BUSINESS LAW. WHAT IS A CONTRACT? An agreement enforceable by law (Section 2 (h) contract act 1872.

BUSINESS LAW

WHAT IS A CONTRACT?

An agreement enforceable by law (Section 2 (h) contract act 1872.

ESSENTIAL ELEMENTS OF A CONTRACT? Lawful consideration Free consent Lawful agreement Offer & acceptance Contractual Capacity Lawful Object Possibility of performance Certainty of Term Legal Formality

VALID CONTRACT?

An contract which satisfies all the legal requirement provided for under sec-10

VOID CONTRACT?

An agreement which ceases to be enforceable by law.

An agreement which is valid in beginning but at later stage it becomes void subsequently due to impossibility of performance.

An agreement void from the beginning is known as ‘void ab in initio’. Then we can not use the term void contract.

eg. An agreement with a minor. Section 2 (j)

WHICH ARE VOID CONTRACT? Mistake of facts – sec. 20 Unlawful object sec 23 Agreement without consideration sec. 25 Agreement in restraint of marriage sec. 26 Agreement in restraint of trade sec. 27 Agreement against legal proceeding: sec 28.

VOIDABLE CONTRACT?

An agreement which is enforceable at the option of one or more parties but not at the option of other party is called voidable contract.

The right of rescind has to be exercised within the reasonable time and before the third party acquire the rights under contract.

Sec. 2 (i)

WHICH ARE VOIDABLE CONTRACTS?

CONTRACTS MADE UNDER COERCION, UNDUE INFLUENCE, FRAUD, MISREPRESENTATION ETC.

IS VOID CONTRACT SAME AS ILLEGAL CONTRACT? NO ALL ILLEGAL CONTRACTS ARE VOID

CONTRACTS BUT ALL VOID CONTRACTS ARE NOT ILLEGAL CONTRACTS.

ILLEGAL CONTRACT

An agreement is illegal when it is against the law of land.

An agreement to commit the fraud & Crime.

Ram Rama Sewa Sansthan

UNENFOCEABLE CONTRACT A contract which is valid but due to some

technical problem it becomes invalid. Technical problems are:

Absence of evidence

Expiry of period


OFFER OR PROPOSAL

When a person signifies to another his willingness to do with a view to obtaining tha assent of the other to do such act, he said to make a proposal or offer.

One who make an offer is called offeror , to whom it is made is called oferee


ESSENTIAL OF OFFER

An offer may be general or specific It should have intention to create legal

obligation It should be definite and certain An invitation to offer is not offer

(advertisement for tender for sale of goods by auction)


Acceptance must be provoked by offer. Acceptance must be given before stipulated

period of timer. Provisional acceptance is not acceptance

unless final order is not given.


An offer must be communicated. Term and Condition of offer must be

communicated. Two identical offer(cross offer) do not make a

contract. Acceptance should be communicated. Acceptance should be as per prescribed

form.



HOW MANY TYPES OF OFFERS CAN YOU MENTION? GENERAL OFFER SPECIAL OFFER CROSS OFFER COUNTER OFFER STANDING OFFER


I MAKE AN OFFER TO RAM TO BUY HIS HOUSE IN RS. 5 LAKH, HE MAKES ANOTHER OFFER TO SELL THE HOUSE AT RS. 6 LAKH. WHAT IS HIS OFFER? IS IT CROSS OFFER = NO IT IS COUNTER OFFER


I MAKE AN OFFER TO RAM TO SELL MY HOUSE AT RS. 5 LAKH, RAM ALSO MAKES AN OFFER TO BUY MY HOUSE AT RS. 5 LAKH. I SEND MY OFFER BY POST, HE SENDS HIS OFFER BY EMAIL. WHAT OFFERS ARE THESE? CROSS OFFER.


I TELL RAM THAT HE MAY BUY MY HOUSE AT ANY TIME IN FUTURE AT RS. 5 LAKH. WHAT TYPE OF OFFER IS IT?

STANDING OFFER


ESSENTIAL CHARACTERISTICS OF AN OFFER? DEFINITE EXPRESSED OR IMPLIED OFFER IS NOT INVITATION TO OFFER CERTAIN INTENED TO CREATE LEGAL RELATIONSHIP OFFER MUST BE COMMUNICATED MUST NOT CONTAIN A TERM – THE NON

COMPLIANCE OF WHICH WILL AMOUNT TO AGREEMENT


I GIVE AN ADVERTISEMENT : “ I HAVE A COMPUTER TO SELL” IS IT AN OFFER? NO IT IS AN INVITATION TO OFFER


I MAKE AN OFFER: “IF YOU DON’T REPLY, I SHALL ASSUME THAT YOU WILL BUY MY HOUSE IN RS. 5 LAKH” IS IT AN OFFER? NO


I MAKE AN ADVERTISEMENT THAT I SHALL SELL MY HOUSE FOR RS. 5 LAKH, TO THE PERSON WHO HELPS ME IN MY LEGAL DISPUTE. IS IT AN OFFER. YES – OFFER CAN BE CONDITIONAL

ALSO.


I MAKE AN OFFER – “I WANT TO SELL MY HOUSE AT RS. 5 LAKH. IN CASE ANY PERSON IS INTERESTED, HE SHOULD SEND THE REPLY BY EMAIL.” MOHAN REPLIES BY POST. IS IT VALID ACCEPTANCE?

NO – THE ACCEPTANCE HAD TO BE THROUGH EMAIL ONLY (IT WAS CONDITIONAL OFFER).


WHAT IS ACCEPTANCE?

WHEN A PERSON CONVEYS HIS WILLINGNESS / ASSENT TO OTHER PERSONS’S OFFER (SEC. 2 (B))


ELEMENTS OF ACCEPTANCE? MUST BE ABSOLUTE AND UNQUALIFIED MUST BE COMMUNICATED MUST BE MADE IN PRESCRIBED

MANNER MUST BE WITHIN TIME MAY BE DONE BY CONDUCT ALSO


RAM SENDS ME AN OFFER REQUESTING TO SELL GOODS OF RS. 5000. I DON’T SEND ACCEPTANCE. I SEND THE GOODS. IS IT VALID ACCEPTANCE?

YES – ACCEPTANCE CAN BE BY CONDUCT ALSO.


I SEND AN OFFER TO JITENDRA BY POST. I SEND IT ON 1 JULY BUT JITENDRA RECEIVES IT ON 10 JULY. WHEN DID I MAKE AN OFFER?

10 JULY


IN THE PREVIOUS QUESTION, WHEN CAN I WITHDRAW MY OFFER AND HOW? BEFORE 10 JULY – MY WIDHDRAWAL

MUST REACH BEFORE MY OFFER – BY ANY MEANS

Contract by Post

Under English law proposer is legally bound by the acceptance effected through postal medium when the letter is prepared, addressed, stamped and mailed even though it is delayed or lost in transit.

Indian Law lays down that the communication of an acceptance is complete as against the proposer when it is put in the course of transmission to him so as to be out of power of the acceptor; as against the acceptor when it comes to the knowledge of the proposer.


Termination of Offer

Lapse

a passage of time/reasonable time

death of the proposer

Failure to fulfill a condition Rejection(from offeror, may be expressed or implied) Destruction of subject matter Revocation(Withdrawal at any time before the letter is communicated, not

in England)



WHAT IS CONSIDERATION?

AT THE DESIRE OF PROMISOR, THE PROMISEE OR ANY OTHER PERSON HAS DONE SOMETHING OR ABSTAIN FROM DOING OR DOES OR ABSTAINS FROM DOING OR PROMISES TO DO OR ABSTAIN FROM DOING SOMETHING – SUCH ACT / ABSTINANCE IS CALLED CONSIDERATION FOR PROMISE

SEC. 2 (D)


ELEMENTS OF CONSIDERATION? Must be at the desire of promisor May be present future or past Need not be adequate. Must be real May be for doing something or for not doing something Should be valuable It should be certain and lawful

Exception to the rule ‘no consideration, no contract’

Agreement made an account of natural love and affection

Promise to compensate voluntary services A completed gift Agency Remission Contribution to charity


Privity of contract

A person who is not a party to a contract can not claim any rights under the contract even though contract may be for his benefit. Such person is known as a stranger to the contract.



If I tell a police officer to protect me and in exchange to that I offer to pay him Rs. 5000. Is it valid consideration? It is the duty of police officer to protect.

Therefore such consideration is not valid.


I tell Jitendra to give me his house and in return I promise to show him an elephant with horns. Is it a valid consideration? No – we know that elephent with horn is not

possible – so this is not a valid consideration.


Which are the agreements, which are valid without consideration? Based on natural love Based on past voluntary services Time barred debt Gifts (In other cases, agreement without

consideration is void as per section 25).


A husband promises to give his car to his wife without consideration. Is this agreement valid? Yes – based on natural love


There was an agreement between Ram and Shyam, can Hari go to court to enforce this agreement? In some cases third party can also go to the

court to enforce the agreement. These are the matters where third party is involved in the matter as beneficiary.


When can third party sue for agrement?

Beneficiary in the case of trust A female member in the case of HUF

agremeents for provision of marriange expenses

In cse of estoppel by acknowledgement Where benefit from contract have been

assigned to some other person

Contractual Capacity

Age of maturity Sound mind Not disqualified by law to which they are

subject


A Minors

Indian Majority Act 1875-the age of majority is18 yrs

If a guardian appointed by a court then the age of majority is 21 yrs


Effect of minors agreement

No estoppels against minor No liability in contract Doctrine of restitution Beneficial contract Ratification(can’t be made valid by subsequent

ratification) Liability for necessaries Person of unsound mind Liabilities for necessary


THANKS

Sachin Raj Singh Chauhan

Researching The World

BUSINESS LAW. WHAT IS A CONTRACT? An agreement enforceable by law (Section 2 (h) contract act 1872.

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Transcript of BUSINESS LAW. WHAT IS A CONTRACT? An agreement enforceable by law (Section 2 (h) contract act 1872.