Indian Contract Act 1872


Published on

Published in: Business
No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Indian Contract Act 1872

  2. 2. What is a contract? <ul><li>Section 2(h) </li></ul><ul><li>“ An agreement enforceable by law is a contract”. </li></ul><ul><li>Thus, </li></ul><ul><li>Contract = Agreement + Enforceability at Law </li></ul>
  3. 3. Agreement? <ul><li>Section 2(e) </li></ul>Promise/(s ) Promise/(s) = Agreement (in exchange for)
  4. 4. Promise? <ul><li>Section 2(b) </li></ul><ul><li>Promise = Proposal/Offer + Acceptance </li></ul><ul><li>Proposal? </li></ul><ul><li>Section 2(a) </li></ul><ul><li>Expression of willingness </li></ul><ul><li>With a view to seek the assent of the other </li></ul><ul><li>Thus, mere expression of willingness doesn’t constitute offer/proposal. </li></ul>
  5. 5. Acceptance <ul><li>Section 2(b) </li></ul><ul><li>Giving of assent to the proposal. </li></ul><ul><li>Enforceability by Law </li></ul><ul><li>Agreements which are not enforceable </li></ul><ul><li>Illegal/unlawful agreements, e.g., to smuggle/to kill </li></ul><ul><li>Social Agreements ( Balfour vs. Balfour ) </li></ul>
  6. 6. Agreements Declared Void under ICA <ul><li>e.g. </li></ul><ul><ul><li>Agreement with or by a minor </li></ul></ul><ul><ul><li>Agreement in restraint of trade </li></ul></ul><ul><ul><li>Marriage brokerage contract </li></ul></ul><ul><ul><li>Wagering/Betting Agreements </li></ul></ul>
  7. 7. Kinds of Contracts <ul><ul><li>From the point of view of Enforceability </li></ul></ul><ul><ul><ul><li>Void </li></ul></ul></ul><ul><ul><ul><li>Voidable </li></ul></ul></ul><ul><ul><ul><li>Valid </li></ul></ul></ul>
  8. 8. Void Agreement vs. Void Contract <ul><li>Void Agreement </li></ul><ul><li>i.e., void-ab-initio i.e. unenforceable from the very beginning </li></ul><ul><li>Becomes void (Void Contract) </li></ul><ul><li>Voidable </li></ul><ul><li>i.e., void + able </li></ul><ul><li>i.e., capable of being declared void </li></ul><ul><li>(unenforceable) at the option of one of the parties to the contract but not at the option of the other. </li></ul>
  9. 9. Valid Contract <ul><li>Section 10 </li></ul><ul><li>To be a valid contract, it must satisfy the following: </li></ul><ul><li>Offer and Acceptance </li></ul><ul><li>Consensus-ad-idem (Meeting of minds) i.e., persons must agree to the same thing in the same sense and at the same time. </li></ul><ul><li>Intention to create legal relationship as against social relationship or illegal/unlawful relationship. </li></ul>
  10. 10. <ul><li>Free and Genuine Consent , i.e., free from </li></ul><ul><ul><li>coercion </li></ul></ul><ul><ul><li>undue influence </li></ul></ul><ul><ul><li>fraud </li></ul></ul><ul><ul><li>misrepresentation </li></ul></ul><ul><ul><li>mistake </li></ul></ul><ul><li>Parties competent to contract </li></ul><ul><li>Lawful consideration and object, i.e., something in return and that must be lawful. </li></ul>
  11. 11. Valid Contract <ul><li>(‘Object’ and ‘Consideration’ usually overlap. However, there may be difference at times e.g., object may be to kill competition and for that purpose in view, a senior manager of the competitor may be paid a certain amount to give unrealistically high quotation .) </li></ul><ul><li>Here: Object is to kill competition. </li></ul><ul><li> Consideration is : </li></ul><ul><li>(i) payment of money </li></ul><ul><li>(ii) giving high quotations </li></ul>
  12. 12. Valid Contract <ul><li>Agreement not declared void . </li></ul><ul><li>Certainty of Meaning : e.g. sale and purchase of 100 tonnes of oil. But which oil? Thus, agreement being uncertain – not valid. </li></ul><ul><li>But, if the seller deals only in one kind of oil and one variety, then it shall be valid since it is capable of being made certain. </li></ul>
  13. 13. Valid Contract <ul><li>Possibility of performance: Impossibility whether known to the parties or not, renders a contract invalid. </li></ul><ul><li>Necessary legal formalities : e.g. sale-deed of immovable property. </li></ul>
  14. 14. Void vs. Illegal Agreements Void Agreement Illegal Agreement <ul><li>Unenforceable </li></ul><ul><li>Not Punishable </li></ul><ul><li>Collateral transactions unaffected. </li></ul><ul><li>Unenforceable </li></ul><ul><li>Punishable (fine or imprisonment or both) </li></ul><ul><li>Collateral transactions are also void. </li></ul>
  15. 15. Specific and General Offer <ul><li>Specific Offer: </li></ul><ul><ul><li>made to a specified person or a group of persons. </li></ul></ul><ul><ul><li>can be accepted only by the person to whom made. </li></ul></ul><ul><li>Thus, if offer is addressed to ‘A’, ‘B’ cannot accept it. </li></ul><ul><li>Case Law: Boulton vs. Jones </li></ul>
  16. 16. Specific and General Offer <ul><li>General Offer: </li></ul><ul><ul><li>which is not a specific offer. </li></ul></ul><ul><ul><li>made to the world at large. </li></ul></ul><ul><ul><li>can be accepted by anyone by complying with the terms of the offer. </li></ul></ul><ul><li>Case Law: Carlill vs. Carbolic Smoke Ball Co. </li></ul>
  17. 17. Offer vs. Invitation to offer <ul><li>Illustrations of Invitation to Offer: </li></ul><ul><ul><li>Prospectus issued by a college. </li></ul></ul><ul><ul><li>Prospectus issued by a company. </li></ul></ul><ul><ul><li>Invitation of bids in an auction. </li></ul></ul><ul><ul><li>Price-catalogues, price lists, quotations </li></ul></ul><ul><ul><li>Display of goods with a price-tag in a shop window. </li></ul></ul>
  18. 18. Special Terms in a Contract <ul><li>Examples: Dry cleaner’s receipt, courier’s receipt, shipment receipt, insurance policy, etc. </li></ul><ul><li>Binding if communicated or attention drawn to the fact that there are certain special terms and conditions. </li></ul><ul><li>Not binding if attention is not drawn and the other party not aware of. </li></ul>
  19. 19. Cross Offers & Counter Offers <ul><li>Cross Offers </li></ul><ul><li>Identical offers cross each other and none of the parties is aware of the same. Doesn’t result in a contract unless one of them is accepted. </li></ul><ul><li>Counter Offer </li></ul><ul><li>Instead of accepting an offer, the offeree makes a counter offer, i.e., accepts the same subject to certain conditions or qualification. </li></ul>
  20. 20. Contracts through Post <ul><li>Communication of Offer </li></ul><ul><li>is complete when the offeree has the knowledge of the same. </li></ul><ul><li>Communication of Acceptance </li></ul><ul><ul><li>It has two aspects, viz., </li></ul></ul><ul><ul><ul><li>As against the proposer </li></ul></ul></ul><ul><ul><ul><li>As against the acceptor </li></ul></ul></ul>
  21. 21. As against the proposer <ul><li>Communication is complete as soon as a duly addressed letter of acceptance is put into the course of transmission. </li></ul><ul><li>Whether the same reaches the proposer or not. </li></ul><ul><li>As against the acceptor </li></ul><ul><li>Communication is complete only when the proposer has received the letter and learnt the contents thereof. </li></ul>
  22. 22. Communication of Revocation <ul><li>Communication of revocation (of offer or acceptance) is complete: </li></ul><ul><ul><li>As against the person who makes it when it is put into the course of transmission. </li></ul></ul><ul><ul><li>As against the person to whom it is made, when it comes to his knowledge. </li></ul></ul>
  23. 23. <ul><li>Comparing ‘offer’ to a ‘train of gunpowder’ and ‘acceptance’ to a ‘lighted match stick’ – How far correct? </li></ul><ul><li>William Anson’s observation though valid in the English context doesn’t hold good in India since in India acceptance is revocable. </li></ul>
  24. 24. Claim for Damages Damages U/S Section 73 Damages U/S Section 74 Only damages naturally flowing From breach (Ordinary Damages) Special Damages (No claim for consequential loss unless in the Contemplation of the parties ( Hedley v. Baxendale Exemplary Damages Nominal Damages Pre-fixed Damages Penalty Liquidated Damages (What can be recovered is actual loss or amount prefixed, whichever is less)