Your SlideShare is downloading. ×
Assignment 1
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Assignment 1

379
views

Published on

Published in: Business

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
379
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
12
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. BUSINESS LAW NAME : Saad Hasan Niazi SECTION : BBA-5(C) REGISTRATION : 22667 ASSIGNMENT : 01 SUBMISSION DATE : 30 OCTOBER, 2012
  • 2. Question #1 ‘A contract is enforceable at law’. Discuss the statement & state the essentials of a valid contract. Answer: An agreement is enforceable if it is recognized by court. In order to be enforceable by law, the agreement must create legal obligations between the parties. Thus the term agreement is wider than a contract. ESSENTIALS OF A VALID CONTRACT: According to Section 10, “All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.” The analysis of the provisions of Section 10 shows that a valid contract must have the following essential elements: 1. Proper Offer and Acceptance: There must be at least two parties- one making the offer and the other accepting it. Such offer any acceptance must be valid. An offer to be valid must fulfill certain conditions, such as it must intend to create legal relations, its term, must be certain and unambiguous, it must be communicated to the person to whom it is made, etc. An acceptance to be valid must folds certain conditions, such as it must be absolute and unqualified, it must be made in the prescribed manner, and it must be communicated by an authorized person before the offer lapses. 2. Intention to Create Legal Relationship: There must be an intention among the parties to create a legal relationship. In case of social or domestic agreements, the usual presumption is that the parties do not intend to create legal relationship but in commercial or business agreements, the usual presumption is that the parties intend to create legal relationship unless otherwise agreed upon. Example: X invited Y to a dinner Y accepted the invitation. It is a social agreement. If X fails to serve dinner to Y, Y cannot go to the courts of law for enforcing the agreement. Similarly, if Y fails to attend the dinner, X cannot go to the courts of law for enforcing the agreement. But even a business agreement may not be enforceable by law where the agreement so provides e.g. in Rose & Frank Co. v. Crompton Bros. (1925) A.C. 445, the agreement entered into stated that it will not be subject to legal jurisdiction in the law courts, the agreement was not enforceable by law as the parties never agreed to create legal obligations despite being a business agreement.
  • 3. 3. Capacity of Parties: The parties to an agreement must be competent to contract. In other words, they must be capable of entering into a contract. According to Section 11 of Indian Contract Act, 1872. “Every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject.” In other words, the person must be major, must be of sound mind and must not be declared disqualified from contracting by any law to which he is subject. If the parties to agreement are not competent to contract, then no valid contract comes into existence. Example: X a minor borrowed Rs. 8,000 from Y and executed mortgage of his property in favor of the lender. This was not a valid contract because X is not competent to contract. Therefore, the mortgage was not valid and the money advanced to minor could not be recovered. 4. Lawful Consideration: An agreement must be supported by lawful consideration. Consideration means something in return. According to Section 23 of the Indian Contract Act, 1872, “the consideration is considered lawful unless it is forbidden by law or is fraudulent or involves or implies injury to the person or property of another or is immoral or is opposed to public policy.” Example: X agrees to sell his car to Y for Rs. 1, 00,000. Here Y’s promise to pay Rs. 1, 00,000 is the consideration for X’s promise to sell the car and X’s promise to sell the car is the consideration for Y’s promise to pay 1, 00,000. 5. Free Consent: There must be free consent of the parties to the contact. According to Section 14, “Consent is said to be free when it is not caused by (i) coercion, (ii) undue influence, (iii) fraud, (iv) misrepresentation, or (v) mistake”. If the consent of the parties is not free, then no valid contract comes into existence. Example: X threatens to kill Y if he does not sell his house to X. Y agrees to sell his house to X. In this case, Y’s consent has been obtained by coercion and therefore, it cannot be regarded as free. 6. Lawful Object: The object of an agreement must be lawful. According to Section 23 of the Indian Contract Act, 1872, “the object is considered lawful unless it is forbidden by law or is fraudulent or involves or implies injury to the person or property of another or is immoral or is opposed to public policy.”
  • 4. Example: X, Y and Z enter into an agreement for the division among them of gains acquired or to be acquired by them by fraud. The agreement is void because its object is unlawful. Example II: X lets a flat on hire to Y a prostitute, knowing that it would be used for immoral purposes. The agreement is void because its object is for immoral purposes. 7. Agreement not expressly declared Void: The agreement must not have been expressly declared void under the provisions of Sections 24 to 30 of the Indian Contract Act, 1872. Under these provisions, agreement in restraint of marriage, agreement in restraint of legal proceedings, agreement in restraint of trade and agreement by way of wager have been expressly declared void. Example: X promised to marry none else except Y and in default pay her Rs 1, 00,000. X married to Z and Y sued X for the recovery of Rs 1, 00,000. It was held that Y was not entitled to recover anything because this agreement was in restraint of marriage and as such void. 8. Certainty of Meaning: The terms of the agreement must be certain and unambiguous. According to Section 29 of the Indian Contract Act, 1872, “agreements the meaning of which is not certain or capable of being made certain are void.” Example: X a dealer in different types of oils agreed to sell 100 tons of oil to Y. This agreement is void on the ground of uncertainty because it is not clear what kind of oil is intended to be sold. If, however, the meaning of the agreement could be made certain from the circumstances of the case, it will be treated as a valid contract. Example: X who is a dealer in mustard oil, agreed to sell 100 tons of oil to Y. This agreement is valid because the meaning of the agreement could be easily ascertained from the circumstances of the case. 9. Possibility of Performance: The terms of the agreement must be such as are capable of performance. According to Section 56, “an agreement to do an impossible act is void.” Example: X agrees with Y to discover treasure by magic and Y agrees to pay Rs 1,000 to X. This agreement is void because it is an agreement to do an impossible act. Example II: X agrees with Y to enclose some area between two parallel lines and Y agrees to pay Rs 1,000 to X. This agreement is void because it is an agreement to do an impossible act. 10. Legal Formalities: The agreement must comply with the necessary formalities as to writing, registration, stamping etc. if any required in order to make it enforceable by law.
  • 5. Example: An oral agreement ‘for arbitration is unenforceable because the law requires that arbitration agreement must be in writing. Question #3 Give a brief description of various types of contracts? Answer: The contracts can be classified into the following four categories:- 1. According to Enforceability: a. Valid Contract: A valid contract is enforceable by law. An agreement becomes enforceable by law when all the essentials of a valid contract are present. Obligation of Parties: In valid contract, all parties are legally responsible for the performance of the contract. If one of the parties breaches the contract, the other party can enforce it through the court of law. b. Void Contract: The word void means not binding in law. Section 2 (j) defines “A contract which ceases to be enforceable by law becomes void, when it ceases to be enforceable”. It means that a void contract is not void from the beginning. It is valid contract when it is made but subsequently it becomes void due to certain reasons. Obligation of Parties: In void contract both the parties are not legally responsible to fulfill the contract. Under this contract the party who has received any benefit is bound to return it to the other party. A contract becomes void under the following circumstances:- I Impossibility of Performance: A contract becomes void due to impossibility of performance. A contract becomes void before performance when it becomes impossible to be performed by any party due to any reason (Sec. 56) II Subsequent Illegality: A contract becomes void by subsequent illegality. A contract may become illegal before performance due to certain reasons. (Sec.56) III. Rejection of Voidable Contract: A voidable contract becomes void when the party whose consent is not free rejects the contract (Sec.19) IV Impossibility of Depending Event: The performance of a contingent contract depends upon the happening or non-happening of a certain event. It becomes void when that event does not happen. (Sec 32) c. Void Agreement: An agreement not enforceable by law is said to be void. The void agreement does not create legal obligations among the parties. An agreement which is void from the beginning is void ab-initio, in void agreement; there is absence of one or more essentials of valid contract except free consent. An agreement with minor and an agreement without consideration is void from the beginning (Sec 2 (g)
  • 6. Obligation of Parties: In void agreement, the party who has received any advantage is bound to restore it to the party from which he received it. Both the parties are not responsible for the performance of the agreement. d. Voidable Contract: “An agreement which is enforceable by law at the option of one or more of the parties thereto but not at the option of the other or others, is a voidable contract”. (Sec 2 ( I) ). A contract is voidable when consent of one of the parties is not free. It is a valid contract until it is avoided by the party having the right to avoid it. If the party decides to confirm, it remains valid. A contract becomes voidable under the following circumstances; A. A contract becomes voidable when the consent of one or more of the parties to a contract is obtained by coercion, undue influence, misrepresentation or fraud. (Sec 15 – 18 ). B. when one party promises to do something for the other party but the other party prevents him from performing his promise, the contract becomes voidable at his option (Sec 53 ) C. When a party to the contract promises to do a certain thing within a specified time, but fails to do it, then the contract becomes voidable at the option of the promise, if time is essence of the contract. ( Sec 55) Obligation of parties: The following are obligations of the parties:- 1. It is a valid contract for both the parties if it is not rejected by the party having the right to reject. 2. The law gives an option to one of the parties to avoid it. 3. The party entitled to cancel the contract is not bound to cancel. If he confirms it, the other party remains bound to perform. 4. The aggrieved party can get damages from the other party. 5. If one party has received some benefit, he must return it to the other Burden of Proof: The burden of proof lays on plaintiff i.e. the aggrieved party. It means that the party, who claims that his consent is unfreeze, has to prove in the court of law. If he fails to prove, the contract remains valid. e. Unenforceable Contract: An unenforceable contract is that contract which cannot be enforced in a court of law because of some technical defects such as absence of writing registration, requisite stamp etc. When these defects are removed, the contract can be enforced.
  • 7. Obligation of Parties: In an unenforceable contract, the parties may perform the contract. But in case of breach of such contract, the aggrieved party is not entitled to legal remedies. f. Illegal Agreement: An agreement is illegal when its performance is forbidden by any law. Such an agreement can never become a contract. An agreement is illegal and void if it is forbidden by law or is of such an nature that if permitted, it would defeat the provision of any law or is fraudulent or involves injury to the person or property of another or the court regards it as immoral or opposed to public policy (Sec 23 ) Obligation of Parties: The parties to the agreement are not responsible to perform their promises. There is punishment for the parties according to law 2 According of Formation: According to formation, a contract has the following three kinds. a. Express Contract: Express contract is one which is expressed in words spoken or written, when such a contract is formed, There is no difficulty in understanding the rights and obligations of the parties, In express contract, the parties directly state the terms of the contract (Sec. 9) b. Implied Contract: An implied contract is made otherwise than by words spoken or written. It arises from acts, conduct of parties, and course of dealing or circumstances. It arises when one person, without being requested to do so, renders services under circumstances indicating that he experts to be paid for them and the other person knowing such circumstances accepts the benefit of those services. (Sec 9) c. Quasi Contract: In a quasi-contract, the law imposes certain obligations under some special circumstances. It is based upon the principle of equity that a person shall not be allowed to get benefit at the cost of another. In fact, it is not a contract but creates relations similar to contract. It is also called constructive contract. 3 According to Performance: a. Executed Contract: A contract is said to be executed when both the parties have completely performed their obligations. It means that nothing remains to be done by either party under the contract. b. Executor Contract: In an executor contract something remains to be done. In other words a contract is said to be executor when both the parties to a contract have yet to perform their obligations. 4. According to Parties: a. Unilateral contract: In a unilateral contract only one party makes a commitment, In other words, it is a contract where only one party is bound but the other party chooses to be bound by it.
  • 8. b. Bilateral contract: It is a contract where both parties are bound by it as soon as the contract is made. In other words it is a contract in which both the parties have yet to perform their obligations. Question #4 what is an offer? State rules to a valid offer. Answer: Offer: It is a part of contract without, it cannot made agreement. Offer is willingness to do something or not to do something which is shown to another person to obtain his consent (views) is called offer. Essentials of a Valid Offer: The following are legal rules or essentials of a valid offer: 1. Express or Implied: An offer may be made by words or conduct. An offer which is made by words spoken or written is called an express offer. The implied offer appears from the actions, conduct of parties, course of dealings or circumstances of the case. 2. Legal Relations: The offer must be made to create legal relations otherwise there is no agreement. If an offer does not give rise to legal obligations between the parties, it is not a valid offer. In business transactions it is presumed that the parties. Intend to create legal relations. 3. Definite & Clear: An offer must be definite and clear. If the terms of an offer are not definite and clear, it cannot be called a valid offer. If such offer is accepted, it cannot create a binding contract. An agreement to agree in future is not a contract because the terms of agreement are not clear. 4. Different from Invitations to Offer: An offer is different from an invitation to offer. In an invitation to offer the person making the invitation does not make an offer but only invites the other party to make an offer. His object is to inform that he is willing to deal with anybody who is willing to deal with him. 5. Specific or General: When an offer is made to a specific person or group of persons, it is called specific offer. Such an offer can be accepted only by the person or person to whom it is made. A general offer is made to public in general and it may be accepted by any person who fulfills the conditions mentioned in it. 6. Communication with Offered: An offer is effective only when it is communicated to the offeree. If an offer is not communicated to the offered, it cannot be accepted. An acceptance of offer without having knowledge of such offer is not a valid acceptance and does not create any legal obligations. Thus, an offer which is not communicated is not a valid offer.
  • 9. 7. Negative Condition: An offer cannot contain a condition that the offer would be considered as accepted, if acceptance is not communicated up to a certain date. If the offeree does not reply, there is no contract because an obligation to reply cannot be imposed on the grounds of justice. 8. Conditions in Offer: An offeror may include any condition in his offer. There is no contract unless all the conditions of the offer are accepted. If the offeror prescribes a specific mode of acceptance, the offeree must adopt the same mode of acceptance. If the offeree does not follow the prescribe mode, the offeror must inform the offeree regarding its rejection otherwise he is considered to have accepted the acceptance. 9. Cross Offers: When two parties make similar offers to each other without having knowledge of other’s offer, it is called cross- offers. The acceptance of cross offers does not result in complete agreement. Question #5 what do you understand by acceptance? What conditions must be fulfilled to convert a proposal into a promise? Answer: The acceptance is a state act or proposition by manner that manifests agree to the term of an offer in a conduct required or invited by the offer so that a compulsory contract is formed. In other words, we can say that is the operate of a someone to whom something is offered by another. Where the offeree express through an act requested by the offer. When a person shows his willingness to do or not to do something to obtain the consent of other person, it is considered a proposal. Question #6: How is an offer made, revoked & accepted? Give examples. What rules apply when an offer is made through the post office? Answer: Offer: The person making the offer is called the offeror or promisor. The person to whom the offer is made is called the offeree. The person accepting the offer is called the promissee or acceptor. The word ‘offer’. The person accepting the offer is called the promise or acceptor. The word ‘offer’ in English Law is similar to the word ‘proposal’ in Pakistani law but the word offer is usually used in our practical life. Example: A makes an offer to sell his calculator to B for Rs. 2000.A makes an offer to B.
  • 10. Revocation: Communication of Revocation. Revocation means cancellation. There may be a revocation of offer and acceptance. The communication of a revocation is complete: a. As against the person who makes it, when it is put in course of transmission to the person to whom it is made, so as to be out of the power of person who makes it. b. As against the person to whom it is made, when it comes to his knowledge. (Sec. 4) It means that communication of revocation completes, as against the person, who makes it, when the letter of revocation is posted. The communication of revocation completes, as against the person, to whom it is made, when the letter of revocation comes to his knowledge. ACCEPTANCE: “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 “. Example: An offers to sell his house to B for Rs. 14Lac B accepts the offer. Question #7: How and on what grounds do proposal stand revoked? Is there any time limit after which revocation of proposals & acceptance cannot be made? Answer: An offer may revoke in any of the following ways: (Sec 6) 1. Notice of Revocation: An offer can be revoked by sending a notice of revocation to the other party. It means that the offeror may revoke his offer at any time before acceptance, even though the period of acceptance of offer has not yet expired. This way the offeree cannot create a contract by accepting the revoked offer. 2. Lapse of Time: When the offer is kept open for a specified time period, it terminates if it is not accepted within that period. If the offer does not specify any time period, it terminates after lapse of a reasonable time. The reasonable time depends upon the circumstance of each case, if the commodity is perishable, the reasonable time will be relatively shorter. 3. Failure to Fulfill Condition: If an offer contains some conditions and the offeree fails to fulfill this condition, the offer terminates. 4. Death or Insanity of offeror: An offer terminates on death or insanity of the offeror, if the offeree comes to know about the death or insanity of offeror before his acceptance, If the offeree does not know about the death or insanity of offeror and gives his acceptance, it is valid acceptance. It result is a valid contract and legal representatives of the deceased offeror will be bound by the contract. 5. Revocation of Offer by Offeree: If the offeree rejects the offer and communicates the rejection to the offeror, the offer terminates even though the period for acceptance of offer has not yet expired.
  • 11. 6. Counter Offer by Offeree: When an offer is accepted with some change in the terms of the offer, such acceptance is called counter offer. An offer terminates when a counter offer is made; the party making a counter offer cannot accept the original offer. 7. Death or Insanity of Offeree: An offer can be accepted only by the offeree. It cannot be accepted by his legal representatives upon his death. If the offeree dies or becomes insane before acceptance, the offer terminates. 8. Subsequent Illegality: An offer lapses if it becomes illegal before its acceptance. An offer may also terminate if it becomes illegal due to change in law before its acceptance by the offeree. 9. Destruction of Subject Matter: An offer lapses if the subject matter of the offer is destroyed before the acceptance of offer by the offeree. 10. Prescribed Manner: If the offeror prescribes the manner of acceptance, the offer terminates if the offeree does not accept it according to the prescribed manner. If the offeror wants to reject the offer, he must inform the offeree with a reasonable time. If offeror does not inform, he will be bound by such acceptance. Lapse of Time: When the offer is kept open for a specified time period, it terminates if it is not accepted within that period. If the offer does not specify any time period, it terminates after lapse of a reasonable time. The reasonable time depends upon the circumstance of each case, if the commodity is perishable, the reasonable time will be relatively shorter. Question #8 “An acceptance to be effective must be communicated to the offeror”. Are there any exceptions to this rule? Answer: Communication with Offeror: The offeree or his agent must communicate the acceptance to the offeror in a clear manner. Showing the intention to accept an offer is not a valid acceptance. If the offeree does not accept the offer, no contract is formed. When offeree accepts an offer but fails to clearly communicate, it is not considered an acceptance.