LAW PPT

1. PGPM -II SEM Business Law (107) Unit 1 Indian Contract Act, 1872

3. Introduction The law of contracts is fundamental to the very existence of the business world. Without this total business as well as entire economic system may collapse. It assures every party to a contract that his lawful expectations will come true and his rights will be safeguarded. The Indian Contract Act 1872 sections 1-75 came into force on 1 September 1872 . It applies to the whole of India except the state of Jammu and Kashmir. It is not a complete and exhaustive law on all types of contracts.

4. Contract- Definition Section 2(h) of the Act defines the term contract as "an agreement enforceable by law". Section 2(e) defines agreement as "every promise and every set of promises, forming the consideration for each other.” Again Section 2(b) defines promise in these words: "when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted, becomes a promise.” A contract is an agreement between competent parties, with free consent, upon a legal consideration and with a lawful object, to do or to abstain from doing something which gives rise to legal obligations of the parties.

5. Nature of Contract When parties intend to enter legal agreements, and meet certain criteria in the process of defining the nature of such agreements, contracts are formed. A contract is a process of negotiation of private rights and obligations between parties to a contract. These agreements may be written or verbal, or may be completed through actions of the parties involved. Individuals form contracts when they undertake common consumer transactions, whether as buyers or sellers or renters. The purpose of the law of contracts is to protect the reasonable expectations of the parties involved in an agreement, through application of contract law, and to provide an avenue for dispute settlement according to the rule of law. Under common law, only parties to a contract are entitled to contractual rights.

8. Essentials of Valid Contract 6. Consideration:- Every agreement to be enforceable by law must be supported by ‘consideration’. An agreement without consideration is void. Consideration means something which the promisor receives from the promisee in return for his promise. 7. Possibility of performance :- an agreement to be valid contract must also be possible to be performed. The terms of the agreement must also be capable of performance physically as well as legally. 8. Compliance of legal formalities:- Generally no legal formalities are required to be complied with for making a valid contract. a contract may be written or oral. But Section 10 of the Act states that a contract should be made in writing or in the presence of witnesses or be registered, if required by any law.

11. Classification according to Enforceability/Legality 5. Illegal agreement :- an agreement which is expressly or impliedly prohibited or forbidden by law is an illegal agreement. 6. Unenforceable contract :- a contract which is good in substance but cannot be enforced in a law court due to some technical defects, is said to be unenforceable contract.

14. PROPOSAL OR OFFER “ When one person signifies to another his willingness to do or to 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.”[ Sec.2(a)] A proposal or offer is an expression of willingness by one person to another to enter into an agreement on the terms stated by him with an intention to obtain the assent of the other. Illustration :A says to B,”I want to buy your ‘Nolakhahaar’ for Rs.nine lakh.Will you sell it?” Here,A is expressing his willingness to B to buy the ‘Nolakhahaar’ at his terms i.e.for Rs. nine lakh with a view to obtaining his assent to it. This is a proposal from A to B.

15. ACCEPTANCE Acceptance is the assent of the of offeree to an offer made to him. It is a communication of his intention to be bound by the terms of the offer. According to 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.” Thus, acceptance is the assent to the proposal and to its terms by the party to whom proposal has been made. On acceptance of the proposal, the proposer is called promisor whereas the offeree is called the promisee.[ Sec.2(c)]

16. CAPACITY TO CONTRACT Capacity or competence to contract means legal capacity of parties to enter into a contract. In other words, it is the capacity of parties to enter into a legally binding contract. Who are competence to contract ?: Section 11 specifies the persons who are competent to contract. Section 11 reads, “Every person is competent to contract who is of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject.”

18. Consideration Consideration consists of promises or performance that the parties to a contract exchange with each other. It is an sense the ‘price’ that the promisee pays for the promise or performance of the promisor. According to Blackstone, “Consideration is the recompense given by the party contracting to the other.”

19. Consideration Illustration: Anta offers Banta to sell his car for Rs. 1 lakh and Banta accepts. Both the parties have agreed to provide consideration to each other. Here, both the parties are exchanging something to each other and that something is consideration for each other . Anta’s consideration is Rs. One lakh and Banta’s consideration is the car.

20. Legality of object and consideration Section 10 implies that an agreement enforceable by law must be for a lawful consideration and with a lawful object. Every agreement of which the object or consideration is unlawful, is void. Illustrations: A promises to obtain for B an employment in public services and B promises to pay Rs. 10,000 to A. Here A’s promise to obtain for B an employment in public services is the consideration for B’s promise to pay Rs. 10,000. the consideration is against the public interest, and therefore unlawful and void.

22. Agreement declared Void 6. Agreement in restraint of marriage.[sec.26] 7. Agreement in restraint of trades.[sec.27] 8. Agreement in restraint of legal proceedings. [sec.28] 9. Agreements the meaning of which is uncertain.[sec.29] 10. Agreements by way of wager. [sec.30] 11. Agreements contingent on impossible event. [sec.36] 12. Agreements to do impossible acts. [sec.56] 13.Reciprocal promises to do thing illegal. [sec.57]

23. Performance of Contract Performance of contract means performing all the promises and fulfilling all the obligations required by the contract. The contract act prescribes the modes or types of performance of contracts. Accordingly parties to a contract must either perform or offer to perform their respective promises, unless such performance is dispensed with or excused under the provisions of the contract act or of any other law.

24. Discharge of Contract A contract is discharged when parties to a contract no longer have any obligation under the contract. In other words, a contract is said to be discharged when both the parties to a contract either perform or extinguish their respective obligations under the contract. Consequently, the contractual relations between the parties to a contract come to an end.

26. Remedies for breach of contract 2. Suit for damages :- the aggrieved party is entitled to file a suit for compensation of damages caused to him by the breach of contract. 3. Suit for quantum Meruit:- when an aggrieved party has partly performed a contract, he can sue for the value of such part of performance. In case of breach of contract this suit is known as suit on quantum meruit i.e. for as much as earned by the party.

27. Remedies for breach of contract 4. Suit for specific performance:- when for the breach of contract, damages are inadequate remedy, the court may order the party for specific performance of the contract. 5. Suit for injunction:- an aggrieved party can sue for injunction and court may issue an injunction against the party to a contract. Injunction prohibits a party from doing or continuing to do something which amounts to breach of contract.

37. Thank You!