03 Indian Contract Act I

7/27/2019 03 Indian Contract Act I

1/71

10/9/20131

INDIAN CONTRACT ACT 1872


2/71

Introduction

10/9/20132

Law of contract Foundation upon which thesuperstructure of modern business is built

Business promise made between partiesperformance follows later

Breaking of a promise without incurring liability

endless complications


3/71

Indian Contract Act

10/9/20133

Law of contract lays down legal rules relating topromises , their formation, performance and

enforcement.

These rules are not only applicable to business

community but others


4/71

10/9/20134

Indian Contract Act

INDIAN CONTRACTACT

GENERAL RULES

SPECIALCONTRACTS


5/71

CONTRACT

10/9/20135

Sec 2(h)

An agreement enforceable by law

is a contract


6/71

Proposal

When one person signifies to another hiswillingness to do or abstain from doing anything

with a view to obtain his assent on such act or

abstinence, he is making proposal.

A goes to a hotel and orders tea. He is making

proposal.

10/9/20136


7/71

Acceptance

When one person signifies his assent thereto onthe proposal made he is said to accept the

proposal.

When A orders tea and B supplies tea it is

understood that the proposal made by A is

accepted by B

10/9/20137


8/71

Promise

10/9/20138

When a person to whom proposal is madesignifies his assent thereto, the proposal is saidto be accepted.

An accepted proposal is known as a promise.

When A asks B to lend him a book and B giveshis assent to lend him a book . This is a promisei.e. Proposal by A to lend the book

Acceptance by B by lending the book


9/71

Consideration

Something in return.

A offers B to sell his car at Rs.1,00,000 /- B

accepts the same. Now for A consideration is

Rs.1,00,000/- and for B consideration is a Car.

Until and unless there is no consideration there

cannot be an agreement.

10/9/20139


10/71

Agreement

10/9/201310

When the proposal is accepted it becomespromise and the promise, when accompaniedwith consideration it becomes agreement.

A offers to sell his car for Rs.1,00,000/- to B. B

accepts his offer. This offer after acceptancebecomes promise and this promise is treated asan agreement between A & B.


11/71

Enforceability

10/9/201311

An agreement is said to be enforceable by lawif it creates legal obligation.

Obligation is a legal tie which imposes

upon determinate person or persons thenecessity of doing or abstaining from

doing a definite act or acts

If an agreement is incapable of creating a dutyenforceable by law, it is not a contract.


12/71

CONTRACT

10/9/201312

Proposal + Acceptance = Promise.

Promise + Consideration = Agreement.

Agreement + Enforceability = CONTRACT.
http://images.google.co.in/imgres?imgurl=http://www.icm.ac.uk/wp-content/uploads/the-law-of-contract.jpg&imgrefurl=http://www.icm.ac.uk/icm-qualifications/single-subject-diploma/legal-studies/the-law-of-contract-republic-of-ireland-only/&usg=__apCa7pltIyGmdIzhf_iqE2MAH_k=&h=146&w=220&sz=16&hl=en&start=145&tbnid=q-4qce6U5_aJ_M:&tbnh=71&tbnw=107&prev=/images%3Fq%3Dquasi%2Bcontract%26gbv%3D2%26ndsp%3D20%26hl%3Den%26sa%3DN%26start%3D140


13/71

Contract Act

10/9/201313

All contracts are agreement but all agreementsare not contracts.

Agreements of moral, religious or social

nature are not contracts

they are not likely to create a duty enforceable by

law parties never intend to create a legal obligation.


14/71

Contd -

10/9/201314

Ex; X invites his friendY to a dinner andY accepts the

invitation. IfY fails to turn up for the dinner. Can hetake his friend to Court????

X cannot go to the court to claim his loss.

A father promises to pay his daughter Rs 1000 aspocket allowance. Later he refuses to pay. Can thedaughter recover the Amount???

The daughter cannot recover as its is adomestic agreement and there is nointention on the part of the parties tocreate legal relations


15/71

Case

10/9/201315

Balfour vs Balfour [(1919) 2 K.B. 571]

A promise by the husband to pay his wife 30

pounds every month . Later Husband refuses topay. Wife goes to court.

Held: unenforceable as parties never

intended it to be bound by legal

obligations.


16/71

contd

10/9/201316

In commercial or business agreements anintention to create legal relations is

presumed. Thus, an agreement to buy and

sell goods intends to create legal

relationship, hence is a contract, provided

other requisites of a valid contract are

present. But if the parties have expressly

declared their resolve is not to create a legalobligation, even a business agreement does

not amount to a contract.


17/71

Case

10/9/201317

Rose&Frank Co. vs Corruption Bros [1925AC 445]

There was an agreement between R company and

C company by means of which the former was

appointed as the agent of the latter. One clause inthe agreement was: This agreement is not entered

into.as a formal or legal agreement and shall not

be subject to legal jurisdiction in the law courts.

HELD - There was no binding contract as there wasno intention to create legal relationship


18/71

Distinction between an agreement and a contract

10/9/201318

Agreement Offer and its acceptance

constitute an agreement

An agreement may or

may not create a legalobligation

Every agreement neednot necessarily be acontract

Agreement is notconcluded or bindingcontract

Contract Agreement and its

enforceability constitutea contract

A contract necessarilycreate a legal obligation

All contracts arenecessarily agreements.

Contract is concludedand binding on theconcerned parties


19/71

Enforceabilty Methodof

CreationExtent of

execution

Valid

Voidable

unenforceable

Illegal

Void

Executed

Executory

Express

Implied

Classificationof Contract

10/9/201319


20/71

10/9/201320

CONTRACTS ON THE BASIS OF CREATION

EXPRESSCONTRACT

IMPLIEDCONTRACT

Express contract is

one which is made

by the words spoken

or written.

An implied contract

is one which is

inferred from the

conduct of a person

or circumstances of

a particular case


21/71

10/9/201321

CONTRACTS ON THE BASIS OF EXECUTION

EXECUTEDCONTRACT EXECUTORYCONTRACT PARTLYEXECUTED &

EXECUTORY

CONTRACT

It is a contract

where both the

parties to the

contract have

fulfilled their

respective

obligations under

the contract

It is a contract

where both the

parties to the

contract have still to

perform their

respective

obligations

It is a contract

where one of the

parties to the

contract has fulfilled

his obligation and

the other party has

still to perform his

obligation


22/71

10/9/201322

Contracts on the basis of enforceability

Valid Contract A contract which satisfies all the

conditions prescribed by law is a

valid contract

Void Contract A contract which ceases to be

enforceable by law becomes void

when it ceases to be enforceable

Void Agreements An agreement not enforceable by

law is said to be void

Voidable Contract A voidable contract is one which can

be set aside or repudiated or

avoided at the option of the

aggrieved party

Illegal Agreement An illegal agreement is one theobject of which is unlawful

Unenforceable Contract The contract which is actually valid

but cannot be enforced due to

technical defect


23/71

Essential elements of a valid

contract

10/9/201323

Proper offer and its proper acceptance

Intention to create legal relationship

Free Consent

Capacity to contract

Lawful consideration

Lawful object

Agreement not expressly declared void

Certainty of meaning Possibility of performance

Legal formalities
http://images.google.co.in/imgres?imgurl=http://www.icm.ac.uk/wp-content/uploads/the-law-of-contract.jpg&imgrefurl=http://www.icm.ac.uk/icm-qualifications/single-subject-diploma/legal-studies/the-law-of-contract-republic-of-ireland-only/&usg=__apCa7pltIyGmdIzhf_iqE2MAH_k=&h=146&w=220&sz=16&hl=en&start=145&tbnid=q-4qce6U5_aJ_M:&tbnh=71&tbnw=107&prev=/images%3Fq%3Dquasi%2Bcontract%26gbv%3D2%26ndsp%3D20%26hl%3Den%26sa%3DN%26start%3D140http://images.google.co.in/imgres?imgurl=http://www.icm.ac.uk/wp-content/uploads/the-law-of-contract.jpg&imgrefurl=http://www.icm.ac.uk/icm-qualifications/single-subject-diploma/legal-studies/the-law-of-contract-republic-of-ireland-only/&usg=__apCa7pltIyGmdIzhf_iqE2MAH_k=&h=146&w=220&sz=16&hl=en&start=145&tbnid=q-4qce6U5_aJ_M:&tbnh=71&tbnw=107&prev=/images%3Fq%3Dquasi%2Bcontract%26gbv%3D2%26ndsp%3D20%26hl%3Den%26sa%3DN%26start%3D140http://images.google.co.in/imgres?imgurl=http://www.icm.ac.uk/wp-content/uploads/the-law-of-contract.jpg&imgrefurl=http://www.icm.ac.uk/icm-qualifications/single-subject-diploma/legal-studies/the-law-of-contract-republic-of-ireland-only/&usg=__apCa7pltIyGmdIzhf_iqE2MAH_k=&h=146&w=220&sz=16&hl=en&start=145&tbnid=q-4qce6U5_aJ_M:&tbnh=71&tbnw=107&prev=/images%3Fq%3Dquasi%2Bcontract%26gbv%3D2%26ndsp%3D20%26hl%3Den%26sa%3DN%26start%3D140


24/71

Offer / PROPOSAL

10/9/201324

When one person signifies toanother his willingness to do

or abstain from doinganything with a view to

obtain his assent on such

act or abstinence, he is

making proposal.


25/71

OFFER

10/9/201325

UNDERSTANDING

AN

OFFER

It must be made byone person to another

person

It must be anexpression ofreadiness or

willingness to do (i.e.,a positive act) or to

abstain from doingsomething (i.e., anegative act)

It must be made witha view to obtain theconsent of that otherperson to proposedAct or abstinence


26/71

Contd

10/9/201326

Offeror The person makingthe proposal is called the

offeror or proposer.

Offeree The person to whom

the proposal is made is calledthe offeree or the proposee.


27/71

Types of offer

10/9/201327

OFFER

EXPRESS

OFFER

SPECIFICOFFER

GENERALOFFER

IMPLIED

OFFER


28/71

Legal rules as to offer

10/9/201328

Certain andunambiguous

terms

Intention tocreate legalrelationship

Different froman invitation to

offer

Propercommunication

No term of non-compliance of

which amount toacceptance

Communicationof special terms

Different from amere declaration

of an intention


29/71

Contd-

10/9/201329

Intention to create legal relationshipAn offer must be such that when it is accepted it will

create a legal relationship

Certain and unambiguous terms

If the terms of the offer are vague or indefinite, its

acceptance cannot create any contractual

relationship.


30/71

Contd -

10/9/201330

Different from a mere declaration ofintention

Mere declaration of intention indicates that

an offer will be made or invited in the future

A declaration of intention by a person doesnot give right of action to another.


31/71

Case

10/9/201331

Harr ison vs Nickerson

An auctioneer advertised in a newspaper that a sale of officefurniture would be held. A broker came from a distant place to

attend that auction, but all the furniture was withdrawn. Thebroker thereupon sued the auctioneer for his loss of time andexpenses.

Held - A declaration of intention to do a thing

did not create a binding contract with those whoacted upon it, so that the broker could notrecover.


32/71

Contd -

10/9/201332

Different from an invitation to offer

In an invitation to offer the person making an invitationinvites others to make an offer to him

It is prelude to an offer inviting negotiations orpreliminary discussions

Case Pharmaceutical Soc iety of Great B ri t ian vs Boo tscash chemis ts L td (1953) 1 QB 401

Harvey v s facey


33/71

Contd-

10/9/201333

Offer must be communicatedAn offer must be communicated to the person to

whom it is made.An offer is complete only when it is communicated

to the offeree

Acceptance is not possible unless offer is broughtto the knowledge of the offeree ie, One can acceptthe offer only when he knows about it.

Acceptance in ignorance of offer confers no right.

ie,An offer accepted without its knowledgedoes not confer any legal rights on the

acceptor.

Case: Lalman Shukla vs Gauri Dutt


34/71

Contd -

10/9/201334

No term of non-compliance of whichamounts to acceptance

The offer must not contain a term, the non-

compliance of which amount to acceptance

Ex: A offers by post to sell his horse to B for Rs

2000. He writes, If you do not reply, I shall assume

you have accepted the offer. There would be no

contract even if B does not reply


35/71

Contd

10/9/201335

While making the offer, the offeror cannot say that ifthe offer is not accepted before a certain date, it will

be presumed to have been accepted

Communication of special terms or

standard terms of contract Special terms of the offer must also be

communicated along with the offer.

If the special terms of the offer are not

communicated, the offeree will not be bound bythose terms.


36/71

Acceptance

10/9/2013

36

Acceptance means giving consent to the offer. It is an expression by the offeree of his

willingness to be bound by the terms of the

offer.

Sec 2(b) A proposal is said to be

accepted when the person to whom the

proposal is made signifies his assentthereto. A proposal when accepted

becomes a promise.

Acceptance is the consent given to offer.


37/71

Contd-

10/9/2013

37

Who can accept In case of a specific offer

To be accepted by that definite person or

that particular group of persons to whom ithas been made and non else.

In case of general offer

An offer made to the world at large or

public in general can be accepted by anyperson having the knowledge of the offer

by fulfilling the terms of the offer.(Carlil v.

Carbolic Smoke Ball Co.)


38/71

Contd -

10/9/2013

38

How to make acceptance Express acceptance

An express acceptance is one in which is made

by words spoken orwritten

Implied acceptance

An implied acceptance is one which is made

otherwise than in words.

It is inferred from the conduct of the parties or the

circumstances of a particular case


39/71

Legal rules of valid acceptance

10/9/2013

39

Absolute andunqualified

Manner

Communication

By whom

To whom

Before the lapseof the offer


40/71

10/9/201340

CAPACITY OF PARTIES

Sec.11 says

Every person is competent to contract who is of

age of majority according to the law to which he

is subject,

And who is of sound mind,And who is not disqualified from contracting by

any law to which he is subject.

Thus, all the three tests must be applied to determine whether a

person is competent to contract or not


41/71

10/9/201341

Who is a MINOR ?

A minor is a person who has not attained majority.

According to Section 3 of the Indian Majority Act,1875, a

person is deemed to have attained majority as under:

Where a guardian of a

minors person or property

is appointed under theGuardian and Wards Act

On completion of 21 years

Where minors property

has passed under the

superintendence of thecourt of wards

On completion of 21 years

In other cases On completion of 18 years


42/71

10/9/201342

Who is a Person of Unsound Mind?

According to Sec 12 of the Indian Contract Act,A person is said to be of sound mind for

the purpose of making contract, if at the

time when he makes it, is capable

To understand terms of contract

To form rational judgment to its effectupon his interests


43/71

10/9/201343

Persons disqualified by law

Persondisqualified by

law

Insolvent Convicts Alien EnemyForeign

sovereigns andambassadors

Joint stockcompanies


44/71

10/9/201344

CONSIDERATION

Sec. 2(d) of the Indian Contract Act defines consideration as under :

when at the desire of promisor, the

promisee or any other person

has done or abstained from doing,

or does or abstains from doing ,

or promises to do or abstain from doing

something,

such act or abstainence or promise iscalled a consideration for the promise"


45/71

10/9/201345

Essential elements of valid

Consideration

i. It must move at the desire of promisor

ii. It may move from any person

iii. It may be past, or present, or future

iv. It must be of some value

v. It must be real and not illusory

vi. Something other than promisors existing Obligation


46/71

10/9/201346

CONSENT

Sec.13 says Two or more personsare said to consent when they

agree on same thing in same

sense

In English Law, this is called

consensus-ad-adem


47/71

10/9/201347

FREE CONSENT

According to Sec.14 consent is said to be

free when it is caused by

a)Coercion, or

b)Undue influence, or

c)Fraud, or

d)Misrepresentation, or

e)mistake


48/71

10/9/201348

COERCION

Coercion means compelling a person to enter into a

contract under a pressure or a threat.

According to Section15, a contract is said to be caused

by coercion when it is obtained by

i. Committing an act which is forbidden by the IndianPenal Code; or

ii. Threatening to commit any act which is forbidden by

Indian Penal Code; or

iii. Unlawful detaining of any property; or

iv. Threatening to detain any property.


49/71

10/9/201349

Undue Influence

The term undue influence means dominating the will

of other person to obtain an unfair advantage over the

other

Sec 16(1) says a contract is influence by undue

influence

a) Where the relations subsisting between the

parties are such that one of the is in position to

dominate the will of another, and

b) The dominant party uses that position to obtain an

unfair advantage over the other


50/71

10/9/201350

Fraud

The term fraud means a false representation of

fact made willfully with a view to deceive the otherparty.

Essential elements of fraud :

I. By a party to a contract

II. False representation

III.Representation as to fact

IV.Actually deceived

V. Suffered loss


51/71

10/9/201351

Misrepresentation

The term misrepresentation means a

false representation of fact made

innocently or non-disclosure of a material

fact without any intention to deceive the

other party.


52/71

10/9/201352

MISTAKE

A mistake is said to have occurred

where the parties intending to do onething by error do something else.


53/71

10/9/201353

Void Agreements

According to Sec2(g) of Indian Contract Act,1872, a void agreement is an agreement which

is not enforceable by law.

The agreements which are not enforceable by

law right from the time when they are made, are

void -ab-initio


54/71

10/9/201354

Types of agreements expressly declared void

1. Agreements by or with persons incompetent to contract

2. Agreements entered into through a mutual mistake of fact

between the parties.

3. Agreement, the object or consideration of which is unlawful

4. Agreement, the consideration or object of which is partly

unlawful

5. Agreement made without consideration.6. Agreement in restraint of marriage

7. Agreement in restraint of trade

8. Agreements in restraint of legal proceedings

9. Wagering agreements

10.Impossible agreements11.An agreement to enter into an agreement in the future


55/71

10/9/201355

Wagering agreements

An agreement between two personsunder which money or moneys worth is

payable, by one person to another on the

happening or non-happening of a futureuncertain event is called a wagering

event.

Such agreements are chance oriented

and therefore, completely uncertain


56/71

10/9/201356

Contigent contracts

Contigent contracts is a contract to do ornot to do something if some events

collateral to such contract, does or does

not happen

Insurance contract provides best

example of contigent contract


57/71

10/9/201357

Distinction between a wagering agreement and contingent contracts

Basis of distinction Wagering

agreement

Contingent contract

Reciprocal promise It consist of reciprocal

pronise

It may or may not

consist of reciprocal

promise

Void/ valid It is void It is valid

Main/ collateral futureevents

Future event isessential to contract

Future event iscollateral to contract

nature It is always of

contingent nature

It may not be of a

wagering nature

Interest of parties Its parties have no

other interest in thesubject matter of the

agreement except

winning or losing of

wagering amount

Its parties may have

other interest as well


58/71

10/9/201358

Breach of contract

A breach of contract occurs if any party refusesor fails to perform his part of contract or by his

act makes it impossible to perform his

obligation under the contract.

In case of breach, the aggrieved party(i.e. the

party not at fault) is relived from performing his

obligation and gets a right to proceed against

the party at fault.


59/71

10/9/201359

Types of breach

Anticipatory breach Actual breach

Anticipatory breach occurs

when the party declares his

intention of non performing

the contract before the

performance is due

Actual breach may take place

when

The party to the contract

refuses or fails to perform his

part at the time fixed for

performanceParty has performed a part

of contract and then refuses

or fails to perform the

remaining part of contract.


60/71

10/9/201360

Remedies for breach of contract

Remediesfor breachof contract

Recession of

contract

Suitfor

damages

Suit forspecific

performance

Suit forinjunctio

n

Suitupon

quantum

merit


61/71

10/9/201361

Quasi contract

A quasi contract is not a contract at all because one or

other essential for the formation of a contract is absent

It is a law upon a person for the benefit of another even

in the absence of a contract.

It is based on the principle of equity, which means noperson shall be allowed to unjustly enrich himself at the

expense of another

such obligations are called quasi contracts or implied

contracts because the outcome of such obligationresemble those created by a contract.


62/71

10/9/201362

Kinds of quasi contracts

Right to recover the price of the necessariessupplied

Right to recover money paid for another person

Right to recover for non-gratutious act

Responsibility of finder of goods

Right to recover from person to whom money is paidor thing is delivered, by mistake or under coercion


63/71

10/9/201363

Modes ofdischarge of

contract

Byperformance

By mutualagreements

By operationof law

By lapse oftime

By breach


64/71

10/9/201364

Byperformance

actual tender


65/71

10/9/201365

By mutualagreement

novation rescission


66/71

10/9/201366

Byperformance

actual tender


67/71

10/9/201367

Byperformance

actual tender


68/71

10/9/201368

Byperformance

actual tender


69/71

10/9/201369


70/71

10/9/201370


71/71

03 Indian Contract Act I

Documents

Transcript of 03 Indian Contract Act I