Section 4 of the Law of Contracts: CLAT 2021 Legal Reasoning Previous Year Questions

Section 4 of the Law of Contracts: The communication of a proposal is considered complete when the intended recipient becomes aware of it. On the other hand, the communication of an acceptance is deemed complete when it is sent out of the acceptor’s control, in the case of the proposer, or when it is known to the proposer, in the case of the acceptor. It’s important to note that the offeror is bound as soon as a properly addressed and stamped acceptance letter is mailed.

However, the acceptor is only bound when the proposer becomes aware of the acceptance. The contract is finalized at the location where the proposal was sent and where the acceptance communication is dispatched. This rule is typically applicable when parties are at a distance and rely on postal communication. In situations where parties are physically present or in direct communication (e.g., by phone), a contract is formed only when the offeror receives the acceptance notification.

Questions and Answers of Section 4 of the Law of Contracts

Questions: In the scenario presented, ‘S’ expressed the intention to buy shares on March 1, 2021. The company, in response, dispatched a letter of allotment accepting the offer on March 10, 2021. Unfortunately, the letter never reached ‘S’ and was lost during transit. Considering these circumstances, which statement accurately reflects the situation?

(A) The acceptance communication is not finalized with ‘S’, leading to an invalid contract with the company.

(B) While acceptance communication is complete with ‘S’, it falls short in completeness with the company.

(C) The acceptance communication is thorough with the company but lacks completion with ‘S’.

(D) Acceptance communication is successfully completed with both ‘S’ and the company.

Correct Option: B

Question: Imagine ‘A’ sitting in Mumbai and giving ‘B’ in Delhi a call to offer goods. In the midst of this phone chat, ‘B’ wholeheartedly accepts the offer. They agree that the goods will be sent to Pune, and the payment will be sorted electronically. Now, in this scenario, where can we say the deal is sealed?

(A) Neither Mumbai, Delhi nor Pune as it is a telephonic contract

(B) Pune

(C) Delhi

(D) Mumbai

Correct Option: D

Question: When can we consider the deal between ‘X’ and ‘Y’ for the sale of the second-hand luxury car finalized? ‘X’, based in Gandhinagar, sent an offer via email on January 15, 2021, at 2:03 pm, and ‘Y’, located in Jammu, unconditionally accepted the offer by replying to the email at 4:04 pm on the same day. ‘X’ read the acceptance email at 7:05 pm on January 15, 2021.

(A) As against ‘X’, on January 15, 2021 at 4:04 pm and as against ‘Y’, on January 15, 2021 at 7:05 p.m.

(B) As against ‘Y’, on January 15, 2021 at 4:04 pm and as against ‘X’, on January 15, 2021 at 7:05 p.m.

(C) January 15, 2021 at 4:04 p.m.

(D) January 15, 2021 at 7:05 p.m.

Correct Option: A

Question: “Imagine X, living in Agra, decides to sell his second-hand luxury car and sends an email offering it to Y in Jammu on January 15, 2021, at 2:03 pm. Unfortunately, due to a technical glitch in the server located in Delhi, Y doesn’t receive the email. Later that day, at 4:04 pm, X calls Y and extends the same offer. During this phone call, at 4:10 pm, Y enthusiastically accepts the offer. Now, in this scenario, where can we say the deal was finalized?”

(A) Delhi

(B) Jammu

(C) Agra 

(D) Neither Delhi, Jammu nor Agra as it is an electronic contract.

Correct Option: C

Question: When you speak words of acceptance into the telephone, they travel through the transmission to the person making the offer in a way that makes it impossible for you to take back those words. Can you identify which statement(s) align with this idea?

I. If communication happens instantly, the contract is formed right away.

II. When communication is instant, both the person making the proposal and the one accepting it are immediately bound by the acceptance.

III. In cases where communication is not instant, the acceptance is considered complete for the person accepting when they speak the words of acceptance into the telephone.

IV. When communication takes time, the acceptance is deemed complete for the person making the proposal when the words of acceptance are spoken into the telephone.

(A) Only I

(B) I and II

(C) III and IV

(D) Only II

Correct Option: B

Read Also: 250 Important Idioms and Phrases for CLAT Exam

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