indian contract and negotiable instrument

1. INDIAN CONTRACT ACT “1872”
BY: Saurabh sen sky

2. AGREEMENT
 “Every promise and every set of promises forming
consideration for each other, is an agreement”
{Sec 2(e)}
AGREEMENT= OFFER+ACCEPTANCE

3. CONTRACT { MEANING}
 The term contract is used to denote an agreement
or a promise made by two or more persons.
 A contract is an agreement.
 The agreement is enforceable by law.

4. CONTRACT {DEFINITION}
 According to {Sec2(h)} of the act “ An agreement
enforceable by law is a contract”
 CONTRACT=AGREEMENT+ENFORCEABILITY OF
AGREEMENT
“ A contract is an agreement creating and defining the
obligations between the parties”
“SIR SALMOND J.”

5. ENFORCEABILITY OF THE AGREEMENT
 Every agreement is not a contract. An agreement
enforceable by law is a contract. An agreement is
enforceable by law only when it creates legal rights
and obligations of the parties.

6. ESSENTIALS/ CHARACTERISTICS
 Plurality of parties
 Offer and acceptance
 Intention to create legal relations
 Contractual capacity
 Consent
 Free consent
 Lawful consideration
 Lawful object
 Certainty of meaning
 Possibility of performance
 Agreement must not be expressly declared void
 Legal formalities

7. DEFINITION OF OFFER
 {Sec2(a)} “ when one person signifies to another
willingness to do or to abstain from doing anything
with a view to obtaining the assent of that other to
such act. Hence he is said to make a proposal.”

8. TYPES OF OFFERS
On the basis of On the basis of On the basis of
Mode Offerees Nature
Express offer Specific offer Cross offer
Implied offer General offer Counter offer
Standing offer

9. DEFINITION OF 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.

10. CAPACITY TO CONTRACT
 (Sec.10) “Capacity to contract means legal capacity
of parties to enter into a contract”

11. WHO ARE COMPETENT TO CONTRACT (SEC
11)
 Major
 Sound Mind
 Not disqualified by any law.

12. WHO ARE NOT COMPETENT TO CONTRACT
 Minors
 Unsound Minds
 Disqualified by any Law

13. MINORS
(Sec 3) “A minor is a person who has not completed
18 years of age”. But the same act also mention's
that in the following two cases a person attains
majority only after we completes his age of 21
years.
 Where a court has appointed guardian of a minors
person or property.
 Where the minors property has been placed under
the superintendence.

14. UNSOUND MIND
Sec 12 “A person is said to be of sound mind for the
purpose of making a contract if at the time when he
makes it, he is capable of understanding it and of
forming a rational judgment as to its effect upon his
interest”.

15. TYPES OF PERSONS OF UNSOUND MIND
 Idiot
 Lunatic
 Drunken
 Senile person

16. PERSONS DISQUALIFIED BY LAW
There are certain persons who are disqualified from
contracting by the other laws of our country. They
are as under :
 Foreign Enemy
 Privileged persons
(a) President
(b) Prime Minister
(c) Mantri’s
 Artificial Persons
 Insolvent
 Convict

17. FREE CONSENT
 Sec 14 “Free Consent is the consent given by the
will of the parties and not caused by any form of
physical or mental force or any kind of mistake”.
Consent is said to be free when it is not caused by

18. COERCION
15
UNDUE
INFLUENCE 16
FRAUD
17
MISREPRESE
NTATION 18
MISTAKE
20,21.22

19. COERCION
 Coercion means and includes the use or
threatening to use the physical force against person
or property, to compel him to enter into a contract.

20. UNDUE INFLUENCE
 When a dominant party misuses his influence to
dominate the will of weaker party, to get unfair
advantage, in a contract, the contract is said to be
influenced by undue influence.

21. FRAUD
 Fraud is the intentional misrepresentation of
material fact of an agreement by a party to or by his
agent with an intention to deceive or induce the
other party to enter in an agreement.

22. MISREPRESENTATION
 Any innocent or unintentional of false statement of
fact made by one party to the other during the
course of negotiation is called Misrepresentation.

23. MISTAKE
 Mistake is a misunderstanding about something
when the consent of both the parties to a contract is
caused by misconception belief, the contract is said
to be induced by mistake.

24. LAWFUL OBJECT
Any agreement for an unlawful object is void.
 If Agreement is forbidden by law.
 If it defeats the provision by any law.
 Fraud.
 If it involve injury to the person or property of
another.
 Immoral.
 Against public policy.

25. AGREEMENT NOT EXPRESSLY DECLARED VOID
 Agreement by incompetent person.(SEC 11)
 Agreement made under mistake.(SEC 20)
 Agreement of which the consideration or the object
is unlawful.(SEC 23)
 Agreement of which the consideration or the object
is unlawful in part and cannot be separated in lawful
part.(SEC 24)
 Agreement made without consideration(SEC2 25)
 Agreement in the restraint of marriage.(SEC 26)
 Agreement in the restraint of trade.(SEC 27)
 Agreement in the restraint of legal
proceedings.(SEC 28)

26. CONTINUE….
 Agreement the meaning of which is uncertain.(SEC
29)
 Agreement by way of wager.(SEC 30)
 Agreement on impossible event.(SEC 32)
 Agreement to do impossible act.(SEC 56)
 Reciprocal promises to do thing illegal.(SEC 21)

27. BASIS OF
DISTINCTION
FRAUD MISREPRESENTATION
MEANING A deceptive act done
intentionally by one party
in order to influence the
other party to enter into
the contract is known as
Fraud.
The representation of a
misstatement, made
innocently, which
persuades other party to
enter into the contract, is
known as
misrepresentation.
Defined in Section 2 (17) of the
Indian Contract Act,
1872
Section 2 (18) of the
Indian Contract Act,
1872
Purpose to deceive the
other party
Yes NO
Variation in extent of
truth
In a fraud, the party
making the
representation knows
that the statement is not
true.
In misrepresentation, the
party making the
representation believes
the statement made by
him is true, which

28. TYPES OF CONTRACTS/AGREEMENT
On the basis of On the basis of On the basis of
Enforceability Mode of Formation Execution
Valid Agreement Express Contract Executed Contract
Void Agreement Implied Contract Executory Contract
Void Contract Quasi Contract
Voidable Contract
Illegal Agreement
Unenforceable Contract

29. DISCHARGE OF CONTRACT
 A contract is discharged when parties to a contract
no longer have no obligation under the contract.

30. MODES OF DISCHARGE OF CONTRACT
 By performance
 By agreement or consent
 By lapse of time
 By operation of law
 By impossibility of performance
 By breach of contract

31. BY PERFORMANCE
ACTUAL ATTEMPTED

32. NOVATION
ALTERATION
REMISSIONRESCISSION
WAIVER
DISCHARGE BY MUTUAL AGREEMENT

33. BY LAPSE OF TIME
 When a contract is to be performed within a
stipulated time period and a party does not perform
it within that time, the contract is discharged by
lapse of time.

34. BY OPERATION OF LAW
BY
OPERATION
OF LAW
DEATH
INSOLVE
NCY
MERGER
LOSS OF
EVIDENCE

35. BY IMPOSSIBILITY OF PERFORMANCE
Initial Subsequent

36. BY BREACH OF CONTRACT
 Breach of contract means refusal or failure fo any
one party to perform his contractual obligations.
 Types of breach of contract:-
 Actual breach
 Anticipatory breach

37. REMEDIES FOR BREACH OF CONTRACT
Suit for
rescission
Suit for
damages
Suit for
quantum
meruit
Suit for
specific
performance
Suit for
injunction

38. INDEMNITY CONTRACT
 A contract where one party promises to save the
other from any loss caused to him by the conduct of
promissor himself or any other person is called
contract of indemnity, (Section 124) Indian Contract
Act, 1872.
 Indemnity contract includes two parties namely;
Indemnifier and Indemnity holder. The person who
is promising to pay compensation is called
Indemnifier and the person who`s loss is
compensated is called Indemnity holder

39. EXAMPLE
 Example: There is a contract between X and Y
according to which X has to Sell a tape recorder
(which is selected) to Y after three months. On the
next day of their contract Z has come to X and has
insisted on selling the same tape recorder to him
(Z). Here Z is promising to compensate X for any
loss faced by X, due to selling the tape recorder to
Z. X has agreed. Now the contract which has got
formed between X and Z is called indemnity
contract, where Z is indemnifier and X is indemnity
holder.

40. GUARANTEE CONTRACT
 A contract to perform the obligation or to discharge
the liability of a third party in case of its default is
called contract of guarantee, (Section 126) Indian
Contract Act, 1872.
 Guarantee contract includes three parties namely;
Creditor, Principal Debtor and Surety.
 The person who is granting the loan is called
creditors, the person who is utilizing the amount of
loan is principal debtor and the person who is giving
guarantee is called surety or guarantor

41. BAILMENT MEANING
 The bailment is derived from the word “bailllier”
which means to deliver.

42. BAILMENT DEFINITION
 Sec 148 “ Bailment is the delivery of goods by one
person to another for some purpose upon a
contract that they shall, when the purpose is
accomplished, be returned or otherwise disposed of
according to the directions of the person delivering
them”

43. PARTIES IN BAILMENT
 Bailor
 Bailee
 Sub-bailee

44. ESSENTIAL ELEMENTS
 Contract
 Goods
 Delivery of goods
 Purpose
 Return of goods
 Return of the same goods

45. DUTIES OF BAILOR
 Duty to deliver the goods
 To disclose faults in the goods
 To repay expenses
 To pay remuneration
 To receive back the goods

46. DUTIES OF BAILEE
 To take care of the goods bailed
 To indemnify in case of negligence
 Not to make unauthorised use of goods
 Not to mix the goods with his own goods
 To return the goods

47. RIGHTS OF BAILOR
 To claim damages
 To avoid the contract
 To require return of goods
 To claim increase or profit from the goods
 To enforce the rights

48. RIGHTS OF THE BAILEE
 To claim damages
 To claim necessary expenses
 Right to be indemnified
 To return goods
 To apply court to stop delivery

49. AGENCY MEANING
 An agency is the relationship between and agent
and his principal created by an express or implied
agreement whereby an agent is authorised by his
principal to represent him and establish contractual
relations with third parties.

50. ESSENTIAL ELEMENTS
 Name of a relation
 Agreement
 Competence of the principal
 Consideration not necessary
 Free consent
 Intention to create contractual relations

51. DUTIES OF AGENT
 To conduct business according to the directions
given by the principal.
 To conduct the business with skill and diligence.
 To compensate for neglect, misconduct etc.
 To render proper account.
 To communicate with principal

52. RIGHTS OF AN AGENT
 Right to retainer
 Right to receive remuneration
 Right of lien
 Right to be indemnified against consequences of
lawful acts
 Right to compensation
 Right of stoppage in transit.

53. NEGOTIABLE INSTRUMENT ACT
“1881”
UNIT-3

54. MEANING OF NEGOTIABLE
INSTRUMENT
 The term negotiable instrument consist of two
words ‘Negotiable’ and ‘instrument’. Negotiable
means transferable from one person to another and
instrument means a written paper or document
creating a right of a person to claim certain sum of
money.

55. DEFINITION
 Acc to sec. 13(1) “a negotiable instrument means a
promissory note, bill of exchange or cheque
payable either to order or to bearer”

56. CHARACTERISTICS
 Written instrument
 Signature
 Unconditional
 Transferable
 Certain sum
 Good title
 Payment in money

57. TYPES OF NEGOTIABLE INSTRUMENTS
 Promissory note
 Bill of exchange
 cheque

58. PROMISSORY NOTE
 Section 4 “A "promissory note" is an instrument in
writing (not being a bank-note or a currency-note)
containing an unconditional undertaking, signed by
the maker, to pay a certain sum of money only to,
or to the order of, a certain person, or to the bearer
of the instrument.”

59. CHARACTERISTICS
 Written
 Unconditional
 Signature
 Stamp
 Certain sum
 Payment in money
 Promise to pay

61. BILL OF EXCHANGE
 Section 5 “A "bill of exchange" is an instrument in
writing containing an unconditional order, signed by
the maker, directing a certain person to pay a
certain sum of money only to, or to the order of, a
certain person or to the bearer of the instrument.”

62. CHARACTERISTICS
 Written
 Signature
 Stamp
 Unconditional
 Three parties
 Certain sum
 Order to pay

64. CHEQUE
 Section 6 “A cheque is bill of exchange drawn on a
specified banker and not expressed to be payable
otherwise than on demand and it includes the
electronic image of a truncated cheque and a
cheque in the electronic form.”

65. CHARACTERISTICS
 Written
 Signature
 Drawn on a bank
 Unconditional
 Certain sum
 Payable in money
 Certain person

67. CROSSING OF CHEQUE
 Crossing of a cheque means "Drawing Two
Parallel Lines" across the face of the cheque.
Thus, crossing is necessary in order to have safety.
Crossed cheques must de presented through the
bank only because they are not paid at the counter.

68. TYPES OF CROSSING
 General crossing
 Specific crossing
 Restrictive crossing
 Not negotiable

69. HOLDER
 Holder has three characteristics :
1. Document is in hand.
2. He is entitled to receive the amount written on
the document.
3. He is entitled to sue against the refusal.

70. HOLDER IN DUE COURSE
1. A holder in due course must have become a holder of the
instrument before the date of its maturity. He must be entitled
to transfer it.
2. He must be a holder for a valuable consideration.
3. He must be valid holder of the instrument.
4. He must be a holder of the instrument in good faith.
5. Amount of document will be payable on that date when it
will be presented.
6. He should be entitled to sue in case of refusal of payment.
7. He must have taken instrument complete and regular on
the face of it.