General Principles of Law of Contract

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1. PROPOSAL:
ESSENTIALS
OF

3. PROMISE:
TYPES
OF PROMISES:

PROPOSAL:

Definite Certain Unequal Clear intention to be bound Communication.

Expressed Promise. Implied Promise. PROMISOR PROMISEE.

KINDS
1. 2. 3. 4. 5. 6.

OF

PROPOSAL: COMPLETION
OF COMMUNICATION OF PROPOSAL:

Express Proposal Implied Proposal Counter Proposal Cross Proposal Specific Proposal General Proposal.
OF

When proposal comes to the knowledge of the person to whom it is made.

COMPLETION

OF COMMUNICATION OF ACCEPTANCE:

TERMINATION
By By By By By By By By By

PROPOSAL:

1. POSTAL RULES:
As against the proposer, when it is put in the course of transit to him(Proposer) so as o be out of the power of the acceptor. 2. As against the Acceptor when it comes to the knowledge of the proposer.

revocation. Rejection counter offer lapse of time-period. failure of condition precedent. death/ insanity of proposer. mode of acceptance. destruction of subject matter. subsequent impossibility / illegality.
OF AN

COMPLETION OF COMMUNICATION REVOCATION:

OF

REVOCATION

ACCEPTANCE:

At any time, before communication of acceptance is complete as against the acceptor but not afterwards.

1. As against the person who makes it, when it is put into a course of transition to the person to whom it is made so as to be out of the power of the person who makes it. 2. As against the person to whom it is made, when it comes to his knowledge.

2. ACCEPTANCE :
ESSENTIALS
OF

ACCEPTANCE:

Mode of acceptance. Acceptance by performing conditions or receiving considerations.

CONSIDERATION:
Characteristics:
At the desire of the Promisor. Promissory Estoppel. Forms: Act Abstinence Promise. May from Promisee or any other person. Why consideration is necessary? Kinds: Past Present (Executed) Future (Executory). Not one sided but Bilateral.

ACCEPTANCE & SILENCE:

A mental determination or mere resolve

EXAMPLES:
Felt house Vs Nephew(Bindley). Telephone.

AGREEMENT:
Proposal + Acceptance = Promise + Consideration = Agreement.

TYPES

OF

AGREEMENTS:

Void Agreements: Not enforceable by Law. Contract: Enforceable by Law.

INVITATION

TO

TREAT:

Difference between Proposal & Invitation to Treat.

After Proposal, if a person is bound, = Proposal. After Proposal, if a person is not bound, = Invitation to Treat.

Examples:
Shop Displays. Advertisements Tender Notice. Auction.

CONSENT:
Based on consensus ad idem

FRAUD:
Deceive or induce other party to enter into a contract. 1. 2. 3. 4. 5. False statement. Concealment. Empty promise. Fitted Act. Declared Act.
AND

FREE CONSENT:
Not obtained by means of Coersion, Undue Influence, Fraud, Misrepresentation or Mistake.

COERSION:
CHARACTERISTICS: Physical Act. Type of physical pressure. May proceed from a third party. May employed against a 3rd person. Criminal Liability.

FRAUD

SILENCE:

GENERAL PRINCIPLE:
Duty to speak. Silence equivalent to speech.

MISREPRESENTATION:
False statement but true in the eyes of the provider. Unwarranted statements. Breach of Duty. Mistake about the subject matter.

UNDUE INFLUENCE:
Relation, Dominate the will.

SPECIFIC INSTANCES:
Real and apparent authority. Fiduciary relationship. Affected mental capacity. Onus of proof.

VOIDABILITY OF AGREEMENT FREE CONSENT:

EXCEPTION:
1. Discovery of truth. 2. Consent unaffected.

WITHOUT

CHARACTERISTICS:
Type of mental/physical pressure. May proceed only from contracting party. May employed only against contracting party. Onus of proof is on defendant.

CONSEQUENCES OF RECISSION VOIDABLE CONTRACTS:

OF

COERSION VS UNDUE INFLUENCE:

Nature. Unlawful/Unfair. Criminal Liability. Onus of Proof. By whom employed. On whom it may be employed. Relationship.

1. No liability on Promisor to perform after recission. 2. Restitution. (Return the benefits)

LOSS OF RIGHT OF RECISSION VOIDABLE CONTRACT:

OF

1. Affirmation. 2. Lapse of time period. 3. Rights of 3rd party. 4. Restitution impossible (e.g. Subject matter is destroyed).

VOID AGREEMENTS
INCOMPETENCY:
I).

A MINOR:

5. AGREEMENT WITHOUT CONSIDERATION.

EXCEPTION: 1. Natural Love & Affection. 2. Past voluntary services. 3. Time barred debt.

1. Age of minority. 2. Doctrine of equitable restitution. 3. No estoppels against minor. 4. No liability under either law of contract or law of tort. 5. Ratification. 6. Beneficial Contract.
II).

PERSON

OF UNSOUND MIND.

- X - ADEQUACY

OF CONSIDERATION

X-

EFFECT.
III).

6. RESTRAINT
PERSONS:

OF

DISQUALIFIED

EXCEPTION: Minor.
OF

MARRIAGE. TRADE.

An insolvent. An alien enemy. A Convict.

7. RESTRAINT 8. RESTRAINT

EXCEPTION: Sale of Goodwill.

OF

2. MISTAKE

OF

FACT.

EXCEPTION: Arbitration.

LEGAL PROCEEDINGS:

Error in consensus (Bilateral). Unilateral Mistakes. Mistake as to the identity of the party.

9. UNCERTAIN AGREEMENTS.
WAGERING AGREEMENTS & COLLATERAL TRANSACTIONS:
1. 2. 3. 4. 5. Definition. Uncertain events. Mutual chances of gain or loss. Control over event. No other interest.

3. MISTAKE

OF

LAW:

Mistake of foreign Law. Mistake of law of land.

4. UNLAWFUL AGREEMENTS:
Consideration and object unlawful Consideration and object unlawful in part.

10. IMPOSSIBLE ACT. 11. AGREEMENT

CONTINGENT ON IMPOSSIBLE EVENT.

CONTINGENT CONTRACTS
DEFINITION: RULES:
Happening of an event. Uncertain future event. Specified event within fixed time. Non happening of an event: Uncertain future Event. Specified event within fixed time. 3. Agreement contingent on impossible event. 4. Conduct of Person.

JOINT PROMISES
1. Performance of Joint Promises. 2. Any one of the Joint promisors may be compelled to perform. 3. Each promisor may compel contribution. 4. Sharing of loss by default in contribution. 5. Effect of release of any of the Joint Promisors. 6. Devolution of Joint Rights.

TIME & PLACE

OF

PERFORMANCE:

Time for performance of promise where: No application is to be made. No time is specified. Time & place for performance of promise: No application is to be made. Time is specified. Application for performance on certain day At proper time and proper place. Place for performance of promise where: No application is to be made. No place is fixed.

PERFORMANCE

OF A

CONTRACT:

Demand by Promisee only. i. Personal Nature. ii. General Nature. Performed by: Personal Nature: Promisor only. General Nature: Promisor A person employed by promisor. Death Legal Representatives. Person employed by legal representatives.

ESSENTIALS

OF A

CONTRACT:

1. Agreement. 2. Lawful consideration with lawful object. 3. Competency of parties. 4. Free consent of parties. 5. Enforceability.

PERFORMANCE OF RECIPROCAL PROMISES

DEFINITION: TYPES:
Independent reciprocal promises. Dependent reciprocal promises: Order of performance of RPs Expressly fixed Nature of transaction requires. Concurrent reciprocal promises. Subsequent voidability of RPs. Effect of default in contract consisting of RPs.

DOCTRINE
Definition:

OF

FRUSTRATION

Unlawful, illegal afterwards.

MAJOR INSTANCES:
Destruction of subject matter. Non-occurrence of an agreed event. Incapacity/Death of Party. Government / Legislative Intervention. Out break of War.

EFFECT

OF

DOCTRINE

OF

FRUSTRATION:

Automatic Termination. Restitution.

LIMITATIONS

TO

DOCTRINE

OF

FRUSTRATION:

VOIDABILITY: TIME:
TIME: ESSENCE
OF

CONTRACT (Voidable at the CONTRACT (Not

Knowledge of Party. Self-induced frustration.

option of promisee).

TIME: NOT ESSENCE

Voidable).

OF

GENERAL PRINCIPLES OF ACCEPTANCE:

Principle: Exception:

OF

COMMUNICATION

APPROPRIATION
Appropriation by:

OF

PAYMENTS

Debtor. Creditor. Operation of Law.

Postal rule. Unilateral Mistake. Waiver of Communication.

CONTRACT AN
FORMATION
1. 2. 3.
OF

OVERVIEW

TENDER
(Offer of performance)

CONTRACT:

Express Contract. Implied Contract. Quasi Contract (Unjust Enrichment)

ESSENTIALS
1. 2. 3. 4. 5. 6. 7.

FOR

TENDER:

ENFORCEABILITY

OF

CONTRACT:

1. Valid Contract. 2. Voidable Contract: Time essence of contract Right from the inception, on the ground of non-free consent. Voidable by subsequent default of one party.

Unconditional. Time and place of performance. Proper person. Reasonable opportunity. Inspection. Whole obligation. Joint Promises.
OF

EFFECT

NON-PERFORMANCE

OF

TENDER:

Promisor is not responsible Entitled to compensation.

3. Unenforceable Contract: Absence of writing. Registration. Time barred by law of limitation. Requisite stamp. 4. Void Contract: Instances: i. Uncertain future event. ii. Specified event with in fixed time. iii. Recission of voidable contract. iv. Frustration.

PERFORMANCE

OF

CONTRACT:

Executed Contract.(e.g. sale) Executory Contract(e.g. agreement to sale) Bilateral Contract (e.g. Contract of sale) Unilateral Contract (e.g. ) Collateral Contract (e.g. Carlill vs. Smoke ball Co.)

REPUDIATORY BREACH

OF

CONTRACT

A. ANTICIPATORY BREACH CONTRACT:

OF

B. ACTUAL BREACH

OF

CONTRACT:

(Before the time fixed for performance)

Exactly on the day of performance; or During the performance.

REMEDIES
CONTRACT:

AVAILABLE TO INNOCENT PARTY

IN CASE OF

ANTICIPATORY

BREACH OF

REMEDIES AVAILABLE TO INNOCENT PARTY IN CASE OF ACTUAL BREACH CONTRACT:

(Suit for) Damages:

OF

A. ACCEPTANCE OF BREACH (Immediate Legal Actions) Effect of acceptance of breach.

KINDS

OF DAMAGES:

B. AFFIRMATION

OF CONTRACT

(Wait & See)

Effects of Affirmation. EFFECTS

OF

ANTICIPATORY BREACH

OF

CONTRACT

Voidable at the option of innocent party.

Nominal (small)-nothing happened Ordinary (Usually happened) Special (Time) Liquidated (Agreed) Remote Penalty Duty to mitigate(to lessen) i.e. mitigation of losses Punitive / Exemplary (Punishment) (Suit for) Specific Performance. (Suit upon) Quantum Meruit. (Suit for) Injunction.

TERMINATION / DISCHARGE CONTRACT

A. BY PERFORMANCE
1. Actual Performance 2. Attempted Performance.

OF

ESSENTIALS OF COERSION, UNDUE INFLUENCE, MISREPRESENTATION, FRAUD: -------X-------X-------X-----CONTRACTS WHICH PERFORMED:

1. 2. 3. 4. 5. 6.
NEED NOT TO BE

B. BY AGREEMENT:
Novation New contract is substituted, parties may change. ii. Alteration change in material terms of contract, same parties. iii. Remission Acceptance of lesser sum/fulfillment than actually contracted iv. Satisfaction fit in exchange of original consideration.

i.

Rescission. Novation. Alteration. Remission. Satisfaction. Refusal to provide reasonable facilities. 7. Rescission of voidable contracts.

QUASI CONTRACTS:
(Unjust enrichment) Introduction. Supply of necessities (incapable person) Payment by interested persons. Non-gratuitous Acts. Finder of Goods. Payment under mistake or Coersion.

C. REFUSAL TO FACILITIES. D. RESCISSION

PROVIDE

REASONABLE

OF

VOIDABLE CONTRACT.

E. BY FRUSTRATIONS (AUTOMATIC TERMINATION) F. BY G. BY

OPERATION OF BREACH OF

LAW.
BITTER

WAY OF

CONTRACT (MOST DISCHARGE).

Anticipatory Breach of Contract. Actual Breach of Contract.

RESTITUTION:

Restoring benefits or compensate otherwise. WHEN

RESTITUTION IS POSSIBLE:

1. Rescission of voidable contract. 2. Discovered to be void agreement. 3. Frustration.

BAILMENT
Parties of Bailment: Bailor Bailee Essentials of Bailment:
Delivery of Goods (Transfer of possession) Actual Delivery. Constructive/Symbolic Delivery. Purpose. Condition.

Rights of Bailee:
Right Right Right Right to to to to necessary expenses. compensation. sue wrong-doer. Lien. Particular Lien (Skills) General Lien: o Bankers. o Factors. o Wharfingers. o Attorneys of High Court. o Policy Brokers o Any other person by making special contract.

Kinds of Bailment:
Gratuitous Bailment. No consideration, No responsibility. Non- Gratuitous Bailment. Consideration + Responsibility. (Bailment for Hire).

Duties of Bailor:
Duty to disclose: o Bailment for hire (Non-gratuitous) o Gratuitous Bailment. Duty to repay necessary expenses in case of gratuitous bailment. Duty to repay extraordinary damages in case of non-gratuitous bailment. Duty to Indemnify Bailee (due to defective title) Duty to receive back the goods.

Duties of Bailee:
Duty of Care. Duty not to make unauthorized use. Duty not to mix. Separable Mixing. Inseparable mixing Duty not to setup adverse title. Duty to return. Duty to return increase.

Termination of Bailment:
1. 2. 3. 4. By notice (in gratuitous bailment) By death (in gratuitous bailment) By inconsistent use. Automatic Termination.

Finder of Goods:
Right of retainer. Right to sue. Right to sell.

PLEDGE
Parties:
1. 2. Pawnor Pawnee

INDEMNITY
Parties:
i. ii. Indemnifier Indemnified

Rights of Pawnee:
Right to retain Right to extraordinary expenses Rights in case of Pawners default; Right to sue Right to sell Subsequent advances

Rights of Indemnified when sued:

Right to damages Right to costs Right to sums

Rights of Indemnifier:
Right of subrogation

Right of defaulting Pawner:

1. Right to redeem

Doctrine of Privity of Contract: Pledge by Non-Owner:

Mercantile agent Person in possession under voidable contract Person having limited interest (Only parties to a contract can sue & can be sued on that contract) Privity of Contract means relationship subsisting b/w the parties who have entered into contractual obligations. It implies a mutuality of will and creates legal bond or tie b/w the parties to a contract

GUARANTEE
Parties:
Surety Creditor Principal debtor

Discharge of Surety:
By Performance. By Revocation. By Notice. By death of surety. By variance. By release (of principal debtor) By Act or omission. By composition. By Extension of time period. By promise not to sue. By loss of security. By impairing surety remedy. By Novation.

Consideration of Guarantee: Nature and extent of Guarantee:

Limited: Unlimited: Coextensive with debtor.

Kinds of Guarantee:
Specific Guarantee Continuing Guarantee

Termination/Revocation of Guarantee:
By notice By death of surety

When surety is discharged due to Acts of Creditors:

By By By By By By By By variance. release(of principal debtor) act or omission (of creditors) composition. extension of time. promise not to sue. loss of security. impairing surety remedy.

Invalid Guarantee:
By misrepresentation By concealment Failure of co-surety to join

Rights of Surety: Against Creditor:

Right to securities Right to set-off Right to Quia-Timet action

When a surety is not discharged due to acts of creditor:

Extension of time (with 3rd P) Forbearance to sue (other than CG) Release of co-surety

Against principal debtor

i. ii. Right to indemnify Right of subrogation

Difference between Indemnity and Guarantee:

No of Parties. No. of contracts. Formation of contracts. Object of contract. At the request. Nature of liability. Commencement of liability. Right to sue.

Against co-sureties
Right to contributions

AGENCY
PARTIES:
1. Principal 2. Agent

DUTIES

OF

AGENT:

AUTHORITY

OF AN

AGENT:

Actual authority (Express + Implied + Extent of actual authority) Ostensible Authority/ Apparent Authority. Authority in emergency.

Duty Duty Duty Duty Duty Duty Duty Duty Duty

to execute mandate. to follow instructions/customs. to communicate. of care and skill. to avoid conflict of interest. not to make secret profits. to remit sums. to maintain accounts. not to delegate. Delegatus non-potest delegare (A delegate cannot delegate)

WHERE

AGENT EXCEEDS HIS AUTHORITY:

Separable transaction. Inseparable transactions.

Duty in selecting substituted Agent. Duty in case of Death of Principal.

CHARACTERISTICS

OF

AGENTS:

RIGHTS
1. 2. 3. 4. 5.

OF

AGENTS:
remuneration. retain. particular Lien. indemnity(Lawful acts) indemnity (Acts in good compensation.

Representative character. Delegated Authority.

IRREVOCABLE AGENCY [SEC-202]

1. Agency coupled with interest. 2. Authority partly exercised. 3. Personal liability incurred by Agent.

Right to Right to Right of Right to Right to faith) 6. Right to

DUTIES
1. 2. 3. 4.

OF

PRINCIPAL:
to to to to pay. indemnity (lawful act) indemnity (Acts in good faith) compensate.

TERMINATION

OF

AGENCY:

By acts of Parties: By mutual agreement. Revocation by Principal. Renunciation by Agent. By Operation of Law: By By By By By By By completion of business. expiry of time period. death of Principal or Debtor. insanity of Principal or Debtor. insolvency of Principal. destruction of subject matter. subsequent impossibility / illegality.

Duty Duty Duty Duty

OF

RIGHTS

PRINCIPAL:

Right Right Right Right Right Right Right

to revoke. in case of departure. in case of misconduct. to refuse remunerations. to accounts. to repudiate to claim benefits.

RATIFICATION:
(Doctrine of Relating Back) Ex Pos Facto Agency (Agency arising after the events)

SUB AGENT: APPOINTMENT

OF

SUB AGENT:

REQUIREMENTS:
On behalf of another. Competency of principal. What acts may be ratified? (Lawful acts) Knowledge of facts. Whole transaction. Time period. Damage to 3rd party.

Principals consent. Nature of work. Trade custom.

EFFECT OF IMPROPER AGENT:

APPOINTMENT OF

SUB-

EFFECTS:
1. Agency. 2. Contract with 3rd party.

1. Principal is not bounded by such appointment. 2. Principal is not bounded by the acts of Sub-Agent. 3. Sub Agent is responsible to Principal for any act of such person.

EFFECTS

OF

PROPER APPOINTMENT:

LIMITATIONS:
1. 2. 3. 4. Principal not existent Incompetent principal Void Contract. Half term actions. 5. Damage to 3rd party.

1. Principal represented by Sub-Agent. 2. Prievity of contracts (So cant except fraud and willful wrong) 3. Agents responsibility. 4. Sub-Agents liability (Not directly liable to principal except fraud and willful wrong)

CREATION

OF

AGENCY:

PERSONAL LIABILITY

OF

AGENT:

Agency by: Express Agreement (Power of Attorney) Special PoA General PoA Implied Agreement. Agency by estoppel. Agency by holding out. Agency by necessity(3 Requirements) Ratification without notice to the principal Operation of Law. (All partners are agents)

General Principal: (Not liable to 3rd party for contract on behalf of principal) Exceptions of General Principals: 1. Foreign Principal. 2. Undisclosed Principal (Definitely liable to 3rd person as being Principal in case of undisclosed principal) 3. Incompetent or non-existent principal.

WHERE AGENT EXCEEDS

HIS AUTHORITY?

(Personally liable to 3P for excess part of it in case of separable) Agency coupled with interest (interest in subject matter, liable to 3rd P to the extent of interest ) Customs or usage of trade (Indicates the A should be liable, he must) Pretended Agent( misrepresentation as Agent of other, other not rescinded, A liable for loss to 3rd Party) Improperly appointed Sub-Agent (liable to 3rd P for acts of improper SA)

Revocation of Agency [Sec-203]

Compensation for revocation by principal or Renunciation.[sec205] Notice of Revocation.[sec-206] Revocation : Either Expressed or Implied.[sec-207] When revocation becomes effective. [sec-208]

[SEC-194] SUBSTITUTED AGENT [SEC-195] DUTY IN SELECTING SUBSTITUTED AGENT