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Introduction
Foundation of the Modern Business Business stands on Promise and Performance Law of Contract Rules of Promises, their formation, performance and enforceability. Contracts also deals with - Sales of Goods, Negotiable Instruments, Insurance, and Insolvency General Principles of Contract Precedes - Mercantile Law
Introduction
Definition of Contracts Elements of Contract Consideration, enforceability, Lawful object, etc Doctrine of Unjust enrichment Indemnity and Guarantee
Contract Definition
Sir William Anson
A contract is an agreement enforceable at law made between two or more persons, by which rights are acquired by one or more to acts or forbearances on the part of the other or others.
Halsbury
An agreement between two or more persons which is intended to be enforceable at law and is constituted by the acceptance by one party of an offer made to him by the other party to do or abstain from doing some act.
Definition
Contract - Sec. 2( h) - An agreement enforceable by law
Two elements Agreement and Enforceability of law
Agreement Sec. 2 (e) Every promise or every set of promises forming the consideration for each other
Two elements Promise and Consideration
Characteristics of Agreement
Plurality of Persons
Tow or more persons to make an agreement
Consenus-ad-idem
Consenting Minds Agree on the subject-matter in the same sense
Offer
Mutually agreed
Agreement
Illegal Contract
Unenforceable
Offer
Mutually agreed
Agreement
Valid Contract
Enforceable
Agreement
An agreement comes into existence when one party makes a proposal or offer and the other accepts it.
Offer
Acceptance
Agreement
All contracts are agreements but all agreements are not contracts
Agreement - Example
Mr. Ram invites Mr. Shyam to a dinner at a Leela Palace Hotel. Mr. Shyam accepts the invitation. It is purely a social agreement if Mr. Ram doesnt arrive for the dinner, Mr. Shyam cannot file a case against Mr. Ram for not fulfilling the promise. There was no intention between two parties for creating any legal obligation.
Contract - Case
Balfour v. Balfour
Mr. Balfour (D) and Mrs. Balfour (P) lived in Ceylon and visited England on a vacation. The plaintiff remained in England for medical treatment and the defendant agreed to send her a specific amount of money each month until she could return. The defendant later asked to remain separated and Mrs. Balfour sued for restitution of her conjugal rights and for alimony equal to the amount her husband had agreed to send.
Contract - Case
Issues Must both parties intend that an agreement be legally binding in order to be an enforceable contract? Under what circumstances will a court decline to enforce an agreement between spouses? Holding and Rule Yes. Both parties must intend that an agreement be legally binding in order to be an enforceable contract. The court will not enforce agreements between spouses that involve daily life.
Contract
Agreements between husband and wife over matters that affect their daily lives are not subject to contractual interpretation, even when consideration is present. The court held that it was presumed that the parties made the agreement as husband and wife and did not intend that it could be sued upon. The court held that as a matter of public policy it could not resolve disputes between spouses.
Contract
Agreement
CONTRACT
ENFORCE ABILITY
Lawful Consideration
Essentials of Contract
Possibility of performance
Capacity of Parties
Free Consent
Consideration
Major Elements of Contract An agreement without consideration is void Blackstone
Consideration is recompense given by the party contracting to another.
Capacity of Parties
Parties must be competent to enter into contract Sec. 11 Major according to law Contract not valid with incompetent persons Minors Persons of unsound mind Persons disqualified by law
Free Consent
Parties must have agreed upon the same thing in the same sense. No influence Absence of consent
Coercion Undue influence Fraud Misrepresentation Mistake
Lawful Object
Object should be enforceable by law Should not be
Fraudulent illegal immoral opposed to public policy
Certainty
Terms should be precise and certain No Vague terms should be used A promises to sell C 100 Kg of Oil. This is vague as specifications are not clear and what is the type of oil that to be supplied is also mentioned.
Possibility of Performance
Capable of Performance Physically and Legally A agrees to B to discover treasure by magic.
Not enforceable because cannot be performed.
Types of Contract
Validity & Enforceability Valid Contract Voidable Contract Void Contract Unenforceable Contract Illegal or Unlawful Contract
A person who makes the proposal or offer is called promisor or offeror A person to whom its made is called offeree A person accepting the offer is called the promisee or acceptor
Acceptance
When the person to whom the proposal is made signifies his assent it is an acceptance of the proposal. Expressed Acceptance made in words spoken or written Implied Acceptance by conduct Can be made only by the person to whom its been made
Rules of Communication
Communication of Offer complete when its reaches the offeree Communication of acceptance
As against the proposer, when it is put in course of transmission to him, so as to be out of the power of the acceptor to withdraw the same As against the acceptor when it comes to the knowledge of the proposer
Rules of Communication
A proposes by letter to the sell the house to B for 10 lakh. B accepts As proposal sent by Post. The communication of the acceptance is complete a against A, when the letter is posted, as against B when the letter is received by A. Communication of Revocation
As against the person who makes it, when it is put into a course of transmission As against the person to whom it is made, when it comes to his knowledge
CONSIDERATION
Consideration is the price for which the promise of other is brought and the promise thus given for value is enforceable Sec 2 (d) Indian Contract Act
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 abstain from doing Such act or abstinence or promise is called a consideration for the promise
Consent of Parties
Competent Persons to contract. (Sec. 10) Every person is competent to contract who is of the age of majority according t the law to which he is subject, and who is of sound mind, and is not disqualified form contracting by any law to which he is subject.
Consent of Parties
Minor Sec 3. of Indian Majority Act 1875 A person under 18 years of age. Absolutely - Void contracts because their mental faculties are not mature Beneficial agreements valid
Consent of Parties
Person of Unsound mind Sec.12 A person is said to be of sound mind for the purpose of making a contract, if at the time when he makes it, he is capable of understanding it and of forming a rational judgement as to its effect upon its interests. Absolutely void and inoperative against him.
Capacity of Parties
Unqualified persons Alien Enemies Foreign Sovereign and Ambassadors Convict Insolvent
Capacity of Parties
Free Consent Sec 13 Two or more persons are said to consent when they agree upon the same thing in the same sense. Consent to be free and caused by
Coercion threatening to commit voidable contract Undue influence (a) one party in a position to dominate the will of the other (b) Uses the position to obtain an unfair advantage over the other voidable contract
Void Agreement
Sec. 2. (g) An agreement not enforceable by law is void. Minor Unsound person Unlawful Consideration Unlawful object With consideration Impossible events or Acts Restraint of marriage Restraint of Trade Restraint of Legal Proceedings Uncertain Meaning Wager Agreement Impossible Events Impossible Acts
Performance of Contract
A person cannot acquire rights under a contract to which he is not a party Promisee can demand the performance of Contract Exception Legal heirs Competent person to perform a contract
Promisor Agent of Promisor Legal Representatives Performance by third Person
Quasi Contracts
Obligations resembling those created by a contract are imposed by law even though the parties have not entered into contract Claims for necessaries supplied to a person incapable of contracting or on his account. Reimbursement of person paying money due by another, in payment of which he is interested Obligation of person enjoying benefit of non-gratuitous act. Responsibility of finder of goods Liability of person to whom money is paid, or thing delivered by mistake
Suit upon Quantum Meruit as much as he earned or in proportion to work done Suit for Specific Performance Suit for injunction
Surety is liable only on the default of the principal debtor Liability of surety arises immediately on the default of the principal debtor Principal debtor need not resort to securities before suing the surety Surety will not be liable for creditor guarantee by misrepresentation
Continuing Guarantee
When a guarantee is given for a single or specific debt single or specific guarantee When a guarantee extends to series of distinct or separable transactions continuing guarantee Revocation of Continuing Guarantee
Notice to Creditor by surety Death of the surety
Discharge of Surety
Notice of Revocation Death Variance of Terms of Contract Release by principal debtor Arrangement by creditor with principal debtor Creditors Act or omission impairing suretys remedy Loss of security Invalidation of contract of Guarantee
CONTINGENT CONTRACTS
Section 31of the Indian Contract Act defines contingent contract as
A contract to door not to do something if some event, collateral to such contract, does or does not happen
Problems
Problems
A invites B for a Dinner. B accepts the invitation. A makes an elaborate arrangement but fails to turn up. B sues for the loss sustained
Answer
No , A cannot sue B for the loss he has suffered, because the agreement of a social nature and hence lacks the intention to create legal relationship. Essentials of a valid contract
Problem
N agrees to pay Rs.100, and in consideration M agrees to write 100 pages of report form him in five minutes. Is it a valid contract
Answer
No, it is not a valid contract. It is a void agreement because an agreement to do an act impossible in itself is void.
Problem
A aged 15 yrs obtains a loan form B. Can A be asked to repay the money.
Answer
No, A cannot be asked to repay the money. A minors agreement is void abnitio
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