Law is the rule of conduct imposed by the State
on its citizens which can be enforced either
By the State against individuals or,
By individuals against individuals.
Law of contracts is the law of merchants and
law for merchants. It consists of set of basic
principles of business transaction between
parties in a civilized society. .
When there is a dispute in relation to a
business transaction, a commercial suit is
filed. This is solved and decided by
referring to principles provided in a
codified form in the law of contract. .
S.2 (h) states “A contract is an
agreement enforceable by law.”
contract is formed if:
– There is an agreement and,
– The agreement is enforceable by law.
Contract = Agreement + Enforceability .
“S.2(e) – An agreement is every promise & every
consideration for each other.
AGREEMENT = PROMISE + CONSIDERATION
“S.2(b) – Proposal when accepted becomes a
PROMISE = OFFER + ACCEPTANCE
RULES OF OFFER:•
Must be capable of creating legal relations
Must be certain, definite & not vague
May be express or implied
May be specific or general
Must be communicated
Must be with a view to obtaining the consent of
May be conditional
Should not contain a term, the non-compliance
of which would amount to acceptance
RULES OF ACCEPTANCE:•
Must be absolute & unqualified
Must be communicated to offeror
Must be in the mode prescribed
Must be given before the offer lapses or within
a reasonable time
Mere silence is not acceptance
Acceptance by conduct
Enforceability – S.10
“ All agreements are contracts if
they are made by free consent of
parties competent to contract for a
lawful consideration and with a
lawful object and are not hereby
expressly declared to be void. ”
There should be lawful offer and lawful
There must be lawful consideration.
The parties should be competent to contract.
There must be free consent of the parties to
Their object should be lawful.
Agreement should not be expressly declared
to be void by any other law in force.
To create a legal relationship.
DEFINITION – S.2(d)
“When at the desire of the promisor,
the promisee or any other person has
done or abstained from doing or does
or abstains from doing or promises to
do or to abstain from doing, such an
act or abstinence or promise is called
consideration for the promise .”
Move at the desire of the promisor.
Move from promisee or any other
Executed & executory
Abstinence is valid consideration.
Adequacy of consideration.
May be past, present or future
Performance of what one is legally
bound to perform
Must not be unlawful, immoral or
EXCEPTIONS TO THE RULE OF
Natural love & affection.
Compensation for past voluntary services.
Promise to charities
SUIT BY THIRD PARTY ON
Certain Marriage Contracts
Estoppel by Acknowledgment
Covenant by Running with Land
POSITION OF MINOR’S AGREEMENT:An agreement entered into by a minor is altogether
Minor can be a beneficiary
Minor can always plead minority
Ratification on attaining majority is not allowed
Contract by guardian – how far enforceable
Liability for necessaries
S.13 – Consensus ad idem
S.14 – Consent is said to
be free when it is not
• S.15 Coercion
• S.16 Undue Influence
• S.17 Fraud
• S.18 Misrepresentation
• S.20 Mistake
Void agreements are those entered
Due to mistake of fact
Without lawful consideration
In restraint of trade
In restraint of judicial proceedings
Based on uncertainty
By way of wager
Impossibility of performance
Discharge of contract means termination of the
contractual relationship between the parties.
The rights and obligations created by the
contract come to an end, the parties to the
contract are said to be discharged.
A contract is said to be discharged –
By impossibility of performance.
By agreement or mutual consent.
By lapse of time.
By operation of Law.
By breach of contract.
Breach of contract means
breaking of the obligation which
the contract imposes. These are of
Actual Breach of Contract
Anticipatory Breach of Contract
When one of the parties fails to perform his part of
the contract, we say that he commits a breach.
When a contract is broken i.e. breached by one party,
the other party i.e. the aggrieved (injured) party has
one or more of the following remedies:Rescission of the contract.
Suit for damages.
Suit upon ‘Quantum Meruit’
Suit for specific performance.