When is a Contract Said to be Completed?

Introduction:

Before entering into the roots let’s first understand what is a Contract? Well, a contract can be termed as an agreement between two parties either to buy or sell anything. It may be done either in a written way or oral way. Both the forms are supported by Law and will be considered as a contract. The contract can be a thing that may be dealt with regularly continuously. For this thing government of various countries has made various rules and provisions regarding how a healthy contract can take place.

Now coming to the essential elements which should be there when a contract needs to be done. The following elements are-

1. Offer
2. Acceptance
3. A promise
4. Valuable consideration
5. Time plays the most important factor
6. Terms and conditions made

Five most important essential things which should be kept in mind while forming a contract are-

1. While forming a contract there should be a legal purpose
2. Before entering into any type of agreement there should be mutual consent which should exist between the parties
3. Consideration and Acceptance which means agreeing to terms and conditions laid by the person who made the offer
4. There is a legal age for entering into a contract.
5. A contract will be considered as a void contract if any kind of illegal thing, fraud, and mistakes is mentioned over it.[1]

Meaning

The term completion of Contract may be described as important terms and provisions which is laid down legally to complete a healthy contract between two parties without any dispute or any disturbances which may result in hampering the contact. When the communication between both parties was completed then the contract will be said to be completed. Upon the completion of the contract, it is said to be done.  

Related Laws

Section 3 of the Indian Contract Act states Communication, acceptance, and revocation of proposals. It states the communication, acceptance, and revocation of proposals between both parties. It also deals with the omission by the party proposing it and communication regarding such proposals and their effects.[2]

Section 4 deals with the communication and how it should be done. This is when the communication of the proposal is said to be complete. If we will talk about the communication of acceptance then when the acceptor accepts the proposal and sends the reply to the person who made it at the moment it is said to be completed.

 If we will talk about the communication of revocation then it is said to be completed when the letter of revocation is sent to the other party then it is said to be completed. It should come in knowledge to the person against whom it was sent.[3]

Illustrations

1. Ronny proposes a letter to send his house to Sam at RS 1000, Ronny proposes by letter to sell his house to Sam at RS 1000 here the communication of the proposal will be complete as soon as the letter sent by Ronny will be received by Sam.
2. Now let’s say Sam accepted the letter sent by Ronny in the form of a post and after going through it he accepts the proposal and sent a letter, here in this case the communication of acceptance will be said to be completed. As Sam accepted the letter sent by Ronny and when the letter will be received by Ronny it will be said that the process is complete.
3. Now let’s say Ronny revokes the proposal by telegram now the revocation of the contract will complete as soon as the telegram gets dispatched. It will be completed as Sam receives it. In the case of Sam, the letter of revocation will be said to be completed when Sam revokes his acceptance and sent it through telegram, and when his revocation letter will be dispatched and it will reach Ronny, it will be completed.

Food Corporation of India v. Surana commercials Co. and Others

Brief Facts of the Case

The main facts of the case stated that there was an agreement between the appellant and Army purchase organization regarding the purchase of Arhar dal to Lucknow. There was a need for milling tenders who could do the job easily therefore the respondent sent two tenders consisting of millers with 1500 metric tons and 2000 metric tons respectively. Both the tenders were accepted and there an agreement was made between them. They started the work accordingly and they finally delivered a total of 1607.495 tonnes of dal to the appellant and the appellant sent it to the army directly but the twist arises when the army rejected 786.505 tonnes of dal and it was not specified why they rejected it.

So, the appellant returned the remaining dal and asked them to upgrade it so an agreement was formed between them to upgrade it. The respondent took back the 208.245 tonnes of dal and after upgrading, they gave 23.945 and were replaced. After that, they delivered on different dates as 47.3888 tonnes on 5.06.1978, 23.750 on 8.6.1978, and 23.655 on 9.6.78 after upgrading. So, a total of 89.607 of dal was left with respondent after everything. They decided not to replace any more dal. But the appellant sold some left dal in the auction and received a total of Rs 9,60,111. Now when the appellant received this message they demanded and filed a suit for their damages for the 89.607 tonnes of dal which they did not receive and they wanted Rs 600 per quintal total amounting to RS 5,37,642 further they demanded Rs 16,46,642 as compensation. In a total compensation was decided of Rs 537642 and the remaining was wiped out as supplementary agreement and other agreement.

Issues Raised

Whether the appellant is entitled to get the full mentioned amount?

Judgment

The case was dismissed and it was held invalid as per sec 2(d) of the contract act which tells us about the consideration and the court ruled out the supplementary agreement.

 As the respondent has given and delivered the dal and the appellant has received it so it cannot be said as a breach of the original agreement and the bank guarantees will not work in this case and the suit is most importantly not claimed in case of the consideration for the supplemental agreement. So, there was no chance for appeal and the case was remained dismissed.[4]

Case Laws

Balfour vs. Balfour

The main facts of the case state that there lived a couple in Ceylon who decided to go for a holiday to England. There the health condition of the wife was not good and the doctors advised her to stay in England for few more days as she was ill. There was an agreement made between the husband and wife that the wife will get a monthly allowance from her husband and due to certain personal issues, they got separated and Mrs. Balfour filed a case against Mr. Balfour. The case got dismissed by the court and the main reason behind its dismissal was every agreement cannot be called a contract. Not every agreement between two individuals will be regarded as a contract.[5] 

Mohiri Bibee vs. Dharmodas Ghose

In this case, a man named Brahmodatt who was a money lender gave money to a minor Dharmodas Ghose who took the money and mortgages his land. The money lending was taking place among Dharmodas and Kedarnath who works as an agent under Brahmodatt. When this thing comes in the knowledge of Dharmodas’s mother she made a statement that since Dharmodas is a minor she cannot enter into an arrangement and agreement but Kedarnath wanted his money and he demanded it.

The court gave its statement that since Dharmodutt was a minor and knowing it they gave money to him so Kedarnath and Brahmodutt are not entitled to receive any compensation.[6]

Analysis

After going through all the cases and mentioned case laws we can understand that the Indian Contract Act, broadly deals with things related to the agreement, promise, consideration, and revocation. All these provisions came in force and were a shadow model of the Act and principles of English Common Law.

If we analyze the role in Food Corporation of India v. Surana commercials Co. and Others; the contract here played an important role and the completion of the contract which is stated here gives a proper definition. But the thing which was noticed here is the completion of the contract which was a little different in this case for which the appellant filed the case and the compensation or the damages which he wanted to play out a completely different role. Another thing that was noticed here was a supplemental agreement which was also a key element and was ruled out in this case.

This case was one of the most important cases whose analysis is required if we want to understand the contract law. As certain conditions were mentioned under Indian Contract Act and if the conditions and terms don’t matter or fulfill the contract will become incomplete. 

Conclusion

The Indian Contract Act can be considered as one of the most important laws which were made in our country. This act lays down certain norms and conditions which are required in every field of law. This Act also can be considered as one of the most essential ingredients of Business Law, Tax Law, Finance Law, and many more. So, having knowledge regarding this Act is necessary.

With all this importance, there arises a question of whether there is an update required regarding the change of the Indian contract law? Should there be any change, that should be immediately done? The Indian contract Act is one of the oldest Acts of India and if we look at the current scenario, the growing business ventures and the growing technologies somewhere the law and rules are lagging behind we can see that. So, there should be a special provision and charge in the law.

In a current business scenario where we can notice the growth rate of a company, which is increasing rapidly there is a need for a special body that should cover all kinds of business deals, contracts, and negotiations. So, a new act relating to these things is needed now. This creation of a new act might help in lowering the burden and work of the Indian Contract Act.

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References:

[1] Legal Match, Ken LaMance, what is Contract, (02.03.2020) https://www.legalmatch.com/law-library/article/what-is-a-contract.html.

[2] Indian Kanoon, Central Government Act, Section 3 in The Indian Contract Act, 1872 https://indiankanoon.org/doc/494623/.

[3]Indian kanoon, Central Government Act, Section 4 in The Indian Contract Act, 1872, https://indiankanoon.org/doc/1332830/.

[4]Food corporation of India v. Surana commercials Co. and Others [(2003) 8 SCC 636], https://indiankanoon.org/doc/1793266/

[5] Balfour v. Balfour [(1919) 2 KB 571].

[6]Mohiri Bibi v. Dharmodas Ghose [ILR (1903) 30 Cal 539 (Pc)] https://www.ijalr.in/2020/10/important-case-laws-of-indian-contract.html