Law_of_Contract.part1_STD_2014.ppt

8/9/2019 Law_of_Contract.part1_STD_2014.ppt

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Law of


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Section 2(e) of the Contracts Act provides that

every promise and every set ofpromises,

forming the considerationfor eachother,

is an agreement.

Definition of Agreement


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Section 2(h) of the Contracts Act, 1950 provides that

an agreement enforceable by lawis a contract.

All contracts are agreements

!t not all agreements are

contracts"""

When does an Agreement becomea Contract?


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9 #$#%#&'S C&'*AC'

1.ffer2.Acceptance

+.Consideration

.Capacity to contract

5. -ntention to create legalrelations

. ree consent/. Certainty of 'erms

. Valid Object

9. Formality


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Definition of proposal-s2(a);

Definition of promise-s2(b);

Who is the promisor and who is the promisee-s2(c);What is consideration-s2(d);

What is an agreement-s2(e);

Difference between agreement and contract?

ffer ! "cceptance ! #e$ocation-definitions


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ffe

r%"ccep

tan

ce!

#e$

ocation-prin

ciples

ofer,ofer,

acceptance,acceptance,

revocation o ofer,revocation o ofer, revocation orevocation o

acceptanceacceptance

must bemust becommunicatedcommunicatedto other party-s3to other party-s3

CommunicationCommunicationmust bemust beefectiveefective


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& 'ethods of ommnication

Instantaneous

method:direct

conversation, telephone

Almost

instantaneous:telex and

online internetconversation &WWW

*on

+nstantaneos

method, $ia post


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The

Pri

nc

iple

s

The

Pri

nc

iple

s

Theprinciplesthat

Theprinciplesthat

wereappliedtothe

wereappliedtothe

illustrationscanbe

illustrationscanbederivedrom

derivedromsection

s3,4and

sections3,4and5ofthe

5oftheContractsAct

ContractsAct1950.1950.Youm

ustread

Youmustread

thosesectionsyoursel

thosesectionsyourseltobeableto

tobeabletoappreciatethem!

appreciatethem!


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fe

r

"cc

epta

nce

#

evo

ca

tion

-

prin

cip

les

Whendoescommunication

Whendoescommunicationoo

ofer,communicationoacceptance,

ofer,communicationoacceptance,

communicationorevocationo

communicationorevocationo

oferandcommunicationo

oferandcommunicationo

revocationoacceptance

revocationoacceptancebecomebecome

eectiveeective$%henitcomestothe

$%henitcomestothe

&nowled'eotheother-s()*+)3+and

&nowled'eotheother-s()*+)3+and

s()+)b+Contracts"ct*./0

s()+)b+Contracts"ct*./0

)i+%henpostalruleappliesacceptance

)i+%henpostalruleappliesacceptance

isefectivea'ainstoferorwhen

isefectivea'ainstoferorwhen

ofereepostsletteroacceptance

ofereepostsletteroacceptance

)ii+%henpostalruleappliesrevocation

)ii+%henpostalruleappliesrevocation

ooferisefectiveireceivedby

ooferisefectiveireceivedby

ofereebeoreofereepostslettero

ofereebeoreofereepostslettero

acceptance

acceptance)iii+%henpostalruleappliesrevocation

)iii+%henpostalruleappliesrevocation

oacceptanceisefectiveireceived

oacceptanceisefectiveireceived

byoferorbeoreoferorreceivesletter

byoferorbeoreoferorreceivesletter

oacceptance

oacceptance


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fer ! "cceptance ! #evocation-principles

%hen can ofer be revo&ed 1%hen can ofer be revo&ed 1

*2*2 beore oferee has &nowled'e o the ofer orbeore oferee has &nowled'e o the ofer orbeore oferee accepts the oferbeore oferee accepts the ofer

22 postal rule applies, beore oferee posts the postal rule applies, beore oferee posts theletter o acceptanceletter o acceptance

3232 .)*+!)+ Contracts "ct *./.)*+!)+ Contracts "ct *./

%hen can acceptance be revo&ed$%hen can acceptance be revo&ed$

1.1.before oeror has knowledge of accetancebefore oeror has knowledge of accetance

22 postal rule applies, beore oferor receives the postal rule applies, beore oferor receives theletter o acceptanceletter o acceptance

3.3.!5"1# $"%# Contracts Act 1950!5"1# $"%# Contracts Act 1950


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4eth

od

so

r

4eth

od

so

r

#

ev

oca

tion

o

#

ev

oca

tion

o

f

er

f

er

5ection6)a+Contracts"ct*./2

5ection6)a+Contracts"ct*./2"

proposalisrevo&ed7

(a) bythecommunicationonoticeo

revocationbytheproposertotheother

party1(b) bythelapseothetimepr

escribed

intheproposaloritsacceptance,or,i

notimeissoprescribed,bythelapse

oareasonabletime,without

communicationotheacceptance1

(c)bytheailureotheacceptortoul8lacon

ditionprecedenttoacceptance1or

(d) bythedeathormentaldisordero

theproposer,itheactohisdeathor

mentaldisordercomestothe

&nowled'eotheacceptorbeore

acceptance2


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. ontract binds offeror and offeree at twodifferentpoints in time

Offeror is boundb/ contract when offeree postsletter of acceptance

Offeree is boundb/ contract when offerees letterof acceptance is received by offeror

2 #e$ocation of offer b/ offeror is effecti$epro$ided it is recei$ed b/ offeree before offeree

posts letter of acceptance

& #e$ocation of acceptance b/ offeree is effecti$epro$ided it is recei$ed b/ offeror before offerorrecei$es letter of acceptance posted b/ offeree

Principles of Postal ule!


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9 #$#%#&'S C&'*AC'

1.ffer2.Acceptance

+.Consideration

.Capacity to contract5. -ntention to create legalrelations

. ree consent

/. Certainty of 'erms

. Valid Object

9. Formality


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0ow to a$oid the implications of the postal rle!

Determine the mode of acceptance to be sed b/

offeree-s1(b)

tate specificall/ that acceptance effecti$e onl/ when

comes to notice of offeror

3ostal rle will not appl/ if,

+t ma/ case incon$enience or absrdit/, Lord

4ramwell54ritish and "merican 6elegraph o $

olson

+t is nreasonable to se the post (wrong address%

postal stri7e)

"uestion!


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atherine 6a/ wee 8ian and #ichard 8a 9ong'eng (2:::)% -ommerce Law,What 9o *eed

to 8now % pblished b/ 6imes 4oo7 +nternational

-mail acceptances fall nder the postal rle #hus

contracts are immediately formed once the offeree

sends the messa$e on%line +n c/berspace% e-mails can

get lost and garbled


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"thors of 4asic Law 4oo7

"cceptance is effecti$e not when you clic on the

icon sendbt rather when the offerors ser$icepro$iders compter% to which the offeror has entrsted

the transmission of his offer recei$es the message

When can offer be re$o7ed? When can acceptance be re$o7ed?


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alwa/s ma7e an e=press statement in /or

offer , acceptance is onl/ effecti$e when

+ ha$e recei$ed it and not when it postedor when it is recei$ed b/ the ser$ice

pro$iders compter


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9lements o9lements o

ContractContract

:irst 9lement0 fer:irst 9lement0 fer


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s. 2(a) of the Contracts Act, 1950

ffer or proposal is an epression of 3illingness to do or

to a4stain from doing anything3ith a view to obtaining the assent

of that other to the act or a4stinence

efinition of #*


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orally

in 3riting

implied from cond!ct

ection & ontracts "ct .>:


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offer that is made to aspecific person or gro!p

of persons

offer that can 4e made to

the world at large(m!st 4e

conditional)

Carlill v. Car4olic Smo6e all,

'ypes of ffer

'st

commnicate

acceptance

*o need to

commnicate

acceptance

@st perform

condition

Promise for

a promise!

Promise

for an act!


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Sit!ations that are &' offers

1. -nvitation to 'reat

2. %ere ans3er to a re7!estfor -nformation


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1. -nvitation to 'reat

1. isplay of 8oods in shops(9harmace!tical Society of 8v.oots Cash Chemist)(isher v. ell)

2. Advertisements(9artridge v. Crittenden)(Coelho v. !4lic ServiceCommission: ;o4 vacancy)

Differentfrom advertisement inCarlillv. Car4olic S..)

+. A!ctions (9aynev. Cave)

Sit!ations that are -nvitation to 'reats


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Sit!ation that is a %ere Ans3er to a*e7!est for -nformation


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+ am willing to sell m/

handphone to /o for

#':: are /o

agreeable? (post)

+ am willing to b/

/or handphone for

#':: are /oagreeable?(e-mail)

Cross Offer

Aenn/

'ar7


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When is the Offer #erminated!

.)#e$ocation

b/offeror

4efore offeree acceptsB

4efore offeree posts letter

of acceptanceB'st be

commnicated to

offeree

sitations

4efore offeree has 7nowledge


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2)#e@ection

b/

offeree

0/de $ Wrench

onter-offerCalified

acceptance

tright re@ection


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&Lapse

of time

pecific time

frame

#easonable

time



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ELoss of capacity

of offeror 7nownat the time

acceptance made

b/ offeree


death

insanit/


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Failre

to meet

conditions



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Puto

ny

our

Puto

ny

our

thin&in

'

cap

s!

thin&in

'c

ap

s! *2*2 wner wants to sell Protonwner wants to sell ProtonPerdana bearin' re'istrationPerdana bearin' re'istrationnumber ;< //3 )secondnumber ;< //3 )secondhand+ or #4./,///2hand+ or #4./,///2

22 wner wants to sell Protonwner wants to sell ProtonPerdana bearin' re'istrationPerdana bearin' re'istrationnumber ;< //3 )secondnumber ;< //3 )secondhand+ or #4=/,///2 Pricehand+ or #4=/,///2 Price

ne'otiable2ne'otiable2

3232 Proton sa'a cars or sale,Proton sa'a cars or sale,priced at #4////2priced at #4////2


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9lementsof

9lementsof

Contract

Contract

5econd 9lement05econd 9lement0

"cceptance"cceptance


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Section / of the Contracts Act, 1950 re7!ires thefollo3ing conditionsto 4e met

a. acceptance m!st 4e a4sol!te and !n7!alified.


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llustrationllustration

fferor

fferor

'ethod of

acceptance

not

prescribed

'ethod of

acceptance

prescribed

'ethod followed

'ethod not followed


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5ection 3 o the Contracts "ct, *./ re>uires05ection 3 o the Contracts "ct, *./ re>uires0acceptance must be communicated to the oferor-acceptance must be communicated to the oferor-brou'ht to oferorbrou'ht to oferor??s &nowled'e2 )condition 3+s &nowled'e2 )condition 3+

There are e@ceptions0There are e@ceptions0

1) ?1) ?nilateral offer, 3here the offeror has 3aived thenilateral offer, 3here the offeror has 3aived theneed of comm!nication of acceptance, ;!st perform actneed of comm!nication of acceptance, ;!st perform acteno!gh@sCA:eno!gh@sCA:

2) Acceptance is via post2) Acceptance is via post and postal rule appliesand postal rule applies

)althou'h letter o acceptance is lost, contract still)althou'h letter o acceptance is lost, contract stille@ists+e@ists+

onditions to be met


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Case# &yde v. WrenchCase# &yde v. Wrench

1.1. n !ne, A saidn !ne, A said GG- am 3illing to sell my- am 3illing to sell myfarm to yo! for B1000.farm to yo! for B1000.

2.2. n !ne, repliedn !ne, replied * am willing to b%y* am willing to b%yfarm for +9,).farm for +9,).

A did not respondA did not respond5555....n 29 !ne, repliedn 29 !ne, replied GG- am 3illing to 4!y farm- am 3illing to 4!y farm

at the original price yo! offered that is B1000at the original price yo! offered that is B1000.( has changed mind and 3ants to accept.( has changed mind and 3ants to acceptoriginal offer)original offer)

-s there a contract in this case-s there a contract in this case


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Halified "cceptance

onter-offer6erminates riginal

ffer

" has an option

whether to acceptCre@ect

onter offerB

n !ne, replied* am willing to b%y farm for +9,).

or


39/60

Section (4) of the Contracts Act, 1950re7!iresthe follo3ing conditionto 4e met

acceptance m!st 4e made 3ithin a specifictime or 3ithin a reasona4le time(condition )

onditions to be met


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Silence or inactivity or fail!re to act on the partof offeree is not acceptance (eltho!se v. indley)(condition 5)

#ception

1.=hen 4oth parties agree that silence 3o!ld amo!ntto acceptance

onditions to be met


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9lements

of

9lement

sof

Contra

ct

Contra

ct

Third 9lement0 Certainty o TermsThird 9lement0 Certainty o Terms


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section +0 of the Contracts Actprovides

that any agreements, the meaning of3hich is not certain, or capa4le of4eing made certain, are void

Certainty of 'erms


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9lements

of

9lementsof

Contra

ct

Contra

ct

:ourth 9lement0 Aawul:ourth 9lement0 Aawul

bBectbBect


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Forbidden

b/ law

Defeat prpose

of lawFradlent

ases in@r/

+mmoralC"gainst

3blic

polic/

$A=?$ C&S-#*A'-& D#C'@s2 and 25


45/60

9lements

of

9lementsof

Contra

ct

Contra

ct

:ith 9lement0 ntention to:ith 9lement0 ntention to

Create Ae'al #elationsCreate Ae'al #elations


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Domestic!

ocial

"greement

ommercial

Dealings

(alfo!r v.alfo!r)(%errit v. %errit)

-&'#&'-& ' C*#A'#$#8A$ *#$A'-&S


47/60

9lements

of9lem

entsof

Contra

ct

Contra

ct

5i@th 9lement0 Ae'al5i@th 9lement0 Ae'al

CapacityCapacity


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CAAC-'E

&at!ral ersons Corporations

Age SanityS!4;ect to the provision

of Companies Act, 195 Dthe doctrine of !ltra vires

%!st 4e at least 1 (the Age of %a;ority Act 19/1)%inorscontract is void (s. 11 of the Contracts Act 1950)

(ss 11 D 12)("greement

is $oid)


49/60

3llu

strati

on

3llu

strati

on

capacit/

*atral person

Legal person

. "ge

2 sanit/

'" and ""


50/60

What if someone is sall/ insane and occasionall/sane?

What if someone is sall/ sane and occasionall/insane?

"greement with insane personis $oid


51/60

Ca

se

0

Ca

se

0M

oho

riB

ibee

v.

Moho

riB

ibee

v.

Dh

arm

od

asGh

ose

(P

rivy

Dh

arm

od

asGh

ose

(P

rivy

Councild

ecision)

Councild

ecision)

acts of caseacts of case%inor mortgaged land as%inor mortgaged land as

sec!rity for loan granted 4y A.sec!rity for loan granted 4y A.

Co!rt held that Co!rt held that

anan agreement with minor isagreement with minor isvoidvoid..1.1. 'h!s land m!st 4e ret!rned'h!s land m!st 4e ret!rned

to minor.to minor.

2.2.


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PROBLEM SOLVINGPROBLEM SOLVING

)acts of case1

%inor mortgaged land as sec!rity for loan

granted 4y A.

A had .O -nowledge of the other "ersonsminority. A did not 4other to find o!t"


53/60

&h

atif

'in

or'a

de

&h

atif

'in

or'a

de

(ra)d

)len

t

(ra)d

)len

t

'is

rere

sentat

ion

th

ath

e

'is

rere

sentat

ion

th

ath

e

was

not

am

inor*+

,esliev

.

was

no

ta

min

or*+

,esliev

.

!he

ill-1

914

!he

ill-1

914

:acts0:acts0

4inorborrowedmoneyrom"2

4inorborrowedmoneyrom"2

4inorhadraudulentlyinormed

4inorhadraudulentlyinormed

"thathewasoa'eo

"thathewasoa'eomaBoritymaBority22

"'aveminoraloan24inor

"'aveminoraloan24inor

deaultedinrepaymentoloan2

deaultedinrepaymentoloan2eld0eld0*2*2a'reementis

a'reementisstillvoidstillvoid22

22ihestillhadtheloanamount

ihestillhadtheloanamount

hecanbeas&edtoreturnit2

hecanbeas&edtoreturnit2

owever,ihehadusedupthe

owever,ihehadusedupthe

loan,loan,hecannotbeaskedto

hecannotbeaskedto

makea/mentfromhis

makea/mentfromhis

resentorf)t)rereso)rces.

resentorf)t)rereso)rces.


54/60

0roblem

0roblem

!o

lving

!o

lving 4inor entered into4inor entered into

a'reement to buy computera'reement to buy computerCDs rom vendor2CDs rom vendor2

4inor a'rees to pay within 4inor a'rees to pay within wee&s2wee&s2

4inor ails to ma&e payment24inor ails to ma&e payment2

%hat can CD vendor do$%hat can CD vendor do$"dvise himEher$"dvise himEher$


55/60

#hese a$reements with minor are valid'

a) agreementfor necessaries

-sI> of ontracts "ct .>:

b) insrance

agreement

c) betrothal% di$orce% dower and adoption

agreement

d) scholarship agreements with go$ernment

(since .>1I)

e) emplo/ment agreement (minor as emplo/ee)


56/60

A

gre

ement

for

A

gre

em

entfo

r

.ecessari

es

.ece

ssari

esA may s!pply to a (mentallyA may s!pply to a (mentally!nso!nd person or a minor )!nso!nd person or a minor )

necessariesnecessariess!ited to theirs!ited to their conditionconditionin lifein lifeandand

A is entitled to 4eA is entitled to 4e reimb%rsedreimb%rsedfrom the "ro"erty of s%chfrom the "ro"erty of s%ch

inca"able "ersons.inca"able "ersons.

/ection 09 Contracts Act 19,)/ection 09 Contracts Act 19,)

ection I> ontracts "ct .>:


57/60

foodclothing shelter

#eligios edcation bic/cle

ection I> ontracts "ct .>:


58/60

3llu

strati

on

3llu

st

rati

on

Jormet food

#ich 7id

3oor 7idnecessar/

sited to

condition in life?

ontract for

necessar/

*ot ontract

for necessar/


59/60

Case# 2overnment of 3alaysia v. 2%rcharan /inghCase# 2overnment of 3alaysia v. 2%rcharan /ingh

8overnment spent *% 11,500 for the8overnment spent *% 11,500 for theed!cation of a minor.ed!cation of a minor.

%inor ref!sed to pay 4ac6 the money%inor ref!sed to pay 4ac6 the money'he co!rt held 'he co!rt held 1.1.that thethat the money given for ed%cationmoney given for ed%cation

came %nder necessariescame %nder necessaries2.2.and therefore the government can 4eand therefore the government can 4ereim4!rsed from property of minor.reim4!rsed from property of minor.


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Contracts (Amendment Act) 19/

'inor is bond b/ scholarship

contractBBB

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