ESSENTIALS ELEMENTS OF VALID CONTRACT UNIT 1

• Offer and acceptance • Intention to create legal relationship • Ex: Balfour vs. Balfour • Ex: Weeks vs. Tybald • Lawful consideration • Quidproquo [something in return] • Capacity of parties • (a) minors (b) unsound mind (c) disqualified by law • Free consent • 1.Coercion2. undue influence3.fraud4.mis representation5.mistake • Lawful object • 1.It is forbidden by law • 2.It is fraudalent • 3.It involves any injury to person or property • 4.court regards it as immoral or oppposed to public policy • Certainty of meaningeat provisions of law • Possibility of performance • Not declared to be void • Legal formalities

• Classification of contracts

• Based on validity

• 1.valid

• Void

• Void agreements

• Voidable contracts

• Unenforceable contracts

• Illegal agreements

• B.formation • Express contracts • Implied contracts • Quasi contracts • E.com contracts c.Performance Executory contracts Executed uni lateral contracts Bilateral contracts

Offer and acceptance

• Kinds of offer

• 1.How made

• Express

• Implied

• 2.to whom made

• General offer

• Specific offer

Essentials of a valid offer

• 1.it must be capable of creating legal relations • Balfour vs balfour • 2.it must be certain ,definite and not vague • Taylor vs portington • 3.it must be communicated to the offeree • Lalman shukla vs gauri dutt • 4.It must be made with a view to obtain the assent of the other party. • Harris v nickerson • 5.it may be conditional • Thompson v l.m railway 1930 • 6.offer should not contain a term the non compliance of which would

amount to acceptance • 7.lapse of offer • 8.an invitation to offer is not an offer.

Essentials of a valid aceptance

• 1.acceptance must be absolute and unconditional

• Ex neele v mrritt(1930)

• 2.acceptance must be communicated to the offerer

• Ex felthouse v. bindley(1862)

• 3.acceptance must be made within a reasonable time

• 4.it must be according to the mode prescribed

• Ex surendranath v kedarnath (1936)

• 5.the acceptor must be aware of the proposal at the time of offer

• Ex lalman shukla vs gauri dutt

• 6.acceptance must be given before the offer lapses

• Union bank of india vs gopal chandra

• 7.acceptance cannot be implied from silence

• Ex brogdon vs metropolitan railway co (1877)

Communication of offer and acceptance and revocation

• Modes of revocation of offer

• 1.by notice of revocation

• 2.by lapse of time

• 3.by non fulfillment of condition precedent

• 4.by death or insanity

• 5.by counter offer

• 6.by the non acceptance of the offer according to the prescribed or usual mode

• 7.by subsequent illegality.

Unit II consideration

• Essentials of consideration

• 1.it must move at the desire of the promisor

• Case:durga prasad s baldeo

• Kedarnath vs gori mohammed

• 2.it must move from the promisee or any other person

• Case:chinnaya vs ramayya

• 3.consideration may be past present or future

• 4.it need not be adequate

• 5.consideration must be real

• 6.consideration must be lawful

• 7.it must be something which the promisor is not already bound to do

Stranger to contract exceptions

• Case:dunlop pneumatic tyre co vs selfridge and co

• 1.trust

• 2.where provision is made in a marriage settlement

• 3.where provision is made in a apartition or family settlement

• 4.where a charge is created in favour of a stranger on specific immovable property

• 5. Where the promisor has by his conduct privityof contract with the stranger

• 6.covenants running with the land. • No consideration _ no contract exceptions • 1.natural love and affection • 2.compensation for services rendered • 3.time barred debts • 4.completed gifts • 5.agency • 6.guarantee • 7.remission

Capacity of parties

• Rules regarding regarding minors agreeements • 1.agreement void ab initio • 2.no ratification • 3.can be a promisee or beneficiary • 4.no estoppel • 5.no specific performance • 6.liability for torts • 7.no insolvency • 8.partnership • 9.can be an agent • 10.cannot bind parent or guardian • 11.joint contract by minor and adult • 12.surety for a minor • 13 minor as a shareholder • 14.liability for necessaries

Persons of unsound mind

• Idiocy

• Lunacy

• Drunknenness

• Hypnotism

• Mental decay

Persons disqualified by law

• 1. alien enemies

• 2.foreign sovereigns and amy minors

• 3.insolvents

• 4.convict

• 5.corporations

• 6.married women

• 7.professional persons

Free consent

• Coercion

• Undue influence

• Fraud

• Misrepresentation

• Mistake

Coercion

• In simple words coercion is threat or force used by one party against another for compelling him to enter into an agreement.

• Ex:A threatens to shoot B a friend of c,if c does not let out his house to him c agrees to do so.The agreement has been brought by coercion.

Undue Influence

• Sometimes the parties to an agreement are so related to each other that one party is in a position to dominate the will of the other.

• Acc to sec 16(2)

• a.Where he holds a real or apparent authority over the other.ex:master servant,police officer and accused,Guru disciple.

• B.Where he stands in a fiduciary relationship to the other.

• C.Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by a reason of age ,illness or mental or bodily distress.

Fraud

The term fraud includes all acts committed

By a person with an intention to deceive

another person.

According sec 17

1.A flase suggestion as to a fact known to be false or not believed to be true.

Ex:peek v. gurney

2.The active concealment of fact by one having knowledge or belief of fact.

• 3.A promise made without any intention of performing it.

• Ex:shireen mall v john james taylor

• 4.Any other act fitted to deceive.

• 5.Any such act or omission as the law specially declared to be fraudulent.

• Mere silence is not fraud

Silence is fraud

• 1.Where the circumstances of the case are such that it is the duty of the person observing silence to speak .ex: contracts of utmost good faith.

• A. Fiduciary relationship

• B. contracts of insurance

• C. contracts of marriage

• D. contracts of family settlement

• E .share allotment contracts

• 2.Where the silence itself is eqivalent to speech

a. Half truth

b. Change of circumstances

Misrepresentation

• Misrepresentation means false representation made innocently with an honest belief as to its truth by a party without any intention to deceive the other party.

• Acc to sec 18 Indian contract act ,Mispresentation includes

• 1.positive assertion

• 2.any breach of duty with or without an intention to deceive the other party

• 3.causing however innocently a party to an agreement to make a mistake as to the substance of a thing which is the subject of an ageement.

Mistake

• Mistake of law: • Mistake of fact: • 1.Mistake as to the subject matter:Bilateral mistake

• A.Mistake as to the existence of the subject matter • B.Mistake as to the identity of subject matter • C.Mistake as to the title of the subject matter • D.Mistake as to the price of the subject matter • E.Mistakeas to the quantity of the subject matter • F.Mistake as to the quality of the subject matter

Mistake as to the possibility of performing the contract

• A.physical impossibility

• B.legal impossibility

Unilateral mistake

• A.mistake as to nature of the contract.

• B.mistake as to the identity of the person contracted with.

UNIT III LEGALITY OF OBJECT

• According to sec 23 of the Indian contract Act an agreement of which the object or consideration is unlawful is

void.Object means purpose or design of the contract. The consideration or the object of an agreement is unlawful in the

following cases: 1.If it is forbidden by law 2.It is of such a nature that if permitted it would defeat the provisions

of any law 3.If it is fraudulent 4.If it involves or implies injury to the person or property of another 5.If the court regards it as immoral 6.If the court regards it as being opposed to public policy

Agreements opposed to public policy

• 1.Trading with enemy • 2.stifling prosecutions • 3.Maintanance and champerty • 4.Traffic related to public offices • 5.Agreements tending to create interest opposed to

duty • 6.Marriage brokage agreements • 7. Agreements tending to create monopolies • 8.Agreements to influence elections to public offices • 9.Agreement in restraint of personal liberty • 10.agreements interfering with marital duties.

Agreements expressly declared to be void

• 1.Agreements made by incompetent parties • 2.Agreement made under mutual mistake of fact • 3.Agreement where consideration or object of which is

unlawful • 4.Agreement made without consideration • 5.Agreement in restraint of marriage • 6.Agreement in restraint of legal proceedings • 7.Agreement in retraint of trade • 8.Agreement the meaning of which is uncertain • 9.Agreements by way of wager • 10.Agreements to do impossible acts

Essentials of wagering agreement

• Definition:A wager may be defined as an agreement to pay money or moneys worth on the happening of a specified uncertain event.

• 1.There must be a promise to pay money or moneys worth • 2.promise must be conditional on an event happening or not

happening • 3.There must be uncertainity of event • 4.There must be two parties.one winner other loser • 5.There must be a common intention to bet at the time of making

such agreement • 6.parties should have no interest in the event except for stake.

Contingent contracts

• Definition:A contingent contract is a contract to do or not to do something , if some event collateral to such contract,does or does not happen.

• Ex:A contract to pay rs.10000 if B’s house is burnt.This is a contingent contract.

• 3 essential features of a contingent contract are:1.Performance depends upon happening or non happening in future of some event.

• 2.The event must be uncertain.

• 3.The event must be collateral i.e, incidental to the contract.

Rules regarding contingent contracts

• 1.Contingent contracts dependent on the happening of an uncertain future event cannot be enforced until the event has happened.

• Ex: A contracts to pay B a sum of money when B marries C.C dies without being married to B. The contract becomes void.

• 2.Where a contingent contract is to be performed if a particular event does not happen,its performance can be enforced when the happening of that event becomes impossible.

• Ex:A agrees to pay B a sum of money if a certain ship does not return.The ship is sunk.The contract can be enforced when the ship sinks.

• 3.If a contract is contingent upon how a person will act at an unspecified time, event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time ,or otherwise than under further contingencies.

• Ex:A agrees to pay B a sum of money if B marries C .C marries D.the marriage of B to C must now be considered impossible ,although it is possible that D may die and that C may afterwards marry B.

• 4.Contingent contracts to do or not to do anything, if a specified uncertain event happens within a fixed time, become void if the event does not happen or its happening becomes impossible before the expiry of that time.

• Ex:A promises to pay B a sum of money if a certain ship does not return within a year. The contract may be enforced if the ship does not return within the year, or is burnt within the year.

• 5.Contingent agreements to do or not to do anything, if an impossible event happens , are void ,whether or not the fact is known to the parties.

• Ex: A agrees to pay rs.1000 if two parallel lines are joined. The agreement is void.

Differences between wagering and contingent contracts

1. A wagering agreement consists of reciprocal promises where as a contingent contract may not contain reciprocal promises.

2. A wagering agreement is essentially of a contingent nature where as contingent contract may not be of wagering nature.

3. A wagering agreement is void where as a contingent contract is valid.

4. In a wagering agreement the parties have no interest in the subject matter of the agreement but it is not so in case of contingent contract.

5. In a wagering agreement the future event is the sole determining factor while in a contingent contract the future event is only collateral.

UNIT IV DISCHARGE OF CONTRACT

• Meaning:A contract is said to be discharged or terminated when the rights and obligations created by it are extinguished.

• The following are the various modes in which a contract may be discharged.

1. Discharge by agreement 2. Discharge by operation of law 3. Discharge by breach 4. Discharge by performance 5. Discharge by impossibility 6. Discharge by lapse of time

Discharge by agreement

1. Novation

2. Alteration

3. Rescission

4. Remission

5. Waiver

6. Accord and satisfaction

DISCHARGE BY OPERATION OF LAW

1. Insolvency 2. Merger 3. Alteration 4. Death DISCHARGE BY BREACH 1.Actual Breach a. When performance is actually due b. When actually performing the contract 2.Anticipatory breach of contract

DISCHARGE BY IMPOSSIBILITY OF PERFORMANCE

• Instances covered under supervening impossibility

1. Destruction of the subject matter

2. Death or personal incapacity

3. Change of law

4. Non existence or non occuring of a particular

State of things

5. Declaration of war

Exceptions to the principle of supervening impossibility

1. Difficulty of performance

2. Commercial impossiblity

3. Impossibility due to the failure of a third person whose work the promisor relied

4. Self induced impossibility

5. Failure of one of the subjects

6. Strikes ,lockouts, and civil disturbances

Effect of impossibility

1. Contract becomes void

2. Benefits to be restored

3. Compensation for non performance

1. Discharge by lapse of time:

REMEDIES FOR BREACH OF CONTRACT

1. Cancellation or rescission 2. Restitution 3. Specific performance 4. Injunction 5. Quantum meruit

Damages are four kinds: 1. General or ordinary damages 2. Special damages 3. vindictive damages or exemplary damages 4. Nominal damages

Damages are 10 kinds

1. section 73 of Indian contract act deals with the principles regarding the measure of damages.The rules as laid down are as follows:

1.Restitution 2.General damages 3.Special damages 4.Remote damages 5.Performance of obligations 6.Mitigation of loss 7.Liquidated damages 8.Vindictive damages 9.Damages in quasi contract 10.Difficulty of assessment.

SALE OF GOODS ACT 1930

• The sale of goods act 1930 deals with the law relating to sale of goods in India.

• “ contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to a buyer for a price.”sec 4

• Contract of sale : A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to a buyer for a price.

Contract of sale consists of the following

1. Sale or absolute sale 2. Agreement to sell or conditional sale Essentials of a contract of sale: 1.Valid contract 2.Two parties 3.Transfer the property 4.Goods a. Money b. actionable claims c. sale of immovable

property 5.Price

Sale and agreement to sell differences

1. Nature of contract

2. Transfer of property

3. Risk of loss

4. Consequences of the breach

5. Insolvency of the buyer

6. Insolvency of the seller

7. General and particular property

8. Right of re sale

Goods

• Existing goods

• 1.specific goods

• 2.ascertained goods

• 3.un ascertained goods

• Future goods

• Contingent goods

Rights of unpaid seller

• 1.Against the goods when the property is passed

• A. right of lien

• B. right of stoppage of goods in transit

• C. right of resale

• 2.Against the buyer personally

• A. right to sue for price

• B. right to sue for damages

• C.right to sue for interest

Differences between right of lien and right of stopage in transit

• Possession of goods

• Insolvency of the buyer

• Termination of right

• Process of right

• Essential element

Consequences of breach of the contract of sale

• Seller remedies 1. Suit for price 2. Suit for damages 3. Suit for interest 4. Suit for damages for repudiation of contract by the buyer before

the due date Buyers remedies: 1. Suit for damages for non delivery of the goods 2. Suit for specific performance 3. Suit for breach of warranty 4. Suit for damages for repudiation of contract by the seller before

due date 5. Suit for interest

Conditions and warranties

• Essentials of conditions

• 1 it is essential for the main purpose of contract

• 2.Non fulfilment may defeat the very purpose of contract

• 3. can repudiate the contract and claim damages

Essentials of warranty

• 1.It is collateral to the main purpose of contract

• 2.does not defeat the main purpose of contract

• Can claim damages but cannot repudiate the contract

Differences between condition and warranty

• 1.importance of contract

• 2.consequences of breach

• Option of treatment

• Types of conditions and warranties

• Express

• Implied

Implied conditions

1. Condition as to title

2. Sale by description

3. Sale by sample as well as description

4. Condition as to quality and fitness

5. Condition as to merchantability

6. Sale by sample

Implied warranties

• Implied warranty of quiet possession • Implied warranty of freedom from encumberances • Implied warranty annexed by usage of trade • Caveat emptor • “Let the buyer be aware” • Exceptions 1. Where the buyer relies on the skill and judgement of

the seller 2. Merchantable quality of goods 3. Consent by fraud 4. Usage of trade