27041495 the Indian Contract Act 1872 Copy

8/9/2019 27041495 the Indian Contract Act 1872 Copy

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THE INDIAN CONTRACT ACT 1872THE INDIAN CONTRACT ACT 1872

Section 2 (h) defines a contract as anSection 2 (h) defines a contract as anagreement enforceable by law thus to make aagreement enforceable by law thus to make acontract there must becontract there must be1.1. An agreement An agreement2.2. The agreement shall be enforceable by law.The agreement shall be enforceable by law.

All agreements are not enforceable by All agreements are not enforceable bylaw and therefore, all agreements arelaw and therefore, all agreements arenot contracts.not contracts.


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An An agreementagreement is is regardedregarded asas aa contractcontractwhenwhen itit isis enforceableenforceable byby lawlaw..

InIn other other words,words, anan agreementagreement thatthat thethe lawlaw willwillenforceenforce isis aa contractcontract. .

TheThe conditionsconditions of of enforceabilityenforceability areare statedstated ininSectionSection 1010.. According According toto thisthis sectionsection allallagreementsagreements areare contractscontracts if if theythey areare mademade byby thethe

freefree consentconsent of of partiesparties competentcompetent toto contract,contract, for for aalawfullawful considerationconsideration andand withwith aa lawfullawful object,object, andandareare notnot herebyhereby expresslyexpressly declareddeclared toto bebe voidvoid..


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Essentials of a valid contractEssentials of a valid contract

1.1. TheThe agreementagreement should be between twoshould be between twoparties. An agreement is the result of aparties. An agreement is the result of aproposalproposal or offer by one party followed byor offer by one party followed byitsits acceptanceacceptance by the other.by the other.

2.2. The agreement should be between theThe agreement should be between the partiespartieswho are competent to contract.who are competent to contract.

3.3. There should be aThere should be a lawful considerationlawful consideration andandlawful objectlawful object in respect of that agreement.in respect of that agreement.

4.4. There should beThere should be free consent of the partiesfree consent of the parties ,,when they enter into the agreement.when they enter into the agreement.

5.5. The agreement mustThe agreement must notnot be one, which hasbe one, which has

beenbeen declared to be void.declared to be void.


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P roposal of offer P roposal of offer

The term proposal has been defined inThe term proposal has been defined insection 2(a) as follows:section 2(a) as follows:

When one person signifies to another When one person signifies to another his willingness to do or abstain fromhis willingness to do or abstain fromdoing anything with a view to obtainingdoing anything with a view to obtainingthe assent of that other to such act or the assent of that other to such act or abstinence, he is said to make aabstinence, he is said to make aproposal.proposal.


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T he willingness to doT he willingness to do or abstain fromor abstain fromdoing something, i.e. the proposal or offer doing something, i.e. the proposal or offer must be made with a view to obtain themust be made with a view to obtain theassent of the other party thereto. For assent of the other party thereto. For example, As willingness to sell his radioexample, As willingness to sell his radio

set to B for Rs. 500 if B accepts toset to B for Rs. 500 if B accepts topurchase the same, amounts to proposalpurchase the same, amounts to proposalby A for the sale of the radio set. But if aby A for the sale of the radio set. But if a

statement is made without any intention tostatement is made without any intention toobtain the assent of the other party theretoobtain the assent of the other party theretothat cannot be termed as proposal.that cannot be termed as proposal.


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Offer and invitation to treatOffer and invitation to treat

A A proposalproposal or or anan offer offer hashas toto bebe distinguisheddistinguished fromfrom ananinvitationinvitation toto treattreat. . SometimesSometimes a a personperson maymay notnot offer offer totosellsell hishis goods,goods, butbut maymay makemake somesome statementsstatements or or givegivesomesome informationinformation withwith aa viewview toto inviteinvite othersothers toto makemakeoffersoffers onon thatthat basisbasis. . For For example,example, a a bookseller bookseller sendssends a a

cataloguecatalogue of of booksbooks indicatingindicating pricesprices of of variousvarious booksbooks totomanymany personspersons. . ThisThis cataloguecatalogue is is notnot anan offer offer toto sellsellthosethose booksbooks atat pricesprices indicatedindicated againstagainst thosethose booksbooks. .ThisThis isis anan InvitationInvitation toto treattreat. . If If anyany personperson isis interestedinterestedinin purchasingpurchasing thosethose booksbooks mentionedmentioned inin thethe cataloguecatalogue

hehe maymay makemake anan offer offer.. Similarly,Similarly, invitinginviting personspersons toto ananauctionauction wherewhere goods,goods, whichwhich areare toto bebe auctioned,auctioned, arearedisplayeddisplayed isis notnot anan offer offer for for thethe salesale of of goodsgoods. . TheTheintendingintending buyers,buyers, whowho makemake thethe bidbid makemake anan offer offer.. SuchSuchanan offer,offer, whenwhen accepted,accepted, byby thethe fallfall of of hammer hammer or or ininsomesome other other customarycustomary way,way, willwill resultresult inin aa contractcontract. .


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Intention to create legal relationshipIntention to create legal relationshipInIn order order thatthat anan offer,offer, after after acceptance,acceptance, cancan resultresult inin aavalidvalid contractcontract itit isis necessarynecessary thatthat thethe offer offer shouldshould bebemademade withwith anan intentionintention toto createcreate legallegal relationshiprelationship. .P romiseP romise inin thethe casecase of of aa socialsocial engagementsengagements is is generallygenerallywithoutwithout anan intentionintention toto createcreate legallegal relationship,relationship, suchsuch ananagreementagreement cannotcannot bebe consideredconsidered to to bebe aa contractcontract. . ThusThusanan agreementagreement to to gogo for for aa walk,walk, toto gogo toto movie,movie, toto playplaysomesome game,game, or or entertainentertain another another personperson withwith aa dinner,dinner,cannotcannot bebe enforcedenforced inin aa courtcourt of of lawlaw.. SometimesSometimes thethepartyparty maymay expresslyexpressly mentionmention thatthat itit isis notnot aa formalformal or or legallegal agreement,agreement, whereaswhereas inin somesome other other casescases suchsuch ananintentionintention couldcould bebe presumedpresumed fromfrom their their agreementagreement. .

TheThe testtest toto knowknow thethe intentionintention of of thethe partiesparties isis objectiveobjectiveandand notnot subjectivesubjective. . MerelyMerely becausebecause thethe promisor promisor contendscontends thatthat therethere waswas nono intentionintention toto createcreate obligationobligationwouldwould notnot exemptexempt himhim fromfrom liabilityliability


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InIn R ose and Frank Co. Vs. Crompton &R ose and Frank Co. Vs. Crompton &Brothers Ltd.Brothers Ltd. the agreement between thethe agreement between theparties provided ;parties provided ;

ThisThis arrangementarrangement is is notnot enteredentered intointo . .asas aa formalformal or or legallegal jurisdiction jurisdiction inin thethe LawLawCourtsCourts. . thatthat itit (the(the agreement)agreement) willwill bebe

carriedcarried throughthrough byby partiesparties withwith mutualmutual loyaltyloyaltyandand friendlyfriendly coco--operationoperation. .OneOne of of thethe partiesparties mademade aa breachbreach of of thisthisagreementagreement. . InIn anan actionaction byby thethe other other partyparty toto

enforceenforce thethe agreement,agreement, it it waswas heldheld thatthat sincesince thetheagreementagreement hadhad providedprovided thatthat itit waswas notnot aa formalformalor or legallegal agreementagreement thethe samesame waswas notnotenforceableenforceable.. ..


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InIn thethe casecase of of M erittM eritt VsVs.. M eritt,M eritt, ( (19701970)) thethehusbandhusband andand wifewife werewere thethe joint joint ownersowners of of aabuildingbuilding whichwhich waswas subjectsubject toto aa mortgagemortgage toto aabuildingbuilding societysociety. . TheThe husbandhusband leftleft thethematrimonialmatrimonial homehome toto livelive withwith another another womanwoman. .

At At thatthat time,time, atat thethe insistenceinsistence of of thethe wife,wife, thethehusbandhusband signedsigned a a notenote sayingsaying thatthat thethe wifewife willwillpaypay allall outstandingoutstanding amountsamounts inin respectrespect of of thethehousehouse andand inin returnreturn II willwill agreeagree toto transfer transfer thethepropertyproperty intointo your your solesole ownershipownership .. ItIt waswas

heldheld thatthat inin thisthis casecase itit waswas clear clear thatthat thethe partiespartiesintendedintended toto createcreate legallegal relationshiprelationship and,and,therefore,therefore, thethe husbandhusband waswas boundbound byby thethecontractcontract


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Communication of offer Communication of offer

A n offer when accepted results in a contract.A n offer when accepted results in a contract.A n offer can be accepted only after the sameA n offer can be accepted only after the samehas come to the knowledge of the offeree.has come to the knowledge of the offeree. ItItmeans that the offer has to be communicated tomeans that the offer has to be communicated tothe offeree in order that the offeree can accept it.the offeree in order that the offeree can accept it.

According to section 4, According to section 4, thethe communicationcommunication of of aa proposalproposal is is

completecomplete whenwhen itit comescomes toto thethe knowledgeknowledge of of thethe personperson to to whomwhom itit isis mademade. .


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If If anan offer offer hashas notnot yetyet beenbeen communicated,communicated, eveneven if if somebodysomebody actsacts accordingaccording toto thethe termsterms of of thethe offer,offer, hehecannotcannot bebe deemeddeemed toto bebe thethe acceptor acceptor of of thethe offer offer.. Acting Actinginin ignoranceignorance of of anan offer offer doesdoes notnot amountamount toto thetheacceptanceacceptance of of thethe samesame. . ThisThis pointpoint maymay bebe explainedexplained bybyreferringreferring toto thethe casecase of of LalmanLalman ShuklaShukla VsVs.. GauriGauri DuttDutt. .((19131913))InIn thisthis casecase thethe defendantsdefendants nephewnephew abscondedabsconded fromfrom

homehome. . TheThe plaintiff,plaintiff, whowho waswas defendantsdefendants servant,servant, waswassentsent toto searchsearch thethe missingmissing boyboy.. After After thethe plaintiff plaintiff hadhad leftleftinin searchsearch of of thethe boy,boy, thethe defendantdefendant issuedissued handbillshandbillsannouncingannouncing a a rewardreward of of RsRs.. 501501 //-- toto anyoneanyone whowho mightmightfindfind thethe boyboy.. TheThe plaintiff plaintiff whowho waswas ignorantignorant of of thisthisreward,reward, waswas successfulsuccessful in in searchingsearching thethe boyboy.. WhenWhen hehe

camecame toto knowknow of of thethe reward,reward, whichwhich hadhad beenbeen announcedannouncedinin hishis absence,absence, hehe broughtbrought anan actionaction againstagainst thethedefendantdefendant toto claimclaim thisthis rewardreward. . ItIt waswas heldheld thatthat sincesince thetheplaintiff plaintiff waswas ignorantignorant of of thethe offer offer of of reward,reward, hishis actact of of bringingbringing thethe lostlost boyboy diddid notnot amountamount toto thethe acceptanceacceptance of of thethe offer,offer, andand therefore,therefore, hehe waswas notnot entitledentitled toto claimclaim thetherewardreward. .


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If If thethe plaintiff plaintiff hashas thethe knowledgeknowledge of of thethe offer,offer, hishis actingactinginin accordanceaccordance withwith thethe termsterms thereof thereof amountsamounts to to thethe

acceptanceacceptance of of thethe samesame. . InIn suchsuch aa casecase itit isis immaterialimmaterialthatthat atat thethe timetime of of acceptingaccepting thethe offer offer thethe acceptor acceptor doesdoes notnotintendintend toto claimclaim thethe rewardreward mentionedmentioned inin thethe offer offer..InIn WilliamsWilliams VsVs.. CarwardineCarwardine ((18331833)) thethe plaintiff plaintiff whowho knewknewthatthat thethe rewardreward hadhad beenbeen announcedannounced to to bebe givengiven toto anyoneanyonewhowho gavegave informationinformation leadingleading toto thethe convictionconviction of of ananassailantassailant for for murder,murder, gavegave thethe necessarynecessary informationinformation. . WhileWhilegivinggiving thethe informationinformation thethe plaintiff plaintiff mentionedmentioned thatthat sheshe hadhadgivengiven thethe informationinformation toto easeease her her conscienceconscience. . At At thatthattimetime sheshe diddid notnot intendintend toto claimclaim thethe rewardreward. . ItIt waswas heldheld thatthatsincesince thethe offer offer hadhad beenbeen acceptedaccepted withwith itsits knowledge,knowledge, theretherewaswas aa validvalid contractcontract and,and, therefore,therefore, sheshe waswas entitledentitled totoclaimclaim thethe rewardreward. .


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Cross offersCross offersWhenWhen thethe offersoffers mademade byby twotwo personspersons toto eacheach other other containingcontaining similar similar termsterms of of bargainbargain crosscross eacheach other other ininpostpost theythey areare knownknown asas crosscross offersoffers. . For For example,example, onon 11ststJanuaryJanuary A A offersoffers toto sellsell hishis radioradio setset toto BB for for RsRs.. 500500//--throughthrough aa letter letter sentsent byby postpost. . OnOn thethe samesame datedate BB alsoalsowriteswrites toto A A makingmaking anan offer offer toto purchasepurchase As As radioradio setsetfor for RsRs.. 500500 //-- WhenWhen A A or or BB sendsend their their lettersletters theythey dodonotnot knowknow aboutabout thethe offer offer whichwhich isis beingbeing mademade byby thetheother other sideside. . InIn thesethese crosscross offers,offers, eveneven thoughthough bothboth thethe

partiesparties intendintend thethe samesame bargain,bargain, therethere arisesarises nonocontractcontract. . A A contractcontract couldcould arisearise onlyonly if if either either A A or or BB ,,after after havinghaving thethe knowledgeknowledge of of thethe offer,offer, hadhad acceptedacceptedthethe samesame. .


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InIn (T inn(T inn VsVs.. HoffmannHoffmann 18731873), ), A A wrotewrote toto BBindicating indicating hishis willingnesswillingness toto sell sell 800 800 tonstons of of ironironat at 6969 ss.. per per tonton.. OnOn thethe samesame dayday BB alsoalsowrotewrote toto A A offeringoffering toto buybuy 800800 tonstons of of ironiron atat thethesamesame raterate of of 6969 ss.. per per tonton.. TheThe twotwo lettersletterscrossedcrossed eacheach other other inin postpost. . BB broughtbrought anan actionactionagainstagainst A A for for thethe supplysupply of of ironiron contendingcontending thatthataa validvalid contractcontract hadhad beenbeen createdcreated betweenbetween thethetwotwo partiesparties. . ItIt waswas heldheld thatthat inin thisthis casecase theretherewerewere onlyonly twotwo crosscross offersoffers andand thethe offer offer of of neither neither of of thethe partiesparties havinghaving beenbeen acceptedaccepted bybythethe other,other, therethere waswas nono contractcontract whichwhich couldcould bebeenforcedenforced


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Specific and General OffersSpecific and General OffersWhenWhen thethe offer offer isis mademade toto aa specificspecific or or anan ascertainedascertainedpersonperson it it isis knownknown asas aa specificspecific offer offer ,, butbut whenwhen thethesamesame isis notnot mademade toto anyany particular particular personperson butbut toto thethepublicpublic atat largelarge itit isis knownknown asas generalgeneral offer offer. . For For instance,instance, anan offer offer toto givegive rewardreward toto anybodyanybody whowho findsfinds aalostlost dogdog isis aa generalgeneral offer offer ThisThis generalgeneral agreementagreement willwillbebe deemeddeemed toto bebe acceptedaccepted byby anyoneanyone whowho actuallyactuallyfindsfinds thethe lostlost dogdog.. TheThe person,person, whowho acceptsaccepts thisthis offer,offer,generallygenerally byby performingperforming thethe conditioncondition of of thethe proposal,proposal,cancan bindbind thethe personperson makingmaking thethe offer offer.. According According toto

SectionSection 88,, P

erformanceP

erformance of of thethe conditionsconditions of of aa proposalproposal.... isis anan acceptanceacceptance of of thethe proposalproposal. . ThusThus althoughalthough a ageneralgeneral offer offer isis mademade toto thethe publicpublic atat large,large, thethe contractcontractisis concludconclud44dd onlyonly withwith thatthat personperson whowho actsacts uponupon thethetermsterms of of thethe offer offer..


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TheThe casecase of of CarlilCarlil VsVs.. CarbonicCarbonic SmokeSmoke BallBall CoCo.. (( 18931893)) II ss ananillustrationillustration of of aa contractcontract arisingarising outout of of aa generalgeneral offer offer.. TheThe factsfacts of of tt hehecasecase areare :: TheThe defendantsdefendants advertisedadvertised their their productproduct CarbonicCarbonic SmokeSmokeBall,Ball, aa preventivepreventive remedyremedy againstagainst influenzainfluenza. . InIn thethe advertisementadvertisementtheythey offeredoffered toto paypay aa sumsum of of 100100 poundspounds asas rewardreward toto anyany oneone whowhocontractedcontracted influenza,influenza, coldscolds or or anyany diseasedisease causedcaused byby takingtaking cold,cold, after after havinghaving usedused thethe SmokeSmoke BallBall threethree timestimes aa dayday for for twotwo weeks,weeks, ininaccordanceaccordance withwith thethe printedprinted directionsdirections. . TheyThey alsoalso announcedannounced thatthat aa

sumsum of of 10001000 poundspounds hadhad beenbeen depositeddeposited withwith thethe Alliance Alliance BankBank totoshowshow sinceritysincerity inin thethe matter matter. . TheThe plaintiff plaintiff (( MrsMrs.. CarlilCarlil )) relyingrelying onon thetheadvertisementadvertisement purchasedpurchased a a SmokeSmoke BallBall fromfrom aa chemist,chemist, usedused thethe samesameinin accordanceaccordance withwith thethe directionsdirections of of thethe defendants,defendants, butbut stillstill caughtcaughtinfluenzainfluenza. . SheShe suedsued thethe defendantsdefendants to to claimclaim thethe rewardreward of of 100100 poundspoundsadvertisedadvertised byby themthem. . ItIt waswas heldheld thatthat thisthis beingbeing aa generalgeneral offer offer addressedaddressed to to allall thethe worldworld hadhad ripenedripened intointo aa contractcontract withwith thethe plaintiff plaintiff byby her her actact of of performanceperformance of of thethe requiredrequired conditionsconditions andand thusthus acceptingacceptingthethe offer offer.. SheShe waswas therefore,therefore, entitledentitled toto claimclaim thethe rewardreward. .


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Revocation of offer Revocation of offer ItIt isis onlyonly after after thethe acceptanceacceptance of of anan offer offer thatthat therethere

arisesarises a a contractcontract andand thenthen bothboth thethe partiesparties becomesbecomesboundbound byby their their respectiverespective promisespromises. . BeforeBefore thethe offer offer hashasbeenbeen acceptedaccepted it it cancan bebe revokedrevoked. . After After thethe offer offer hashasbeenbeen acceptedaccepted it it ripensripens intointo aa contractcontract andand thenthen itit cannotcannotbebe revokedrevoked. . According According toto SectionSection 55 ::

A A proposalproposal maymay bebe revokedrevoked atat anyany timetime beforebefore thethecommunicationcommunication of of itsits acceptanceacceptance is is completecomplete asas againstagainstthethe proposer,proposer, butbut notnot afterwardsafterwards. .InIn casecase of of salesale byby auctionauction thethe bidsbids mademade atat thethe auctionauctionareare offers,offers, andand thethe highesthighest offer offer maymay bebe acceptedaccepted byby thetheauctioneer auctioneer. . InIn suchsuch aa casecase thethe salesale isis completecomplete whenwhenthethe auctioneer auctioneer announcesannounces its its completioncompletion byby thethe fallfall of of thethehammer hammer or or inin anyany other other customarycustomary manner manner ; ; andand , , untiluntilsuchsuch announcementannouncement is is made,made, anyany bidder bidder maymay retractretract hishisbidbid..


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SubmissionSubmission of of aa tender tender toto supplysupply or or purchasepurchase goodsgoods atat aa statedstatedpriceprice isis makingmaking anan offer offer.. P ersonP erson submittingsubmitting thethe tender tender maymay withdrawwithdrawhishis tender tender beforebefore thethe samesame hashas beenbeen approvedapproved. . EvenEven after after thethetender tender hashas beenbeen approvedapproved thatthat remainsremains onlyonly aa standingstanding offer,offer, whichwhichisis capablecapable of of beingbeing revokedrevoked beforebefore aa contractcontract arisesarises byby placingplacing of of ordersorders. . InIn R ajendraR ajendra Kumar Kumar VermaVerma VsVs.. StateState of of M adhyaM adhyaPradeshPradesh A IRA IR 19721972

TheThe respondentsrespondents advertisedadvertised for for receivingreceiving tenderstenders for for salesale of of TenduTenduP

attaP

atta (leaves)(leaves). . TheThe petitioner petitioner submittedsubmitted hishis tender tender. . BeforeBefore thethe datedateof of thethe openingopening of of thethe tenderstenders thethe petitioner petitioner mademade anan applicationapplicationwithdrawingwithdrawing hishis tender tender andand alsoalso requestingrequesting thatthat hishis tender tender bebe notnotopenedopened. . OneOne of of thethe conditionsconditions inin thethe tender tender noticenotice waswas thatthat aatenderer tenderer maymay withdrawwithdraw hishis tender tender beforebefore thethe tender tender areare openopenprovidedprovided thatthat therethere shouldshould bebe atat leastleast oneone other other validvalid tender tender whenwhenthethe tenderstenders areare openedopened. . P etitionersP etitioners tender tender waswas thethe onlyonly tender tender

submittedsubmitted. . InIn spitespite of of hishis requestrequest toto withdrawwithdraw thethe tender tender thetheGovernmentGovernment acceptedaccepted hishis tender tender. . SinceSince thethe petitioner petitioner diddid notnotexecuteexecute thethe purchaserspurchasers agreementagreement , , TenduTendu leavesleaves werewere soldsold totosomebodysomebody elseelse atat aa lower lower rate,rate, andand thenthen anan actionaction waswas broughtbroughtagainstagainst thethe petitioner petitioner toto claimclaim compensationcompensation for for thethe lossloss sufferedsuffered bybythethe GovernmentGovernment. .


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TheThe contentioner contentioner of of thethe petitioner petitioner waswas thatthat sincesince hehe hadhad

withdrawnwithdrawn hishis tender tender beforebefore thethe samesame hadhad beenbeen openedopenedandand accepted,accepted, therethere waswas nono offer offer inin existenceexistence whichwhichcouldcould bebe acceptedaccepted. . TheThe respondents,respondents, however,however,contendedcontended thatthat thethe offer offer couldcould notnot bebe withdrawnwithdrawn ininaccordanceaccordance withwith thethe tender tender noticenotice and,and, therefore,therefore, thethe

petitionerspetitioners offer offer waswas stillstill alivealive andand hadhad ripenedripened intointocontractcontract byby acceptanceacceptance. .ItIt waswas heldheld thatthat inin spitespite of of thethe clauseclause inin thethe tender tender noticenoticeagainstagainst thethe withdrawalwithdrawal of of thethe offer,offer, thethe petitioner petitioner hadhad aarightright toto withdrawwithdraw hishis offer offer beforebefore thethe samesame waswas

acceptedaccepted. . InIn thisthis casecase therethere waswas nono offer offer whichwhich couldcould bebeaccepted,accepted, therethere hadhad arisenarisen nono contractcontract betweenbetween thethepetitioner petitioner andand thethe respondentsrespondents and,and, asas such,such, thetherespondentsrespondents hadhad nono rightright toto claimclaim anyany compensationcompensation. .

27041495 the Indian Contract Act 1872 Copy

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