3. NATURE
The law relating to contracts in India is contained in Indian Contract
Act, 1872.
It determines the circumstances in which promises made by the
parties to a contract shall be legally binding on them.
Each contract creates some rights and duties on the contracting
parties.
Indian Contract Act of 1872, deals with the enforcement of these
rights and duties on the parties in India.
4. OFFER
A person is said to make a proposal when "he
signifies to another his willingness to do or to
abstain from doing anything with a view to
obtaining assent of that other to such act or
abstinence".
5. ACCEPTANCE
When the person to whom the proposal is
made, signifies his assent there to, the proposal is
said to be accepted.
6. PROMISE
A Proposal when accepted becomes a promise.
In simple words, when an offer is accepted it
becomes promise.
7. PROMISOR AND PROMISEE
When the proposal is accepted, the person
making the proposal is called as promisor and
the person accepting the proposal is called as
promisee.
8. AGREEMENT
An agreement consists of an offer by one party
and its acceptance by the other.
Agreement = Offer + Acceptance
9. CONSIDERATION
The benefit each party promises the other is
called consideration.
When a party to an agreement promises to
do something he must get “something” in
return .This “something” is defined as
consideration.
10. CONTRACT
An agreement enforceable by Law is a
contract. There must be an agreement and it
should be enforceable by law.
Contract = Agreement + Enforceability
12. VOID AGREEMENT
An agreement not enforceable by law is void.
A contract where both the parties are mistaken
about the subject matter of contract cannot be
enforced, such contracts are void.
13. VOID ABLE CONTRACT
A contract which is valid unless until avoided by
either the party.
A contract formed through coercion, undue
influence, misrepresentation or fraud is a
voidable contract.
14. CAPACITY TO CONTRACT
Following are the conditions for a person to enter
into a contract.
He must be major.
He must be sound mind.
He must not be disqualified by any other law.
15. DISQUALIFIED PERSONS TO ENTER
INTO A ACT
Minor
Unsound
Others i.e. alien enemy, convicts etc.
16. MINOR
Minor is defined as any person under the
age of 18 years.
A minor is not mature enough to fully understand
the world around him.
A contract with minor is void.
17. UNSOUND PERSON
A person generally sound , occasionally
unsound can enter into a contract when he
of sound mind.
A person generally unsound occasionally
sound can enter onto contract when he is
sound mind .
18. FREE CONSENT
Two or more persons are said to consent when they
agree upon the same thing in the same sense.
Consent is said to be free when it is not caused by:
Coercion
Undue influence
Fraud
Misrepresentation
19. COERCION
Consent is said to be caused by coercion when
obtained by:
The committing or threatening to commit any act
forbidden by the Indian Penal Code
The unlawful detaining or threatening to detain
any property
20. UNDUE INFLUENCE
Sometimes a party is compelled to enter into a
contract against its will as a result of unfair persuasion
by the other party.
A contract is said to be induced by undue influence
where the relations between the parties are such that
one of the parties is in a position to dominate the will
of the other and uses that position to obtain an unfair
advantage over the other.
21. FRAUD
Fraud means and includes any of those acts committed by a
party to contract or with his connivance or by his agent with
an intent to deceive or induce a person to enter a contract:
The suggestion that a fact is true when it is not true and the
person making it does not believe in it to be true
The active concealment of a fact by a person having
knowledge or belief of the fact
A promise made without any intention of performing it
Any other act fitted to deceive
Any such act or omission as the law specially declares to be
fraudulent
22. MISREPRESENTATION
There is a misrepresentation:
When a person positively asserts a fact is true when his
information does not warrant it to be so, though he believes it
to be true
When there is any Breach of duty by a person which brings an
advantage to the person committing it by misleading another
to his prejudice
When a party causes however innocently the other party to
the agreement to make a mistake as to the substance of the
thing which s the subject of the agreement
23. LEGALITY OF OBJECT
The object of consideration of an agreement must be lawful,
in order to make the agreement a valid contract
Section 23 declares what kinds of considerations and
objects are not lawful. If the object or consideration is
unlawful for one or the other of the reasons mentioned in
Section 23, the agreement is ‘illegal’ and therefore void
24. LEGALITY OF OBJECT
Section 23 of the Indian Contract Act has specified certain
considerations and objects as unlawful.
The consideration or objects of an agreement is lawful,
unless- it is forbidden by law
X promises to obtain for Y an employment in the public
service, and Y promises to pay X Rs. 1000 for that. This
agreement is void as the consideration in this case is
unlawful.
25. UNLAWFUL OBJECT
If the object of an agreement is the performance of an
unlawful act, the agreement is unenforceable.
For a contract to be valid only if the object and the
consideration should be legal.
The word object means purpose or design
26. CONTINGENT CONTRACTS
A contingent contract is a contract to do or not to do
something, if some event, collateral to such contract, does
or does not happen. It is also called a conditional contract.
27. ESSENTIAL ELEMENTS
There are two persons.
There must be an uncertain future event.
Some control over the event but not absolute control.
There is no reciprocal promise between the persons.
Others may be interested in the contract.
It is a valid contract.
29. Ajay calls up a taxi service and enquired if they
can send a taxi at 5:00 PM to the airport. The taxi
service replied in affirmative , however they failed
to send the taxi causing monetary losses to Ajay.
Case 1
Principle: Agreements must be performed by
consenting parties.
30. Case 2
Aman has two visitors at his home, Dilip and Sahil.
Aman had hired a taxi from Dilip the previous week
and had come to collect Rs 9000 at rate of Rs 1800
per day for five weeks. Dilip now has come to
collect his money. Sahil was jobless and he was
there to collect Rs.40,000 as donation for starting his
business which Aman had said would give him. But
now Aman is out of funds and he told both of them
not to come again for the money.
Principle: Agreements which have consideration for
both the parties are to be enforced and are hereby
called contracts.
31. Pramod manufactures spurious machines and Mohan runs a shop to sell
the consignments supplied by Pramod. Mohan made an advance payment
of Rs.20,000 for a consignment and he was to pay Rs.30,000 later. Soon
after Mohan received the goods police raided his house and confiscated
the entire stock. Mohan is now refusing to pay the remaining amount
while Pramod claims there is contract and he must get his consideration.
Case3
Principle: Contracts tainted with illegality are not to be enforced.
32. A person holds gun to the head of another and makes him enter into a
contract .
A person enters into a contract by giving false information.
Case 4
Principle: Contracts tainted by illegality are not to be enforced.
Contracts caused by fraud, coercion can be set aside by the innocent
party.
33. Case5
In a contract, Supratim was to hire out a public address system to
Shailabh,
on monday,for 12 hours,for a freshers party.Supratim failed to supply
the
equipment. Shailabh got the equipment from another party.However,
it was
done on a short notice, he had to pay Rs 5,000 more for the same
equipment.
Here the question arises. Should there be a remedy for Shailabh?
Commen
sense suggests that yes,it would be,if Supratim pays up Rs 5,000,it
would be
34. CASE 6
Vivek enters a shop to buy a dvd player.Now we are analyzing
different
communication which could take place between him and
shopkeeper Jay.
Situtation1:Vivek says,"I want a philips dvd player.The price
quoted in
the company's advertisments is Rs 4,000.Will you sell me one for
this
price?Jay replies,"yes sir,I will".
Situtation2:Jay says,"philips is a good make.I recommend it to
you.It is
priced Rs 4,200".Vivek replies,"I can pay Rs 3,500".Jay
35. Ram says to Shaym,"I have got a job transfer.I can sell my motorcycle
to you for Rs 35,000.Shaym replies"Thank you,but i am not interested
as i bought a new motorcycle just yesterday."
In this case Ram made an offer to shaym.However Shaym rejected
the
offer.
Principle: An offer or proposal can be accepted or rejected.If the offer
is
rejected , that is the end of it.
Case 7
36. A person walked into a grocery store.A refrigerator stacked up with
bot-
tles of kinley mineral water,was kept next to the shopkeeper.He
pointed
his finger towards the bottles. The shopkeeper picked up a bottle and
gave it to him.The person gave him a Rs 20 note.The shopkeeper retu-
rned Rs 10 in less than a minute and the person walked out.
Not a single word was exchanged between the customer and the
shop-
keeper.
Principle: Offer and acceptance can be express(spoken and written
Case 8
