23412779-law-of-contract 123

8/7/2019 23412779-Law-of-Contract 123

1/34

Indian Contract Act 1872

8/7/2019 23412779-Law-of-Contract 123

2/34

2/14/2011 Prof Navin Shrivastava 2

Contract Act 1872

Contract : An agreementcreating and defining

obligations between theparties

Pollock: Every Agreement andpromise enforceable at acourt of law is contract

8/7/2019 23412779-Law-of-Contract 123

3/34


Contract =

Agreement +Enforceability

Agreement =

offer (Proposal) + Acceptance

8/7/2019 23412779-Law-of-Contract 123

4/34


Concepts related to

offer,Proposal : When one person

signifies to another his willingness to

do or to abstain from doing. Anything with a view to obtaining theascent of that other to such Act of

abstinence he is said to make aproposal

8/7/2019 23412779-Law-of-Contract 123

5/34


Promise:

A proposal when accepted become a

promise

8/7/2019 23412779-Law-of-Contract 123

6/34


Essentials of valid contract

Offer and Acceptance

Intention to create legal relationship

Lawful consideration

Capacity to contract

Free Consent

LawfulObject

Not expressly declared to be void

Possibility of performance

Legal Formalities

8/7/2019 23412779-Law-of-Contract 123

7/34


LEGAL RULES FOR OFFER IT MUST BE INTENDEED TO CREATE

LEGAL RELATIONS IT MUST BE CERTAIN

IT MUST BE DISTINGUISHED FROM

A) A DECLERATION OF INTENTION

B) INVITATION TO MAKE OFFER IT MUST COMMUNICATED TO THE

OFFEREE

IT MUST BE MADE WITH A VIEW TO

OBTAINING THE ASSENTOF THE OFFEREE IT MUST NOT CONTAIN ATERM THE NON-

COMPLIANCE OF WHICH WOULD AMOUNT

TO ACCEPTANCE

A STATEMENT

OF PRICE IS N

OT AN

OFFER.

8/7/2019 23412779-Law-of-Contract 123

8/34


LEGAL RULES FOR ACCEPTANCE

1. IT MUST BE ABSOLUTE AND UNQUALIFIED2. IT MUST BE COMMUNICATED TO THE OFFEROR

3. IT MUST BE ACCORDING TO THE PRESCRIBED ORUSUAL MODE

4. IT MUST BE GIVEN WITHIN THE PRESCRIBED ORREASONABLE TIME

5. IT MUST SHOW AN INTENTION TO FULFILL THEPROMISE

6. IT CANNOT PRECEDE ANOFFER

7. IT MUST BE GIVEN BY A SPECIFIC PERSON TOWHOM THEOFFER IS MADE

8. IF THE OFFER IS GENERAL, IT MAY BE ACCEPTEDBY ANY PERSON.

9. IT MUST BE GIVEN BEFORE THEOFFER LAPSES

10. MENTAL ACCEPTANCE IS NO ACCEPTANCE.

8/7/2019 23412779-Law-of-Contract 123

9/34


Acceptance and

Consideration,

ACCEPTANCE IS THE ACT OF

ASSENTING BY THE OFFEREE

TO AN OFFER.

8/7/2019 23412779-Law-of-Contract 123

10/34


LEGAL RULES AS TO CONSIDERATION

1. IT ESSENTIAL TO SUPPORT CONTRACT2. IT MUST MOVE AT THE DESIRE OF THE

PROMISOR

3. IT MAY MOVE FROM THE PROMISEE OR ANYOTHER PERSON

4. IT MAY BE PAST ,PRESENT OR FUTURE

5. IT NEED NOT BE ADEQUATE

6. IT MUST BE REAL AND NOT ILLUSIONARY

7. IT MUST NOT BE SOMETHING WHICH THE

PROMISOR IS ALREADY LEGALLY ORCONTRACTUALLY BOUND TO DO.

8. IT MUST NOT BE ILLEGAL,IMMORAL OROPPOSED TO PUBLIC POLICY.

8/7/2019 23412779-Law-of-Contract 123

11/34


Balfour v. Balfour 1919Balfour v. Balfour 1919 A famous English contract law case that held that there

is a rebuttable presumption against an intention to

create a legally enforceable agreement when the

agreement is domestic in nature.

Using contract-like terms,

case: Mr. Balfour had agreed to give his wife 30 amonth as maintenance for while he was off living in

Ceylon.Once he had left, they separated and Mr.

Balfour stopped payments.

Mrs. Balfour brought an action to enforce the

payments.At the Court of Appeal, the Court held that there was

no enforceable agreement as there was not enough

evidence to suggest that they were intending to be

legally bound by the promise.

8/7/2019 23412779-Law-of-Contract 123

12/34


Mr. and Mrs. Merritt [1970]

The case is often cited in conjunction with

this case. Here the court distinguished the

case from Balfour v. Balfour on the fact

that Mr and Mrs Merritt, although still

married, were estranged at the time the

agreement was made and therefore any

agreement between them was made withthe intention to create legal relations.

Both cases are often quoted examples of

the principle of precedent.

8/7/2019 23412779-Law-of-Contract 123

13/34


Principles Governing

Capacity of Parties andUnsound mind

Insane

Idiot

Drunkard

Minor

Disqualified by lAW

Foreign Sovereign

Insolvent

Married woman (PN)

Convict

Alien Enemy

8/7/2019 23412779-Law-of-Contract 123

14/34


Minor

According to Section 3 of the Indian Majority

Act, 1875, a minor is a person who has not

completed 18 years of age. However, in the

following two cases, a minor attains majorityafter 21 years of age:

Where a guardian of minors person or

property has been appointed under the

Guardians and Wards Act, 1890, or

Where the superintendence of minors

property is assumed by a Court of Wards.

8/7/2019 23412779-Law-of-Contract 123

15/34


POSITION OF MINORS

CONTRACTS

1. A minors agreement cannot be ratified by theminor on attaining majority.

2. A contract with a minor is void ab-initio.

3. A minor cannot be asked to refund any benefitreceived under a void agreement.

4. A minor is not estopped to plead minority even

where he falsely represents himself to be of fullage.

5. A minor cannot be a partner in a partnershipfirm. He may, however, be admitted to the

benefits of an already existing partnership.

8/7/2019 23412779-Law-of-Contract 123

16/34


POSITION OF MINORS

CONTRACTS

..contd6. A minor can, however, be a promisee or

beneficiary.

7. A minors estate is liable to a person whosupplies necessaries of life to a minor.

8. Minors parents/guardians are not liable to aminors creditor for the breach of contract by a

minor.

9. A minor can act as agent.

8/7/2019 23412779-Law-of-Contract 123

17/34


Mohiri Bibi Vs Dharmodas

Ghose(1903)A minor, entered into a contract for

borrowing a sum of Rs. 20,000 out of

which the lender paid the minor a sumof Rs. 8,000. The minor executed

mortgage of property in favour of the

lender. Subsequently, the minor suedfor setting aside the mortgage.

8/7/2019 23412779-Law-of-Contract 123

18/34


Lunatics.

A lunatic is a person who is mentallyderanged due to some mental strain or otherpersonal experience. However, he has

some intervals of sound mind. He is notliable for contracts entered into while he isof unsound mind. However, as regardscontracts entered into during lucid intervals,

he is bound. His position in this regard isidentical with minor i.e. in general thecontract is void but the same exceptions asdiscussed above (under minors contracts)

are relevant.

8/7/2019 23412779-Law-of-Contract 123

19/34


Idiots.

An idiot is a person who is permanentlyof unsound mind. He does not have

lucid intervals. He is incapable of entering into a contract and, therefore, acontract with an idiot is void. However,like a minor, his properties, if any, shall

be liable for recoveries on account ofnecessaries of life supplied. Also hecan be a beneficiary.

8/7/2019 23412779-Law-of-Contract 123

20/34


Drunken or Intoxicated

Persons.

A person who is drunk, intoxicated or

delirious from fever so as to be

incapable of understanding the natureand effect of an agreement or to form a

rational judgment as to its effect on his

interests cannot enter into valid contracts

whilst such drunkenness or delirium

lasts.

8/7/2019 23412779-Law-of-Contract 123

21/34


Free Consent,Legality

of Objects,Coercion

Undue influence

Mistake

Misrepresentation

Fraud

8/7/2019 23412779-Law-of-Contract 123

22/34


COERCION (SECTIONS 15, 19 AND 72)

Coercion is

(i) the committing, or threatening to commit

any act forbidden by the Indian Penal Code

or

(ii) the unlawful detaining, or threatening to

detain, any property ,to the prejudice of any

person what- ever, with the intention of causing any person to enter into an

agreement.

8/7/2019 23412779-Law-of-Contract 123

23/34


UNDUE INFLUENCE (SECTIONS 16 & 19A)

Undue influence consists in the improper

exercise of a power over the mind of one of the

contracting parties by the other. According toSec. 16, a contract is said to be induced by

undue influence where the relations subsisting

between the parties are such that one of the

parties is in a position to dominate the will ofthe other and uses that position to obtain an

unfair advantage over the other

8/7/2019 23412779-Law-of-Contract 123

24/34


Fraud (Sections 17 and 18)

Fraud means and includes any of the

following acts committed by a party to a

contract (or with his connivance or by hisagent) with intent to deceive another party

thereto or his agent; or to induce him to

enter into the contract:

8/7/2019 23412779-Law-of-Contract 123

25/34


Fraudulent Acts

The suggestion, as a fact, of that which is not trueby one who does not believe it to be true

The active concealment of a fact by one havingknowledge or belief of the fact;

A promise made without any intention ofperforming it

Any other act fitted to deceive;

Any such act or omission as the law speciallydeclares to be fraudulent.

8/7/2019 23412779-Law-of-Contract 123

26/34


Misrepresentation (Sections 18 and

19)

Misrepresentation is incorrect or false

statement but the falsity or inaccuracy

is not due to any desire to deceive ordefraud the other party. It is innocent.

The party making it believes it to be

true.

8/7/2019 23412779-Law-of-Contract 123

27/34


MISTAKE

Mistake may be defined as an erroneous beliefconcerning something. Mistake is of two kinds

(1)Mistake of fact, and (2) Mistake of law.

Mistake of Fact

A mistake of fact may either be:

(a) bilateral or

(b) unilateral.

Mistake of Law (Section 21)

Mistake of law may be (a) mistake of law of the

land, and (b) mistake of foreign law.

8/7/2019 23412779-Law-of-Contract 123

28/34


Performance of Contract

1. It must be unconditional2. It must be made at the fixed or proper time &

Place

3. It must be made by a person who is able and

willing4. In case of tender of goods it must made for the

quality and quantity agreed upon

5. In case of tender of goods reasonableopportunity must be given to promise examinethe goods

8/7/2019 23412779-Law-of-Contract 123

29/34


Performance of Contract

It must be made to any one of the joint

promissors

It may be made to any of the jointpromissors

In case of tender of money the payment

must me made in legal tender money.

8/7/2019 23412779-Law-of-Contract 123

30/34


QUASI CONTRACTS

(Sections 68-72

)] [Certain Relations resembling those

created by Contracts]

Quasi Contracts are so-called because

the obligations associated with such

transactions could neither be referred as

tortuous nor contractual, but are stillrecognized as enforceable, like contracts,

in Courts.

8/7/2019 23412779-Law-of-Contract 123

31/34


According to Dr. Jenks

Quasi-contract is a situation in

which law imposes upon one person,

on grounds of natural justice, an

obligation similar to that which arises

from a true contract, although no

contract, express or implied, has in fact

been entered into by them.

8/7/2019 23412779-Law-of-Contract 123

32/34


Under ICA

1. Claim for Necessaries Supplied to aperson incapable of Contracting or on hisaccount. (68)

2. Reimbursement of person paying moneydue by another in payment of which he isinterested. (69)

3. Obligation of a person enjoying benefitsof non-gratuitous act. (70)

4. Responsibility of Finder of Goods. (71)

8/7/2019 23412779-Law-of-Contract 123

33/34


Breach of Contract

and its Remedies, Right of Rescission Right to claim damages

a) Ordinary Damages

b) Special damagesc) Vindictive or exemplary damages

d) Nominal damages

Quantum Meruit

Special Performance sec 10 Injunction order

Cancellation

8/7/2019 23412779-Law-of-Contract 123

34/34


T H A N K Y O U

23412779-law-of-contract 123

Documents