PPT_Contract_Unit 1_BBALLB.pptx

Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, SectorA-8,Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
CLASS & SEMESTER: BBALL.B
1st SEMESTER
NAME OF THE SUBJECT: LAW OF CONTRACT-I
UNIT I
TOPIC: FORMATION OF CONTRACT
FACULTY NAME : Ms. Mahima Khetarpal
Assistant Professor- SoL
1

CONTENTS
UNIT-I : FORMATION OF CONTRACT
Plot No. OCF, SectorA-8, Narela,New Delhi– 110040
(Affiliated to Guru Gobind Singh Indraprastha Universityand Approved by Govt of NCT of Delhi & Bar Council of India)
a. Meaning, Nature and Scope of Contract
b. Offer / Proposal: Definition, Communication, Revocation, General/ Specific
Offer
c. Invitation to Treat
d. Acceptance: Definition, Communication, Revocation, Tenders / Auctions
e. Effect of Void,Voidable, Valid, Illegal, Unlawful Agreements
f. Standard Form of Contract
g. Online Contracts
2

MEANING, NATURE AND SCOPE OF CONTRACT
Section-1:
Name- Indian contract act 1872;
Extent-It extends to the whole of India except state of J&K.
Enforce-It shall came into force on 1st sep1872.
3

•ICA was compiled on 25th april 1872
•It is in act no. 9 of 1872
•The ICA is not a complete and exhaustive law on all types of contract. It
lays down only general principles of contract law.
Other principles relating to contract are being given in IPA,SGA,
TPA, Company act, Railway act etc.
•The Purpose and Preamble of ICA is to define and amend
certain parts of the laws relating to contract.
•It is a civil law becoz it enacted only about damages not about punishment.
•Before 1855 in India there was no fixed law oncontract.Parties
of agreement were either regulated by English law, Hindu Law,
Muslim law or by equityetc.
Chanderprabhu Jain College of Higher Studies & School ofLaw
Plot No. OCF, SectorA-8, Narela,New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University andApproved by Govt of NCT of Delhi & Bar Council of India)
4

•To stop that uncertainityIInd law commission Prepares the draft of ICA,which
was later on presented by IIIrd law commission.Butbecoz of argumented
situation b/w government and commission,the draft was not fully accepted.
Then James Stephen made some amendments and it was finally enforced on
1stsep1872.Thats why credit of its making goes to James Stephen.
•Its effect is not Retrospective,means it will not applicable on the contracts
dated before 1stsep1872
Chanderprabhu Jain College of Higher Studies & School ofLaw
Plot No. OCF, SectorA-8, Narela,New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University andApproved by Govt of NCT of Delhi & Bar Council of India)
5

CHART
Proposal[S.2(a)] +Acceptance[S.2(b)]=Promise[S.2(b)]
+
Consideration[S.2(d)]
=Agreement[S.2(e)]
If Enfocable by law If not Enfocableby law
= Contract[S.2(h)]=VoidAgreement[S.2(g)]
Void Conract[S.2(i)] VoidableContract[S.2(j)]
6

ESSENTIALS OF PROPOSAL
(A)Number of Persons-Because nobody makes a proposal to itself, that’s
why atleast two persons must be needed for proposal. Remember there is no
limit on maximum persons i.e they can be counted orcountless.
(B)Offer must be made with an Intention to Legally Bind each other: A
proposal must be made with an intention to legally bind each other. If there is
no such intention to legally bind each other, the agreement will not result into
a contract.
7

Example: A invites B to a dinner party, B promised but does not attend the dinner
party.
In this case A can not sue B for breach of contract.[KalaiHaldar Vs
Sheikh].There is no as such provision in ICA but it is a well settled rule in
English Law that the parties ought to have the intention to create a legal
relationship b/w them through the form of proposal.It must not be merely a moral
or social one.
8

(C)The Proposal must be communicated- A proposal to be
complete must be communicated to the person to whom it is
made, otherwise there can be no acceptance by him. An acceptance to a
proposal in ignorance of a proposal is not acceptance and does not
create any boundation on the acceptor. [Lalman Shukla v. Gori Dutt]
(D)Offer & Invitation to an Offer are not the same thing-
An offer should be distinguished from an invitation to an offer. An offer is
definite and capable to convert an intention into a contract.
Plot No. OCF, SectorA-8,Narela,New Delhi– 110040
(Affiliated to Guru Gobind Singh Indraprastha Universityand Approved by Govt of NCT of Delhi & Bar Council of India) 9

Whereas an invitation to an offer is only a circulation of an
offer. It is an attempt to induce offers and precedes a definite offer.
Acceptance of an invitation to an offer does not result contract and only an
offer emerges in the process of negotiation. An offer when accepted
becomes an agreement on the other hand an invitations to offer when
accepted becomes only an offer. [Harvey Vs Faisey]
10

(F)Proposal should be in the form of request and not in order- It must be
remembered that a proposer cannot make offer in the form of order so as to
compel the offeree to reply to his offer rather he must make a request to this
effect. [Felthouse Vs Bindly]
(G) The proposal should be made with a view to obtainingthe
consent of theofferee.
(H)The proposal should not contain a term the non compliance of which would
amount to acceptance. Thus a man cannot say that if acceptance is not
communicated by a certain time the proposal would be considered asaccepted
11

In Carlill Vs Carbolic smoke Ball Co.Lord Justice Bowen ruled that in
case of public adversiment the performance of the conditions of
advertisement is sufficient acceptance of the offer & the same need not to be
notified to the offeror.
(iii)Positive and Negative Proposal-A proposal to do anything is called
positive one while a proposal not to do anything is called negative one.
(iv)Conditional and Unqualified Proposal- A proposal with one or more
conditions is called conditional one while a proposal without condition is
called unqualified proposal.
12

Ans:Acceptance-Acceptance plays a very important role for proposal. In
order to convert a proposal into agreement an acceptance should be there.In
the words of Anson- “Acceptance is to offer what a lighted match is to a train
of gunpowder” it means gunpowder remains dormant unless it has been
contracted with a lighted match similarly mere offer does not create legal
rights & obligations between the contracting parties unless it has been accepted
by the acceptor.
Ques: Define the word Acceptance with its essentials.
13

Sec2(b)defines acceptance as "when the person to whom the proposal is
made signifies his assent there to the proposal is said to be accepted. A
Proposal when accepted become a promise.“
Promisor and Promisee—2(c)- The person making the proposal is called the
promisor. The person accepting the proposal is called the promisee.
14

Sec.9 says –when acceptance of any offer is made in words it said to be express
acceptance while acceptance is made otherwise than in words,its said to be
implied.
Sec.8- Performance of the condition of a proposal,or the acceptance of any
consideration for a reciprocal promise which may be offered with a proposal,is
an acceptance of the proposal.
In Carlill Vs Carbolic smoke Ball Co. Lord Justice Bowen ruled
that in case of public adversiment the performance of the conditions of
advertisement is sufficient acceptance of the offer & the same need not to be
notified to the offeror.
15

Ans- According to Sec.3 -Revocation of proposal/acceptance are deemed to be
made by any act or omission of the party revoking, by which he intends to
communicate such revocation of proposal/acceptance or which has the effect of
communicating it.
Sec.6 deals with types of revocation of an offer-
(1) Notice of Revocation- According to sec.6(1) an offer is revoked
by the communication of notice of revocation by the proposer to the
other party.
According to sec.5- An offer may be revoked at any time before the
communication of its acceptance is complete against the proposer.
Ques-Discuss the provisions of ICA regarding revocation of an
offer & revocation of an acceptance.
16

According to sec.4- Communication of an acceptance is complete as against the
proposer when it is put in course of transmission to him so as to be out of the
power of the acceptor to with draw the same.
Example-A proposes by a letter sent by post to sell his house to B.
B acceptes the proposal by a letter sent by post.
Against A the communication is complete when the letter is posted by B.
So A may revoked his proposal at any time before or at the moment when B posts
his latter of acceptance , but not afterwards.
17

(2)Laps of Prescribed or Reasonable Time- According to sec.6(2) an offer is
revoked by the laps of time prescribed in such proposed for its acceptance or if no
time is so prescribed, by the laps of a reasonable time without communication if
the acceptance. The Reasonable time will depend upon facts & circumstances of
each & every case.
(3)Not fulfilment of a condition Precedent-According to sec.6(3) an offer is
revoked by the failure of the acceptor to fulfill a condition precedentto
acceptance.
(4) Death or Insanity of Proposer-According to sec.6(4)an offer is
revoked by the death or insanity of the proposer ,if the fact of his
death or insanity comes to the knowledge of the offeree before acceptance.It
means if acceptor knows about the death or insanity of proposer before
acceptance the consent will be illegal otherwise legal and valid.
18

Revocation of Acceptance - According to Sec.3- The communication of
proposal , the acceptance of proposal and the revocation of the proposal and
acceptance ,respectively, are deemed to be made by any act or omission of the
party proposing, accepting or revoking , by which he intends to communicate to
such proposal, acceptance or revocation or which has the effect of
communicating it.
According to Sec.5- An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the acceptor , but not
afterwards.
19

According to Sec.4- The communication of an acceptance ,is complete against the
acceptor, when it comes to the knowledge of the proposer.
Example- A proposes by a letter sent by post to sell his house to B. B
acceptes the proposal by a letter sent by post.
The communication of the acceptance is complete as against B when the letter is
received by A.
So B may revoked his acceptance at any time before or at the moment when the
letter communicating it reaches A,but notafterwards.
20

Ans- Consideration is one of the essential elements to support a valid contract.
When a party to an agreement, promises to do something he must get 'something'
in return. If he does not get something in return, the contract is not valid. This
'something' is defined as consideration.
Definition-
“Consideration is the recompense given by the party contracting to the
other.”…..Blackstone
“When at the desire of the promisor,thepromisee or any other
person has done abstained from doing,ordoes,or abstain from doing or promise
to do or to abstain from doing something.Such act or abstainence or promise
is called a consideration for the promise.“ - Sec.2(d) of ICA
Ques-Define the word ‘consideration’ with its essential.
Also, distinguish it with English Law.
21

Consideration is based on the term ‘quid-pro-quo’ which means
‘something in return’. When a person makes a promise to other, he does
so with an intention to get some benefit from him. This act to do or to
refrain from doing something is known as consideration.
22

Difference between EnglishLaw& IndianLawofConsideration-
1.Indian Law categories consideration as past, present & future while English
Law in present & future consideration i.e under English past consideration is no
consideration.
2. Under English Law, Consideration should be from the promise & promise alone
and not from a third person while under the Indian Law Consideration may move
from Promisee or if promisor has no objection it may also move by any other
person who is not a party to the contract.
3. In English Law real or formal contracts need not to be supported by
consideration. They derive their validity ‘form’ while in Indian Law every
promise must be supported by consideration unless the case falls within exceptions
23

Ans-Consideration is one of the essential elements to support a valid contract.
When a party to an agreement, promises to do something he must get 'something'
in return. If he does not get something in return, the contract is not valid. This
'something' is defined as consideration. Therefore, an agreement without
consideration is void and cannot become a contract.
Sec25 states the general rule is that an agreement made without consideration is
void,i.e "no consideration no contract" An
agreement without consideration is called "NudumPactum".
Ques- ”An agreement without Consideration is void”.
Discuss the exception of this rule. Discuss the validity of an
agreement without Consideration.
24

Example– A agrees B to given 1000/- without consideration.
Agreement is void
Exceptions: Following are the exceptions to the rule ‘no consideration, no
contract’i.ein the following situations an agreement without consideration is also
valid-
1)Natural Love and Affection– sec.25(1) states that– "a written and registered
agreement based on natural love and affection between the parties standing in near
relation (like husband and wife,son and father etc. to each other is enforceable even
without consideration.
In FunuBiwi Vs Fyaz Baksh it was held that the ICA provides no guidance in the
respect of the word “Near Relation”. However, according to judicial
interpretation it includes parties related byblood or marriage.
25

Example– A for natural love and affection promises to give his son B, Rs1000/-. A
puts his promise to B in to writing and registers it.This is a contract.
2)Past Voluntary Service– sec.25(2) states that– “A promise to
compensate,wholly or in part,a person who has already voluntarily done something
for the promisor,or something which the promisor was legally compellable to do.
Example1) A finds B’s purse and gives to him.B promises to give a
Rs 500.This is a contract.
2) A support’s B’s infant son.B promises to pay A’sexpenses in
doing.This is acontract.
3)Time Barred Debt– sec.25(3) states that– "A promises,made in writing and
signed by the person to be charged therewith or by his.
26

agent to pay wholly or in part a debt of which the creditor might have enforced
payment but for the law for the limitations of suit.
Example– A owes B Rs.1000 but the debt is barred by the limitation act.A signs a
written promise to pay B Rs500 on account of the debt.This is a contract.
4)Gift– Explantaion 1 of sec.25 states that– "No thing in this section shall affect
the validity as between the donor and donee,of any gift actually made.
5)Sec.63- The second part of this section states that-“every promise may extend the
time for the performance of contract or may accept any satisfaction which he thinks
fit instead of the whole claim without requiring any consideration to support such an
agreement.”
27

Example- 1)A Promises to paint a picture for B. B afterwards for bids him to
do so.A is no longer bound to perform the Promise. (Dispense)
2) A owes B ` 5,000. A pays to B and B accepts in satisfaction
of his whole debt ` 2,000 paid at the time and place at which the
` 5000 were payable. The whole debt is discharge.
5)Free Bailment– sec.148 states that– "Agreement to delivered thing as a free
bailment is valid though there is no consideration.
6)Agency- Sec.185 states that-"No consideration is necessary to create an
agency.
28

According to explanation-2 of sec.25-“an agreement to which the consent
of the promisor is freely given is not void merely because the consideration
is inadequate; but the inadequacy of the consideration may be taken into
account by the Court in determining the question whether the consent of the
promisor was freely given.”
Example- A agrees to sell a horse worth Rs.1000 for Rs.10.A denies that
his consent to the agreement was freely given.
The inadequacy of the consideration is a fact which the Court
should take into account by in determining whether or not the
consent of the A’s was freely given.
Whether question of inadequacy of consideration can be
raised in court?-
29

•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)]
Example- A contracts B with fraud. Contract is voidable at the option of B.
•Void Contract-A contract which ceases to be enforceable by law becomes void
when it ceases to be enforceable. [sec-2(j)]
Example- A agrees to pay B 1000 rupees if B will marry A’s
daughter C. C was dead at the time of the agreement. The agreement
is void.
30

1.Void contract is void from the very beginning while voidable contract is valid
when made and continues to remain valid till it is repudiated by the aggrieved
party.
2. Void contract is void because an essential element of a valid contract is missing
while voidable contract is voidable because the consent of a party is notfree.
3.Void contract is cannot be enforced by any party while voidable contract is
continued to be enforceable if the aggrieved party does not repudiate the
contract.
Difference between Void & Voidable contract-
31

4. Even on the expiry of a reasonable time void contract is can never become a
valid contract while on the expiry of a reasonable time voidable contract may
become a valid contract if the aggrieved party does not repudiate the contract
within reasonable time. In void contract the question of damages does not arise
while in voidable contract the aggrieved party can claim damages arise.
32

Is an Online Agreement Valid?
Contracts formed online are legally binding and enforceable. Digital
contract management refers to an information system tha stores and
managesa company's contracts and other contract-related documents.
The purpose of the system is to enhance the monitoring of a contract's
life cycle from contract negotiations to electronicsignature.
33

THANKYOU
34

PPT_Contract_Unit 1_BBALLB.pptx

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