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Assignment Set 1 Mb0035 Legal Aspects of Business 1. Explain

Assignment Set 1 Mb0035 Legal Aspects of Business 1. Explain

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ASSIGNMENT SET 1MB0035LEGAL ASPECTS OF BUSINESS1.Explain the essential of contract and acceptance.
All contracts are agreements but all agreements need not becontracts. The agreements that create legal obligations only arecontracts. The validity of an enforceable agreement depends uponwhether the agreement satisfies the essential requirements laid downin the Act. Section 10 lays down that ‘all the agreements are contractsif they are made by the free consent of the parties competent tocontract for a lawful object and are not hereby expressly declared tobe void’. The following are the essentials:
a) Agreement:
An agreement which is preliminary to everycontract is the outcome of offer and acceptance. An offer to do or notto do a particular act is made by one party and is accepted by theother to whom the offer is made. Then we say that there is a meetingof the minds of the parties. Such a position is known as consensus adidem.
b) Free consent:
The parties should agree upon the same thing inthe same sense and their consent should be free from all sorts of pressure. In other words it should not be caused by coercion, undueinfluence, misrepresentation, fraud or mistake.
c) Contractual capacity:
The parties entering into an agreementmust have legal competence. In other words, they must have attainedthe age of majority, should be of sound mind and should not bedisqualified under the law of the land. A contract entered into betweenthe parties having no legal capacity is nullity in the eyes of law.
d) Lawful consideration:
There must be consideration supportingevery contract. Consideration means something in return forsomething. It is the price for the promise. An agreement not supportedby consideration becomes a ‘nudum pactum’ i.e., naked agreement. The consideration should be lawful and adequate. However, there arecertain exceptions to this rule.
e) Lawful object:
The object or purpose of an agreement must belawful. It should not be forbidden by law, should not be fraudulent,should not cause injury to the person or property of another, shouldnot be immoral or against public policy.
f) Not expressly declared void:
The statute should not declarean agreement void. The Act itself has declared certain types of agreements as void. E.g., agreements in restraint of marriage, trade,legal proceedings. In such cases, the aggrieved party can’t seek anyrelief from the court of law.
g) Possibility of performance:
The agreement should be capableof being performed. e.g., Mr. A agrees with Mr. B to discover treasureby magic. Mr. B can’t seek redressal of the grievance if Mr. A fails toperform the promise.
h) Certainty of terms:
The terms of the agreement should becertain. E.g., Mr. A. agrees to sell 100 tons of oil. The agreement isvague as it does not mention the types of oil agreed to be sold.
i) Intention to create legal obligation:
Though Sec. 10 is silentabout this, under English law this happens to be an importantingredient. Therefore, Indian courts also recognize this ingredient. Anagreement creating social obligation can’t be enforced.
 j) Legal formalities:
Indian Contract Act deals with a simplecontract supported by consideration. Agreements made in India maybe oral or written. However, Sec. 10 states that where the statutestates that the contract should be in writing and should be witnessedor should be registered, the same must be observed. Otherwise, theagreement can’t be enforced e.g., Under Indian Companies Act, theMemorandum of Association and Articles of Association must beregistered.
According to
Sec. 2 (b) “When the person to whom the proposal ismade signifies his willingness thereto the proposal is said to beaccepted. A proposal, when accepted, becomes a promise
.”By accepting the offer, the acceptor expresses his willingness to bebound by the terms and conditions of the offer. Regarding an offer andits acceptance, Anson has given an analogy of a lighted match stick.
 Acceptance is to an offer what a lighted match is to a train of gunpowder. It produces something which can’t be recalled or undone
.”An acceptance turns the offer into a binding obligation.
Rules Regarding Acceptance:a) An offer can be accepted only by the person to whom it ismade:
The offeree only has to accept the offer. In case it is acceptedby any other person no agreement is formed. However, in case
authority is given to another person to accept the offer on behalf of theperson to whom it is made, it is a valid acceptance.
b) Acceptance should be unconditional and absolute:
Sec. 7(I) states that the acceptance should be absolute and unconditional. The acceptor should accept the offer in toto. If it is qualified orconditional, it ceases to be valid. In fact, a qualified or conditionalacceptance is nothing but a counter-offer.
c) Acceptance should be communicated:
The party acceptingthe offer must communicate his acceptance to the offeror. Acceptanceis not a mental resolve but some external manifestation. Theacceptance can be communicated in writing or word of mouth or alsoby conduct. An agreement does not result from a mere state of mind.As regards unilateral contracts (e.g., offer of reward) it is impossible tothe offeree to communicate his acceptance otherwise than byperforming the contract. In the case of bilateral contracts acceptancemust be communicated. The offeror can’t force a contract on offereeby fixing the mode of refusal. Further, acceptance should becommunicated only to the offeror and not to somebody else.
d) Acceptance should be according to the prescribed form:
Unless specified in the offer the acceptance must be in some usual andreasonable manner. The proposer has the right to prescribe themanner of acceptance. He may require it to be oral or in writing or tobe communicated to him by phone or telephone etc. He can also waivehis right or may ask the offeree to express acceptance by somegesture. Once he prescribes the mode of communication later he can’tsay that it was insufficient.If the offeree does not signify his assent to the offeror according to themode prescribed it becomes ‘deviated acceptance’ and strictlyspeaking it is no acceptance at all. However, such a regid rule is notfollowed in India. In the case of deviated acceptance the proposer mayinsist for the acceptance in the prescribed manner. He then has to dothis within a reasonable time after communication of acceptance tohim. Otherwise it will be presumed that the proposer has accepted thedeviated acceptance. Sec. 7 of the Act does not tell that deviatedacceptance is no acceptance.
e) Acceptance must be provoked by offer:
The acceptor mustbe aware of the offer. Even if he fulfills the conditions mentioned in theoffer, if he is ignorant of the offer itself, he can’t give a validacceptance. [
Lalmann Shukla V, Gouridutt 
f) Acceptance must be given before the offer lapses or isrevoked:
Where a time limit has been fixed the acceptor has to

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