This document discusses the key legal aspects of contracts in India according to the Indian Contract Act of 1872. It defines a contract as an agreement that is legally enforceable. The essential elements that make a contract valid are an offer and acceptance, lawful consideration, capacity to contract, agreement is not void, and all parties have consented. It also discusses the parties to a contract, discharge of obligations, different types of breach of contract, and advantages and disadvantages of using contracts.

1. LEGAL ASPECTS
OF CONTRACTS
PREPARED BY:
• Abhinav Jain 2K11/EN/01
• Abhishek Pandey 2K11/EN/02
• Aditya Singh Patel 2K11/EN/03
• Ajay Singh 2K11/EN/04
• Akash Jai Singh 2K11/EN/05
• Aman Sokhal 2K11/EN/06
• Ankush Das 2K11/EN/06

2. As per Contract Act, an
agreement enforceable by
law is a contract. [section
2(h)]
“A promise or set of
promises which the law will
enforce”.
The agreement will create
rights and obligations that
may be enforced in the
courts.
The normal method of
enforcement is an action for
damages for breach of
contract.
CONTRACT
WHAT IS A CONTRACT ?
INDIAN CONTRACT ACT, 1872
 In India, all contracts are covered/governed by the
Indian Contract Act, 1872

3. COMPONENTS OF A VALID CONTRACT
Discharge of the Contract
Agreement should not be void or voidable
Lawful consideration
Legal Capacity to contract
Offer/Proposal & Acceptance
Parties to an contract

4. PARTIES TO A CONTRACT
Promisor
A person making
the proposal (offer)
is known as a
promisor
We can also
recognize him as a
proposer.
Promisee
A person accepting
the proposal (offer)
is known as a
promisee.
He is also known as
an offeree.

5. OFFER/PROPOSAL
OFFER
Can be oral,
written or
through
conduct
Offer and
Invitation
Must be
communicated
to the offeree
Offer gets
terminated
by
Lapse of
time
Withdrawal
of Offer
Death
Rejection

6. ACCEPTANCE
“When a person to
whom the proposal is
made signifies his assent
thereto, the proposal is
said to be accepted.” –
Sec 2(b)

7. LEGAL CAPACITY TO CONTRACT
WHAT IS LEGAL
CAPACITY?
The ability, capability, or fitness to
do something; a legal right, power,
or competency to perform some act.
An ability to comprehend both the
nature and consequences of one's
acts.
The parties must be legally capable
of entering into a contract

8. Both parties must have provided
consideration, i.e. each side must promise
to give or do something for the other.
For Example
Property
Anything of
Value
Money

9. AGREEMENT SHOULD NOT BE VOID OR
VOIDABLE
WHAT IS VOID AGREEMENT?
Agreement to do an impossible act
Agreement without consideration;
except for gifts, debt etc.
Agreement in restraint of legal
proceedings

10. DISCHARGE OF CONTRACTS
The cases in which a contract is
discharged may be classified as follows
By
performance
or tender.
By
impossibility
of
performance
By operation
of law.
By lapse of
time
By breach of
contract

11. BY
PERFORMANCE
OR TENDER
• When both the parties
perform their promises
and fulfil the contract
BY IMPOSSIBILITY
OF PERFORMANCE
• Inherent impossibility
• Known/Unknown to
the parties
• Subsequent
impossibility
• Destruction of subject
matter of contract
BY OPERATION OF
LAW
• By death
• By insolvency
• the state of having
liabilities that exceed
assets, inability of a
debtor to pay their
debt
• By merger

12. BY LAPSE
OF TIME
a contract should
be performed
within a specified
period i.e. period
of limitation.
if the contract is
not performed
promisee is
deprived of his
remedy at law.
Actual
Breach of
Contract:
• when a party fails to perform his
obligation upon the date fixed for
performance by the contract
Anticipatory
Breach of
Contract:
• takes place before the date of actual
performance.
• the promisor may either inform the
promisee that he will not perform the
contract

13. ADVANTAGES
CAN BE COST-EFFECTIVE
• The use of contract manufacturers
means that the hiring firm does not
need to purchase expensive
manufacturing facilities, equipment,
machinery, raw materials or hire
specialized labor.
• This not only allows the hiring firm to
focus solely on sales, advertising and
marketing but also allows a firm that is
comparatively more efficient at
manufacturing to carry out the process.
• As a result, hiring firms often benefit
from economies of scale and the
purchasing power of large
manufacturers. All of these factors
lower production costs.
ENCOURAGES
CONSISTENCY
• Having a written agreement provides
one set of procedures for everyone
to follow. For example, if a group
rotates its secretary and treasurer,
each person might track money and
keep records a little differently,
which could create an administrative
muddle.
• Providing the secretary and treasurer
with written procedures will help
prevent that problem

14. HELPS PREVENT
AMNESIA
• Putting information and
decisions on paper means
keeping less of it in your
head; there's a limit to how
many details we can keep
organized in our brains.
• Even with people whom you
trust completely, you may
have had the experience of
remembering the same
event or conversation
differently.
LEADS TO A WELL-
THOUGHT-OUT
PLAN
• Putting ideas in writing
helps a group think through
details that might not have
been ironed out during
discussions.
• Plans that seem really great
over a glass of wine don't
always make as much sense
when you lay them out on
paper.

15. DISADVANTAGES
TIME AND MONEY
• Perhaps the main disadvantage to
the use of contracts to reduce risk
is that drawing up contracts takes
both time and money. To
construct an airtight contract, a
company has to employ the
services of a lawyer to draft the
contracts, and lawyers are seldom
inexpensive.
• In addition, focusing on contracts
draws time away from other
activities that could help grow
the business.
LITIGIOUS ATMOSPHERE
• Making every person who deals with
an organization sign contracts that
are designed to reduce the
company's risk can create an
atmosphere in which everyone has
their hackles up.
• This may not only breed suspicion,
but it can actually increase the
likelihood of a lawsuit, as people
forced to sign these contracts may
seek the counsel of a lawyer they
wouldn't otherwise approach.

16. BINDING CONTRACTS
• Once a contract is signed with a
manufacturer, the hiring firm
essentially calls all the shots. This
can lead to serious problems for
the reputation of the manufacturer
if the wrong firm is partnered with.
• Consequently, through no fault of
their own a manufacturer can be
linked to an inferior product,
possibly damaging their future
business prospects.
PRESSURE TO DELIVER
• Due to unforced delays, the parties
are left with less time to perform
the work. The pressure to deliver
in less time reciprocates itself in
the reduced quality of the work.

17. • For a written contract, no
evidence outside the document
itself, i.e. extrinsic evidence,
may normally be adduced to
contradict, vary, add to or
subtract from the written terms
EXTRINSIC
EVIDENCE
• The contract must ascertain the
meaning of the words actually
used.EXPRESSED
INTENTION
A FEW MORE IMPORTANT POINTS TO GIVE
THE ESSENCE OF LEGAL ASPECTS.

18. • A contract is void or voidable because of
misrepresentation, fraud, mistake, illegality,
duress, minority or made by a mentally
disordered person or that the contract has
been varied.
ATTACKING
THE
CONTRACT
• Negligence means the breach of a contractual
obligation to take responsible care or to
exercise reasonable skill or breach of an
equivalent common law duty
NEGLIGENCE
LIABILITY
• When parties have acted in a transaction upon
an agreed assumption that a particular state of
facts between them is to be accepted as true,
each is to be regarded as estopped as against
the other from questioning as regards that
transaction the truth of the facts so assume.
AGREED
FACTUAL
ASSUMPTION