INDIAN CONTRACT ACT “1872”BY: Saurabh sen sky

AGREEMENT “Every promise and every set of promises

forming consideration for each other, is an agreement”

{Sec 2(e)}

AGREEMENT= OFFER+ACCEPTANCE

CONTRACT { MEANING} The term contract is used to denote an

agreement or a promise made by two or more persons.

A contract is an agreement. The agreement is enforceable by law.

CONTRACT {DEFINITION} According to {Sec2(h)} of the act “ An

agreement enforceable by law is a contract”

CONTRACT=AGREEMENT+ENFORCEABILITY OF

AGREEMENT

“ A contract is an agreement creating and defining the obligations between the parties”

“SIR SALMOND J.”

ENFORCEABILITY OF THE AGREEMENT Every agreement is not a contract. An

agreement enforceable by law is a contract. An agreement is enforceable by law only when it creates legal rights and obligations of the parties.

ESSENTIALS/ CHARACTERISTICS Plurality of parties Offer and acceptance Intention to create legal relations Contractual capacity Consent Free consent Lawful consideration Lawful object Certainty of meaning Possibility of performance Agreement must not be expressly declared void Legal formalities

DEFINITION OF OFFER {Sec2(a)} “ when one person signifies to

another willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to such act. Hence he is said to make a proposal.”

TYPES OF OFFERS Types of offers

On the basis of On the basis of On the basis of

Mode Offerees Nature

Express offer Specific offer Cross offer

Implied offer General offer Counter offer

Standing offer

DEFINITION OF ACCEPTANCE {sec.2(b)} “ when the person to whom the

proposal is made signifies his assent thereto, the proposal is said to be accepted.”

A proposal when accepted becomes a promise.

CAPACITY TO CONTRACT (Sec.10) “Capacity to contract means legal

capacity of parties to enter into a contract”

WHO ARE COMPETENT TO CONTRACT (SEC 11) Major Sound Mind Not disqualified by any law.

WHO ARE NOT COMPETENT TO CONTRACT Minors Unsound Minds Disqualified by any Law

MINORS(Sec 3) “A minor is a person who has not

completed 18 years of age”. But the same act also mention's that in the following two cases a person attains majority only after we completes his age of 21 years.

Where a court has appointed guardian of a minors person or property.

Where the minors property has been placed under the superintendence.

UNSOUND MINDSec 12 “A person is said to be of sound mind

for the purpose of making a contract if at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interest”.

TYPES OF PERSONS OF UNSOUND MIND Idiot Lunatic Drunken Senile person

PERSONS DISQUALIFIED BY LAWThere are certain persons who are disqualified

from contracting by the other laws of our country. They are as under :

Foreign Enemy Privileged persons (a) President (b) Prime Minister (c) Mantri’s Artificial Persons Insolvent Convict

FREE CONSENT Sec 14 “Free Consent is the consent given by

the will of the parties and not caused by any form of physical or mental force or any kind of mistake”. Consent is said to be free when it is not caused by

COERCION 15

UNDUE INFLUENCE

16

FRAUD 17

MISREPRESENTATIO

N 18

MISTAKE 20,21.22

COERCION Coercion means and includes the use or

threatening to use the physical force against person or property, to compel him to enter into a contract.

UNDUE INFLUENCE When a dominant party misuses his influence

to dominate the will of weaker party, to get unfair advantage, in a contract, the contract is said to be influenced by undue influence.

FRAUD Fraud is the intentional misrepresentation of

material fact of an agreement by a party to or by his agent with an intention to deceive or induce the other party to enter in an agreement.

MISREPRESENTATION Any innocent or unintentional of false

statement of fact made by one party to the other during the course of negotiation is called Misrepresentation.

MISTAKE Mistake is a misunderstanding about

something when the consent of both the parties to a contract is caused by misconception belief, the contract is said to be induced by mistake.

LAWFUL OBJECTAny agreement for an unlawful object is void.

If Agreement is forbidden by law. If it defeats the provision by any law. Fraud. If it involve injury to the person or property of

another. Immoral. Against public policy.

AGREEMENT NOT EXPRESSLY DECLARED VOID Agreement by incompetent person.(SEC 11) Agreement made under mistake.(SEC 20) Agreement of which the consideration or the

object is unlawful.(SEC 23) Agreement of which the consideration or the

object is unlawful in part and cannot be separated in lawful part.(SEC 24)

Agreement made without consideration(SEC2 25) Agreement in the restraint of marriage.(SEC 26) Agreement in the restraint of trade.(SEC 27) Agreement in the restraint of legal proceedings.

(SEC 28)

CONTINUE…. Agreement the meaning of which is

uncertain.(SEC 29) Agreement by way of wager.(SEC 30) Agreement on impossible event.(SEC 32) Agreement to do impossible act.(SEC 56) Reciprocal promises to do thing illegal.(SEC

21)

BASIS OF DISTINCTION

FRAUD MISREPRESENTATION

MEANING A deceptive act done intentionally by one party in order to influence the other party to enter into the contract is known as Fraud.

The representation of a misstatement, made innocently, which persuades other party to enter into the contract, is known as misrepresentation.

Defined in Section 2 (17) of the Indian Contract Act, 1872

Section 2 (18) of the Indian Contract Act, 1872

Purpose to deceive the other party

Yes NO

Variation in extent of truth

In a fraud, the party making the representation knows that the statement is not true.

In misrepresentation, the party making the representation believes the statement made by him is true, which subsequently turned out as false.

Claim The aggrieved party, has the right to claim for damages.

The aggrieved party has no right to sue the other party for damages.

TYPES OF CONTRACTS/AGREEMENT

On the basis of On the basis of On the basis of Enforceability Mode of Formation Execution

Valid Agreement Express Contract Executed ContractVoid Agreement Implied Contract Executory ContractVoid Contract Quasi ContractVoidable ContractIllegal AgreementUnenforceable Contract

DISCHARGE OF CONTRACT A contract is discharged when parties to a

contract no longer have no obligation under the contract.

MODES OF DISCHARGE OF CONTRACT By performance By agreement or consent By lapse of time By operation of law By impossibility of performance By breach of contract

BY PERFORMANCE

ACTUAL

ATTEMPTE

D

NOVATION

ALTERATION

REMISSIONRESCISSION

WAIVER

DISCHARGE BY MUTUAL AGREEMENT

BY LAPSE OF TIME When a contract is to be performed within a

stipulated time period and a party does not perform it within that time, the contract is discharged by lapse of time.

BY OPERATION OF LAW

BY OPERATION OF LAW

BY IMPOSSIBILITY OF PERFORMANCE

Initial Subsequent

BY BREACH OF CONTRACT Breach of contract means refusal or failure fo

any one party to perform his contractual obligations.

Types of breach of contract:- Actual breach Anticipatory breach

REMEDIES FOR BREACH OF CONTRACT

Suit for rescissio

n

Suit for damages

Suit for quantum meruit

Suit for specific

performance

Suit for injunctio

n

INDEMNITY CONTRACT  A contract where one party promises to save

the other from any loss caused to him by the conduct of promissor himself or any other person is called contract of indemnity, (Section 124) Indian Contract Act, 1872.

Indemnity contract includes two parties namely; Indemnifier and Indemnity holder. The person who is promising to pay compensation is called Indemnifier and the person who`s loss is compensated is called Indemnity holder

EXAMPLE Example: There is a contract between X and

Y according to which X has to Sell a tape recorder (which is selected) to Y after three months. On the next day of their contract Z has come to X and has insisted on selling the same tape recorder to him (Z). Here Z is promising to compensate X for any loss faced by X, due to selling the tape recorder to Z. X has agreed. Now the contract which has got formed between X and Z is called indemnity contract, where Z is indemnifier and X is indemnity holder.

GUARANTEE CONTRACT A contract to perform the obligation or to

discharge the liability of a third party in case of its default is called contract of guarantee, (Section 126) Indian Contract Act, 1872.

Guarantee contract includes three parties namely; Creditor, Principal Debtor and Surety.

The person who is granting the loan is called creditors, the person who is utilizing the amount of loan is principal debtor and the person who is giving guarantee is called surety or guarantor

BAILMENT MEANING The bailment is derived from the word

“bailllier” which means to deliver.

BAILMENT DEFINITION Sec 148 “ Bailment is the delivery of goods

by one person to another for some purpose upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them”

PARTIES IN BAILMENT Bailor Bailee Sub-bailee

ESSENTIAL ELEMENTS Contract Goods Delivery of goods Purpose Return of goods Return of the same goods

DUTIES OF BAILOR Duty to deliver the goods To disclose faults in the goods To repay expenses To pay remuneration To receive back the goods

DUTIES OF BAILEE To take care of the goods bailed To indemnify in case of negligence Not to make unauthorised use of goods Not to mix the goods with his own goods To return the goods

RIGHTS OF BAILOR To claim damages To avoid the contract To require return of goods To claim increase or profit from the goods To enforce the rights

RIGHTS OF THE BAILEE To claim damages To claim necessary expenses Right to be indemnified To return goods To apply court to stop delivery

AGENCY MEANING An agency is the relationship between and

agent and his principal created by an express or implied agreement whereby an agent is authorised by his principal to represent him and establish contractual relations with third parties.

ESSENTIAL ELEMENTS Name of a relation Agreement Competence of the principal Consideration not necessary Free consent Intention to create contractual relations

DUTIES OF AGENT To conduct business according to the

directions given by the principal. To conduct the business with skill and

diligence. To compensate for neglect, misconduct etc. To render proper account. To communicate with principal

RIGHTS OF AN AGENT Right to retainer Right to receive remuneration Right of lien Right to be indemnified against

consequences of lawful acts Right to compensation Right of stoppage in transit.

NEGOTIABLE INSTRUMENT ACT “1881”UNIT-3

MEANING OF NEGOTIABLE INSTRUMENT The term negotiable instrument consist of

two words ‘Negotiable’ and ‘instrument’. Negotiable means transferable from one person to another and instrument means a written paper or document creating a right of a person to claim certain sum of money.

DEFINITION Acc to sec. 13(1) “a negotiable instrument

means a promissory note, bill of exchange or cheque payable either to order or to bearer”

CHARACTERISTICS Written instrument Signature Unconditional Transferable Certain sum Good title Payment in money

TYPES OF NEGOTIABLE INSTRUMENTS Promissory note Bill of exchange cheque

PROMISSORY NOTE Section 4 “A "promissory note" is an

instrument in writing (not being a bank-note or a currency-note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.”

CHARACTERISTICS Written Unconditional Signature Stamp Certain sum Payment in money Promise to pay

BILL OF EXCHANGE Section 5 “A "bill of exchange" is an

instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.”

CHARACTERISTICS Written Signature Stamp Unconditional Three parties Certain sum Order to pay

CHEQUE Section 6 “A cheque is bill of exchange

drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.”

CHARACTERISTICS Written Signature Drawn on a bank Unconditional Certain sum Payable in money Certain person

CROSSING OF CHEQUE  Crossing of a cheque means "Drawing Two

Parallel Lines" across the face of the cheque. Thus, crossing is necessary in order to have safety. Crossed cheques must de presented through the bank only because they are not paid at the counter.

TYPES OF CROSSING General crossing Specific crossing Restrictive crossing Not negotiable

HOLDER Holder has three characteristics :

1. Document is in hand.

2. He is entitled to receive the amount written on the document.

3. He is entitled to sue against the refusal.

HOLDER IN DUE COURSE 1. A holder in due course must have become a holder of the

instrument before the date of its maturity. He must be entitled to transfer it.

2. He must be a holder for a valuable consideration.

3. He must be valid holder of the instrument.

4. He must be a holder of the instrument in good faith.

5. Amount of document will be payable on that date when it will be presented.

6. He should be entitled to sue in case of refusal of payment.

7. He must have taken instrument complete and regular on the face of it.