Law Of Contracts (16 10 09 Fri.)


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Law Of Contracts (16 10 09 Fri.)

  1. 1. Law of Contracts:Introduction <ul><li>      Lays down general principles of contract. It is like a boundary or limit within which parties can agree upon anything. </li></ul><ul><li>Lays down the circumstances in which it will be legally obligatory to perform a promise; provides remedies for breach </li></ul><ul><li>Examples: minor’s contract is not binding on him. Social promises are not binding in law. Contracts without consideration, barring certain exceptions, are void. </li></ul><ul><li>Affects all of us since everyone enters into some kind of a contract every other day without being aware of it </li></ul>
  2. 2. <ul><li>Eating out in a hotel, travelling by bus, taking property on lease, buying anything from movie tickets to buying a house, are all contracts: express(written or verbal) or implied (implied by conduct) </li></ul><ul><li>Contracts create personal rights and obligations for the parties to the contract: particularly vital for business community:It means, specific persons who are parties to contract have rights and duties against each other </li></ul><ul><li>There are other legal rights and obligations which are not created by contracts: a right not to be defamed, or a right not to be harmed, right to enjoy one’s property, that are available against the whole world </li></ul>
  3. 3. What is a contract? <ul><li>An agreement recognised and enforced by law. Every agreement is not a contract: some agreements do not create legal obligations or are not recognised as binding by law for some reasons </li></ul><ul><li>It needs at least two persons, who are capable in law to make a contract </li></ul><ul><li>Each one agrees to do something for the other in expectation of receiving something of value from that person </li></ul>
  4. 4. Essential characteristics of contract-I <ul><li>ALL CONTRACTS ARE AGREEMENTS BUT ALL AGREEMENTS ARE NOT CONTRACTS </li></ul><ul><li>Essentials of valid contract: Sec. 10 of Contract Act: Agreement(Offer+Acceptance), competent parties, lawful consideration, lawful object, not expressly declared to be void by Contract act </li></ul>
  5. 5. Offer <ul><li>       Offer is a proposal </li></ul><ul><li>       Technical definition of offer </li></ul><ul><li>       One person expresses his willingness to do or abstain/ refrain from doing something for another person </li></ul><ul><li>       Such expression of willingness is with the object of obtaining consent/concurrence to the proposed act or abstinence of that another person </li></ul><ul><li>       Examples: A says to B: ‘would you sell me your car for one lakh rupees?’. ‘A offers to sell shares of Reliance company to B at Rs 1150/- per share’ </li></ul>
  6. 6. Legal requirements of an offer <ul><li>Certainty, Definiteness and clarity </li></ul><ul><li>Communication to the acceptor </li></ul><ul><li>Must be made by offeror himself or his authorised agent </li></ul><ul><li>N ot an invitation to offer or answer to question or statement about price </li></ul><ul><ul><li>Harvey Vs Facie( Bumper Hall Pen Case) </li></ul></ul><ul><li>General and special offer </li></ul><ul><ul><li>Carlil Vs Carbolic Smoke Ball Co. </li></ul></ul><ul><li>Express or implied </li></ul>
  7. 7. Lapse of offer <ul><li>Notice of revocation </li></ul><ul><li>Lapse of time </li></ul><ul><li>Non-fulfilment of any condition of offer </li></ul><ul><li>Death or insanity of offeror </li></ul><ul><li>Counter offer </li></ul>
  8. 8. Acceptance <ul><li>Promisee expresses his assent to the offer Counter offer: not an acceptance </li></ul><ul><li>Offer when accepted becomes a promise: Promissor and promisee </li></ul>
  9. 9. Essentials of acceptance <ul><li>Communication to offeror or his authorised agent </li></ul><ul><li>Absolute and unqualified/unconditional </li></ul><ul><li>In manner prescribed by offer </li></ul><ul><li>Within time prescribed by offer/within reasonable time </li></ul><ul><li>Cannot be presumed from silence </li></ul><ul><li>Can be implied from conduct of acceptor </li></ul>
  10. 10. Consideration <ul><li>Something in return </li></ul><ul><li>Price for which the promise of the acceptor is bought </li></ul><ul><li>It need not always be in money terms: it can be a performance of an act </li></ul><ul><li>Essential features: it must be lawful, must be real and not illusory, need not be sufficient, may be given by promisee or any other person, can be past, present or future </li></ul>
  11. 11. Absence of consideration <ul><li>Agreement without consideration is void </li></ul><ul><li>Exceptions: </li></ul><ul><ul><li>Contracts based on Natural love and affection </li></ul></ul><ul><ul><li>Contracts to compensate Past voluntary services </li></ul></ul><ul><ul><li>Promise to pay time barred debt </li></ul></ul>
  12. 12. Contracts based on natural love and affection <ul><li>Must be in writing, signed by promisor and registered </li></ul><ul><li>Must be based on natural love and affection between the parties, e.g., father and son, or other close relatives </li></ul>
  13. 13. Contract to compensate past services <ul><li>Services rendered in the past by A to B </li></ul><ul><li>Services are not rendered at B’s request but voluntarily </li></ul><ul><li>Contract is made in present times for past services </li></ul>
  14. 14. Promise to pay time barred debt <ul><li>Concept of time-barred debt: it is a legally non-recoverable debt </li></ul><ul><li>Debtor promises the creditor to pay such debt or a part thereof </li></ul><ul><li>Promise must be in writing and signed by the debtor or his agent </li></ul>
  15. 15. Legal Capacity of Parties <ul><li>Minors </li></ul><ul><li>Persons of unsound mind </li></ul><ul><li>Persons disqualified by law </li></ul>
  16. 16. Lawful Consideration, Lawful Object <ul><li>Consideration and object of the contract must be lawful </li></ul><ul><li>It should not involve any illegality </li></ul><ul><li>If the object of the contract is doing something prohibited by law, the contract is not valid </li></ul><ul><li>If the contract involves the doing of something in return for something which is illegal, the contract is not valid </li></ul>
  17. 17. Free Consent <ul><li>Consent: basis of agreement: agreeing upon the same thing in the same sense </li></ul><ul><li>Free Consent: consent must be free from vitiating factors </li></ul><ul><li>Consent caused by any of the following factors is not free: </li></ul><ul><ul><li>Coercion </li></ul></ul><ul><ul><li>Undue influence </li></ul></ul><ul><ul><li>Fraud </li></ul></ul><ul><ul><li>Misrepresentation </li></ul></ul><ul><ul><li>Mistake </li></ul></ul>
  18. 18. Agreements expressly declared void <ul><li>Void Agreements are without any legal effect: no party to such agreement can sue the other on the basis of such agreement. </li></ul><ul><li>Examples of such agreement: </li></ul><ul><ul><li>Wagering agreements </li></ul></ul><ul><ul><li>Agreement in restraint of trade </li></ul></ul><ul><ul><li>Agreement in restraint of marriage </li></ul></ul><ul><ul><li>Agreement in restraint of legal proceedings </li></ul></ul><ul><ul><li>Uncertain agreements </li></ul></ul><ul><ul><li>Agreements to do impossible act </li></ul></ul>