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8/7/2019 fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration
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AMITY GLOBALBUSINESS SCHOOL Bangalore
CONTRACT
An agreement enforceable by law is a contract.
1. an agreement2. the agreement should be enforceable by law
3. An agreement is defined as every promise and
every set of promises forming the consideration
for each other and a promise is an accepted
proposal
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AMITY GLOBALBUSINESS SCHOOL Bangalore
Agreement
Every set of promises forming consideration for each
other is agreement
It has proposal and acceptance
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AMITY GLOBALBUSINESS SCHOOL Bangalore
Agreement essentials
Plurality of persons
Consensus ad- idem:
Agree on same thing in same sense
Viniculum juris
Relates to legal matters not social arrangements
Promise and reciprocal promises
8/7/2019 fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration
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AMITY GLOBALBUSINESS SCHOOL Bangalore
Kinds of agreement
agreementsSocial agreement
illegal
voidable
unenforceable
Valid
void
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AMITY GLOBALBUSINESS SCHOOL Bangalore
FORMATION OF A CONTRACT
Plurality of persons
proposal or offer
acceptance
Legal relationship, legal consequence Lawful consideration
Lawful object
Contractual capacity
Free consent of parties Agreement not declared void
Certainity and possibility of performance
Legal and procedural formalities
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AMITY GLOBALBUSINESS SCHOOL Bangalore
offer
When one person signifies to another his willingness to
do /or abstain from doing anything with a view to
obtaining the assent of the other to such act or
abstinence, he is said to make a proposal
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AMITY GLOBALBUSINESS SCHOOL BangaloreEssentials of offer
Express/ implied
Positive/negative
Intent legal relationship
Terms certain Made to public or person
Communicated to offeree
Different from invitation to offer
View to get assent May be conditional
Standing offer and cross offer
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AMITY GLOBALBUSINESS SCHOOL BangaloreTermination of offer
Notice of revocation
Lapse of time
Failure to fulfill condition precedent to accp.
Not in mode prescribed
Death inanity of offeror
By rejection
Subsequent illegality/ destruction of subject
matter
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AMITY GLOBALBUSINESS SCHOOL Bangaloreacceptance
When the person to whom the proposal is made signifies
his assent thereto, the proposal is said to be accepted.
Proposal when accepted becomes a promise
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AMITY GLOBALBUSINESS SCHOOL BangaloreEssentials of acceptance
Absolute unconditional
Usual mode
Cannot preceed offer
May be expressed/ implied Within reasonable time
By person to whom offer is made
Offer once rejected cannot be accepted till renewed
Before lapse or revocation of offer
Silence does not mean acceptance
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AMITY GLOBALBUSINESS SCHOOL BangaloreExceptions silence when taken
acceptance Previous dealings
Where all conditions of offer if performed
means acceptance: carlil case Offeree has reasonable time to reject but
accepts the benefit of offer
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AMITY GLOBALBUSINESS SCHOOL Bangalore
Legalrelationship
Intention to create legal relationship
Balfour v. Balfour
8/7/2019 fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration
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AMITY GLOBALBUSINESS SCHOOL BangaloreContractual capacity
Parties competant to contract
Mental deficiency Legal disability
Infancy
idiocy
Contractual capacity
Drunkness
luancy
Political
status
insolvency
Corporatestatus
Imprisonment
Married
status
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AMITY GLOBALBUSINESS SCHOOL BangaloreFreeconsentofparties
Coercion
Undueinfluence
Fraud
Misrepresentation
Mistake
8/7/2019 fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration
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AMITY GLOBALBUSINESS SCHOOL BangaloreLawful object and consideration
Consideration or object is unlawful if
(1) It is forbidden by law,
(2) Is of such a nature if permitted it would defeat the provisions of any
law,
(3) It is fraudulent,
(4) The court regards it immoral,(5) The court regards it opposed to public policy. Every agreement of
which the consideration or object is unlawful is void.
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AMITY GLOBALBUSINESS SCHOOL Bangalore
Agreementnotdeclared void
Agreement in restraint of trade
Agreement in restraint of legal
proceedings Wagering agreement
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AMITY GLOBALBUSINESS SCHOOL BangaloreConsideration
An agreement made without consideration is void, unless (1) Agreement without consideration void, unless it is in writing and regis-tered.It
is expressed in writing andregistered under the law for the time being in force for theregistration of documents, and is made on account of natural love and affectionbetween parties standing in a near relation to each other, or unless
(2) or is a promise to compensate for something done. It is a promise tocompensate, wholly or in part, a person who has already voluntarily done somethingfor the promisor, or something which the promisor was legally compellable to do,or
unless (3) or is a promise to pay a debt barred by limitation law. It is a promise, made in
writing and signed by the person to be charged therewith, or by his agent generally orspecially authorized in that behalf, to pay wholly or in part a debt of which the creditormight have enforced payment but for the law for the limitation of suits.
In any of these cases, such an agreement is a contract.
Explanation 1: Nothing in this section shall affect the validity, as between the donorand donee, of any gift actually made.
Explanation 2: An agreement to which the consent of the promisor is freely given isnot void merely because the consideration is inadequate ; but the inadequacy of theconsideration may be taken into account by the Court in determining the questionwhether the consent of the promisor was freely given.
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AMITY GLOBALBUSINESS SCHOOL BangaloreConsideration
The price at which the promise is bought
At the desire of the promisor
The promisee/ or any other person Has done/ abstained from doing
Promises to abstain from doing
Such act or promise
Is consideration for promise
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AMITY GLOBALBUSINESS SCHOOL BangaloreEssentials of consideration
Required both for formation and discharge of contract
May be past present future
Positive/ negative
May be for Forbearance to sue
Must move at the desire of the promisor
May be furnished by promisee or any other person
Must be lawful
Must be real not illusory
Must be of some value Need not be adequate
Must not be for performing existing duties
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AMITY GLOBALBUSINESS SCHOOL Bangalore
No consideration no contract
Quid pro quo:something in returnsomething is consideration
Nudum pactum:Nude contract
contractw
ithoutconsideration1 Agreement out of natural love and affection
2 Compensation for past voluntary services
3 Promise to pay time barred debt
4 Completed gifts
5 Agreements of agency6 Gratuitous bailment
7 Guarantee
8 Contribution to charity
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AMITY GLOBALBUSINESS SCHOOL Bangalore
1. Agreement out of natural love and affection
it is in writing and regis-tered.It is expressed in
writing and registered under the law for the time
being in force for the registration of documents, andis made on account of natural love and affection
between parties standing in a near relation to each
other
Venkataswamy V. Rangaswamy
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AMITY GLOBALBUSINESS SCHOOL BangaloreNo consideration no contract
2 Compensation for past voluntary services
It is a promise to compensate, wholly or in
part, a person who has already voluntarily
done something for the promisor, or
something which the promisor was legally
compellable to do
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AMITY GLOBALBUSINESS SCHOOL BangaloreNo consideration no contract
3 .Promise to pay time barred debt
It is a promise, made in writing and signed by the
person to be charged therewith, or by his agent
generally or specially authorized in that behalf,to pay wholly or in part a debt of which the
creditor might have enforced payment but for the
law for the limitation of suits.
8/7/2019 fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration
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AMITY GLOBALBUSINESS SCHOOL BangaloreKedar Nath V. Gorie
Mohammad Promise to contribute to charity isenforceable ,if on the faith of the promise
the promisee takes definite steps in
furtherance of the object.
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AMITY GLOBALBUSINESS SCHOOL BangaloreStranger to contract stranger to
consideration When consideration paid by 3rd party pomisee isstranger to consideration
He cannot enforce the promise
But if he is party to contract he can sue thecontract
When he is stranger to contract he cannot sue
the contract Exceptions
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AMITY GLOBALBUSINESS SCHOOL BangaloreExceptions: Stranger to contract
can sue Provision is made in a marriage settlement
agreementcreatingchargeonland
Charge on property made in favor of the bride
Khwaja Mohammad Khan V Hussaini Begum
Provisionmadeinpartitionorfamilysettlement
female members can enforce arangements made by
male members
for their benefit even though not party to these
agreements.
( annuity for mother decided to be shared by the
brothers)
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AMITY GLOBALBUSINESS SCHOOL BangaloreExceptions: Stranger to contract
can sue Contracts entered through agentsWhen agent acts within scope of authority
Principal bound even though not party to the agreement
Beneficiaryinatrustorcharge
beneficiary though stranger to contract can sue to
enforce trust
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AMITY GLOBALBUSINESS SCHOOL BangaloreChinmaya V Ramayya
Stranger to consideration can sue:
Mother wills property to daughter, directs
certain annuity for her brother- aftermothers death daughter refuses to pay
Uncle can recover since party to contract
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AMITY GLOBALBUSINESS SCHOOL BangaloreStranger to contract
Dunlop pneumatic tyre co. Selfridge Co.
A- B not to sell below certain price
B-C not to sell below such priceC sells below price
A cannot sue C
A is not party between B and C
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AMITY GLOBALBUSINESS SCHOOL BangaloreDoctrine of privity of contract
It means that contract can only impose rightsand obligation on people who are party to thecontract
3rd
parties cannot sue for the performance ofcontract
Only when it says he can
where contract gives some benefit to him
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AMITY GLOBALBUSINESS SCHOOL BangaloreProvision is made in a marriage
settlement
Daropati V. Jaspati Rai
Provision made for the benefit of some
person, such person can sue for enforcingthe agreement even if not the party to to
the agreement
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AMITY GLOBALBUSINESS SCHOOL Bangaloreminor
Domiciled in India under 18 yrs is minor
Where person or property under
guardianship 21 yrs
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AMITY GLOBALBUSINESS SCHOOL BangaloreRules relating to minor
1. Agreement with minor void ab initio
2. No restitution against minor
3. Beneficial agreements are valid contracts
4. Contract of apprenticeship and service
5. no ratification of minors agreement6. Rule of estoppel does not apply
7. Minors liability for necessaries
8. Minor partner
9. Minor agent10. Position of minors parents
11. Minors liability in tort
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AMITY GLOBALBUSINESS SCHOOL BangaloreRestitution
To restore
Minor can be asked to restore the benefits
obtained by him by the court to the extentto which he or his estate has benefitted
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AMITY GLOBALBUSINESS SCHOOL Bangaloreratification
Means approval or confirmation
Minor cannot ratify made by him during
minority when he is a major
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AMITY GLOBALBUSINESS SCHOOL BangaloreLiability for necessity
If a minor is supplied with necessities, minors propertyis liable
Provided:
1. Contract is for goods necessary for minors support inlife
2. He should not have sufficient supply of thesenecessities
8/7/2019 fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration
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AMITY GLOBALBUSINESS SCHOOL BangaloreNecessity:
1. Funds supplied for female member
2. Debt incurred for performing funeral rites
3. Expenses incurred for property litigation4. Expenses incurred in connection with
education and training expenses
Roberts v. Gray
8/7/2019 fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration
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AMITY GLOBALBUSINESS SCHOOL BangaloreRule of estoppel
One cannot deny the truth of anything that
he has represented to be truth
If the minor represents to be a major andtakes a loan he cannot be compelled to
repay the money.
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AMITY GLOBALBUSINESS SCHOOL BangaloreMinor and tort
Tort is a civil wrong
Only if tort is independent of contract will minorbe liable
Burnard V Haggis Minorborrows horse lends it to friend : friendmakes it jump horse dies: minor liable for tort
Jennings V Rundall
Minor hires the horse for short time, takes itfor long ride horse injured. Minor not liablesince it would have been a contract
8/7/2019 fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration
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AMITY GLOBALBUSINESS SCHOOL BangaloreUnsound mind
Sound mind means:
understand the contract
Capable of forming rational judgement abouteffects of contract on his interest
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AMITY GLOBALBUSINESS SCHOOL Bangaloreunsoundness
Permanent unsoundness:
Idiots
Lunatics Temporary unsoundness
Intoxicated persons
drunkards
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AMITY GLOBALBUSINESS SCHOOL BangalorePolitical status
Alien enemy
Foreign diplomats:
Protocol
when himself carries on the trade or owns an
immovable property for which he is to be sued
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AMITY GLOBALBUSINESS SCHOOL BangaloreCoercion
Where person is compelled to enter into a
contract by use of force by the other party
8/7/2019 fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration
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AMITY GLOBALBUSINESS SCHOOL Bangalore
EssentialsofCoercion
1. Threat to commit act forbidden by IPC2. Committing an act forbidden by IPC
3. Unlawful detaining of property
4. Act of coercion may be directed at anyperson, not only toother party of contract
5. Threat to file suit on false charges
6. Threat to commit suicide7. Even if IPC is not in force, suit should filed
in India
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AMITY GLOBALBUSINESS SCHOOL BangaloreEffect of coercion
1. Voidable contract, onus of proving on the
party who wants to set aside the contract
2. Remedy U/S 64 aggrieved party torestore any benefit it recd.
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AMITY GLOBALBUSINESS SCHOOL BangaloreUndue Influence
Influence that prevents someone from excersing
an independent judgement with respect to any
transaction.
It is the relation as such to dominate the will ofanother, to obtain an unfair advantage
It is not necessary that the person in a position
to dominate the will of the other party must
himself benefit. It is sufficient that the third
person in whom he is interested benefitted.
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AMITY GLOBALBUSINESS SCHOOL BangaloreEssentials of Undue Influence
Domination of the will
He holds real/apparent authority
Stands in the fiduciary relation Make a contract with a personwhose
mental capacity is temporarily or
permanently effected by reason of
age,illness,distress.
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AMITY GLOBALBUSINESS SCHOOL BangaloreUndue Influence
Presumptions
Unconscionable Transactions:
unreasonable bargains,exorbtant profitscharged
2. Pardanashhin Woman:
seculsion and isolated
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AMITY GLOBALBUSINESS SCHOOL BangaloreEffect of Undue Influence
1. Recession of contract
2. Sec 19a, courts discretion to give part,
whole or no restoration order or refundorder
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AMITY GLOBALBUSINESS SCHOOL Bangalore
Difference between coercion Undue influence
Difference Coercion U. Influence
Nature of act Destrution of will Dominance of will
Rel. b/w parties Not necessary Must exist
Type of force Physical Mental
Third parties Can be directed
against 3rd party
Exc. On the other
party to the contract
Nature of liability Criminal Civil
Burden of proof To be proved Presumption
Relation with
consent
Destroyed Induced
Rights ava. Sec 64 Discretionary
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AMITY GLOBALBUSINESS SCHOOL Bangalore
Fraud
All acts committed with intention todeceive
and includes wilful misrepresentation
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AMITY GLOBALBUSINESS SCHOOL BangaloreEssentials of Fraud
1. False statement made knowingly, without
belief in its truth, carelessly
2. Concealment of fact
3. Promise made with no intention to fulfill
4. Any other acts to deceive
5. Ommission of material fact
6. Party must suffer loss
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AMITY GLOBALBUSINESS SCHOOL Bangaloresilence as fraud/ constructive fraud
1. Duty to speak2. Where silence = speech
3. Change of circumstances
4. Half truth
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AMITY GLOBALBUSINESS SCHOOL BangaloreDuty to speak/ Uberrimae fidei
Done in utmost good faith
Where one party has duty to disclose
material facts relevant to subject matter to
the other party
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AMITY GLOBALBUSINESS SCHOOL BangaloreDuty to speak
1. Contract of insurance
2. Relating to family settlement
3. Allotment of shares
4. Contract of Guarantee
5. Contract of partnership
6. Contract of fiduciary relationship7. Contract for sale of immovable property
8/7/2019 fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration
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AMITY GLOBALBUSINESS SCHOOL BangaloreEffects of fraud
1. Right of recession
2. Voidable contract within reasonable time
3. Right to affirm4. Claim for damages
8/7/2019 fb31aCONTRACT ACT essential,offer, accept, Free consent, Capacity, consideration
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AMITY GLOBALBUSINESS SCHOOL BangaloreLoss of right of recession
in case of C, UI, F, Mis
Not rescinded:
Restitution not possible: matter alreadyconsumed
Lapse of time
Right to 3rd
parties Affirmation by aggrieved party
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AMITY GLOBALBUSINESS SCHOOL BangaloreAffirmation by aggrieved party
Shares alloted on misrepresentation in
prospectus, party accepts the dividend but
wants to later rescind the contract
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AMITY GLOBALBUSINESS SCHOOL BangaloreMisrepresentation
Representation is statement of fact by oneparty to the other either at/ before time ofcontract
expressed / implied Person making the false statement
believes it to be true and does not intend
to mislead the party is known asmisrepresentation
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AMITY GLOBALBUSINESS SCHOOL BangaloreEssentials of Misrepresentation
1. Positive assertion of unwarrantedstatements believed to be true
2. Breach of duty bring advantage
3. Mistake about subject matter innocently4. Instrumental in inducing the party to
enter into contract
5. Must become untrue
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AMITY GLOBALBUSINESS SCHOOL Bangalore
Misrepresentation
Innocent Mis.:Has reasonable ground to
believe in its truth
Negligent Mis.:Believes in the statement,
Has no grounds to believe so
Fraudulent Mis. :does not know its truthbut knows its not false
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AMITY GLOBALBUSINESS SCHOOL BangaloreEffects of Misrepresentation
1. Contract voidable
2. Right to recession
3. Right to insist on performance4. Right to claim refund not damage
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AMITY GLOBALBUSINESS SCHOOL BangaloreDifference between Fraud and
Misrepresentation
Difference Fraud misrepresentation
Intention Deliberate innocent
Recession Claim damage No claiming damages
Diligence in truth
finding
Voidable even if
truth found out
Cannot avoid if can find
out truth
Criminal act Yes civil
Silence Can be used to
induce fraud
no
AMITY GLOBAL
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AMITY GLOBALBUSINESS SCHOOL BangaloreMistake
It is erronous belief about something
AMITY GLOBAL
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AMITY GLOBALBUSINESS SCHOOL Bangalore
Mistake
Foreign law
Indian law
factlaw
unilateral
Bilateral
AMITY GLOBAL
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AMITY GLOBALBUSINESS SCHOOL Bangalore
Physical
M. Possibilty ofperformance
Mistake of subjectmatter
a. Existenceb. Identity
c. Titled.Pricee. Qualityf. quantity
Bilateral
legal
AMITY GLOBAL
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AMITY GLOBALBUSINESS SCHOOL BangaloreUnilateral mistake
Contract voidable:Fraud/ Misrep.
Agreement voidab-initio
Contract valid:Caveat emptor
M. Nature&Character of Doc.
M. Identity ofperson
AMITY GLOBAL
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AMITY GLOBALBUSINESS SCHOOL BangaloreMistake as to identity of person
If only the name is fictitious there is no
mistake of identity and contract voidable
Where the identity of the other party is
important to the offerror, contract void ab-
initio
Said V. Dutt
Mistake as to attributes & M to identity
AMITY GLOBAL
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AMITY GLOBALBUSINESS SCHOOL BangaloreNature of document
Where the mind of the signer is not with
the signature: i.e he did not intend to sign
it.
Even if caused by Mis representation
contract is void and 3rd party acquires no
rights
AMITY GLOBAL
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AMITY GLOBALBUSINESS SCHOOL BangaloreQuasi Contracts
Resembles a contract
As far as result or effect is concerned
Has little / no resemblance w.r.t. mode ofcreation
Special circumstances, obligationsresembling that created by contracts
Obligation imposed by law = Constructivecontracts
AMITY GLOBAL
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AMITY GLOBALBUSINESS SCHOOL BangaloreKinds of Quasi Contracts
1. Claim for necessities
2. Right to recover money paid for anotherperson, payment of which he is interested
3. Obligation of person enjoying benefit ofnon-gratuitous act
4. Responsibility of finders of goods
5. Liability of person to whom money is paid
or things delivered by mistake / coercionNo person is allowed to enrich himself at
the expense of another
AMITY GLOBAL
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AMITY GLOBALBUSINESS SCHOOL BangaloreLegalities of Object
Agreement with unlawful object is void
1. Forbidden by law
2. If agreement is permitted it would defeat the
purpose of law
3. Object is fraudulent
4. Involves injury to another person
5. Considered immoral by court6. Court considers as opposed to public policy
AMITY GLOBAL
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AMITY GLOBALBUSINESS SCHOOL BangaloreConsidered Immoral by Court
1. Sexual immorality
2. Interference with marital relations
3. Acts against public morality
AMITY GLOBAL
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AMITY GLOBALBUSINESS SCHOOL BangaloreCourt considers as opposed to
public policy1. Ag for stifling criminal prosecution
2. Ag interfering with course of justice
3. Ag with an alien enemy
4. Maintenance & Champerty5. Traffic in Public Offices
6. Ag and unduly restraining personal liberty
7. Ag interfering parental duties
8. Marriage brokerage agreement9. Miscellaneous: Money paid to witness
AMITY GLOBAL
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AMITY GLOBALBUSINESS SCHOOL BangaloreMaintenance & Champerty
1. Maintenance: An Ag by which a stranger
promises to help another person by
money or otherwise in litigation in which
the third person himself has no interest
2. Champerty: An Ag in which the person
agrees to assist another in litigation in
exchange of a promise to hand over aportion of the proceeds of action