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Commercial Law including Company Law and Industrial Law
- By Sen & Mitra
2
- Rules of permissible conduct, limits on allowable
conduct
- Not the same as a moral limit or rule, but is
supposed to be reflective of morals and
ethics
- But we all know there are many things that
you can do, but should not do.
The Law Ethics
An agreement enforceable by law is a contract. In a
contract there must be a) an agreement and b) the
agreement must be enforceable by law. An agreement
which can be enforced through the courts of law, is
called a contract.
1. Offer and Acceptance: There must be a lawful offer by
one party and a lawful acceptance of the offer by the other
party or parties. Lawful means the offer should be
confirmed by law, by the court of the certain country.
2. Intention to create Legal Relationship: There must be
an intention (among parties) that the agreement shall
result in or create legal relations.
3. Lawful Consideration: Subject to certain exceptions, an
agreement is legally enforceable only when each of the
parties to it gives something and gets something. An
agreement to do something for nothing is usually not
enforceable by law.
Consideration is essential for the validity of a
contract. "A promise without consideration is a gift;
one made for a consideration is a bargain”.
A promise without consideration is a gratuitous
undertaking and cannot create a legal obligation.
Under Roman law an agreement without
consideration was called a nudum pactum and was
unenforceable. Under English law simple contracts
must be supported by consideration but specially
contracts require no consideration. Under Indian law
the presence of consideration is, as a rule, essential
to the validity of contracts.
“An agreement made without consideration is
void. But there are a few exceptions to the rule,
where an agreement without consideration will be
perfectly valid and binding. These exceptions are
as follows:
a) Agreement made on account of natural love
and affection – if following conditions met:
Expressed in writing
It is registered
Is made on account of natural love and affection
Between parties standing in near relation to each
other.
b. Voluntary compensation:
 If a person has done a voluntary service in the
past and the beneficiary promises to pay at a
later date, then the contract is binding
provided:
 The service was rendered voluntarily in the past
 It was rendered to the promisor
 The promisor was in existence when the voluntary service was
done
 The promisor showed his willingness to compensate the voluntary
service
 Example, Peter finds Johns wallet on the road and returns
it to him. John is happy to find his lost wallet and promises
to pay Peter Rs 2,000. In this case, too, the no
consideration no contract rule does not apply. This
contract is a valid contract.
4. Capacity of Parties: The parties of an agreement must be
legally capable of entering into an agreement. Want of capacity
arises from minority, lunacy, drunkenness, and similar other
factors. If any of the parties to the agreement suffers any such
disability, the agreement is not enforceable by law, except in
some special cases.
5. Free Consent: In order to be enforceable, an agreement must
be based on the free consent of all parties.
6. Legality of the Object: The object for which the agreement
has been entered into must not be illegal, or immoral or opposed
to public policy.
7. Certainty: The agreement must not be vague. It must be
possible to ascertain the meaning of the agreement, for otherwise
it cannot be enforced.
8. Possibility of Performance: The agreement must be capable
of being performed.
9. Void agreements: An agreement so made must not have been
expressly declared to be void.
10. Writing, Registration, and Legal Formalities: An oral
contract is a perfectly good contract, except in those cases where
writing or registration is required by some statute.
 It is when two or more persons agree upon the same
thing and in the same sense”. So the two people
must agree to something in the same sense as well.
 A consent is considered free consent when it is not
caused or effected by the following-
◦ Coercion
◦ Undue Influence
◦ Fraud
◦ Misrepresentation
◦ Mistake
 Coercion means using force to compel a person to
enter into a contract. So force or threats are used to
obtain the consent of the party under coercion, i.e it is
not free consent. Section 15 of the Act describes
coercion as-
◦ committing or threatening to commit any act forbidden by the
law in the IPC
◦ unlawfully detaining or threatening to detain any property with
the intention of causing any person to enter into a contract
 For example, A threatens to hurt B if he does not sell
his house to A for 5 lakh rupees. Here even if B sells
the house to A, it will not be a valid contract since B’s
consent was obtained by coercion.
 Section 16 of the Act contains the definition of undue
influence. It states that when the relations between the
two parties are such that one party is in a position to
dominate the other party, and uses such influence to
obtain an unfair advantage of the other party it will be
undue influence.
 The section also further describes how the person can
abuse his authority in the following two ways,
◦ When a person holds real or even apparent authority over the
other person. Or if he is in a fiduciary relationship with the other
person.
◦ He makes a contract with a person whose mental capacity is
affected by age, illness or distress. The unsoundness of mind
can be temporary or permanent.
 Say for example A sold her gold watch for only tk.
500/- to her teacher B after her teacher promised her
good grades. Here the consent of A (adult) is not freely
given, she was under the influence of his teacher.
 Fraud means deceit by one of the parties, i.e. when one
of the parties deliberately makes false statements. So
the misrepresentation is done with full knowledge that
it is not true, or recklessly without checking for the
trueness, this is said to be fraudulent. It absolutely
impairs free consent.
 When a party convinces another to enter into an
agreement by making statements that are-
◦ suggesting a fact that is not true, and he does not believe it to
be true
◦ active concealment of facts
◦ a promise made without any intention of performing it
◦ any other such act fitted to deceive
 Misrepresentation is also when a party makes a
representation which is false, inaccurate, incorrect etc.
The difference here is the misrepresentation is
innocent, i.e. not intentional. The party making the
statement believes it to be true.
Contracts can be classified into four broad divisions.
These are-
1. Method of formation of a contract
2. Time of its performance
3. It’s parties
4. it’s legality or validity
1. Express contract: Express contract is one which is
expressed in words spoken or written. When such a
contract is formed, there is no difficulty in
understanding the rights and obligations of the parties.
2. Implied Contract: The conditions of an implied
contract is to be understood from the acts, the conduct of
the parties and the course of dealing between them.
3. Quasi Contract: There are certain dealings which are
not contracts strictly, though the parties act as if there is
contract. The contract act specifies various situations
which come within what is called Quasi Contract.
1. Executed contract: parties perform their
obligations immediately.
2. Executory contract: parties perform their
obligations at a later time.
1. Bilateral contracts: At least two parties to the
contract.
2. Unilateral contracts: In certain contracts, one party
has to fulfill his obligations whereas the other party
has already performed his obligations.
1. Valid
2. Void
3. Voidable
4. Illegal
5. Unenforceable
Chapter 1_The Law of Contract.pptx

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Chapter 1_The Law of Contract.pptx

  • 1. Commercial Law including Company Law and Industrial Law - By Sen & Mitra
  • 2. 2 - Rules of permissible conduct, limits on allowable conduct - Not the same as a moral limit or rule, but is supposed to be reflective of morals and ethics - But we all know there are many things that you can do, but should not do. The Law Ethics
  • 3. An agreement enforceable by law is a contract. In a contract there must be a) an agreement and b) the agreement must be enforceable by law. An agreement which can be enforced through the courts of law, is called a contract.
  • 4. 1. Offer and Acceptance: There must be a lawful offer by one party and a lawful acceptance of the offer by the other party or parties. Lawful means the offer should be confirmed by law, by the court of the certain country. 2. Intention to create Legal Relationship: There must be an intention (among parties) that the agreement shall result in or create legal relations. 3. Lawful Consideration: Subject to certain exceptions, an agreement is legally enforceable only when each of the parties to it gives something and gets something. An agreement to do something for nothing is usually not enforceable by law.
  • 5. Consideration is essential for the validity of a contract. "A promise without consideration is a gift; one made for a consideration is a bargain”. A promise without consideration is a gratuitous undertaking and cannot create a legal obligation. Under Roman law an agreement without consideration was called a nudum pactum and was unenforceable. Under English law simple contracts must be supported by consideration but specially contracts require no consideration. Under Indian law the presence of consideration is, as a rule, essential to the validity of contracts.
  • 6. “An agreement made without consideration is void. But there are a few exceptions to the rule, where an agreement without consideration will be perfectly valid and binding. These exceptions are as follows: a) Agreement made on account of natural love and affection – if following conditions met: Expressed in writing It is registered Is made on account of natural love and affection Between parties standing in near relation to each other.
  • 7. b. Voluntary compensation:  If a person has done a voluntary service in the past and the beneficiary promises to pay at a later date, then the contract is binding provided:  The service was rendered voluntarily in the past  It was rendered to the promisor  The promisor was in existence when the voluntary service was done  The promisor showed his willingness to compensate the voluntary service  Example, Peter finds Johns wallet on the road and returns it to him. John is happy to find his lost wallet and promises to pay Peter Rs 2,000. In this case, too, the no consideration no contract rule does not apply. This contract is a valid contract.
  • 8. 4. Capacity of Parties: The parties of an agreement must be legally capable of entering into an agreement. Want of capacity arises from minority, lunacy, drunkenness, and similar other factors. If any of the parties to the agreement suffers any such disability, the agreement is not enforceable by law, except in some special cases. 5. Free Consent: In order to be enforceable, an agreement must be based on the free consent of all parties. 6. Legality of the Object: The object for which the agreement has been entered into must not be illegal, or immoral or opposed to public policy.
  • 9. 7. Certainty: The agreement must not be vague. It must be possible to ascertain the meaning of the agreement, for otherwise it cannot be enforced. 8. Possibility of Performance: The agreement must be capable of being performed. 9. Void agreements: An agreement so made must not have been expressly declared to be void. 10. Writing, Registration, and Legal Formalities: An oral contract is a perfectly good contract, except in those cases where writing or registration is required by some statute.
  • 10.  It is when two or more persons agree upon the same thing and in the same sense”. So the two people must agree to something in the same sense as well.  A consent is considered free consent when it is not caused or effected by the following- ◦ Coercion ◦ Undue Influence ◦ Fraud ◦ Misrepresentation ◦ Mistake
  • 11.  Coercion means using force to compel a person to enter into a contract. So force or threats are used to obtain the consent of the party under coercion, i.e it is not free consent. Section 15 of the Act describes coercion as- ◦ committing or threatening to commit any act forbidden by the law in the IPC ◦ unlawfully detaining or threatening to detain any property with the intention of causing any person to enter into a contract  For example, A threatens to hurt B if he does not sell his house to A for 5 lakh rupees. Here even if B sells the house to A, it will not be a valid contract since B’s consent was obtained by coercion.
  • 12.  Section 16 of the Act contains the definition of undue influence. It states that when the relations between the two parties are such that one party is in a position to dominate the other party, and uses such influence to obtain an unfair advantage of the other party it will be undue influence.  The section also further describes how the person can abuse his authority in the following two ways, ◦ When a person holds real or even apparent authority over the other person. Or if he is in a fiduciary relationship with the other person. ◦ He makes a contract with a person whose mental capacity is affected by age, illness or distress. The unsoundness of mind can be temporary or permanent.
  • 13.  Say for example A sold her gold watch for only tk. 500/- to her teacher B after her teacher promised her good grades. Here the consent of A (adult) is not freely given, she was under the influence of his teacher.
  • 14.  Fraud means deceit by one of the parties, i.e. when one of the parties deliberately makes false statements. So the misrepresentation is done with full knowledge that it is not true, or recklessly without checking for the trueness, this is said to be fraudulent. It absolutely impairs free consent.  When a party convinces another to enter into an agreement by making statements that are- ◦ suggesting a fact that is not true, and he does not believe it to be true ◦ active concealment of facts ◦ a promise made without any intention of performing it ◦ any other such act fitted to deceive
  • 15.  Misrepresentation is also when a party makes a representation which is false, inaccurate, incorrect etc. The difference here is the misrepresentation is innocent, i.e. not intentional. The party making the statement believes it to be true.
  • 16. Contracts can be classified into four broad divisions. These are- 1. Method of formation of a contract 2. Time of its performance 3. It’s parties 4. it’s legality or validity
  • 17. 1. Express contract: Express contract is one which is expressed in words spoken or written. When such a contract is formed, there is no difficulty in understanding the rights and obligations of the parties. 2. Implied Contract: The conditions of an implied contract is to be understood from the acts, the conduct of the parties and the course of dealing between them. 3. Quasi Contract: There are certain dealings which are not contracts strictly, though the parties act as if there is contract. The contract act specifies various situations which come within what is called Quasi Contract.
  • 18.
  • 19. 1. Executed contract: parties perform their obligations immediately. 2. Executory contract: parties perform their obligations at a later time.
  • 20. 1. Bilateral contracts: At least two parties to the contract. 2. Unilateral contracts: In certain contracts, one party has to fulfill his obligations whereas the other party has already performed his obligations.
  • 21. 1. Valid 2. Void 3. Voidable 4. Illegal 5. Unenforceable