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CONTRACT LAW : Classical contract theory: 3 threads : Classical contract theory: 3 threads Contract is a bargain Will of parties [consensus

ad idem-agreement] Freedom of Contract is paramount Development of Contract Law: Principles : Development of Contract Law: Principles Law of obligations [vinculum juris] Moral obligations contractual obligations Law of unjust enrichment Law of restitution [Injurious reliance] Courts in England : Courts in England Writ of performance Writ of debt Writ of covenant writ of deceit Quid pro quo Pacta sunt servanda Freedom of contract ? : Freedom of contract ? Contract as an instrument of free bargaining between parties on the basis of equality Freedom: Need ? : Freedom: Need ? To determine the primary obligations of parties To understand the inequality of bargaining power To understand public utilities Means of contract : Means of contract Formal and Informal contracts Bilateral and Unilateral contracts Contractual terms: Formation Performance : Contractual terms: Formation Performance Contract may be oral or written. Representation Express Implied Intermediate terms Terms/ Expressed in writing Conditions/warranties Implied by Statute terms by customary usage Standard form of contract Object of Law of contract :

Object of Law of contract To avoid litigation To establish set of rules for compliance To penalize defaulters Point of Legality : Point of Legality Valid Contract Void Agreements : sec. 2(g) Voidable contracts: Illegal contracts Law of torts and Contract : Law of torts and Contract Misfeasance Malfeasance Nonfeasance Would an action stand in Tort when the Contract is silent : Would an action stand in Tort when the Contract is silent Blackpool and Fylde Aero Club v Black pool Borough Council 1990 WLR 1195 Reid v Rush Tompkin Group 1990: Car accident case. Winterbottom v Wright 1842 152 Eng Rep 402 Digital contracts : Digital contracts Issues : Issues Conceptual framework Rules governing e-contracts I T 2000 Digital signature E-auction Issues in E-contract : Issues in E-contract California Software Inc v Reliability Research Inc, 1356 [C D Cal, 1986] Beta Computers Ltd v Adobe Systems Ltd 1996 FSR 367 TCS v State of A. P European Commission and Product liability Shrink wrap ClickWrap ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir., 1996 Outsourcing Contract : Outsourcing Contract Issues Sections 13, 15 and 44A of the Indian Civil Procedure Code and Section 41 of the Indian Evidence Act, govern the conclusiveness and enforcement of foreign judgments in India Liability of a software developer

Problems with E-contract : Problems with E-contract Taxing E-commerce Copyright or Patent of software ? UK Electronic Commerce Act 2002 Limitation of Digital Contracts Indian Partnership : Indian Partnership Essentials of Firm : Essentials of Firm 1. Association of two or more persons 2. In pursuance of an agreement or contract Re Fisher and Sons 1912 2 KB 491: difference between Co-owners and partners 3. To combine property, labor or skill 4. In a business New Mofussil Co v Rustomji 1936 Coope v Eyre 1788 5. Carried on by all or any one of them on behalf of all Firm name/Property Miles v Clarke 1953 1 ALL ER 779 6. With a View to share Profits Daulat Ram v Dharm Chand AIR 1934 Lah 110 Minor Partner : Minor Partner Sec. 30(1): A person who is a minor according to the law to which he is subject may not be a partner in a firm, but with the consent of all partners for the time being, may be admitted to the benefits of partnershipA A Khan v Amer Karium AIR 1952 Mys 131 Lachmi Narain v Beni Ram, AIR 1931 ALL 327 Rights of minor: Questions Tulsi das v Gangaram AIR 1925 Sund 272 Satya Narain v Juggal Kishore AIR 1958 All 312] Minors liabilities sec. 30(3)(5) (7)(9) Sanyasi Charan Mandal v Asutosh Ghose 1915 42 Cal 225 CIT v Vijay Kumar Rajesh Liability of a minor after attaining majority Types of partnership : Types of partnership Partnership at will : M O H Uduman v Ashurn AIR 1991 SC 1020: Karumuthu Thiagarajan Chettiar v Muthappa Chettiar AIR 1961 SC 1225 Partnership for a fixed term Particular partnership : Limited Partnership : Partnership by Holding out Sleeping partner Nominal partner Working partners Rights of a partner : Rights of a partner 1. Joint ownership of partnership property 2. Right to take part in the management [sec. 12] Suresh Kumar v Amrit Kumar AIR 1982 Del 131 Right to Express opinion [sec. 12 c]Lord Fldon in Const v Harris 1824 said for a majority of partners to say, we do not care what one partner may say,

we being the majority will do what we please is what a court of equity will not allow.Dismissal of a servant New business Blisset v Daniel 1853 3. Access accounts and act during emergency Re Martindale ex Truman 1832 4. Right to profit : 4. Right to profit Mansa Ram v Tej Bhan AIR 1958 Punj 5 Delhi Veopar Mandal v IT Commissioner AIR 1967 Dawood Sahib v Sheik Mohiuddin Sahib AIR 1938 5. No claim for interest of capital 6. Right to indemnity sec. 13(e) Thomas v Atherton 1877 Rights of partners : Rights of partners 6. Right not to be expelled 7. No new partner to be introduced: right to prevent 8. No liability before joining unless with consent and expressly stated in the deed 9. Right to retire: 3 ways Nature of Liability of partners : Nature of Liability of partners Joint and several: sec. 25: every partner is liable jointly with all the other partners and also severally for all acts of the firm done while he is a partnerTest Benefit of the partnership Within the scope of authority Malyn v John Houston 1903 1 KB 81 Moreton v Harden 1825 Citizens Life Assurance v Brown 1905 R W Pathirana v Pathirana 1967 1 AC 233 Nature of Implied Authority : Nature of Implied Authority 1. Authority to purchase and sell Bond v Gibson [1808] 2. power to recover money due to firm/ borrow money on credit: Higgins v Beauchamp 1914 2 KR 1992: 3. Authority to engage lawyers 4. Authority to insure firm goods Conditions for application of Implied authority : Conditions for application of Implied authority 1. Act must be done in the capacity of a partner: Gouthwaite v Duckworth [1810 104 ER 174]: 2. Act must be done on behalf of the firm and not on personal behalf 3. Act must relate to activities within the scope of business 4. Act must be done in the firms name Does implied authority vary acc/ to type of partnership :

Does implied authority vary acc/ to type of partnership LLP, Will the concept of mutual agency continue ? Dissolution : Dissolution Of partnership of Firm End of the term completion of business by death/insolvency by retirement Dissolution of Firm : Dissolution of Firm Without Court By Agreement Compulsory dissolution Dissolution on contingency By notice By Court Persistent misconduct or disregard to partnership agreement Unsoundness of partners Business at loss Jurisdiction of the Courts to try dissolution MD Hassen Hashmi v Kaberi Roy AIR 1993 Cal 70 Winding Up : Winding Up Right to continue business Good will Restraint of trade What is a proposal/offer : What is a proposal/offer I think I like your car and will try to buy itI saw an advertisement for the sale of your car, will you sell your car to me?I am willing to buy your car for a reasonable price. Are these Offer ? Invitation to Treat : Invitation to Treat Advertisements: General Offer Display of goods for sale Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Harvey v Facey [1893] AC 552Will you sell us Bumper Hall pen, telegraph at what price lowest price for the pen is 100Powell v Lee [1908] 99 L Y 284 MC Pherson v Appanna [AIR 1951 SC 184] wont accept less than 10,000. Modes of Offer : Modes of Offer Time table Tenders and Auctions [Harris v Nickerson] Restaurant menu card ATM or vending machines Offer: Communication :

Offer: Communication Gibbons v Proctor 1891 64 LTN S 594 [Reward for a criminal] Lalman Sukla v Gouri Dutt 1913ALJ 4891 [Missing boys case] Tim v Hoffman 1873, 29 L T 271: cross offer is no offer Counter Offer Proposal must be made to another person Termination of Offer : Termination of Offer An offer can be withdrawn at any time before it is accepted.Distinction between lapse of offer and revocation Notice, Death, incapacity, lapse of time Errington v Errington [1952] Father promises to son and daughter in law that if they pay mortgage amount of the property, the property would be theirs Acceptance : Acceptance Acceptance must be in toto: Mirror Image Rule Manner/mode of acceptance [sec. 7] By an act promise Is Silence an acceptance ? Felthouse v Bindley 1862 11 CB 869.: Uncle tells his nephewIf I hear no more from you, the horse in mine.The nephew during an auction stated to the auctioneer to reserve the horse for his uncle Silence and thereafter a conduct of acceptance ? LIC of India v Vasireddy AIR 1984 SC 1014 27th Dec. 1960 filing of proposal for LIC Proposer died on 12th Jan 1961 Can Acceptance be revoked ? Acceptance: contd : Acceptance: contd Is Communication of Acceptance essential? Acceptance through post: Mailbox rule Adams v Lindsell [1818 1 B& Ald. 681. 2/9/1817, defendants offered to sell a quantity of wool at a certain price and expected the answer by post, the letter reached the plaintiff on 5th, the same day, he posted the acceptance, which reached the defendants on 9th. The defendants waited till 7th and on 8th sold the same wool to another person Is there an acceptance ? Who can communicate the acceptance ? When is a unilateral contract accepted ? When does the mailbox rule apply? : When does the mailbox rule apply? Q. Is revocation of acceptance possible ? Henthorn v Fraser 1892 Secretary signed a note giving option to purchase for 14 days at P-750, next day withdraws through post at 12-1.00 pm, claimant posts the acceptance on the same day between 3-4 pm. Which ever communication reaches first is valid

Offer and Acceptance: Where the contract is made? : Offer and Acceptance: Where the contract is made? It determines the time of forming the contract It stipulates the jurisdiction of the court; and It affixes the rights and obligations of parties Is the contract complete at the instance and place of the acceptor or offeror? Invitation to Treat : Invitation to Treat Advertisements: General Offer Display of goods for sale Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Harvey v Facey [1893] AC 552Will you sell us Bumper Hall pen, telegraph at what price lowest price for the pen is 100Powell v Lee [1908] 99 L Y 284 MC Pherson v Appanna [AIR 1951 SC 184] wont accept less than 10,000. Modes of Offer : Modes of Offer Time table Tenders and Auctions [Harris v Nickerson] Restaurant menu card ATM or vending machines Termination of Offer : Termination of Offer An offer can be withdrawn at any time before it is accepted.Distinction between lapse of offer and revocation Notice, Death, incapacity, lapse of time Errington v Errington [1952] Father promises to son and daughter in law that if they pay mortgage amount of the property, the property would be theirs Acceptance : Acceptance Acceptance must be in toto: Mirror Image Rule Manner/mode of acceptance [sec. 7] By an act promise Is Silence an acceptance ? Felthouse v Bindley 1862 11 CB 869.: Uncle tells his nephewIf I hear no more from you, the horse in mine.The nephew during an auction stated to the auctioneer to reserve the horse for his uncle Silence and thereafter a conduct of acceptance ? LIC of India v Vasireddy AIR 1984 SC 1014 27th Dec. 1960 filing of proposal for LIC Proposer died on 12th Jan 1961 Can Acceptance be revoked ? Acceptance: contd : Acceptance: contd Is Communication of Acceptance essential? Acceptance through post: Mailbox rule Adams v Lindsell [1818 1 B& Ald. 681. 2/9/1817,

defendants offered to sell a quantity of wool at a certain price and expected the answer by post, the letter reached the plaintiff on 5th, the same day, he posted the acceptance, which reached the defendants on 9th. The defendants waited till 7th and on 8th sold the same wool to another person Is there an acceptance ? Who can communicate the acceptance ? When is a unilateral contract accepted ? When does the mailbox rule apply? : When does the mailbox rule apply? Q. Is revocation of acceptance possible ? Henthorn v Fraser 1892 Secretary signed a note giving option to purchase for 14 days at P-750, next day withdraws through post at 12-1.00 pm, claimant posts the acceptance on the same day between 3-4 pm. Which ever communication reaches first is valid Offer and Acceptance: Where the contract is made? : Offer and Acceptance: Where the contract is made? It determines the time of forming the contract It stipulates the jurisdiction of the court; and It affixes the rights and obligations of parties Is the contract complete at the instance and place of the acceptor or offeror? Chapter-3: Capacity to Contract : Chapter-3: Capacity to Contract Two kind of personsNatural Legal or juristic person Natural Person Latent incapacity patent incapacity [infancy, unsoundness, lunacy] [Bcos of Status: insolvency, alien enemy, Married] Legal person : Legal person Ultra vires winding up any other Acts of sovereign, Corporate and companies Liability of Minors in Contract : Liability of Minors in Contract Sec. 68: if a person, incapable of entering into a contract is supplied with necessaries in life, the person who supplies is entitled to be reimbursedDoyle v White City Stadium 1935 1 KB 110, Insanity/lunacy :

Insanity/lunacy Inder Singh v Parmeshardhni Singh AIR 1957 Pat. 49 Mathews v Baxter [1873, L R 8 Ex. 132] Other Incapacities : Other Incapacities Political Status Alien enemy Foreign sovereigns and ambassadors Mighell v Sultan of Johore [1894, 1 QB 149] [Also see sec. 86 of CPC which provides that in case of suit against a foreign sovereign, the consent of the Central Govt is required] Corporation Ashbury Railways Carriage Co. V Riche 1875, 7 HL 653. [an agreement for purchase of railways which was not mentioned in the MOA was held ultra vires] Q. Does Ultra vires means void contract ? Are third parties protected from such ultra vires acts ? Other Incapacities : Other Incapacities Married Status Professional status: can an advocate sue in contract, his client for fee ? Chapter 4: Consideration : Chapter 4: Consideration Sec. 10 requires Lawful consideration as an essential factor for giving enforceability to an agreement. Sec. 25 an agreement without consideration is void [nudum pactum] Sec. 23 and 24 deal with circumstances in which the consideration will be treated unlawful What is consideration : What is consideration Money [need not be adequate] An act, abstinence or promise Must be real [White v Bluett] Performance of a legal duty is no consideration Why Consideration ? : Why Consideration ? Consideration only at the desire of the promisor Durga Prasad v Baldeo [Building a market place at the order of the Collector, Defendants, a tenant made a promise to pay, later refused, was held not liable to pay] Consideration by the promisee or any other person Chinnaya v Ramaya [old lady granted an estate to the daughter with a direction that the daughter should pay an annuity of Rs 653 to the ladys brother. On the same day the daughter executed a promise to pay to the mothers brother Rs 653. She failed and claimed that the brother had not given any consideration. Held: consideration by the mother is enough consideration] Consideration may be Past, Present or Future Privity of contract A person may not give any

consideration, but is a party to the contract may enforce the contract A stranger to a contract cannot sue : Suppose A and B enter into a contract for the benefit of C. The agreement between and A and B cannot be enforced by C. Tweddle v Atksinson : two father entered into an agreement to pay a new couple money on their marriage. The couple cannot sue for enforcement of the contract between the fathers. Exceptions : Exceptions Law of Trust/ Insurance Klause Mittelbachert v East India Hotels [pilot, head injuries during a dive at the swimming pool, contract between Lufthansa and hotel Oberoi, can the pilot claim damages, though the consideration was not moving from him ?] Conduct, Acknowledgment or Admission Narayani Devi v Tagore Commercial Corporation [If the defendants start the payment and then withdraws] Provision for marriage expenses or maintenance under family arrangement/ Veeramma v Appayya [daughter agreed to take care of the father for which the father promised to convey property to her. Later when the father refused, the daughter sued successfully. Sundaraja Aiyangar v Lakshmiammal [partition deed between brothers to provide for marriage expenses of the sister, is enforceable by the sister] Subscription for a charitable purpose Kedar Nath v Gorie Mahomed Doctrine of Promissory Estoppel : Doctrine of Promissory Estoppel Central London Property trust Ltd V High Trees House Ltd 1947 KB 130. Rule in Pinnel Case [promise to pay less than the due amount] D&C Builders v Rees 1966 2 QB 617 M P Sugar Mills v State of U PAIR 1979 SC 621 Forbearance to sue is good consideration When Agreement without consideration is valid : When Agreement without consideration is valid Natural love and affection Compensation for past voluntary services Promise to pay a time barred debt Creation of Agency does not require consideration Free Consent : Free Consent Coercion: committing or threatening to commit an act forbidden by IPC Ranganayakamma v Alwar Setti [Adoption of son by a widow] Chikkan Ammiraju v Chikkam Seshama [Threat to commit suicide] Economic duress B& S Contracts & Designs v Victor Green Publications Ltd 1984 ICR 419 [erecting a stand, contractor claimed labour strike and increased amount]

Undue Influence: a Specie of fraud : Undue Influence: a Specie of fraud Taking of unfair advantage [sec. 16] Misuse of influence Abuse of trust and confidence Connotation of impropriety Classes of undue influence Actual presumed undue influence Based on proof What constitute undue influence : What constitute undue influence Relationship of parties is such that one party is in a position to dominate the will of the other. Real and apparent authority fiduciary relationship mental capacity, age, illness The party in the dominating position uses that position to obtain an unfair advantage Presumption of undue influence: position of domination : Presumption of undue influence: position of domination Parent and child Guardian and ward Trustee and beneficiary Solicitor and client Doctor and patient Spiritual adviser and disciple The list does not include husband and wife nor does it include principal and agent, banker and customer or teacher and student Illustration : Illustration Tate v Williamson 1866 LR 2 Ch. App 55 Allcard v Skinner 1887 36 Ch.d 145 Rebutting the presumption of undue influence : Rebutting the presumption of undue influence Whether the victim had independent and qualified advise ? Solicitors must give fair and disinterested advise He must ensure that the decision of his client is proper and to his benefit The victim understood the nature and consequences of the transaction ? Disclosure of material facts Whether he was able to arrive at independent and informed decision/judgment. Objective and conduct of parties Fraud : Fraud False statement of facts Mere silence is no fraud Duty to speak by law P Sarojam v LIC [aliments were not disclosed in the form] Rajinder Singh v Pomilla [premartial status of a party was a material fact] Active concealment Shri Krishna v Kurukshetra University

Misrepresentation : Misrepresentation Fraudulent Negligent Innocent Rescind claim damages[tort] no claim Misrepresentation : Misrepresentation Conditions [sec 12 (2) of the Sale of goods Act] Warranties A representation is a statement made at the time of the contract by way of affirmation, denial or description or presentation of a material fact to contract. It is more than the intention of parties and different from opinion Smith v Land & House Property Corp (1884) 28 Ch D 7 The plaintiff put up his hotel for sale stating that it was let to a 'most desirable tenant'. The defendants agreed to buy the hotel. The tenant was bankrupt. As a result, the defendants refused to complete the contract and were sued by the plaintiff for specific performance. The Court of Appeal held that the plaintiff's statement was not mere opinion, but was one of fact. Representation : Representation Must relate to fact and not law Must relate to Fact and promise There must be a representation or assertion It must be made with the knowledge that it is false or without belief in its truth It must be acted upon Damages must be suffered: No fraud no damages [sec. 17 read with sec. 19 of ICA] Ex: Prospectus of a company Sec. 55 of the TP Act requires the seller of immovable propery to disclose to the buyer material defects in the property Implied representation : Implied representation Spice Girls v Aprilia World Service BV 2002 Ch D A entered an contract for endorsing product [scooter] with Spice Girls [a group of 5]. Within two weeks, Ginger spice left the group, making the product vulnerable in the market. The Pop group did not disclose this to the Agency. Was the group split before endorsement ? Was there an intention to split ? Was there a misrepresentation that the group was together ? Held misrepresentation. [Carbolic smoke ball company] Void agreements : Void agreements Mistake :

Mistake Of Law Of Fact Of ordinary law of foreign law of pvt rights As to nature of contract as to persons contracted with as to subject matter Mistake : Mistake 1. Mistake when there is no consensus ad idem [Raffles v Wichelhuas 1864 ] 2. Mistake as to a matter of fact essential to the agreement [sec. 20] Ayekam Angahal Singh v UOI Air 1970 3. Mistake of Law Lakshman Prasad and Sons v Achuthan Nair AIR 1955 Mad 652 4. Mistake on subject matter: Leaf v International Galleries [1950] 1 All ER 693 5. Mistake as to possibility of performance of the contract Sheikh Bros v Ochsner 1957 AC 136 ---- Griffith v Brymer (1903) 19 TLR 434 6. Mistake as to identity of parties Boulton v Jones 1857--- Said v Butt 1920 Mistake: New developments : Mistake: New developments Contract made inter praesentes Phillips v Brooks 1919 Ingram v Little [1960] 3 All ER 332 Bell v Lever Bros Ltd. [1932 AC 161] Plea of Non est factumDularia Devi v Janardan Singh AIR 1990 SC 1173 Legality of object and Consideration : Legality of object and Consideration 1. It is forbidden by law Universal Plast Ltd v Santosh Kumar AIR 1985 2. Defeat the provision of any law Ram Sewak v Ram AIR 1962 All 177 -Abdul Piojkhan Nabab v Hussenbi 1904 3. Injurious to person or property Gurmukh Singh v Amar Singh 1991 2 SCC 79 4. Agreement Injurious to public policy Sukha v Ninni AIR 1966 - Punnakotiah v Kallapalli Kolikamba AIR 1967 AP --- Mewa Ram v Ram Gopal ILR 1926 5. Immoral Pearce v Brooks 1866-- Bai Viji v Nansa Nagar 1885 ----Narayani v Pyare Mohan AIR 1927 6. Agreement opposed to public policy Sec. 23 Trading with an enemy Trafficking in public offices Interference with the administration of justice Marriage brokerage contracts: Herman v Charlesworth 1905 2 KB 123 Void Agreements : Void Agreements 1. Agreement in restraint of marriage: sec. 26 Rao Rani v Gulab Rani AIR 1942 2. Agreement in restraint of trade [sec. 27] Herbert Morris Ltd Saxelby 1916 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co 1894 Gujarat Bottling Co v Coca Cola Company Air 1995 SC 2372 Exception to an agreement in restraint of trade 1. Sale of Good will 2. Exception under Indian Partnership Act 3. Restraint by a contract of service [employment] Niranjan Shankar v Century Spinning and Manufacturing Co AIR 1967 4. Trade combinations Sheikh Kalu v Ram Sharan Bhagat 1909 13 CNN 388 5.

Agreement in restraint of legal proceedings: sec. 28 Ghose v Reliance Insurance Co 1934 6. Wagering Contracts Quasi Contracts : Quasi Contracts 1. Claim for necessaries supplied to a person incompetent to contract [sec. 68] 2. Reimbursement of money paid due by another Exall v Patridge 1799 Bansidhar Joshi v Chandrakumar AIR 1964 All 348 3. Obligation of person enjoying benefit of non-gratuitous act: [sec. 70] Indu Mehta v State of UP AIR 1987 ALL 309 4. Enjoyment of benefit by the defendant is necessary: P C Wadhwa v State of Punjab AIR 1987 PH 117 5. Finder of Lost goods: sec. 71 Discharges/ Remedies under Law of Contract : Discharges/ Remedies under Law of Contract 1. Performance of contract 2. Quantum meruit Performance of Contract : Performance of Contract Every such offer must fulfill the following conditions:1) it must be unconditional Navin Chandra v Yogendra Nath 2) it must be made at a proper time and place Start-up v Macdonald 1843 3) under such circumstances that the person to whom it is made may have a reasonable opportunity for inspection Performance on death of a party Performance by the promisor or his agent or representatives. 4) An offer to one of several joint promisees has the same legal consequences as an offer to all of them. Remedies for Breach of Contract : Remedies for Breach of Contract Dr. Sairam Bhat Assistant Professor of Law The Law : The Law Indian Contract Act 1872 Specific Relief Act Law of obligation Law of Unjust enrichment Law of Restitution Plea : Plea Non est factum Gallie v Lee Specific Performance/substantial performance Dakin v Lee When time is the essence of the contract: Right to rescind the contract R K Saxena v Delhi Development Authority AIR 2002 SC 2340

Impossibility of Performance Taylor v Caldwell (1863) 3 B&S 826 Doctrine of Frustation Arti Sukhdev Kashyap v Daya Kishore Arora AIR 1994 Discharge of Contract : Discharge of Contract Bilateral discharge Accord and satisfaction RESCISSION AND SUBSTITUTION and Novation VARIATION WAIVER Breach of contract : Breach of contract Anticipatory breach Hochster v De La Tour Liability of loss only due to CAUSATION [carpenter left the door unlocked] Remoteness of damages Mitigation of loss Breach : Breach Rectification and cancellation of Instrument Damages Nominal Penalty Injunction Temporary Permanent

1 CONTRACT LAW INTERPRETATION CONTRACTS ACT 1950 : 2 INTERPRETATION CONTRACTS ACT 1950 S 2(h) contract is an agreement enforceable by law Valid agreement is legally binding the parties Enforceable in the court of law S 2(g) an agreement not enforceable by law is void ELEMENTS OF CONTRACT : 3 ELEMENTS OF CONTRACT Offer and acceptance Consideration Intention to create legal relations Capacity to contract Consent Certainty OFFER AND ACCEPTANCE : 4 OFFER AND ACCEPTANCE proposal s 2(a) when a person signifies to another his willingness to do or to abstain from doing anything , with a view of abstaining his assent of that other to the act of abstinence, he is said to make

proposal Proposal should be distinguished from invitation to treat An attempt to induce another party to make an offer. -It is not an offer by itself) not be bound by the law. OFFER WHEN IT IS EFFECTIVE? : 5 OFFER WHEN IT IS EFFECTIVE? S 4 proposal is only effective if it is communicated to the acceptor PROPOSAL vs INVITATION TO TREAT : 6 PROPOSAL vs INVITATION TO TREAT Proposal/offer must be distinguished from an invitation to treat. Q: What is an invitation to treat ?? general rule: An invitation to treat is NOT a proposal/offer but a sort of preliminary communication which passes between the parties at the stage of negotiation. EXAMPLES OF INVITATION TO TREAT : 7 EXAMPLES OF INVITATION TO TREAT Display of goods in a self service supermarket Auctioneer inviting bids for a particular article Advertisement in the newspaper Think : 8 Think Suppose that you put an ad in the classified section of your local newspaper offering to sell your guitar for RM 150. 7 people called & accepted your offer before you can remove your ad from the newspaper. If the ad were truly an offer, you would be bound by 7 contracts to sell your guitar. But advertisements are treated as invitations to make offers rather than an offer, thus, you would have 7 offers to choose from, & you could accept the best one without incurring any liability for the 6 you rejected. EXCEPTION TO THE GENERAL RULE: : 9 EXCEPTION TO THE GENERAL RULE: On some occasions, courts have construed advertisements to be offers because the ads contained definite terms that invite acceptance. E.g: deposited an amount of money See Carlill v. Carbolic Smoke Ball TERMINATION OF THE OFFER BY: :

10 TERMINATION OF THE OFFER BY: Revocation of the offer the offeror can revoke the offer as long as the revocation is communicated to the offeree before the offeree accepts. Rejection of the offer by the offeree the offer may be rejected by the offeree, in which case the offer is terminated. Counteroffer by the offeree a counter offer is a rejection of the original offer & the simultaneous making a new offer. TERMINATION OF THE OFFER BY: : 11 TERMINATION OF THE OFFER BY: Lapse of time an offer terminates automatically by law when the period of time specified in the offer has passed. Destruction of the subject matter an offer is automatically terminated if the specific subject matter of the offer is destroyed before the offer is accepted. Death or incompetence of the offeror/ offeree an offerees power of acceptance is terminated when the offeror/offeree dies or is deprived of legal capacity to enter into the proposed contract. ACCEPTANCE : 12 ACCEPTANCE S 2(b) when a person to whom the promise is made signifies his assent thereto, the proposal is said to be accepted. COMMUNICATION OF ACCEPTANCE : 13 COMMUNICATION OF ACCEPTANCE Acceptance must be communicated/ make known Acceptance is said to be communicated if it reaches to the proposer/offeror ACCEPTANCE BY POST : 14 ACCEPTANCE BY POST S 4(2) communication of acceptance by post is complete as against the proposer when it is put in the course of transmission to him, so as to be out of the course of the acceptor as against the acceptor, when it comes to the knowledge of the offeror The offeror is bound by a contract made through post even though he does not know about the acceptance The acceptor is bound by the contract only when the acceptance has reached the knowledge of the offeror 15: 15 REVOCATION OF OFFER AND ACCEPTANCE S 5(1) A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards S. 5 (2) - An acceptance may be

revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards 16: 16 EXAMPLES A-offerror B-acceptor post letter of offer 5 Jan Pos letter of acceptance (put the letter into a letter box) A cannot cancelthe contract s.4(2) (a) - Acceptance is completed against A when the letter is posted receives letter of acceptance from B - S.4(2)(b) acceptance completed against B 1 Jan 8 Jan 17: 17 S.5(2) A-offerror B-acceptor 1 Jan Post LO to B 5 Jan Post LA to A (s.4(2) (a)- contract concluded) 8 Jan : receive LA from B B cannot revoke his acceptance on 8 Jan, contract completed against B. (S 5(2)) CONSIDERATIONS : 18 CONSIDERATIONS The price which one party pays to buy the promise or act of the other. No need to be adequate (bungalow = RM500) Pang Swee Kim v. Beh I Hock INTENTION TO CREATE LEGAL RELATIONS : 19 INTENTION TO CREATE LEGAL RELATIONS Intention relates to somebodys state of mind Law cannot read the mind use presumption In business agreement, there is a presumption that the parties intend to enter into contractual relationship/ to enforce the contract In social/ domestic agreement, it is implied that no legal relations are contemplated but these presumptions are rebuttable proven otherwise CAPACITY TO CONTRACT : 20 CAPACITY TO CONTRACT S 11 every person is competent to contract who is of the age of majority, who is of sound mind, is not disqualified from contracting from any law to which he is subject 21: 21

Can a minor enter into a contract? : Can a minor enter into a contract? 22 CONTRACT BY MINOR : 23 CONTRACT BY MINOR Age of Majority Act 1971 18 years Effect of contract by minor VOID Mohori Bibee v. Dharmodas Ghose (contract by an infant is void) Exceptions S 4 matters relating to marriage, divorce, dower and adoption Religion and religious rites of persons within Malaysia EXCEPTIONS : 24 EXCEPTIONS Contracts by minors are valid under certain circumstances Contracts for necessaries. 25: 25 Scholarships Insurance Insurance Act1963 A minor over the age of 10 may enter into a contract of insurance but if he is under 16, the written consent of parent or guardian is needed SOUND MIND : 26 SOUND MIND S 12 Contracts Act A person is said to be of sound mind for the purpose of making the contract, if at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interest A person usually suffering from mental disorder may make a contract during those periods when he is sound 27 A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind CERTAINTY : 28 CERTAINTY Terms in the contract must be certain if the terms are uncertain, not capable of being made certain - the agreement is void unenforceable Ali offers to sell to B his house for RM50,000 or RM70,000 100 kg of flour (what kind of flour) LEGAL EFFECTS OF CONTRACTUAL RELATIONSHIP :

29 LEGAL EFFECTS OF CONTRACTUAL RELATIONSHIP Valid contract -Contractual obligations, legal remedies in the case of breach voidable contracts - can affirm or repudiate the contract void contracts - cannot be enforced in the court of law VALID CONTRACTS : 30 VALID CONTRACTS If fulfill all the elements of contracts offer and acceptance considerations legal capacity of parties intention to create legal obligations certainty VOIDABLE CONTRACTS : 31 VOIDABLE CONTRACTS : coercion (threat) undue influence fraud (any act to induce another party to enter a contract) misrepresentation (true/ false statement) mistake VOID AND ILLEGAL CONTRACTS : 32 VOID AND ILLEGAL CONTRACTS Not enforceable by law s 24- the consideration or object of an agreement is lawful unless: forbidden by law if permitted, would defeat any law fraudulent implies injury to a person or property of another court regard it immoral or opposed to public policy LEGAL REMEDIES : 33 LEGAL REMEDIES Valid contract breach of contract actions in court order of court rescission damages specific performance injunction RESCISSION : 34 RESCISSION One party breach/ does not perform his obligation the other party may rescind the contract because of non performance DAMAGES : 35 DAMAGES S 75 -a party who has the right to rescind the contract can seek legal redress damages/ compensation for any damage sustained Type of damages pecuniary losses non pecuniary losses PECUNIARY LOSSES :

36 PECUNIARY LOSSES Wasted expenditure Loss of profits (if the contract had been performed) NON PECUNIARY LOSSES : 37 NON PECUNIARY LOSSES The damages granted for disappointment, distress SPECIFIC PERFORMANCE : 38 SPECIFIC PERFORMANCE A decree of the court directing that a contract/ certain act should be performed specifically, according to its terms (original terms) Specific Relief Act 1950 s 11 - When the contract agreed to be done is in the performance, wholly or partly of a trust illustration : 39 illustration A holds certain stock in trust for B. A wrongfully disposes of the stock. The law creates an obligation on A to restore the same quantity of stock to B and B may enforce specific performance of this obligation INJUNCTION - restrain from doing unlawful act : 40 INJUNCTION - restrain from doing unlawful act Temporary injunction for specified time or until the order of the court to preserve status quo of the parties can be granted at any time by order of court Perpetual injunction permanent order granted by the degree made at hearing upon merits of the suits, defendant perpetually enjoined from the assertion of the right, from commission of an act examples : 41 examples Mareva Injuction - prevent the defendant from removing assets from within the jurisdiction BBMB v. Lorrain Osman 42: DISCUSSION 1: Discuss your experience relating to contract entered by your company/institution. How do you solve the problems relating to the said contract ? DISCUSSION 2: (REFER PAPER) :

DISCUSSION 2: (REFER PAPER) CASE STUDY Case 1 CARLILL V. CARBOLIC SMOKE BALL CO [1893] 1 QB 256 FACTS: The defendants, who were the proprietors and vendors of a medical preparation called The carbolic Smoke Ball inserted in the Pall Mall Gazette of November 13, 1891, and in other newspapers, the following advertisement: 100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. 1000 is deposited with the Alliance Bank, Regent Street, showing our sincerely in the matter.The plaintiff, a lady, on faith of this advertisement, bought one of the balls at a chemists, and used it as directed, three times a day, from November 20, 1891, to January 17, 1892, when she was attacked by influenza. The plaintiff, upon refusal of the defendants to honour their promise, proceeded to sue them. Consider the above case in relation to offer, acceptance and invitation to treat. 43 Discussion3: ETHICAL ISSUE : 44 Discussion3: ETHICAL ISSUE A took his son to B, a doctor, and asked B to operate on the sons hand. B said that the boy would be in the hospital 3 or 4 days & that the hand would probably heal a few days later. The sons hand did not heal for a month. Q:Would A succeed in the legal suit against B? Is this legal suit ethically brought up? 45: A: B did not make an offer to heal the sons hand in 3 or 4 days. He merely expressed an opinion as to when the hand would heal. An opinion is not an offer & not a contract term. Goods or services can be perfect in one partys opinion & poor in anothers. 45 case 4: ADAMS V. LINDSELL (1818) 1 BE ALD 681 : case 4: ADAMS V. LINDSELL (1818) 1 BE ALD 681 FACTS: The plaintiffs were woolen manufacturers in Worcestershire. The defendants were wool dealers in Huntingdon. On 2nd Sept 1817, defs wrote to ptfs offering to supply wool to ptfs and requiring an answer in course of post. This letter was misdirected with the result that it did not reach the ptfs until 5th Sept. The same evening ptfs posted a letter of acceptance. This letter was delivered to the Defs on 9th Sept. on 8th Sept; the defendants had sold their wool to third parties. 46 47:

The vital question was whether a contract for the sale of wool had come into existence before Sept. 8th, the date that the defs had sold the wool to the 3rd party. Three possible options were open to the court. They could say that the defs offer was accepted by the ptfs when: The ptfs posted it on the 5th When the ptfs letter was delivered to the defs address on 9th, or When that letter was brought to the actual notice of the def. 47 case 5: BRYNE V VAN TIENHOVEN (1880) 5 C.P.D. 344 : case 5: BRYNE V VAN TIENHOVEN (1880) 5 C.P.D. 344 1 October, def posted letter of offer in Cardiff to the ptf in New York. 8 October, def posted a letter revoking the offer of October 1. 11 Oct, ptf received the letter of offer posted on October 1 and sent acceptance by telegram the same day. It also followed up with letter of acceptance on 15 October. 20 October: defendants letter of revocation received by plaintiff. 48 Question: : Question: Has a revocation any effect until communicated? Does the posting of a letter of revocation amount to a communication to the person to whom the letter is sent? 49 50: Case 6 THE KODAK CASE FACTS: Early in 2002, Kodak refused to honour orders for digital camera advertised on their retail website at 100 pounds, denying that an automated response to customers confirming confirmation of their orders constituted an acceptance of their 100 pounds offer. Kodak claimed the price was a mistake and should have been 329 pounds. Several hundred consumers were believed to be affected and had been threatening legal actions against Kodak unless their contract were honoured. Kodaks defense: Their standard terms on the site, which were the terms of sale which state Kodak had a right to change the content of the website at any time including prices. The defence of mistake in English Law which makes a contract void The display of price-marked goods wherever the display is, is not an offer to sell goods but, is an invitation to a customer to make an offer to buy an invitation to treat). How would you decide the above case? 50

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