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Business Law

By
Dr. Reena Mehta

Business Law- Contract Act 1872

Pending cases
• 3 million cases are pending in India's 21 high
courts
• 26.3 million cases are pending in subordinate
courts across the country.
• Quarter million under-trials languishing in
jails across the country.
– 2,069 have been in jail for more than five years
(Home ministry's department of justice, under a Right to Information Act)

Status of Pending Cases in India
– 704,214 are criminal
– 3.2 million are civil
cases
• Gujarat 3.9 million
• West Bengal 1.9
million

• Karnataka 1.06
million
• Rajasthan 1.05
million
• Orissa 1 million
• Andhra Pradesh
0900,000
• Bihar 1.2 million


What is Law?
• Rules
• Enforced by the state
• The state to enforce law should be sovereign
state
• It receives due recognition
• It attempts to receive some sort of uniformity
and security in its application.

INDIAN CONTRACT ACT 1872
Agreement
Every promise and set of promise, forming
consideration for each other is an agreement.
Contract
An agreement enforceable by law is contract.

Kinds of Contract
•
•
•
•
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Void contract
Voidable contract
Executed contract
Executory contract
Unenforceable contract
Express contract

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•
•
•
•

Implied contract
Quasi contract
Contingent contract
Contract of records
Statutory contract


Quasi Contract sec (68)
• Certain relations between the parties resemble
those created by contract. Law requires a
person who receives the benefit to pay or
compensate the person giving the benefit, even
though he receives benefits without the
contract. There is no contract infact but it is
created by law, it is quasi contract.


Contingent Contract sec (31)
• It is a contract to do or not to do something, is
some event, collateral to such contract, does or
does not happen.


Essential Elements of Valid Contract
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•
•
•
•
•
•
•
•
•
•

Proposal
Acceptance
Consideration
Capacities of Parties to Contract
Free Consent
The agreement should not be void
Writing & registration
Legal Relationship
Certainty
Possibility of Performance
Enforceable by law

Essential Elements of Valid Contract
•
•
•
•
•

Writing and registration
Legal relationship
Certainty
Possibility of performance
Enforced by law.


Proposal
Sec 2(a)
When one person signifies to another his
willingness to do or 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.


Acceptance
Sec 2 (B)
• When the person to whom the proposal is
made signifies his assent thereto, the
proposal is said to
be accepted. A
proposal when accepted, becomes a
promise

Consideration
Sec 2(d)
• When at the desire of promisor, the promisee
or any other has done or abstained from
doing,or does or abstains from doing, or
promises to do or abstain from doing
something such act or abstinence or promise is
called a Consideration for the promise.

Essentials of Valid Proposal
• Beyond expression of willingness, there must be
something in the nature of a request.
• Proposer cannot dictate terms.
• An offer must be intended to create a legal
relationship.
• Kalai halder v. sheikh
• Balfour v. Balfour


• A mere statement of intention does not constitute a
binding promise even though a person to whom it is
made acts upon it.
– Harvey v. Facey
• The words used must apply to definite persons to
create legal relations.
• The term of offer must be certain and unambiguous.
• An offer can be expressed or implied.


• An offer must be communicated to an offeree. A person
cannot accept an offer unless he knows of the existence of the
offer.
– Lalman Shukla v. Gauri Datta
• The person making an offer should intend to be bound by it as
soon as it is accepted.
• Offer can be conditional, but the conditions must be
communicated clearly.
• Counter Offer
• Offer and Invitation to offer

Essentials of valid Acceptance
• Be absolute and unqualified.
– Neele v. Meritt
• It should be accepted in some usual and reasonable
manner.
• Mental acceptance is not sufficient in law.
• Acceptance must be communicated to the offerer.
• Acceptance of the proposal.


Essentials of Valid Acceptance
• Acceptance of the proposal need not always be
expressed in words.
• Acceptance must be by a certain person.
• If the act is done in ignorance of the proposal, it is no
acceptance of the proposal.
• Acceptance must be given within a reasonable time.
• Acceptance must be given before the offer lapses or is
revoked.


Essentials of Valid Consideration
• It must move at the desire of the promisor.
• It may move from promisee or any other
person- stranger to the contract.
–Chinnaya v. Ramaya
• It can be past, present, future.
• Consideration need not be adequate.


Essentials of Valid Consideration
• It may be an act of doing or abstain from
doing something.
• It should be real and not illusory.
• It need not be unlawful, illegal, immoral
and opposed to public policy.
• Performance of existing obligation is no
consideration.
• Forbearance to sue is a good
consideration.

Agreement Without Consideration is
Valid
• Agreement made on account of natural love
and affection.
• Promise to compensate for past voluntary
services.
• Promise to pay time barred debt.


Capacity to Contract
• Minor
–MohoribebeeV. Dharamdas Ghose.
–Estoppel
– Promisee or transferee
– Agency
– Partnership


Capacity to Contract
•
•
•
•
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Contracts by Lunatic
Contract by Drunkards
Contract by Parda Nishin Women
Contract by Married Women
Contract by Corporation
Contract by Insolvent


Free Consent
• Coercion
It is committing , or threatening to commit, any
act forbidden by the Indian penal code , or the
unlawful detaining, or threatening to detain any
property, to the prejudice of any person, with the
intention of causing any person to enter into an
agreement
• Amiraju v. Seshma
• Purabi Bennerji v. Basudev Mukherjee.

Undue Influence
• Sec 16 (1)
• A contract is said to be influenced by “undue
influence” where the relations subsisting
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.


Fraud
• Means and includes any of the following act
committed by 1. a party to a contract 2. with his
connivance or 3.by his agent , with intent to deceive
another party thereto or his agent or induce him to
enter in contract.
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–
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Active concealment
Suggestion which is not true
A promise made without any intention to perform it.
Any act fitted to deceive, Any act which is declared
fraudulent


Exceptions
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•
•
•

Deceit which does not deceive is not a fraud
Negligence is no fraud
Ignorance is no fraud
Waiver

• Silence whether fraud?


Misrepresentation
• Like fraud, it is incorrect or false statement but
the falsity or inaccuracy is not due to any
desire to deceive or defraud the other party. It
is innocent. Party making it believes it to be
true.


Mistakes
• An enormous belief about something is called
as mistake
• Two kinds of mistakes
– Mistake of Law
– Mistake of Fact


Void Agreement sec 2 (G)
•
•
•
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•

Agreement in restraint of marriage
Agreement in restrain of trade
Agreement in restraint of legal proceedings
Agreement meaning of which is uncertain
Agreement by way of wager:Money is payable by one person to another
conditional on happening or not happening of
future uncertain event .there must be mutual
chances of gain or loss

Void Agreement
• Agreement contingent on an uncertain future
event if the even become impossible.
• Agreement contingent on an impossible act.
• Agreement to do an act which subsequently
becomes impossible


Discharge of Contract
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By performance sec (37)
By death
By refusing tender of performance
By breach of contract
– Anticipatory breach of contract

• By impossibility of performance
• By agreement or by consent
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Novation
By accord and satisfaction
By remission and waiver
By operation of law
By unauthorized material alteration of a contract.

Breach of Contract
• Remedies to aggrieved party
• Suit for specific performance
• Suit for injunction
• Suit for damages

• Types of damages
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Compensatory damages
Nominal damages
Exemplary damages
Special demages


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