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Indian Contract Act


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Indian Contract Act

  1. 1. CONTRACT ACT 1872<br />Basics of Contract Act <br />
  2. 2. Law of Contracts : Introduction<br />      Lays down general principles of contract. It is like a boundary or limit within which parties can agree upon anything.<br /><ul><li> Lays down the circumstances in which it will be legally obligatory to perform a promise; provides remedies for breach</li></ul>Examples: minor’s contract is not binding on him. Social promises are not binding in law. Contracts without consideration, barring certain exceptions, are void.<br /><ul><li>Affects all of us since everyone enters into some kind of a contract every other day without being aware of it</li></li></ul><li><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)
  3. 3. 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
  4. 4. 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></li></ul><li>CONTRACT<br />Agreement in daily life<br />An Agreement is defined in section 2 (e) of the Act is - a promise .<br />Promise – a proposal when accepted , becomes a promise. ( Sec 2 b).<br />Agreement = Offer + Acceptance<br />
  5. 5. Promise?<br /> Section 2(b)<br /> Promise = Proposal/Offer + Acceptance <br />Proposal?<br /> Section 2(a)<br /> Expression of willingness to do something <br /> With a view to seek the assent of the other party.<br /> Thus, mere expression of willingness doesn’t constitute offer/proposal. <br />
  6. 6. Acceptance<br />Section 2(b)<br /> Giving of assent to the proposal.<br /> Enforceability by Law<br /> Agreements which are not enforceable<br /> Illegal/unlawful agreements, e.g., to smuggle/to kill<br /> Social Agreements (Balfour vs. Balfour)<br />
  7. 7. CONTRACT ACT<br />Every Agreement is not a Contract.<br />AGREEMENT ENFORCEABLE IN LAW IS CONTRACT.<br />Contract : Agreement + enforceable by law. i.e. legal obligations to do or abstaining from doing anything. ( Social, illegal)<br />All contracts are agreement but all agreements are not contracts<br />Legal Contracts creates “Rights in Personam” not right in “rem”<br />
  8. 8. Essential of Contract<br />Section 10 : states elements of Contract which are<br />1)Agreement & Legal Obligation ;<br />Agreement ( Offer+ Acceptance)<br />Two parties ( Promisor & Promisee)<br />2)Intention to create legal relationship<br />3)Free Consent ( Sec 13,14)<br />
  9. 9. 4)Parties competent to Contracts<br />5)Lawful consideration <br />6)Lawful Object ( Not illegal/immoral)<br />7)Agreements not declared void or illegal ( S 24-30)<br />8)Certainty of Meaning (29)<br />9)Possibility of performance<br />10) Necessary Legal Formalities<br />
  10. 10. CONTRACT ACT<br />Classification/Types of Contracts:<br />Classification according to Enforceability :<br />Valid, Void & Voidable, Illegal, Unenforceable<br />Valid = section 10 elements<br />Enforceable at the option of one or more parties = Voidable<br />Section 23-30 = Void<br />Classification according to Formation <br />Express, Implied & Quasi Judicial<br />Classification according to Performance :<br />Executed, Executory, Unilateral, Bilateral<br />
  11. 11. OFFER & ACCEPTACE<br />:<br />Offer – Section 2 (a) : <br />When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal<br />Essential of Valid Offer :<br />Must be made with a view to obtain consent <br />Must be made with the intention of creating legal relation<br />Terms of offer must be definite, unambiguous & certain of capable of being made certain <br />
  12. 12. CONTRACT ACT<br />Elements of OFFER: <br />It must be distinguished from mere declaration of intention or invitation of offer. ( A Tender is an offer)<br />It must be communicated to offered.<br />The offer must not be contain a term the non-compliance of which may be assume to amount to acceptance<br />Special Terms<br />Cross offers<br />
  13. 13. CONTRACT ACT<br />ACCEPTACE :<br />Meaning:<br />When a person to whom the proposal is made, signifies his assent thereto, the proposal is said to be accepted. A proposal, when a accepted, becomes a promise<br />Elements of ACCEPTANCE :<br />It must be absolute & Unqualified<br />It must be communicated to the Offerer<br />It must be according to the mode prescribed<br />It must be given in specified time<br />
  14. 14. CONTRACT ACT<br />ACCEPTACE :<br />Meaning<br />Acceptance how made and by whom<br />Elements of ACCEPTANCE :<br />It must be absolute & Unqualified<br />It must be communicated to the Offeror<br />It must be according to the mode prescribed<br />It must be given in specified time<br />
  15. 15. CONTRACT ACT<br />ACCEPTACE :<br />Meaning<br />Acceptance how made and by whom<br />Elements of ACCEPTANCE :<br />It must be absolute & Unqualified<br />It must be communicated to the Offeror<br />It must be according to the mode prescribed<br />It must be given in specified time<br />
  16. 16. Every promise and every set of promises, forming the consideration for each other, is an agreement<br />An agreement enforceable by law is a contract<br />
  17. 17. CONTRACT ACT<br /> Communication of Revocation : <br />The communication of revocation is complete :<br />Against the person who makes it – when it is put into a course of transmission so as to be out of power of the person who makes it.<br />Against the person to whom it is made – when it comes to his knowledge.<br />
  18. 18. CONTRACT ACT<br /> Communication of Revocation : <br />The communication of revocation is complete :<br />Against the person who makes it – when it is put into a course of transmission so as to be out of power of the person who makes it.<br />Against the person to whom it is made – when it comes to his knowledge.<br />
  19. 19. Consideration <br />As per sec 25 a contract without consideration is void. A contract without consideration is called nudumpactum. Means bare promiss. <br />Consideration means something in return to the promisor. <br />
  20. 20. The term consideration is defined as “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, something, such act or abstinence or promise is called a consideration for the promise”<br />
  21. 21. Elements of consideration<br />1) Consideration may move from promisee or any other persons<br />2) Consideration must be at the desire of the promisee<br />3) Consideration may be past preset or future<br />4) Consideration need not be adequate.<br />5) Consideration must be real not illusionary<br />
  22. 22. Privity of contract and cosideration<br />Under Indian contract third person in the contract can sue. Privity of consideration is allowed. <br />Privirty of contract is third person in the contract he is not the party of contract. There is no offer and acceptance between third party. Privity of contract is not allowed.<br />
  23. 23. Exception to privity of contract cannot sue.<br />1)When a trust is created<br />2) Contract through an agent <br />3) When a charge is created on a specific immovable property<br />4) In case of family arrangement of HUF<br />5) When promisee by his act created privity of contract. <br />
  24. 24. Exception to rule “no consideration no contract”<br />1)Agreement based on love and affection<br />2) Agreement to pay past voluntary services<br />3) Agreement to pay time bared debt <br />4) Gift agreement <br />5) Agency <br />
  25. 25. Capacity to contract<br />Capacity means legal ability of a person to enter in to contract. As per sec 10 every person who are competent to enter in to contract if <br />He is of the age of majority <br />He is of sound minded <br />He is not disqualified by law from contracting <br />
  26. 26. Minor and legal rules <br />A person who is not attained the age of majority is a minor. <br />Law regarding minors agreements <br />Agreement by or with minor is void<br />Minor is not bound to return the benefit received(leslieVssheil)<br />Minor cannot rectify his act <br />Restitution of property in case of fraud<br />Minor is liable of necessaries supplied<br />Minor as a beneficiaries<br />Minor as agent <br />Minor as a partner<br />Minor as an insolvent <br />
  27. 27. Persons of unsound mind<br />A person is said to be sound minded for the purpose of making contract if at the time of making the contract he is capable of underrating and forming a rational judgment on the contract. <br />Following are the persons of unsound mind <br />Idiot<br />Lunatic<br />Drunken <br />
  28. 28. Person disqualified from contracting <br />Foreign ambassadors<br />Alien enemies<br />Companies<br />Professionals<br />Felons<br />Insolvent<br />
  29. 29. Free consent<br />According to sec 14 the consent is said to e free when it is not caused by <br />Coercion<br />Undue influence <br />Fraud <br />Misrepresentations <br />Mistake <br />
  30. 30. When a person obtain the consent of the other party by force or under the fear caused by threat of bodily violence and imprisonment he is said to make coercion.<br />When the relationship between the parties of a contract is such that one of the party can dominate the will of the other and uses the position to claim an unfair advantages over the others, the contract is caused by undue influences <br />
  31. 31. Fraud is will full representations made by a party to a contract with the intention of cheating others.<br />The representation refers to a statement or assertion made by one party to another either before or at the time of making contract regarding some matters related to the contract. When it is wrongly made it is called misrepresentations<br />Mistake is error a) mistake of fact b) mistake of law <br />
  32. 32. Legality of Object and Considerations<br />Under following circumstances object and consideration may be unlawful<br />It is forbidden by law<br />When it is defeating any provision of law<br />When it is fraudulent <br />When it cause to injury to a person or property of a person <br />When it is opposed public policy or immoral <br />
  33. 33. Agreement opposed to public policy <br />1)Trading with enemy<br />2) Champerty and maintenance contract <br />3) Agreement for trifling prosecution<br />4) Marriage brokerage agreement<br />5) Agreement for sale of public office <br />6)Agreement to create monopoly <br />7)Waiver of illegality <br />8) Agreement in restraint of marriage <br />9) Agreement in restraint of trade <br />10) Agreement between pleader and client <br />11) Agreement in restraint of legal proceedings <br />12) Agreement for not to bid <br />
  34. 34. Wager and contingent contract <br />Wager means promise to give money or monies worth up on the determination of an uncertain event in which both parties have no material interest and with mutual chance for gain or loss. Wager means betting <br />A contract is said to be contingent when the performance depends on happening or non happening of certain events. The performance will become due only after happening of certain event <br />
  35. 35. Discharge of contract <br />Discharge of contract means terminating the contractual relationship between the parties to a contract. When the contract is discharged all the right and liability of contracting parties are extinguished and their relationship comes to an end Contract can be discharged by<br />By Performance <br />By agreement <br />By laps of time <br />By operation of law<br />By impossibility of performance <br />By committing breach of contract <br />
  36. 36. Discharge by performance <br />Actual performance<br />Attempted performance ( tender)<br />Discharge by agreement <br />By novation<br />By altration<br />By recession<br />Remission<br />By waiver <br />Merger<br />
  37. 37. Discharge by operation of law<br />By death<br />By insolvency <br />Discharge by impossibility of performance <br />Impossibility at the time of contract <br />Impossibility subsequent to the formation of contract( supervening impossibility)<br />Destruction of subject matter <br />Death of personal or incapacity of personal<br />Contract becoming <br />
  38. 38. Remedies for Breach of Contract <br />Recession of contract <br />Restitution of contract <br />Suit for specific performance <br />Suit for injunction<br />Suit for quantum merit<br />suit for damages <br /> a) general damages<br />b)Special damages<br />c)Exeplary damages<br />d) Nominal damages<br />
  39. 39. Quasi contract <br />This are relationship created by parties between two person. There is no contractual relationship between two parties.<br />Types:<br />Necessaries supplied to a person incapable of contracting <br />Payment by an interested person(Damodarmudaliar Vs secretary of the state )<br />Liability by non gratuitous act <br /> obligation of finder of goods <br />Payment by mistake or coercion (sales tax officer , benares Vs kanhyalal)<br />