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Chapter 1 nature of contract


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Chapter 1 nature of contract

  1. 1. NATURE OF CONTRACT The Indian Contract Act, 1872 Adithya Venugopal 0801101 IInd BCom (A&F), Shift I
  2. 2. Contents Objects of Law of Contract The Indian Contract Act,1872 Definition of Contract Essential Elements of a Valid Contract Classification of Contracts Classification of Contracts in English Law
  3. 3. Object of Law of Contract Definiteness in business transactions. To ensure realisation of reasonable expectation of the parties who enter into a contract. Of particular importance to people engaged in trade, commerce and industry as bulk of their business transactions are based on contracts.
  4. 4. The Indian Contract Act,1872 Branch of law which determines circumstances in which promises made by parties to a contract shall be legally binding on them. It deals with  General Principles of the Law of Contract (Sec 1-75)  Some special contracts only (Sec124-238) The Act is not exhaustive : Does not deal with contracts relating to partnership, sale of goods, negotiable instruments, insurance etc. Nature of the Law: Does not lay down the rights and duties law will enforce, but consists of limiting principles subject to which the parties may create rights and duties for themselves, which the law will uphold.
  5. 5. Is not the whole law of agreements nor whole law of obligations: Excludes from its purview all obligations not contractual in nature and agreements which are social in nature Creates jus in personam as distinguished from jus in rem: Example: A owes a certain sum of money to B. B has a right to recover it from A. This right can be exercised only by B and by none else against A. This right of B is a jus in personam. Right against or in respect of a thing Available against the world at large Right against or in respect of a specific person Available only against particular persons
  6. 6. Proposal Promise Agreement Legal Obligation Contract Consensus Ad Idem Offer + Acceptance Agreement Enforceability at Law Sec 2(h) based on Pollock “ Every agreement and promise enforceable at law is a contract.” Definition of Contract
  7. 7. Essential Elements of a Valid Contract SN o Element Description 1 Offer and Acceptance There must be offeror and acceptor. Offer: Definite Acceptance: Absolute, unconditional, communicated in the mode prescribed 2 Intention to create legal relationship Social agreements do not create legal relations, therefore not contracts, Example: Balfour Vs. Balfour 3 Lawful Consideration Consideration: Something in return, must be real and lawful 4 Capacity of Parties Parties must be: Of age of majority Of sound mind Not disqualified from contracting by any law subject to
  8. 8. SN o Element Description 5 Free and Genuine Consent Parties must agree on subject matter in the same sense and at the same time. Consent should not be induced by coercion, undue influence, misrepresentation, fraud or mistake. 6 Lawful Object Object must not be: Illegal Immoral Opposed to public policy 7 Agreement not declared void Must not have been expressly declared void by any law in force in the country 8 Certainty and Possibility of performance Agreement must not be vague or impossible to perform 9 Legal formalities Contract preferably written, must be registered or stamped as per requirements.
  9. 9. Classification of Contracts Validity PerformanceFormation Bilateral Illegal Void Express Voidable Unenforceable E-CommerceQuasiImplied Unilateral Executory Executed Contracts
  10. 10. Classification - Quick Study Type of Contract Description Voidable A contract enforceable by law at the option of one or more of the parties to the contract, but not at option of other or others . Void A contract which ceases to be enforceable by law. Illegal One which transgresses public policy, is illegal or criminal. Unenforceable One that cannot be enforced because of a technical defect or lapse of time. Express A contract in which the terms are stated in words. Implied One inferred from the circumstances or from conduct of parties. Quasi Obligation created by law, regardless of any agreement. E-Commerce One which is entered into via the internet. Executed Contract wholly performed by both parties. Executory Contract where promises by both parties are yet to be
  11. 11. Classification of Contracts-English Law Formal Contracts of Record Simple Contracts under Seal A judgement of a Court or a Recognisance( due to the Crown) based on authority, not agreement. Based on its form, does not require consideration, signed, sealed and delivered by the parties. All contracts which are not made under seal, requiring consideration. Contracts
  12. 12. End of Chapter 1 Nature of Contract The Indian Contract Act,1872