Law of contract

CONTRACT

Contract:

Definition of Contract by Pollack

“every agreement and promise enforceable at law is contract.”

Contract Act

Definition of Contract by Salmond

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

Contract Act

Definition of Contract u/s 2(h)

“An agreement enforceable by law is a Contract.”

Enforceability:

An agreement is enforceable if it is recognized by court. In order to be enforceable by law, the agreement must create legal obligations between the parties.

Types of Agreement: Social Agreement: Social agreement

are not enforceable because they do not create legal obligations between the parties.

Example: invitation for dinner

Legal Agreement: Legal agreement are enforceable because they create legal obligations between the parties.

Example: “A” promise to sell his car to “B”

Contract Act

Contract = Agreement + Enforceability

Agreement = Offer + Acceptance

Enforceability = Legal obligations b/w parties

ESSENTIALS OF VALID CONTRACT

Offer and Acceptance Legal Obligation Lawful Consideration Capacity of Parties Free Consent

Lawful Object In Writing and

Registration Certainty of Terms Possibility of

Performance Not expressly

declared void



• Offer and Acceptance

For an agreement, there must be a lawful offer by one party and lawful Acceptance of that offer by other party. The term lawful means that the offer and acceptance must satisfy the requirements of contract act.

Example:

“A” offers to sell his cycle to “B” for Rs.45000, This is an offer, if “B” accepts this offer there is an acceptance.

Legal obligation:The parties to an agreement must create legal

obligations. It means that if one party does not fulfill his promise, he shall be liable for breach of contract.

Example: “A” offers to “B” to sell his home for Rs.2

Million, It is a contract as it creates legal obligation.



Lawful Consideration:For a valid contract, consideration must

be lawful, Consideration is the price paid by one party for the promise of the other party. A contract is enforceable only when both the parties give and take something. That something given or taken is called consideration.

Example: “A” promises to sell his car to “B” for 1 million, For “A” the 1 million is consideration and for “B” car is the consideration.


Capacity of Parties: An agreement is enforceable if it is made

by parties who are the competent to contract. To be competent to contract, it is essential that the parties are of the age of majority, have sound mind etc.

Example:“M” a person of unsound mind agree to

sells his house to “S” for Rs 2 lacs. It is not a valid contract because “M” is unsound.


Free Consent:For a valid contract, it is essential that the

consent of parties must be free, Consent is free when it is not obtained by force, undue influence, fraud, mispresentation or any kind of mistakes,

If the consent of either party is not free, the agreement cannot become a contract.

Example: “A” forced “B” at gun point to enter into a contract.


Lawful Objects: It is necessary that agreement is made for a lawful object. The object of contract must not be illegal, immoral, opposed to public policy. Every agreement with unlawful object is illegal and therefore contract is void.

Example: “A” hires a house to use for gambling.

The object of agreement is illegal and void.

Writing and Registration :

A contract may be oral or in writing, It is preferable that the contract be in writing because it is easy to prove in court.


Certainty of Terms: The terms and conditions of a contract

must be clear, complete and certain. If the terms are uncertain the agreement is void.

Example: “A” promises to sell 200 books to “B”

without specifying their titles. The agreement is void because the terms are not clear.



Possibility of Performance: A valid contract must be capable of being

performed, An agreement to do an impossible act is void. If the act is legally or physically impossible to perform, the agreement cannot be enforced by law.

Example;“A” agrees with “B” to discover a treasure

by magic, the agreement is not enforceable.

KINDS OF CONTRACT:

There are four types of contracts.

1: According to Enforceability. 2: According to Formation. 3: According to Performance. 4: According to Parties.

KINDS OF CONTRACT: 1: According to Enforceability:According to enforceability, a contract can

be divided as under;

a: Valid Contract. b: Void Contract. c: Void Agreement. e: Unenforceable contract. f. Illegal Agreement.

KINDS OF CONTRACT: 1: According to Enforceability: a: Valid Contract: A valid contract is enforceable by law, An

agreement becomes enforceable by law when all the essentials of a valid contract are present.

Obligations of Parties:In a valid contract, all parties are legally

responsible for the performance of the contract, if one of the parties breaches the contract, the other party can enforce it through court of law.

Example: If “A” agrees to sell a car to “B”, if it fulfills all the essentials of a contract, it is a valid contract, If “A” fails to deliver the car, “B” can sue him and if “B” fails to pay, A can sue him.

KINDS OF CONTRACT: 1: According to Enforceability: b: Void Contract: The term void

means not binding by the law. A contract which is not enforceable by law is a void contract.

Obligations of Parties:A contract becomes void due to

impossibility to performance. A contract becomes void before performance when it becomes impossible to be performed by any party due to following reasons.

KINDS OF CONTRACT:A contract becomes “void” before performance when it becomes impossible to be performed by any party due to following reasons.Impossibility to performanceSubsequently illegalityRejection of voidable contractImpossibility of depending event

KINDS OF CONTRACT: 1: According to Enforceability: c : Void Agreement: An agreement

not enforceable by law is said to be void. The void agreement does not creates any legal obligations on among parties. An agreement which is void from the beginning is void agreement.

Example: “A” promise to buy a cow from “B” for 25000Rs/= .The cow was dead before the contract. Both parties were unaware. The agreement is void.

KINDS OF CONTRACT: 1: According to Enforceability: d: Voidable Contract:

It is voidable contract when the consent of one of the parties is not free, contract which has been made on by using false means, through fraud and mispresentation.

Example: “D” forced “Q” to sell his car at gunpoint.

“A” deceives “B” by stating that his factory produces 10 million kg of sugar monthly and induces “B” to buy it. The contract is voidable at the option of “B”.

KINDS OF CONTRACT: 1: According to Enforceability: e: Unenforceable contract: An

unenforceable contract is that contract which cannot be enforced in a court of law because of some technical defects and faults such as absence of writing, registration, requisite stamp etc.

Example: “A” borrow Rs. 1 billion from “B” and makes a pronote on a Rs.10 stamp paper, it is unenforceable because pronote is undervalued.

KINDS OF CONTRACT: 1: According to Enforceability: f: illegal Agreement: An agreement

is illegal when its performance is forbidden by any law. Such an agreement can never become a contract. An agreement is illegal and void if it is forbidden by law or is of such a nature that if permitted.

Example: “A” gives “B” money to buy smuggling goods, The agreement is illegal and the money cannot be recovered.

2: According to Formation: According to Formation a contract has the following three kinds.

Express Contract.Implied Contract.Quasi Contract.

KINDS OF CONTRACT:

KINDS OF CONTRACT: 2: According to Formation:

Express Contract : Express contract is one which is expressed in words spoken or written. When such a contract is formed, there is no difficulty in understanding the rights, terms, obligations and conditions of a contract.

Example: “A” gives his house on rent to “B”, on per month 10000 Rs and for one year of period, “A” mentioned terms and condition on a paper.

2: According to Formation:

Implied Contract: An implied contract is made without any words spoken and written, It arise from acts, conduct of parties, course of dealing or circumstances.

Example: “A” went into a restaurant and had a cup of tea. It is implied contract that A will pay for the cup of tea

KINDS OF CONTRACT:

2: According to Formation:

Quasi Contract: In a quasi contract, the law imposes

certain obligations under some special circumstances. It is based upon the principle of equity that a person shall not get allowed to get benefit at the cost of another.

Example: “A” finds lost goods of “B” . “A” is bound legally to return goods back to “B”.

KINDS OF CONTRACT:

3: According to Performance: According to performance a contract is of

following two kinds.

Executed Contract Executory Contract

KINDS OF CONTRACT:

3: According to Performance: Executed Contract : A contract is said to be

executed when both the parties have completely performed their obligations. It means that nothing remains to be done by either party under the contract.

Example: “A” buys a book from “B” . “A” delivers

the books “B” pays the price. It is an executed contract.

KINDS OF CONTRACT:

3: According to Performance: Executory Contract :

In an executory contract something remains to be done. In other words, a contract is said to be executory when both parties to a contract have yet to perform their obligations.

Example:“M” sells his car to “N” for 1 million, “N”

has not yet paid and “M” has not delivered the car.

KINDS OF CONTRACT:

4. According to Parties:

According to parties a contract may be of the following two kinds.

Unilateral Contract Bilateral Contract

KINDS OF CONTRACT:

4. According to Parties: Unilateral Contract: In a unilateral

contract only one party has commitment. In other words, it is a contract where only one party is bound but the other party chooses to be bound by it.

Example: A promises to pay Rs 10,000 to any one

who finds his lost beg, B finds the bag and returns to A, it is a unilateral contract which comes into existence when the bag is found.

KINDS OF CONTRACT:

4. According to Parties: Bilateral Contract: It is a contract where

both parties are bounded to perform certain duties, responsibilities and obligations.

Example: A promises to supply raw material and B promises to pay the price of raw materials to B.

KINDS OF CONTRACT:

Discharge of a Contract By Following modes in which a contract

may be discharged.

By Performance By Mutual Agreement By impossibility of Performance By Operation of Law By Breach

Discharge of a Contract

By Performance : When the parties to the contract have duly performed their respective promises undertaken by them, the contract comes to an end.


By Mutual Agreement:

A contract comes into being by the agreement

between two parties, therefore it may also be discharged by their mutual agreement and willingness.


By the impossibility to perform:

If the performance of contract becomes, or turns out to be, impossible, the parties to the contract are discharged from their respective obligations.


By Operation of Law:

Some times the performance of a contract is discharged by the operation of some law. For instance, is soon as a person is discharged by an order of court.


By Breach: When one party to the contract breaks

the contract by non performance of the promise or otherwise, the other party is discharged from his obligation under the contract and has right of action against the party responsible for the breach.

Law of contract

Law

Transcript of Law of contract