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  1. 1. Business Law By Dr. Reena Mehta Business Law- Contract Act 1872
  2. 2. 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) Business Law- Contract Act 1872
  3. 3. 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 Business Law- Contract Act 1872
  4. 4. 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. Business Law- Contract Act 1872
  5. 5. 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. Business Law- Contract Act 1872
  6. 6. Kinds of Contract • • • • • • Void contract Voidable contract Executed contract Executory contract Unenforceable contract Express contract • • • • • Implied contract Quasi contract Contingent contract Contract of records Statutory contract Business Law- Contract Act 1872
  7. 7. 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. Business Law- Contract Act 1872
  8. 8. 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. Business Law- Contract Act 1872
  9. 9. Essential Elements of Valid Contract • • • • • • • • • • • 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 Business Law- Contract Act 1872
  10. 10. Essential Elements of Valid Contract • • • • • Writing and registration Legal relationship Certainty Possibility of performance Enforced by law. Business Law- Contract Act 1872
  11. 11. 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. Business Law- Contract Act 1872
  12. 12. 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 Business Law- Contract Act 1872
  13. 13. 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. Business Law- Contract Act 1872
  14. 14. 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 Business Law- Contract Act 1872
  15. 15. Essentials of Valid Proposal • 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. Business Law- Contract Act 1872
  16. 16. Essentials of Valid Proposal • 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 Business Law- Contract Act 1872
  17. 17. 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. Business Law- Contract Act 1872
  18. 18. 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. Business Law- Contract Act 1872
  19. 19. 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. Business Law- Contract Act 1872
  20. 20. 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. Business Law- Contract Act 1872
  21. 21. 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. Business Law- Contract Act 1872
  22. 22. Capacity to Contract • Minor –MohoribebeeV. Dharamdas Ghose. –Estoppel – Promisee or transferee – Agency – Partnership Business Law- Contract Act 1872
  23. 23. Capacity to Contract • • • • • • Contracts by Lunatic Contract by Drunkards Contract by Parda Nishin Women Contract by Married Women Contract by Corporation Contract by Insolvent Business Law- Contract Act 1872
  24. 24. 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. Business Law- Contract Act 1872
  25. 25. 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. Business Law- Contract Act 1872
  26. 26. Fraud • Means and includes any of the following act committed by 1. a party to a contract 2. with his connivance or his agent , with intent to deceive another party thereto or his agent or induce him to enter in contract. – – – – 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 Business Law- Contract Act 1872
  27. 27. Exceptions • • • • Deceit which does not deceive is not a fraud Negligence is no fraud Ignorance is no fraud Waiver • Silence whether fraud? Business Law- Contract Act 1872
  28. 28. 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. Business Law- Contract Act 1872
  29. 29. Mistakes • An enormous belief about something is called as mistake • Two kinds of mistakes – Mistake of Law – Mistake of Fact Business Law- Contract Act 1872
  30. 30. Void Agreement sec 2 (G) • • • • • 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 Business Law- Contract Act 1872
  31. 31. 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 Business Law- Contract Act 1872
  32. 32. Discharge of Contract • • • • 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 – – – – – Novation By accord and satisfaction By remission and waiver By operation of law By unauthorized material alteration of a contract. Business Law- Contract Act 1872
  33. 33. Breach of Contract • Remedies to aggrieved party • Suit for specific performance • Suit for injunction • Suit for damages • Types of damages • • • • Compensatory damages Nominal damages Exemplary damages Special demages Business Law- Contract Act 1872