suggested answer contractlaw

8/17/2019 Suggested Answer ContractLaw

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PROBLEM NO

QUESTION

A the owner of four thoroughbred horses employed two trainers to look after them. Of

these horses Toofan a 3 year old stallion was the pride of the stable. Being in dire

financial straits, A decided to sell Toofan and accordingly informed his trainees to look

out for prospective buyers. B approached the first trainer and offered Rs.1 50 0001 for

Toofan . This price was telegraphed to A on 1.4.94. On 12.4.94 A sent a reply that he

won t accept less than Rs.4 OO OOOI which was received on 15.4.94. On 17.4.94 B

telegraphed his acceptance of the price. Meanwhile on 12.4.94 the other trainer sent

another offer of

Rs.4 25 0001

which reached A on 19.4.94. A had already sent a letter

of acceptance to B on 18.4.94, so he sent a telegram dated 19.4.94 revoking his

acceptance and another to his other trainer accepting the second offer. B didn t receive

the telegram but the other party did. Now both of them claim that they have a right to buy

Toofan .

ISSUE:

Which of the parties B or the party brought by trainer 2 is entitled to get the horse toofan?

Whose claim is valid?

ANSWER:

A receives offer for his horse toofan from B on 12.4.94 for Rs.1,50,000 which he

rejects and sends a letter to B that nothing less Rs.4,OO,OOOmay be accepted by him. Here

B sends his acceptance for Rs.4,OO,OOOo A by telegram on 17.4.94 and A accepts the

offer ,and sends a letter to B on 18.4.94. With the acceptance letter posted and out of

control of A now it stands to be a valid contract according to Section 4 and 5 of Indian

Contract Act, 1872 which reads thus:


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Communication when complete - The communication of a proposal is complete when it

comes to the knowledge of the person to whom it is made. The communication of an

acceptance is complete:

• as against the proposer, when it is put in a course of transmission, to him so as to

be out of the power of the acceptor.

• as against the acceptor, when it comes to the knowledge of the proposer.

The communication of a revocation is complete:

• as against the person who makes it, when it is put into a course of transmission to

the person to whom it is made, so as to be out of the power of the person who

makes it

• as against the person to whom it is made, when it comes to his knowledge.

When the parties are at a distance and are contacting through post or by messengers, the

question arises when is the contract concluded? Does the contract arise when the

acceptance is posted or when it is received?

The question first arose in England in dams v. Lindsell

On September 2, 1817, the defendants sent a letter offering to sell quantity of wool to the

plaintiffs. The letter added, receiving your answer in course of post . The letter reached

the plaintiffs on September 5. On that evening the plaintiffs wrote an answer agreeing to

accept the wool. This was received by the defendants on September 9. The defendants

waited for the acceptance up to September 8 and not having received it, sold the wool to

other parties on that date. They were sued for breach of contract.

It was contended on their behalf that till the plaintiffs answer was actually received there

could be no binding contract and, therefore, they were free to sell the wool on

8th.

But the

court said;

If that were so, no contract could ever be completed by post. For if the defendants were

not bound by their offer when accepted by the plaintiffs till the answer was received, then

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the plaintiffs ought not to be bound till after they had received the notification that the

defendants had received their answer and assented to it. And so it might go on infinitum

(endlessly).

The result of the decision is that a complete contract arises on the date when the letter of

acceptance is posted in due course.

This rule was affirmed by the Court of Appeal in Household Fire

Accident Insurance

Co

v.

Grant

as well as in the case

Dunlop

v.

Higgini

where an acceptance letter posted

in due time was delayed by one day as the slippery state of Roads from frost prevented

the mail bag from reaching the station before the departure of the train, nevertheless the

defendants were held to be bound.

The offerer becomes bound when a properly addressed adequately stamped letter of

acceptance is posted. This aspect was emphasized by the Allahabad High Court in

Ramdas Chakrabarti

v.

Cotton Ginning Co Ltd

wherein a letter of allotment of shares

was claimed to have been posted by a company, but the applicant denied to have received

it.

The high court said: it follows from this (section 4 and 5) that a notice of allotment,

which is the acceptance of the offer to purchase shares, is communicated to the allottee

when it is dispatched, and from that moment there is a complete contract for him.

Whether he receives the letter or not is absolutely immaterial.

Taking the precedence of these cases and considering the section 4 and 5, A s acceptance

letter to B on 18.4.94 constitutes a valid contract and hence his revocation telegram and

selling the horse to the third party is not valid.

2 (1848) 1 HLC 381

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ON LUSION

A s acceptance letter to B constitutes a valid contract and his contract with third

party

sell the horse to him is not valid B can file a suit and claim for the right of Toofan and

will succeed

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suggested answer contractlaw

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