supply their documents supporting their work experience
and financial position along with the application, and furnishing of required documents was made a
pre-condition, it was held that tenderer can be excluded from consideration for failure to supply
required documents.
It is a well settled rule of administrative law than an executive authority must be rigorously
held to the standards by which it proposes its actions to be judged and it must scrupulously observe
those standards on pain of invalidation of an act in violation of them.
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
the same contract which may be disadvantageous to him. The maxim is qui approbat non reprobate
(one who approbates cannot reprobate).
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
it will be treated as applying retrospectively so as to validate actions or claims under the contract in
respect of the period prior to the formal execution of the contract.
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
But it is clear again that such an extension of time cannot be a unilateral extension on the part of the
promisee. It is only at the request of the promisor that the promisee may agree to extend the time of
performance and thereby bring about an agreement for extension of time. Therefore, it is only as a
result of operation of Section 63 of Contract Act that the time for the performance of the contract can
be extended and that time can only be extended by an agreement arrived at between the promisor and
promisee.
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA
CE 6010 – CONSTRUCTION CONTRACTS & SPECIFICATIONS
from getting his claims adjudicated upon through arbitration if the undertaking was given under
undue influence.
Under the general law of contracts, once the contract is entered into, any clause giving
absolute power to one party to override or modify the terms of the contract at his sweet will or to
cancel the contract – even if the opposite party is not in breach, would amount to interfering with the
integrity of the contract.
In some instances, courts have upheld clauses which are one-sided such as Clause 11 of the
MES standard form of contract which debars any claim for compensation for delays, in respect of
which extensions have been sought and obtained. Similarly clause 59 of the A.P. Standard
Specifications, which states that no claim for compensation on account of delays or hindrances to the
work from any cause would lie except as therein defined, has been upheld.
1.11. Fraud-What is
Fraud may be defined as an act of deliberate deception with the design of securing some unfair or
undeserved benefit by taking undue advantage of another.
EXTRACTS FROM BUILDING & ENGINEERING CONTRACTS (LAW & PRACTICE) BY DR. P C MARKANDA