Business Law Business law is a rule which helps us to regulate and manageour business transactions and activities system. It has direct relationwith trade, industry and commerce. e.g. insurance act, contract act,tax act, sale of goods act, agency act etc.
INDIAN CONTRACT ACT, 1872Enacted by Parliament of IndiaDate enacted 25 April 1872Date commenced 1 September 1872Total sections 238Extent All States of India except the State of Jammu & KashmirThe Indian Contract Act consists of the following two parts:
What is a Contract? An agreement which is legally enforceable alone is a contract.Agreements which are not legally enforceable are not contracts butremain as void agreements which are not enforceable at all or asvoidable agreements which are enforceable by only one of the partiesto the agreement. “All contracts are agreements, But all agreements are not contracts.”
Offer/Proposal sec 2(a) - When one person signifies to another hiswillingness to do or to abstain from doing anything, with a view toobtaining the assent of that other person either to such act or abstinence,he is said to make a proposal.Acceptance sec 2(b) - When the person to whom the proposal is made,signifies his assent there to , the proposal is said to be accepted.Promise sec 2(b) - A Proposal when accepted becomes a promise. Insimple words, when an offer is accepted it becomes promise.Promisor and promise sec 2(c) - When the proposal is accepted, theperson making the proposal is called as promisor and the personaccepting the proposal is called as promisee.
Consideration sec 2(d) - When at the desire of the promisor, thepromisee or any other person has done or abstained from doingsomething or does or abstains from doing something or promises to door abstain from doing something, such act or abstinence or promise iscalled a consideration for the promise.Price paid by the one party for the promise of the other Technical wordmeaning QUID-PRO-QUO i.e. something in return.Agreement sec 2(e) - Every promise and set of promises forming theconsideration for each other.
AGREEMENT ENFORCEABLE BY LAW CONTRACTContract sec 2(h) - An agreement enforceable by Law is a contract.
ESSENTIALS OF A VALID CONTRACT As per Section 10 “All agreements are contracts, if they aremade – by free consent of the parties, competent to contract,for a lawful consideration and with a lawful object, and nothereby expressly declared to be void .”
ESSENTIAL ELEMENTS OF A VALID CONTRACT • Offer and acceptance • Legal relationship • Consensus - ad-idem • Free consent. • Capacity or competency of parties • Lawful object • Lawful consideration • Certainty and possibility of performance • Agreements not declared to be void • Legal formalities
Offer and Acceptance: In order to create a valid contract, there mustbe an agreement between two parties. An agreement involves avalid offer by one party and valid acceptance of the same by theother party. CASE: BOULTON (vs) JONES. CASE: HARVEY (vs) FACEY.Legal relationship: The parties must intend their agreement to result inlegal relations. This means that the parties must intend that if one ofthem falls to perform his promise, he shall be answerable for that failurein law. Duties and rights should be legal and not merely moral. [anagreement of a purely domestic or social nature is not a contract ] CASE: WEEKS (vs) TYBALD - 1905 CASE: BALFOUR (vs) BALFOUR - 1919
Consensus-ad-idem: The minds of both the parties must be ad-idem. Inother words, the tow parties must have agreed about the subjectmatter of the contract at the same time and in the same sense. Free consent (Permission or Willingness): An agreement must have been made by free consent of the parties. consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake. CASE: RANGANAYAKAMA (vs) ALWAR SETHI
Capacity : The parties to a contract must have capacity (legal ability) tomake valid contract.Section 11:- of the Indian contract Act specify that every person iscompetent to contract provided. Is of the age of majority according to the Law which he is subject Who is of sound mind and Is not disqualified from contracting by any law to which he is subject.Lawful object :The object of agreement should be lawful and legal.Consideration or object of an agreement is unlawful if itis forbidden by law; oris of such nature that, if permitted, would defeat the provisions of any law; oris fraudulent; orInvolves or implies, injury to person or property of another; orCourt regards it as immoral, or opposed to public policy .
Lawful consideration : All contracts must be supported by consideration.Consideration means “something in return” (quid pro quo). It can be cash,kind, an act or abstinence. It can be past, present or future. However,consideration should be real and lawful.A consideration must not be unlawful, immoral or opposed to the publicpolicy.Not expressly declared to be void Possibility of performanceNecessary legal formalities •A contract may be oral or in writing
Review ELEMENTS OF A VALID CONTRACT AGREEMENT Two parties REALITY OF LEGALITY CONSENT not validOFFER ACCEPTANCE • FRAUD SUBJECT OBJECTIVE Legal relationship • MISREPRESENTATION MATTER • DURESS • UNDUE INFLUENCE • MUTUAL MISTAKE CONSIDERATION CAPACITY not valid LEGAL BARGAINED •INFANTS WRITING DETRIMENT/ FOR •MENTAL LAWFUL •DRUNKARDS •CORPORATIONS
ON THE BASIS OF CREATIONExpress Contracts: Where the terms of the contract are expressly agreedupon in words (written or spoken) at the time of formation, the contractis said to be express contract.Implied Contracts: Implied contracts in contrast come into existence byimplication.Most often the implication is by law and or by action.
Tacit Contracts: Tacit contracts are those that are inferred through theconduct of parties.Quasi Contracts: A quasi contract is created by law. Thus, quasicontracts are strictly not contracts as there is no intention of parties toenter into a contract. It is legal obligation which is imposed on a partywho is required to perform it
ON THE BASIS OF VALIDITYValid contract : An agreement which has all the essential elements of acontract is called a valid contract. A valid contract can be enforced by law.Void contract (2(j) : "A contract which ceases to be enforceable by lawbecomes void when it ceases to be enforceable". Thus a void contract isone which cannot be enforced by a court of law. Under a mistake of facts  Consideration or object of an agreement is unlawful  Agreement made without consideration  Agreement in restrain of marriage  Restraint of trade  Restrain legal proceeding . Agreement by wage of wager 
Voidable contract Section 2[i] : Defines that an agreement which isenforceable by law at the option of one or more parties but not at theoption of the other or others is a voidable contract.Result of coercion, undue influence, fraud and misrepresentation.Unenforceable contract : Where a contract is good in substance butbecause of some technical defect cannot be enforced by law is calledunenforceable contract. These contracts are neither void nor voidable.Example: Writing registration or stamping.
Illegal contract : Contracts those which are forbidden by law. All illegalcontracts are hence void also, because of the illegality of their naturethey cannot be enforced by any court of law. In fact even associatedcontracts cannot be enforced. Contracts which are opposed to publicpolicy or immoral are also illegal.“All illegal agreements are void agreements but all void agreements are notillegal.”
ON THE BASIS OF EXECUTIONExecuted contract : An executed contract is one in which both the .parties have performed their respective obligation.Executory contract : An executory contract is one where one or boththe parties to the contract have still to perform their obligations infuture. Thus, a contract which is partially performed or whollyunperformed is termed as executory contract.
ON THE BASIS OF LIABILITYUnilateral contract : A unilateral contract is one in which only oneparty has to perform his obligation at the time of the formation of thecontract, the other party having fulfilled his obligation at the time ofthe contract or before the contract comes into existence.Bilateral contract : A bilateral contract is one in which the obligationon both the parties to the contract is outstanding at the time of theformation of the contract. Bilateral contracts are also known ascontracts with executory consideration.