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LEGAL RULES AS TO CONSIDERATION
INDIAN CONTRACT ACT 1872
CONTRACT - According to sec.2(h), a contract is defined as an
agreement enforceable before the law.
AGREEMENT - According to sec.2(e), every promise or set of promises
forming consideration for each other.
PROMISE - According to sec.2(b), when a person made a proposal to
another to whom proposal is made, if proposal is assented there to.
OFFER - According to Sec.2(a), when a person made a proposal, when he
signifies to another his willingness to do or to abstain from doing
something.
AGREEMENT = OFFER + ACCEPTANCE
CONSENSUS - AD IDEM-
According to Sec.13, meeting of minds or identity of minds or receiving the
same thing in same sense at same time.
TYPES OF CONTRACTS
VALID CONTRACTS Absolute contract--Contingent contract(Sec. 31-
36)
Express contract--Implied/Quasi contract(Sec.68- 72)
Valid contract - If all the condition are fulfilled it is called as a valid
contract.
Contingent contract - In a contract to do or not to do something, if an
event is collateral, does or doesn't happen.
Express contract - When contracts are either in writing or in oral.
Implied contract - When contracts are neither in writing nor in oral.
Absolute contract - A contract which is not dependent on fulfillment of
any condition.
Invalid contract - In a contact if any one condition is not fulfilled.
Is void (Void-ab-initio) - An agreement which is not valid from the
beginning.
Becomes void - An agreement which is valid in the beginning but due
to some supervening impossibility the contract becomes
void.
Voidable contract - A contract which is valid unless until avoided by
either the party.
Illegal contract - An agreement forbidden by law.
Unenforceable contract - It is valid but due to some technical defect the
contract becomes void. In case defects are removed the contract is
enforceable.(lack of registration, lack of signature etc.,)
OTHER TYPES OF CONTRACTS
Executed contract - In a contract where both the parties have
performed their obligation, there is remaining nothing to perform.
Executory contract - In a contract where both the parties are yet to
perform their obligation.
Unilateral contract - In a contract one party has performed his
obligation and other person is yet to perform his obligation.
Bilateral contract - In a contract where both the parties have
performed their obligation. Bilateral & Executory are same and inter -
changeable.
OFFERAccording to Sec.2(a), when a person made a proposal, when
he signifies to another his willingness to do or to abstain from doing
something.
TYPES OF OFFER
Express offer - When offer is given to another person either in writing or
in oral.
Implied offer - When offer is given to another person neither in writing nor
in oral.
Specific offer - When offer is given to a specific person.
General offer - When offer is given to entire world at a large.(Carlill Vs.
Carbolic smoke ball Co.,)
Cross offer - When both the persons are making identical offers to
eachother in ignorance of others offer.
Counter offer - When both the persons are making offers to eachother
which are not identical in ignorance of others offer.
Standing offer - An offer which remains continuously enforceable for a
certain period of time.
ACCEPTANCE
According to sec.2(b), when a person made a proposal to another to
whom proposal is made, if proposal is assented there to, it is called
acceptance.
LEGAL RULES FOR ACCEPTANCE
Acceptance must be given as per the mode prescribed by the offerer.
Acceptance must be given before the lapse of time or within
reasonable time.
Acceptance must be unconditional.
Acceptance may be given by any person in case of general offer.
CONSIDERATION
According to sec 2(d) consideration is defined as when at the
desire of the promisor , or promisee or any other person has
done or abstained from doing or does or abstains from doing ,or
1)It must move at the desire of the promi [Durga Prasad v.
Baldeo ]
2)It may move by the promisee .[Chinnaya v. Ramayya ]
3)It must be past ,present or future .
4)It need not be adequate .
5)It must be real .
6)It must not be illegal , immoral or opposed to public policy .
Essentials of undue influence
There is an undue influence between the following persons: -Principal and
agent -Superior and and subordinate - Doctor and patient- Father and son-
Teacher and student - Promoter and company- Master servant - Spiritual
advisor and devotee
FRAUD
According to Sec 17 fraud means and includes any of those acts
committed by a party to contract or with his connivance or by his
agent with an intent to deceive or induce a person to enter a contract:
1. The suggestion that a fact is true when it is not true and the person
making it does not believe in itto be true 2. The active concealment of a
fact by a person having knowledge or belief of the fact 3. A promise
made without any intention of performing it 4. Any other act fitted to
deceive 5. Any such act or omission as the law specially declares to be
fraudulent
UNLAWFUL OBJECT
If the object of an agreement is the performance of an unlawful act, the
agreement is unenforceable.For a contract to be valid only if the object and
the consideration should be legal.The word object means purpose or
design.
ESSENTIAL ELEMENTS OF WAGER
There are two persons.
There must be an uncertain future event.
No control over the event by both the parties.
There must be a reciprocal promise.
Others are not interested in the contract.
Wager Contract (Sec 30)
A wager contract is a contract in which one person promises to another to
pay money or moneys worth by the happening of an uncertain future event
in consideration for other persons promise to pay if the event does not
happen.
Contingent Contract(sec 31)A contingent contract is a contract to do or
not to do something, if some event, collateral to such contract, does or does
not happen. It is also called a conditional contract.
Essential Elements of a Contingent Contract:
There are two persons.
There must be an uncertain future event.
Some control over the event but not absolute control.
There is no reciprocal promise between the persons.
Others may be interested in the contract.
It is a valid contract.
DISCHARGE BY BREACH OF CONTRACT
ACTUAL BREACH :
At the time of performance
During the performance
ANTICIPATORY BREACH
By the act of promisor
(implied repudation)
By renunciation of obligation
(express repudation)
RESCISSION ESSENTIAL ELEMENT OF VALID CONTRACT
When a contract is broken by one party,the other party may sue to treat the CONTRACT
contract as rescinded and refuse further performance.In such a case,he is Section 2 (h):An agreement enforceable by law is a contract.
absolved of all his obligations under the contract. Section 2 (e):Every promise and every set of promises, forming the
The court may give rescission due to consideration for each other, is an agreement.And when, at desire of the
1)contract is voidable.2)contract is unlawful promisor, the promisee or any other person has done or abstained from
The court may refuse to rescind if doing, something, such act or abstinence or promise is called consideration
1)Plaintiff has ratified the contract.2)Parties cannot be restored to the for the promise.Essential Element of Valid Contract
original position.3)The third party has acquired for value.4)When only a At least two parties
part is sought to be rescinded.(sec 27 of specific relief act 1937) Agreement
Offer
DAMAGES Acceptance
Damages are a monetary compensation allowed to the injured party by the Legal Relationship
court for the loss or injury suffered by him by the breech of the Free Consent
contract.The objective of awarding damages for the breech of contract is to Lawful Consideration
put the injured party in the same position as if he had not been injured.This Lawful Object
is called the doctrine of restitution.The fundamental basis is awarding Legal Formalities
damages for the pecuniary loss. Certainty and Possibility of Performance
QUANTUM MERUIT AT LEAST TWO PARTIES
The phrase quantum meruit literally means as much as earned.A right to Competent Parties
sue on a quantum meruit arises when a contract, partly performed by one Majority
party,has been discharged by breach of contract by the other party.This Sound Mind
right is performed not on original contract but on implied promise by other Not disqualified by any law
party for what has been done.
SPECIFIC PERFORMANCE OFFER OR PROPOSAL
In certain cases of breach of contract damages are not an adequate Section 2(a)When one person signifies to another his willingness to do or
remedy.The court may,in such cases,direct the party in breach to carry out To abstain from doing anything, With a view to obtaining the assent of that
his promise according to terms of the contract.This is a direction by the other to such act or abstinence, He is said to make a proposal;
court for specific performance of the contract at the suit of the party not in Essential Element of Valid Offer
breachCases for specific performance to be enforced Express or Implied
1)when the act agreed to be done is such that compensation is not adequate Legal relations
relief.2)when there is no standard for ascertaining the actual damage Definite and clear
3)when it is probable that compensation cannot Different from invitation to offer
be agreed to be done. Specific or General
INJUNCTIONWhen a party is in breech of a negative term of contract the Communicated to the Offeree
court may,by issuing an order,restrain him by doing what he promised him Should not contain negative conditions
not to do. Such an order of the court is called injunction Subject to any conditions
Court refuses grant of injunction Must not contain cross offers
[1] whereby a promisor undertakes not to do something ACCEPTANCE
[2] which is negative in substance though not in form Section 2(b)The person to whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted. A proposal, when accepted
TYPES OF QUASI CONTRACTS becomes a promise;
Supply of necessaries (Sec 68) Legal Relationship
Payment by a interested person (Sec 69) Intention
Obligation to pay for non gratuitous acts (Sec 70 ) Social, Moral, Religious nature do not contemplate legal relations.
Responsibility of finder of goods (Sec 71 ) Rose and Frank Company
Mistake or Coercion (Sec 72 ) Free Consent
Section 13:Two or more persons are said to have consent when they agree
GUARANTEE (Sec 126) upon the same thing in the same sense.
A CONTRACT OF GUARANTEE IS A CONTRACT TO PERFORM The consent is said to be free when it is not caused by:
THE PROMISE, OR DISCHARGE THE LIABILITY,OF A THIRD Section 15: Coercion
PERSON IN CASE OF HIS DEFAULT. THE PERSON WHO GIVES Section 16: Undue Influence
THE GUARANTEE IS KNOWN AS THE SURETY, THE PERSON Section 17: Fraud
IN RESPECT OF WHOM THE GUARANTEE IS GIVEN IS KNOWN Section 18: Misrepresentation
AS THE PRINCIPAL DEBTOR, AND THE PERSON TO WHOM Section 20: Mistake
THE GUARANTEE IS GIVEN IS CALLED THE CREDITOR. A Lawful Consideration
GUARANTEE MAY BE EITHER ORAL OR WRITTEN. Cash
ESSENTIAL FEATURES OF GUA To do something
Not to do something
Valid in eye of law
Lawful Object
Subject matter must be lawful.
Legal Formalities
Stamp duty
Registeration
Other legal requirements
Certainty and Possibility of Performance