Introduction to Contract

NLSIU

Classical contract theory: 3 threadsContract is a bargain

Will of parties [consensus ad idem-agreement]

Freedom of Contract is paramount

Development of Contract Law: PrinciplesLaw of obligations [vinculum juris]

Moral obligations contractual obligationsLaw of unjust enrichment

Law of restitution [Injurious reliance]

Courts in EnglandWrit of performance

Writ of debtWrit of covenant writ of deceit

Quid pro quo

Pacta sunt servanda

Freedom of contract ?

Contract as an instrument of free bargaining between parties on the basis of equality

Freedom: Need ?To determine the primary obligations of parties

To understand the inequality of bargaining power

To understand public utilities

Means of contractFormal and Informal contractsBilateral and Unilateral contracts

Contractual terms: Formation PerformanceContract may be oral or written. Representation

ExpressImpliedIntermediate termsTerms/ Expressed in writing

Conditions/warranties Implied by Statute terms by customary usage Standard form of contract

Object of Law of contractTo avoid litigation

To establish set of rules for compliance

To penalize defaulters

Point of LegalityValid ContractVoid Agreements : sec. 2(g)Voidable contracts:Illegal contracts

Law of torts and ContractMisfeasanceMalfeasanceNonfeasance

Would an action stand in Tort when the Contract is silentBlackpool and Fylde Aero Club v Black pool Borough Council 1990 WLR 1195 Reid v Rush Tompkin Group 1990: Car accident case.Winterbottom v Wright 1842 152 Eng Rep 402

Digital contracts

IssuesConceptual framework Rules governing e-contractsI T 2000Digital signatureE-auction

Issues in E-contractCalifornia Software Inc v Reliability Research Inc, 1356 [C D Cal, 1986]Beta Computers Ltd v Adobe Systems Ltd 1996 FSR 367TCS v State of A. PEuropean Commission and Product liability Shrink wrapClick-WrapProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir., 1996

Outsourcing ContractIssuesSections 13, 15 and 44A of the Indian Civil Procedure Code and Section 41 of the Indian Evidence Act, govern the conclusiveness and enforcement of foreign judgments in IndiaLiability of a software developer

Problems with E-contractTaxing E-commerce Copyright or Patent of software ? UK Electronic Commerce Act 2002Limitation of Digital Contracts

Indian Partnership

Essentials of Firm1. Association of two or more persons2. In pursuance of an agreement or contractRe Fisher and Sons 1912 2 KB 491: difference between Co-owners and partners 3. To combine property, labor or skill4. In a businessNew Mofussil Co v Rustomji 1936Coope v Eyre 17885. Carried on by all or any one of them on behalf of allFirm name/PropertyMiles v Clarke 1953 1 ALL ER 7796. With a View to share ProfitsDaulat Ram v Dharm Chand AIR 1934 Lah 110

Minor PartnerSec. 30(1): A person who is a minor according to the law to which he is subject may not be a partner in a firm, but with the consent of all partners for the time being, may be admitted to the benefits of partnershipA A Khan v Amer Karium AIR 1952 Mys 131Lachmi Narain v Beni Ram, AIR 1931 ALL 327Rights of minor: QuestionsTulsi das v Gangaram AIR 1925 Sund 272Satya Narain v Juggal Kishore AIR 1958 All 312]Minors liabilities sec. 30(3)(5)(7)(9)Sanyasi Charan Mandal v Asutosh Ghose 1915 42 Cal 225CIT v Vijay Kumar RajeshLiability of a minor after attaining majority

Types of partnershipPartnership at will : M O H Uduman v Ashurn AIR 1991 SC 1020: Karumuthu Thiagarajan Chettiar v Muthappa Chettiar AIR 1961 SC 1225Partnership for a fixed termParticular partnership : Limited Partnership : Partnership by Holding out Sleeping partnerNominal partnerWorking partners

Rights of a partner1. Joint ownership of partnership property2. Right to take part in the management [sec. 12]Suresh Kumar v Amrit Kumar AIR 1982 Del 131Right to Express opinion [sec. 12 c] Lord Fldon in Const v Harris 1824 said for a majority of partners to say, we do not care what one partner may say, we being the majority will do what we please is what a court of equity will not allow.Dismissal of a servantNew businessBlisset v Daniel 18533. Access accounts and act during emergencyRe Martindale ex Truman 1832

4. Right to profitMansa Ram v Tej Bhan AIR 1958 Punj 5 Delhi Veopar Mandal v IT Commissioner AIR 1967Dawood Sahib v Sheik Mohiuddin Sahib AIR 1938 5. No claim for interest of capital6. Right to indemnity sec. 13(e)Thomas v Atherton 1877

Rights of partners6. Right not to be expelled7. No new partner to be introduced: right to prevent8. No liability before joining unless with consent and expressly stated in the deed9. Right to retire: 3 ways

Nature of Liability of partnersJoint and several: sec. 25: every partner is liable jointly with all the other partners and also severally for all acts of the firm done while he is a partnerTestBenefit of the partnershipWithin the scope of authority

Malyn v John Houston 1903 1 KB 81Moreton v Harden 1825Citizens Life Assurance v Brown 1905R W Pathirana v Pathirana 1967 1 AC 233

Nature of Implied Authority1. Authority to purchase and sellBond v Gibson [1808] 2. power to recover money due to firm/ borrow money on credit: Higgins v Beauchamp 1914 2 KR 1992: 3. Authority to engage lawyers4. Authority to insure firm goods

Conditions for application of Implied authority1. Act must be done in the capacity of a partner: Gouthwaite v Duckworth [1810 104 ER 174]: 2. Act must be done on behalf of the firm and not on personal behalf3. Act must relate to activities within the scope of business4. Act must be done in the firms name

Does implied authority vary acc/ to type of partnershipLLP, Will the concept of mutual agency continue ?

Dissolution

Of partnershipof Firm

End of the termcompletion of business by death/insolvency by retirement

Dissolution of FirmWithout CourtBy AgreementCompulsory dissolutionDissolution on contingencyBy noticeBy CourtPersistent misconduct or disregard to partnership agreementUnsoundness of partnersBusiness at loss

Jurisdiction of the Courts to try dissolutionMD Hassen Hashmi v Kaberi Roy AIR 1993 Cal 70

Winding UpRight to continue businessGood willRestraint of trade

What is a proposal/offerI think I like your car and will try to buy itI saw an advertisement for the sale of your car, will you sell your car to me?I am willing to buy your car for a reasonable price. Are these Offer ?

Invitation to TreatAdvertisements: General OfferDisplay of goods for saleCarlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Harvey v Facey [1893] AC 552Will you sell us Bumper Hall pen, telegraph at what pricelowest price for the pen is 100Powell v Lee [1908] 99 L Y 284MC Pherson v Appanna [AIR 1951 SC 184] wont accept less than 10,000.

Modes of OfferTime tableTenders and Auctions [Harris v Nickerson]Restaurant menu cardATM or vending machines

Offer: CommunicationGibbons v Proctor 1891 64 LTN S 594 [Reward for a criminal]Lalman Sukla v Gouri Dutt 1913ALJ 4891[Missing boys case]Tim v Hoffman 1873, 29 L T 271: cross offer is no offer

Counter OfferProposal must be made to another person

Termination of OfferAn offer can be withdrawn at any time before it is accepted.Distinction between lapse of offer and revocationNotice, Death, incapacity, lapse of time Errington v Errington [1952] Father promises to son and daughter in law that if they pay mortgage amount of the property, the property would be theirs

AcceptanceAcceptance must be in toto: Mirror Image Rule Manner/mode of acceptance [sec. 7]

By an actpromiseIs Silence an acceptance ?Felthouse v Bindley 1862 11 CB 869.: Uncle tells his nephewIf I hear no more from you, the horse in mine.The nephew during an auction stated to the auctioneer to reserve the horse for his uncleSilence and thereafter a conduct of acceptance ?LIC of India v Vasireddy AIR 1984 SC 101427th Dec. 1960 filing of proposal for LICProposer died on 12th Jan 1961Can Acceptance be revoked ?

Acceptance: contdIs Communication of Acceptance essential?Acceptance through post: Mailbox ruleAdams v Lindsell [1818 1 B& Ald. 681.2/9/1817, defendants offered to sell a quantity of wool at a certain price and expected the answer by post, the letter reached the plaintiff on 5th, the same day, he posted the acceptance, which reached the defendants on 9th. The defendants waited till 7th and on 8th sold the same wool to another personIs there an acceptance ?Who can communicate the acceptance ?When is a unilateral contract accepted ?

When does the mailbox rule apply?Q. Is revocation of acceptance possible ?Henthorn v Fraser 1892Secretary signed a note giving option to purchase for 14 days at P-750, next day withdraws through post at 12-1.00 pm, claimant posts the acceptance on the same day between 3-4 pm.Which ever communication reaches first is valid

Offer and Acceptance: Where the contract is made?It determines the time of forming the contractIt stipulates the jurisdiction of the court; and It affixes the rights and obligations of parties

Is the contract complete at the instance and place of the acceptor or offeror?

Invitation to TreatAdvertisements: General OfferDisplay of goods for saleCarlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Harvey v Facey [1893] AC 552Will you sell us Bumper Hall pen, telegraph at what