Professional Documents
Culture Documents
It is a rule of external human action enforced by the sovereign political authority Law is the body of principles recognized and applied by the state in administration of justice Democracy can remain in a society of equals. The concept of equality of all persons in the eye of law is the basis of what is called Rule of Law
Business Manager
A Business Manager is always under Legal obligations A practicing manager must know the Business laws A manager is effective in managing the affairs of business, only if, he is aware about the laws to which he is subject to
Ever realised!
In each of the above and numerous such situations you enter into a contractual obligation.
Essentials of Contract
(Sec. 10,29,56)
Offer & Acceptance Intention to create legal relation Lawful consideration Capacities of parties or competence Free consent Lawful object Not expressly declared to be void Writing & Registration Legal formalities Certainty & Possibility of performance
Types of Contracts
voidable and void contracts, contracts
Quasi contracts
A contract, which ceases to be enforceable A voidable contract is an agreement which is by law, becomes void when it ceases to be enforceable by law at the option of one or more of enforceable [Section 2 (j)]. the parties thereto, but not at the option of the other(s) [Section 2 (i)].
A void contract is valid and binding upon the A voidable contract is repudiate at the option of the parties when entered into, but subsequent aggrieved party. It remains a valid contract until it is to its formation, it becomes unenforceable set aside or rescinded by the party entitled to do so. due to certain reasons.
3.
Factors responsible
undue
influence,
error,
fraud,
supervening impossibility; change of law; a misrepresentation are the main factors responsible contingent contract due to emergence of an for rendering a contract voidable. uncertain event etc.
Enforceability
6.
7.
Compensation
case
of
voidable
contract, can
the also
party claim
compensation or damages does not rescinding arise on the non-performance of such damages. contract.
the
contract
8.
Lapse of reasonable time does not If a voidable contract is not rescinded by the render a void contract enforceable. It aggrieved party within reasonable time it may always remains void i.e., become enforceable at the option of the other party (i.e, who induced the contract).
unenforceable.
DEFINING AN OFFER
An offer is a medium through which a person expresses his intention to enter into a contractual obligation against a promise. Section 2(a)
Acceptance
An acceptance is a expression of assent to the terms of the offer. When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise. Section 2(b) Acceptance to an offer is what a lighted match to is to a train of gunpowder. Thus, an offer becomes irrevocable upon its acceptance.
Refusal or counter-offer
Gourav owned a house at Calcutta. Nibedita offered to buy that house for Rs.2 lacs and Gouravs agent Debendra to whom the offer was given cabled to Gourav: Have had offer for the house for Rs.2 lacs. Then the agent got the reply from Gourav: Will not accept less than Rs.3 lacs Then Nibedita accepted Gouravs price of Rs.3 lacs and confirmed the acceptance by a letter to the agent. But Gourav sold the the house for a higher price to Purnendu. Nibedita then sued Gourav for damages for breach of contract. Decide the case
There was no offer, but an invitation to an offer;
The Managing Committee of a college in response to Prof. Ravi Ranjans application for the post of principal passed a resolution appointing Prof. Ravi to the post. But this decision was not communicated to Prof. Ravi. However Prof. Ravi came to know about this decision from one of the member of the Managing Committee. After waiting for six months, Prof. Ravi filed a case against the Managing Committee for breach of contract. Decide the case
Prof. Ravi will not succeed since there were no communication of the acceptance to him
Dinesh agrees to pay Rs.5000 if Jagmohan marries Aishariya. But Aishariya marries Abhisek. Subsequently Abhisek divorced Aishariya and Jagmohan married Aishariya. Now Jagmohan claims Rs.5000 from Dinesh which he refuses. Decide
Jagmohan will fail. Contract became void on the ground of impossibility as soon as Aishariya married Abhisek.
Priyanka promised to repay a loan of Rs.5000 to Manasi by 5 equal installments. She further agreed that if she defaults to pay any one installment then the whole amount of Rs.5000 will become due. Decide?
It is a void contract since the sum mentioned amounts to penalty which is not allowed under contract Act
Chandramuli agrees to buy a certain horse from Biswajit. It turns out that the horse was dead at the time of bargain, though neither party was aware of the fact. Is the agreement valid?
Prashant promises to obtain for Pritam an employment in the public service and Pritam promises to pay Rs. 1 lac to Prashant. Is this a valid contract?
A agrees to pay B a sum of money if B marries C. C married D. B is still willing to marry C when D dies. What is the consequence?
Now marriage of B to C shall be considered impossible vide sec. 34. Hence the contract is void
A promise to deliver 50 rice bags at Bs warehouse on 1st January. A brings the goods as promised but after the usual business hours. Decide
A has not performed his part of the promise. It is voidable at the option of B
P promised to marry L and L only. P further promised to pay L a sum of Rs. 2 lac in case P broke the promise. P broke promise and married X. Can L recover the sum promised?
No. Agreements in restraint of marriage is opposed to public policy.
Aditya, a merchant of Agra, made a contract to despatch 100 quintals of gur to Akhil at Delhi at a certain price and Akhil paid Rs.5000 as earnest money. None of the parties had knowledge that gur transport from state to state is prohibited by Govt. Aditya owing to such prohibition could not transport the goods. Akhil claims damages for non performance as well as refund of earnest money. Is he entitled to these remedies?
The agreement is void ab initio. Akhil can claim refund of earnest money but not damages
Chapter 3: Consideration
Consideration is elemental to a contract. A promise is not binding unless made for something in return - consideration. For instance the seller of goods undertakes to transfer ownership in the goods for a price to be paid by the buyer for acquiring the ownership.
Consideration simply means that both the contracting parties are bound to give something (of value) to each other. Thus, the term consideration is used in the sense of quid pro quo, meaning thereby something in return. It may involve a positive act (i.e., doing something) or an abstinence (i.e., something given up). Consideration may be in the form of some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered or undertaken by the other.
1. A offers to sell his plasma TV set to B for Rs 50,000. B accepts the offer. Here, Bs promise to pay Rs 50,000 is the consideration for As promise to sell the TV and As promise to sell the TV is the consideration for Bs promise to pay Rs 50,000. 2. X applies for a loan from Y, who is unwilling to advance the amount, unless S guarantees the repayment of the loan if X defaults and thereupon Y advances money to X. In this case, the benefit conferred on X by Y at the surety of S is a sufficient consideration on the part of Y as against the promise of S to repay the loan. In other words, the detriment which Y may not suffer by advancing loan to X due the guarantee of S is sufficient consideration on the part of Y in respect of the promise of S to repay the loan. 3. A promises to maintain Bs child, and B promises to pay A Rs 1,000 annually for the purpose. Here, the promise of each party is the consideration for the promise of the other party. (Illustration appended to Section 23)
4. A promises Y, his debtor, not to file a recovery suit against him on Bs agreeing to repay the amount of loan along with a compound interest @ 12% p.a. within a year. As abstinence is the consideration for Y based on Bs promise to pay.
A stranger to a contract is one who is not a party to the contract. The rule that consideration may move from the promisee or any other person implies that the consideration is permitted to be supplied by a third person (i.e., stranger) as well, thereby need not necessarily be supplied by the promisee himself. In other words, as long as there is a consideration in exchange of a promise, it is immaterial who has furnished it. Thus, a stranger to the consideration may maintain a suit. But the English Law on this point is different. Nonetheless, a stranger to a contract cannot sue upon a contract both under the British Law as well as the Indian Law. From this arises the doctrine of privity of contract, discussed below.
Completed Gift In case of completed gifts (i.e., gifts actually made), the rule no consideration no contract does not apply. Here nearness of relation between the parties is immaterial and even if it, there may not be any natural love and affection between them. Agency As per Section 185 of the Indian Contract Act, no consideration is required to create an agency. Guarantee In a contract of guarantee there is no consideration between the creditor and the surety [Section 127].