bba-sem-5-mercantile law-the indian contract act,1872
TRANSCRIPT
Don’t think that ‘TIME’ will change our LIFE, Don’t think that ‘TIME’ will change our LIFE, ‘‘TIME’ only change The Expiry Dates of the TIME’ only change The Expiry Dates of the
‘OPPORTUNITIES’ !! ‘OPPORTUNITIES’ !!
Outline of UNIT Definitions Nature and Essential of contract Classification of contract Offer and Acceptance - Legal rules & Special terms Consideration – definition & Legal Rules Capacity to contract Free consent Legality of object Void Agreement Contingent Contracts – Meaning and Types Performance of Contract Remedies for Breach of Contract Quasi Contract – Meaning and kinds
IntroductionIntroduction
• ‘Contract’ is the most usual method of defining the ‘give and take’ rights and duties in a business transaction.
• Section 2(h) of the Act defines the term contract
“as an agreement enforceable by law”.
Cont...• A contract is an agreement made between two or
more parties which the law will enforce
• “Every agreement and promise enforceable at law is a contract”
• “A legally binding agreement between two or more persons by which rights are acquired by one or more to acts on the part of the other”
Agreement = Offer + AcceptanceContract = Agreement + Enforceability at Law
Which statement is TRUE ???
• All agreements are contract but all contracts are not agreements
• All contracts are agreements but all agreements are not contract
• All agreements are not contract but all contract are agreements
ESSENTIAL ELEMENTS OF A VALID ESSENTIAL ELEMENTS OF A VALID CONTRACTCONTRACT
• Offer and acceptance• Intention to create legal relationship• Lawful consideration• Capacity of parties- competency• Free and genuine consent• Lawful object• Agreement not declared void • Certainty and possibility of performance• Legal Formalities
CLASSIFICATION OF CONTRACTSCLASSIFICATION OF CONTRACTS
• Classification according to validity– Voidable contract
– Void Agreement – Void Contract
– Unenforceable Contract
• Classification according to formation– Express contract– Implied contract – Quasi contract– E-commerce contract
Cont...• Classification according to performance– Executed contract– Executory contract– One-side Contract
• Classification of contracts in English Law– Formal contract• Contract of record• Contract under seal
– Simple contract
OFFER & ACCEPTANCEOFFER & ACCEPTANCE
An offer may be made by express words spoken or written
General Offer : An offer made to the public in general and hence anyone can acceptant do the desired act.
Special Offer : When offer is made to a definite person, it is known as specific offer and such offer can be accepted only by that specified person.
General OfferGeneral Offer
Special Offer Special Offer
Legal Rules as to Offer Legal Rules as to Offer The offer must be capable of creating legal relationThe offer must be certain, definite and unambiguous The offer may be expressed or impliedThe offer must be distinguished from an invitation to
offerAn offer may be specific or generalThe offer must be communicated It must be made with a view to obtaining the assent of
the offereeA statement of price is not an offer
Special terms of offerSpecial terms of offer
These must be brought to the notice of the other party before the acceptance of the offer otherwise the acceptor will not be bound by such terms
The acceptor knows that there are some special terms and his attention is drawn to them, hi is bound by them
ACCEPTANCEACCEPTANCE
A proposal or offer is said to have been accepted when the person to whom the proposal is made signifies his agree to the proposal to do or not to do something [Section 2 (b)]
Acceptance may be express or implied
Legal rules as to Acceptance Legal rules as to Acceptance It must be absolute and unqualified It must be communicated to the offeror It must be according to prescribed mode It must be given within the prescribed or reasonable
time It must show an intention to fulfil the promise It cannot precede an offer It must be given to specific person It must given before the offer lapse Mental acceptance is no acceptance
Consideration Consideration
When a party to an agreement promises to do something, he must get ‘something’ in return
A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other
Legal Rules as to ConsiderationLegal Rules as to Consideration
it must at the desire of the promisor it may move from the promisee or any other
person it may be an act, abstinence or forbearance or
a return promise it may be past, present or future it need not be adequate it must be real and not illusory
Capacity to contractCapacity to contract
Minors
Persons of unsound mind
Person disqualified by any law to which they are subject
Free ConsentFree Consent
o “All agreements are contracts if they are made by the free consent of parties...”
Consent is said to be free when it is not caused by—
o Coercion as defined in sec.15o Undue influence as defined in Sec.16o Fraud as defined in Sec.17o Misrepresentation as defined in Sec.18o Mistake, Subject to the provision Sec.20,21,22
COERCIONCOERCION
• ‘’Coercion’’ is the committing or threatening to commit any act forbidden(prohibited) by the Indian Penal Code 1860– A threat to commit suicide amounts to coercion
• There must be intention of causing any person to enter into an agreement
• It involves a criminal act
Undue InfluenceUndue Influence
• Where relations subsisting between the parties are such that one of the parities in a position to dominate the will of the other.
– Parent and child– Trustee and beneficiary– Guardian and ward – Doctor and patient
Misrepresentation & FraudMisrepresentation & Fraud
• Misrepresentation is a false statement which the person making it honestly believes to be true or which he dose not know to be false – It must be a representation of a material fact– It must be made before the conclusion of the
contract with a view to inducing the other party to enter into the contract
– it must be made with any intention to deceive(mislead) the other party
Mistake Mistake • Mistake is erroneous belief about something. It may be a (1)
mistake of law of the country (2) mistake of law of a foreign country
• Mistake of fact may beMistake of fact may be– Bilateral fact • The mistake must be mutual• The mistake must relate to a matter of fact essential to the agreement• Subject-matter, Price-matter, Quantity-matters, Identity of subject-
matter, Title to subject-matter
– Unilateral fact• Identity of the person contract• Nature of contract
LEGALITY OF OBJECTLEGALITY OF OBJECT
• When consideration or object is unlawful
– If it is forbidden by law– If It defeat the provisions of any law– If it is fraudulent– If it involves or implies injury to the person or
property of another– If the court regard it as immoral
Agreement Opposed to Public Agreement Opposed to Public PolicyPolicy
• Agreement of trading with enemy• Agreement to commit a crime• Agreements in restraint to legal proceedings• Trafficking in public offices and titles• Agreements tending to create interest
opposed to duty• Agreements which interfere with
administration of justice
Cont...
• Agreements in restraint of parental rights• Agreements restricting personal liberty• Agreements in restraint of marriage• Marriage brokerage agreement
Void Agreement Void Agreement • A void agreement is one which is not enforceable by
the law. • Following agreements have been expressly declared
to be void. Agreements by incompetent parties (Sec.11) Agreements made under a mutual mistake of fact (Sec. 20) Agreements the consideration or object of which is
unlawful (Sec. 23) Agreements the consideration or object of which is
unlawful in part (Sec.24)
Cont..Agreements made without consideration (Sec. 25)Agreements in restraint of marriage (Sec. 26)Agreement in restraint of trade (Sec. 27)Agreement in restraint of legal proceedings (Sec. 28)Agreements the meaning of which is uncertain (Sec.
29)Agreements by way of wager (Sec. 30)Agreements contingent on impossible events (Sec. 36)Agreements to do impossible acts (Sec. 56)
Cont...• Agreement the meaning of which is uncertain
ExistenceQuantityQualityPrice
• Wagering agreements or wager (Sec. 30)A wagering agreement is an agreement to pay
money on the happening or non-happening of a specified uncertain event.
Cont...• Essentials of a wagering agreement
Promise to pay moneyEach party must stand to win or loseNo control over the eventNo other interest in the event
• Void ContractContract to do or not to do something on the
happening of an event becomes void when event becomes impossible
• Restitution
CONTINGENT CONTRACTCONTINGENT CONTRACT
• Contingent means that which is dependent on something else
• Essentials of contingent contract
– Its performance depends upon the happening or non-
happening events
– The event must be uncertain
– The event must be deposited
Cont...• Rules regarding contingent contract
– Its performed if an uncertain future event happens, it cannot be enforced until the event has happened
– It a contingent contract depends for its performance on doing of an act by the promisor, the contract become void
– If a contingent contract contemplates to do anything within time if an impossible event happens it is void
PERFORMANCE OF CONTRACT PERFORMANCE OF CONTRACT
• Performance of contract takes place when the parties to the contract fulfil their obligation arising under the contract within time and in the manner prescribed
Offer to Perform (Sec.38)
• It must be unconditional• It must be mad to proper person• it must be by a person who is in a position and
willing to perform the promise• it may be made to one of the several joint
promises– When a party to a contract refuses to perform or
disables himself from performing, his promise in its entirety the promise may put an end of the contract (Sec.39)
Contract which need NOT be performed
• When its performance becomes impossible • When the parties to it agree to substitute a new
contract for it or alter• When the promisee dispenses with , wholly or in
part. The performance of the promisee made to him
• When the person at whose option it is voidable• When it is illegal
By whom must contracts be performed ??
• Promisor himself
• Agent
• Legal representatives
• Third parties
• Joint Promisors
Devolution of Joint Liabilities & Rights (Sec. 42 to 45)
“Devolution”- Passing over from one person to another
Devolution of Joint Liabilities any one of the joint promisors may be compelled to
performA joint promisor compelled to perform may claim
contributionSharing of loss arising from default Release of Joint promisor
Time and Place of Performance(Sec. 46 to 50)
Where no application is to be made and not time specified
Where time is specified and no application is to be made
Application for performance on a certain day and placeApplication by the promisor to the promisee to appoint
place Performance in manner or at time prescribed or
sanctioned by the promisee
Reciprocal Promises
Mutual and independent
Conditional and dependent
Mutual and concurrent
Rules regarding reciprocal Promises
Real-time performance of reciprocal promises
Order of performance of reciprocal promises
Effect of one party preventing another from
performing promise
Effect of default as to promise to be performed
first
DISCHARGE OF CONTRACT DISCHARGE OF CONTRACT Discharge of contract means termination of
the contractual relationship between parties A contract may be discharged-
By performanceBy agreement or consentBy impossibility of performanceBy lapse of timeBy operation of lawBy breach of contract
DISHCHARGE BY PERFORMANCE
Discharge by performance takes place when the parties to the contract fulfil their obligations arising under the contract within the time and the manner prescribed
It may be ACTUAL PERFORMANCE ATTEMPTED PERFORMANCE
DISCHARGE BY AGREEMENT OR CONSENT
• A contract rests on the agreement of the parties. As its is agreement with binds them, so by their agreement or consent they may be discharged – Novation• When a new contract is substituted for existing one
– Alteration• When one or more of the terms of the contract is/are
altered by the mutual consent of the parties
– Rescission (cancellations)• When all or some of the terms of the contract are cancelled
Cont..
– Remission• Acceptance of lesser fulfilment of the promise made by
parties – Waiver• Intentional giving up of a rights by a parties entitled thereto
under a contract– Merger• When inferior right accruing to a party under a contract
merges into a superior rights accruing to the same party under new contract
DISCHARGE BY IMPOSSIBLITY OF PERFORMANCE
• Impossibility existing at the time of agreement – Know to the parties– Unknown to the parties
• Impossibility arising subsequent to the formation of contract
Cont..
Discharge by supervening impossibility
Destruction of subject-matter of contract Non-existence or non-occurrence of particular
state of things Death or incapacity for personal service Change of law Outbreak of war
Cont..
Impossibility of performance-not an excuse
Difficulty of performance Commercial impossibility Impossibility due to failure of a third person Strike and lock out Failure of one the objective
DISCHARGE BY LAPES OF TIME A contract should be performed within a
specified period, called period of limitation.
DISCHARGE BY OPERATION OF LAWo By Deatho By mergero By insolvencyo By unauthorized alteration of the termso By rights and liabilities becoming vested in the same person
DISCHARGE BY BREACH OF CONTRACT
• Breach of contract means a breaking of the obligation which a contract executes
• Actual breach of contract – At the time when the performance is due– During the performance of the contract
• Anticipatory breach of contract– By expressly renouncing his obligation – By doing of some act so that the performance of his
promise become impossible
Remedies for Breach of Contract Remedies for Breach of Contract
When the contract broken, the injured party (the party who is not in breach) has one or more following remedies
Rescission (Cancellation) of the contractSuit for damagesSuit upon quantum meruitSuit for specific performance of the contractSuit for injuction
Cont...• RescissionRescission– When there is breach of a contract by a party, the
injured party may sue to treat the contract as cancel. He is also absolved of all his obligation under the contract.
• Mr. A promise B to supply 10 Parker pens on a certain day. B agree to pay the price after the receipt of the goods. A does not supply the goods. B is discharged from liability to pay money
Cont...• DamagesDamages– Damages are monetary compensation awarded to the
injured party by court for the loss or injury suffered by him
– Ordinary damages• Damages which actually arise in the usual course of things
from breach of contract.
– Special damages • Damages which may reasonably be supposed to have been
in the contemplation of the both parties when they made contract.
Cont...• Vindictive or Exemplary Damages – These damages are allowed in case of breach of a
contract to marry or dishonour of a cheque by a banker wrongfully.
• Nominal Damages– Where the injured party has not suffered any loss by
reason of the breach of contract, court may award a very nominal sum of damages.
• Damage of loss of reputation– If the banker wrongly refuse to honour customer’s
cheque
Cont...
• Damage for inconvenience and discomfort– Damage can be recovered for physical
inconvenience and discomfort. The general rule for damage is that measure of damages is not affected by the motive.
Suit upon quantum meruitSuit for specific performance of the contractSuit for injuction
QUASI CONTRACT QUASI CONTRACT When ‘’Creation relations resembling those
created by contract’’ in English Law, such relations are called quasi-contract
Supply necessaries (Sec.68)Payment by an interested person (Sec.69)Obligation to pay for non-gratuitous (Sec.70)Responsibility of finder of goods (Sec. 71)Mistake or coercion (Sec. 72)