2. Law of Contracts : Introduction
Lays down general principles of contract. It is like a boundary or
limit within which parties can agree upon anything.
Lays down the circumstances in which it will be legally
obligatory to perform a promise; provides remedies for breach
Examples: minors contract is not binding on him. Social promises
are not binding in law. Contracts without consideration, barring
certain exceptions, are void.
Affects all of us since everyone enters into some kind of a
contract every other day without being aware of it
Eating out in a hotel, travelling by bus, taking property on
lease, buying anything from movie tickets to buying a house, are
all contracts: express(written or verbal)or implied (implied by
conduct)
3. Contracts create personal rights and obligations for the
parties to the contract: particularly vital for business
community:It means, specific persons who are parties to contract
have rights and duties against each other
4. There are other legal rights and obligations which are not
created by contracts: a right not to be defamed, or a right notto
be harmed, right to enjoy ones property, that are available against
the whole world
CONTRACT
Agreement in daily life
An Agreement is defined in section 2 (e) of the Act is - a promise
.
Promise a proposal when accepted ,becomes a promise. ( Sec 2
b).
Agreement = Offer + Acceptance
5. Promise?
Section 2(b)
Promise = Proposal/Offer + Acceptance
Proposal?
Section 2(a)
Expression of willingness to do something
With a view to seek the assent of the other party.
Thus, mere expression of willingness doesnt constitute
offer/proposal.
6. Acceptance
Section 2(b)
Giving of assent to the proposal.
Enforceability by Law
Agreements which are not enforceable
Illegal/unlawful agreements, e.g., to smuggle/to kill
Social Agreements (Balfour vs. Balfour)
7. CONTRACT ACT
Every Agreement is not a Contract.
AGREEMENT ENFORCEABLE IN LAW IS CONTRACT.
Contract : Agreement + enforceable by law. i.e. legal obligations
to do or abstaining from doing anything. ( Social, illegal)
All contracts are agreement but all agreements are not
contracts
Legal Contracts creates Rights in Personam not right in
rem
8. Essential of Contract
Section 10 : states elements of Contract which are
1)Agreement & Legal Obligation ;
Agreement ( Offer+ Acceptance)
Two parties ( Promisor & Promisee)
2)Intention to create legal relationship
3)Free Consent ( Sec 13,14)
9. 4)Parties competent to Contracts
5)Lawful consideration
6)Lawful Object ( Not illegal/immoral)
7)Agreements not declared void or illegal ( S 24-30)
8)Certainty of Meaning (29)
9)Possibility of performance
10) Necessary Legal Formalities
10. CONTRACT ACT
Classification/Types of Contracts:
Classification according to Enforceability :
Valid, Void & Voidable, Illegal, Unenforceable
Valid = section 10 elements
Enforceable at the option of one or more parties = Voidable
Section 23-30 = Void
Classification according to Formation
Express, Implied & Quasi Judicial
Classification according to Performance :
Executed, Executory, Unilateral, Bilateral
11. OFFER & ACCEPTACE
:
Offer Section 2 (a) :
When one person signifies to another his willingness to do or to
abstain from doing anything, with a view to obtaining the assent of
that other to such act or abstinence, he is said to make a
proposal
Essential of Valid Offer :
Must be made with a view to obtain consent
Must be made with the intention of creating legal relation
Terms of offer must be definite, unambiguous & certain of
capable of being made certain
12. CONTRACT ACT
Elements of OFFER:
It must be distinguished from mere declaration of intention or
invitation of offer. ( A Tender is an offer)
It must be communicated to offered.
The offer must not be contain a term the non-compliance of which
may be assume to amount to acceptance
Special Terms
Cross offers
13. CONTRACT ACT
ACCEPTACE :
Meaning:
When a person to whom the proposal is made, signifies his assent
thereto, the proposal is said to be accepted. A proposal, when a
accepted, becomes a promise
Elements of ACCEPTANCE :
It must be absolute & Unqualified
It must be communicated to the Offerer
It must be according to the mode prescribed
It must be given in specified time
14. CONTRACT ACT
ACCEPTACE :
Meaning
Acceptance how made and by whom
Elements of ACCEPTANCE :
It must be absolute & Unqualified
It must be communicated to the Offeror
It must be according to the mode prescribed
It must be given in specified time
15. CONTRACT ACT
ACCEPTACE :
Meaning
Acceptance how made and by whom
Elements of ACCEPTANCE :
It must be absolute & Unqualified
It must be communicated to the Offeror
It must be according to the mode prescribed
It must be given in specified time
16. Every promise and every set of promises, forming the
consideration for each other, is an agreement
An agreement enforceable by law is a contract
17. CONTRACT ACT
Communication ofRevocation :
The communication of revocation is complete :
Against the person who makes it when it is put into a course of
transmission so as to be out of power of the person who makes
it.
Against the person to whom it is made when it comes to his
knowledge.
18. CONTRACT ACT
Communication ofRevocation :
The communication of revocation is complete :
Against the person who makes it when it is put into a course of
transmission so as to be out of power of the person who makes
it.
Against the person to whom it is made when it comes to his
knowledge.
19. Consideration
As per sec 25 a contract without consideration is void. A contract
without consideration is called nudumpactum. Means bare
promiss.
Consideration means something in return to the promisor.
20. The term consideration is defined as When, at the desire of
the promisor, the promisee or any other person has done or
abstained from doing, or does or abstains from doing, or promises
to do or to abstain from doing, something, such act or abstinence
or promise is called a consideration for the promise
21. Elements of consideration
1) Consideration may move from promisee or any other persons
2) Consideration must be at the desire of the promisee
3) Consideration may be past preset or future
4) Consideration need not be adequate.
5) Consideration must be real not illusionary
22. Privity of contract and cosideration
Under Indian contract third person in the contract can sue. Privity
of consideration is allowed.
Privirty of contract is third person in the contract he is not the
party of contract. There is no offer and acceptance between third
party. Privityof contract is not allowed.
23. Exception to privity of contract cannot sue.
1)When a trust is created
2) Contract through an agent
3) When a charge is created ona specific immovable property
4) In case of family arrangement of HUF
5) When promisee by his act created privity of contract.
24. Exception to rule no consideration no contract
1)Agreement based on love and affection
2) Agreement to pay past voluntary services
3) Agreement to pay time bared debt
4) Gift agreement
5) Agency
25. Capacity to contract
Capacity means legal ability of a person to enter in to contract.
As per sec 10 every person who are competent to enter in to
contract if
He is of the age of majority
He is of sound minded
He is not disqualified by law from contracting
26. Minor and legal rules
A person who is not attained the age of majority is a minor.
Law regarding minors agreements
Agreement by or with minor is void
Minor is not bound to return the benefit
received(leslieVssheil)
Minor cannot rectify his act
Restitution of property in case of fraud
Minor is liable of necessaries supplied
Minor as a beneficiaries
Minoras agent
Minoras a partner
Minor as an insolvent
27. Persons of unsound mind
A person is said to be sound minded for the purposeof making
contract if at the time of making the contract he is capable of
underrating and forming a rational judgment on the contract.
Following are the persons of unsound mind
Idiot
Lunatic
Drunken
28. Person disqualified from contracting
Foreign ambassadors
Alien enemies
Companies
Professionals
Felons
Insolvent
29. Free consent
According to sec 14 the consent is said to e free when it is not
caused by
Coercion
Undue influence
Fraud
Misrepresentations
Mistake
30. When aperson obtainthe consent of the other party by force
or under the fear caused by threat of bodily violence and
imprisonment he is said to make coercion.
When the relationship between the parties of a contract is such
that one of the party can dominate the will of the other and uses
the position to claim an unfair advantages over the others, the
contract is caused by undue influences
31. Fraud is will full representations made by a party to a
contract with the intention of cheating others.
The representation refers toa statement or assertion made by one
party to another either before or at the time of making contract
regarding some matters related to the contract.When it is wrongly
made it is called misrepresentations
Mistake is errora) mistake of fact b) mistake of law
32. Legality of Object and Considerations
Under following circumstances object and consideration may be
unlawful
It is forbidden by law
When it is defeating any provision of law
When it is fraudulent
When it cause to injury to a person or property of a person
When it is opposed public policy or immoral
33. Agreement opposed to public policy
1)Trading withenemy
2) Champerty and maintenance contract
3) Agreement for trifling prosecution
4) Marriage brokerage agreement
5) Agreement for sale of public office
6)Agreement to create monopoly
7)Waiver of illegality
8) Agreement in restraint of marriage
9) Agreement in restraint of trade
10) Agreement between pleader and client
11) Agreement in restraint of legal proceedings
12) Agreementfor not to bid
34. Wager and contingent contract
Wager means promise to give money or monies worth up on the
determination of an uncertain event in which both parties have no
material interest and with mutual chance for gain or loss. Wager
means betting
A contract is said to be contingent when the performancedepends on
happening or non happening of certain events. The performance will
become due only after happening of certain event
35. Discharge of contract
Discharge of contract means terminating the contractual
relationship between the parties to a contract. When the contract
is discharged all the right and liability of contracting parties
are extinguished and their relationship comes to an end Contract
can be discharged by
By Performance
By agreement
By laps of time
By operation of law
By impossibility of performance
By committing breach of contract
36. Discharge by performance
Actual performance
Attempted performance ( tender)
Discharge by agreement
By novation
By altration
By recession
Remission
By waiver
Merger
37. Discharge by operation of law
By death
By insolvency
Discharge by impossibility of performance
Impossibility at the time of contract
Impossibility subsequent to the formation of contract( supervening
impossibility)
Destruction of subject matter
Death of personal or incapacity of personal
Contractbecoming
38. Remedies for Breach of Contract
Recession of contract
Restitution of contract
Suit for specific performance
Suit for injunction
Suit for quantum merit
suit for damages
a) general damages
b)Special damages
c)Exeplarydamages
d) Nominal damages
39. Quasi contract
This are relationship created by parties between two person. There
is no contractual relationship between two parties.
Types:
Necessaries supplied to a person incapable of contracting
Payment by an interested person(Damodarmudaliar Vs secretary of the
state )
Liability by non gratuitous act
obligation of finder of goods
Payment by mistake or coercion (sales tax officer , benares Vs
kanhyalal)