Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
INTRODUCTION:
Law of contract – Foundation upon which the superstructure of modern business is built
Law of contract lays down legal rules relating to promises, their formation, performance and
enforcement.
These rules are not only applicable to business community but others
INDIAN
SPECIAL GENERAL
CONTRACT
CONTRACTS RULES
ACT
Proposal:
When one person signifies to another his willingness to do or abstain from doing anything with
a view to obtain his assent on such act or abstinence, he is making proposal.
Acceptance:
When one person signifies his assent thereto on the proposal made he is said to accept the
proposal.
When A orders tea and B supplies tea it is understood that the proposal made by A is accepted
by B .
Promise:
When a person to whom proposal is made signifies his assent thereto, the proposal is said to be
accepted.
When A asks B to lend him a book and B gives his assent to lend him a book . This is a promise
i.e. Proposal by A to lend the book. Acceptance by B by lending the book.
Consideration:
Something in return.
A offers B to sell his car at Rs.1,00,000 /- B accepts the same. Now for A consideration is
Rs.1,00,000/- and for B consideration is a Car.
Agreement:
When the proposal is accepted it becomes promise and the promise, when accompanied with
consideration it becomes agreement.
A offers to sell his car for Rs.1,00,000/- to B. B accepts his offer. This offer after acceptance
becomes promise and this promise is treated as an agreement between A & B.
Enforceability:
Obligation is a legal tie which imposes upon determinate person or persons the necessity of
doing or abstaining from doing a definite act or acts
“All contracts are agreement but all agreements are not contracts”.
Example;
1) X invites his friend Y to a dinner and Y accepts the invitation. If Y fails to turn up for the dinner.
Can he take his friend to Court????
- X cannot go to the court to claim his loss.
2) A father promises to pay his daughter Rs 1000 as pocket allowance. Later he refuses to pay. Can
the daughter recover the Amount???
- The daughter cannot recover as its is a domestic agreement and there is no intention on the
part of the parties to create legal relations.
Agreement Contract
Offer and its acceptance constitute an agreement. Agreement and its enforceability constitute a Contract
An agreement may or may not create a legal A contract necessarily creates a legal obligation.
obligation.
Every agreement need not necessarily be a All contracts are necessarily agreements
contract.
Agreement is not concluded or binding contract. Contract is concluded and binding on the concerned
parties.
CLASSIFICATION OF CONTRACT:
Enforceability Method of Creation Extent of execution
1) Valid Contract: A contract which satisfies all the conditions prescribed by law is a valid contract.
v. Lawful consideration
x. Legal formalities
2) Void Contract: A contract which ceases to be enforceable by law becomes void when it ceases to
be enforceable.
3) Void Agreements: An agreement not enforceable by law is said to be void.
4) Voidable Contract: A voidable contract is one which can be set aside or repudiated or avoided at
the option of the aggrieved party.
5) Illegal Agreement: An illegal agreement is one the object of which is unlawful.
6) Unenforceable Contract: The contract which is actually valid but cannot be enforced due to
technical defect.
Contracts on the basis of CREATION:
1) Express contract: Express contract is one which is made by the words spoken or written.
2) Implied contract: An implied contract is one which is inferred from the conduct of a person or
circumstances of a particular case.
1) Executed contract: It is a contract where both the parties to the contract have fulfilled their
respective obligations under the contract.
2) Executory contract: It is a contract where both the parties to the contract have still to perform
their respective obligations.
3) Partly executed & executory contract: It is a contract where one of the parties to the contract
has fulfilled his obligation and the other party has still to perform his obligation.
OFFER / PROPOSAL:
When one person signifies to another his willingness to do or abstain from doing anything with a view to
obtain his assent on such act or abstinence, he is making proposal.
• Offeror – The person making the proposal is called the ‘offeror’ or ‘proposer’.
• Offeree – The person to whom the proposal is made is called the ‘offeree’ or the ‘proposee’.
TYPES OF OFFER:
1) Express offer –
a) Specific offer
b) General offer
2) Implied offer
LEGAL RULES AS TO OFFER:
1. Certain and unambiguous terms - If the terms of the offer are vague or indefinite, its acceptance
cannot create any contractual relationship.
2. Intention to create legal relationship - An offer must be such that when it is accepted it will create
a legal relationship.
3. Different from an invitation to offer - In an invitation to offer the person making an invitation
invites others to make an offer to him. It is prelude to an offer inviting negotiations or preliminary
discussions. Case – Pharmaceutical Society of Great Britain vs Boots cash chemists Ltd (1953) 1 QB
40. Harvey vs facey.
5. No term of non-compliance of which amount to acceptance - The offer must not contain a term,
the non-compliance of which amount to acceptance. Ex: A offers by post to sell his horse to B for
Rs 2000. He writes, “ If you do not reply, I shall assume you have accepted the offer.” There
would be no contract even if B does not reply. While making the offer, the offeror cannot say that
if the offer is not accepted before a certain date, it will be presumed to have been accepted.
6. Communication of special terms or standard terms of contract - Special terms of the offer must
also be communicated along with the offer. If the special terms of the offer are not
communicated, the offeree will not be bound by those terms.
7. Different from a mere declaration of an intention - Mere declaration of intention indicates that
an offer will be made or invited in the future. A declaration of intention by a person does not give
right of action to another. Harrison vs Nickerson - An auctioneer advertised in a newspaper that a
sale of office furniture would be held. A broker came from a distant place to attend that auction,
but all the furniture was withdrawn. The broker thereupon sued the auctioneer for his loss of time
and expenses. Held - A declaration of intention to do a thing did not create a binding contract with
those who acted upon it, so that the broker could not recover.
ACCEPTANCE 2(b):
Acceptance means giving consent to the offer. It is an expression by the offeree of his willingness to be
bound by the terms of the offer. Acceptance is the consent given to offer.
Sec 2(b) – “ A proposal is said to be accepted when the person to whom the proposal is made signifies
his assent thereto. A proposal when accepted becomes a promise.”
In case of a specific offer – To be accepted by that definite person or that particular group of persons to
whom it has been made and non else.
In case of general offer – An offer made to the world at large or public in general can be accepted by
any person having the knowledge of the offer by fulfilling the terms of the offer. (Carlil v. Carbolic Smoke
Ball Co.).
Express acceptance – An express acceptance is one in which is made by words spoken or written.
Implied acceptance – An implied acceptance is one which is made otherwise than in words. It is inferred
from the conduct of the parties or the circumstances of a particular case.
CAPACITY OF PARTIES:
Sec.11 says “Every person is competent to contract who is of age of majority according to the law to
which he is subject, And who is of sound mind, And who is not disqualified from contracting by any law
to which he is subject.” Thus, all the three tests must be applied to determine whether a person is
competent to contract or not.
Who is a MINOR?
According to Section 3 of the Indian Majority Act,1875, a person is deemed to have attained majority as
under:
“A person is said to be of sound mind for the purpose of making contract, if at the time when he makes
it, is capable –
1) Insolvent
2) Convicts
3) Alien Enemy
4) Foreign sovereigns and ambassadors
5) Joint stock companies
CONSIDERATION:
“when at the desire of promisor, the promisee or any other person has done or abstained from doing,
or does or abstains from doing , or promises to do or abstain from doing something, such act or
abstinence or promise is called a consideration for the promise"
CONSENT:
Sec.13 says “Two or more persons are said to consent when they agree on same thing in same sense”
FREE CONSENT:
a) Coercion, or
b) Undue influence, or
c) Fraud, or
d) Misrepresentation, or mistake
a) COERCION - Coercion means compelling a person to enter into a contract under a pressure or a
threat. According to Section15, a contract is said to be caused by coercion when it is obtained
by—
i) Committing an act which is forbidden by the Indian Penal Code; or
ii) Threatening to commit any act which is forbidden by Indian Penal Code; or
b) UNDUE INFLUENCE - The term ‘undue influence’ means dominating the will of other person to
obtain an unfair advantage over the other. Sec 16(1) says a contract is influence by undue
influence—
i) Where the relations subsisting between the parties are such that one of the is in
position to dominate the will of another, and
ii) The dominant party uses that position to obtain an unfair advantage over the other.
c) FRAUD - The term fraud means a false representation of fact made willfully with a view to
deceive the other party.
i. By a party to a contract
ii. False representation
iii. Representation as to fact
iv. Actually deceived
v. Suffered loss
The agreements which are not enforceable by law right from the time when they are made, are void -ab-
initio
2. Agreements entered into through a mutual mistake of fact between the parties.
9. Wagering agreements
WAGERING AGREEMENTS:
An agreement between two persons under which money or money’s worth is payable, by one person to
another on the happening or non-happening of a future uncertain event is called a wagering event.
CONTIGENT CONTRACTS:
Contingent contracts are a contract to do or not to do something if some events collateral to such
contract, does or does not happen.
BREACH OF CONTRACT:
A breach of contract occurs if any party refuses or fails to perform his part of contract or by his act
makes it impossible to perform his obligation under the contract.
In case of breach, the aggrieved party(i.e. the party not at fault) is relived from performing his obligation
and gets a right to proceed against the party at fault.
Types Of Breach:
1) Anticipatory Breach - Anticipatory breach occurs when the party declares his intention of non
performing the contract before the performance is due
2) Actual Breach - Actual breach may take place when – A) The party to the contract refuses or
fails to perform his part at the time fixed for performance. B) Party has performed a part of
contract and then refuses or fails to perform the remaining part of contract.
A quasi contract is not a contract at all because one or other essential for the formation of a contract is
absent.
It is a law upon a person for the benefit of another even in the absence of a contract.
It is based on the principle of equity, which means no person shall be allowed to unjustly enrich himself
at the expense of another such obligations are called quasi contracts or implied contracts because the
outcome of such obligation resemble those created by a contract.
2) Discharge by Mutual Agreement - Since a contract is created by mutual agreement, it can also
be discharged by mutual agreement. A contract can be discharged by mutual agreement in any
of the following ways:
a) Novation [Section 62] - Novation means the substitution of a new contract for the original
contract. Such a new contract may be either between the same parties or between different
parties. The consideration for the new contract is the discharge of the original contract.
(b) Rescission [Section 62] - Rescission means cancellation of the contract by any party or all the
parties to a contract.
(c) Alteration [Section 62] - Alteration means a change in the terms of a contract with mutual
consent of the parties. Alteration discharges the original contract and creates a new contract.
However, parties to the new contract must not change.
(d) Remission [Section 63] - Remission means acceptance by the promisee of a’ lesser fulfillment
of the promise made. According to Section 63, “Every promisee may dispense with or remit,
wholly or in part, the performance of the promise made to him, or may extend the time for such
performance, or may accept instead of it any satisfaction which he thinks fit.”