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IAI Actuarial Core Principles · Business Management · Sources of Indian law and valid contracts

Mehta Actuarial Services emails a prospective client, Sunil, saying: 'We are willing to value your pension fund for Rs 2,00,000; reply if you agree.' Sunil replies, 'I accept.' Under the Indian Contract Act, 1872, which statement best describes the position?

A valid agreement is formed. Mehta's definite proposal was met with Sunil's unconditional, communicated acceptance. Under the Indian Contract Act a proposal that is accepted becomes a promise, and no deed, advance payment or oral form is required for an ordinary service contract.

  1. AA valid agreement is formed because a definite proposal was met with an unconditional acceptanceCorrect
  2. BNo contract exists until Mehta Actuarial Services signs a written deed
  3. CThe agreement is void because the fee was not paid in advance
  4. DThe agreement is only a voidable contract at Sunil's option
  5. The agreement is unenforceable because acceptance must be given orally

Explanation

A proposal when accepted becomes a promise, and an agreement enforceable by law is a contract. Here the proposal was definite and the acceptance absolute and unqualified, communicated to the proposer. Indian law does not require advance payment, a deed or oral acceptance for such a contract.

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