Basics of Contract Act[1] | Offer And Acceptance | Damages

CONTRACT ACT

Basics of Contract Act

CONTRACT

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Meaning and definition of Contract & other relative terms such as Offer, Acceptance etc as per Contract Act,1872. Elements and classification of Contracts Relevant provisions of the Act & cases Communication & Revocation Discharge of Contract Remedies for breach of Contracts Precautions Special Contracts – agency; Contingent, minor, quasi, mortgage,

CONTRACT
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Agreement in daily life An Agreement is defined in section 2 (e) of the Act is - a promise . Promise – a proposal when accepted , becomes a promise. ( Sec 2 b). Agreement = Offer + Acceptance

i. illegal)  All contracts are agreement but all agreements are not contracts  .  AGREEMENT ENFORCEABLE IN LAW IS CONTRACT.  Contract : Agreement + enforceable by law.CONTRACT ACT Every Agreement is not a Contract. ( Social.e. legal obligations to do or abstaining from doing anything.

CONTRACT ACT The Contract Act is the law of those agreements which create obligation and there is a legal remedy for the breach thereof.  Legal Contracts creates “Rights in Personam” as distinguished from Rights in Rem i.  » Consensus-ad-idum . Rights against the whole world.e.

Misrepresentation (18) or Mistake ( 21-22) .  Section 10 : states elements of Contract which are – Agreement ( Offer+ Acceptance) » Two parties ( Promisor & Promisee) – Intention to create legal relationship – Free Consent ( Sec 13. Undue Influence(16). Fraud(17).CONTRACT ACT Essential of Contract:  Agreement & Legal Obligation .14) » Coercion(15).

cash. unsound mind. present. abstinence) – – – – – Lawful Object ( Not illegal/immoral) Agreements not declared void or illegal ( S 24-30) Certainty of Meaning (29) Possibility of performance Necessary Legal Formalities . disqualified by law – Lawful consideration » ( Past . kind. act. future.CONTRACT ACT  Elements of Contract : – Parties competent to Contracts » Minor.

Unilateral.CONTRACT ACT Classification/Types of Contracts:  Classification according to Enforceability : – Valid. Void & Voidable. Unenforceable » Valid = section 10 elements » Enforceable at the option of one or more parties = Voidable » Section 23-30 = Void   Classification according to Formation – Express. Illegal. Bilateral . Implied & Quasi Judicial Classification according to Performance : – Executed. Executory.

CONTRACT ACT Precautions :  Elements of valid contract  DATE & Place  Name of the Parties & status thereof  Signed by the Same Person or POA = Free consent. Sign on each page.  Terms and consideration to be clearly defined  All column to be filled up  Modification or Over-writing to be initialed .

unambiguous & certain of capable of being made certain . written Implied/by way of Conduct – Act or Omission  General and Specific Offer  Essential of Valid Offer : – Must be made with a view to obtaining acceptance – Must be made with the intention of creating legal relation – Terms of offer must be definite.CONTRACT ACT OFFER & ACCEPTACE :  Offer – Section 2 (a) : Proposal .  How an offer is made : Express =spoken.

CONTRACT ACT  Elements of OFFER: – It must be distinguished from mere declaration of intention or invitation of offer. ( A Tender is an offer) – It must be communicated to offeree – The offer must not be contain a term the noncompliance of which may be assume to amount to acceptance – Special Terms – Cross offers .

CONTRACT ACT Termination/Lapse of Offer  The offer lapses after stipulated or reasonable time  Death or insanity of the offeror or the offeree  Rejected by offeree  Revoked by Offeror  Not being accepted in the specified mode or reasonable manner.  Counter offer .

CONTRACT ACT ACCEPTACE :  Meaning  Acceptance how made and by whom  Elements of ACCEPTANCE :  – – – – It must be absolute & Unqualified It must be communicated to the Offeror It must be according to the mode prescribed It must be given in specified time .

withdrawn or revoked – It must be given to the Offeror or its Authorized Agents.CONTRACT ACT  ELEMENTS OF ACCEPTANCE: – It must be in response to the Offer – It must be made before the offer is lapses. terminated. .

CONTRACT ACT COMMUNICATION of Offer. . Acceptance & Revocation thereof.  Acceptance : The communication of Acceptance is complete : – Against the proposer – when it is put into a course of transmission so as to be out of power of the acceptor – Against the Acceptor – when it comes to the knowledge of the Proposer.  Offer :The communication of offer is complete when it comes to the knowledge of the person to whom it is made.

CONTRACT ACT Communication of Revocation :  The communication of revocation is complete : – Against the person who makes it – when it is put into a course of transmission so as to be out of power of the person who makes it. . – Against the person to whom it is made – when it comes to his knowledge.

 Acceptance : An Acceptance may be revoked at any time before the communication the acceptance is complete as against the Acceptor. .CONTRACT ACT Section 5 : Revocation of Offer & Acceptance :  Offer : An offer may be revoked at any time before the communication of its acceptance is complete as against the Proposer.

Raghav Vs Srinivas = mortgage in favour of M The agreement cannot be ratified by the Minor on attaining majority.CONTRACT ACT Contract with MINOR :  Indian Majority Act – not completed 18 years. ( Exception = Sindha Vs Abrahim = continuity of service after majority) . – Mohri Bibi Vs Dharam Das Ghosh   Minor can be beneficiary – Scooter. hence a contract with Minor is Void-ab-intio.  A Minor is not competent to contract.  Law protects minor but no hardships to others.

profit enjoyed by him. Minor’s parent cannot be liable to Minor’s creditor for the breach of contract. (s65) A Minor can always plead minority. Minor cannot be adjudged as an insolvent. (even if he misrepresented his age – he will have to restore the property).CONTRACT ACT    Minor can not be asked to refund the benefit.    A Minor cannot be a partner in any Partnership Firm except for profits. A Minor can act as Agent. . however any contract entered into on behalf of Minor by the Parents can be enforced provided it is in their authority and for the benefit of Minor.

– Necessary goods » Not only bread and clothes but may include watch. bicycle etc. Fur coat may be – Necessary Services – education. – Loan for necessaries . sports training etc.CONTRACT ACT  A Minor’s estate is liable to a person who supplies necessaries of life to a Minor. » Reasonably necessary to him having regard to his life style  11 coats – not.

debtor.)  By Performance – Doing of what is required under contract.  By Mutual Consent ( Expressed or implied): – Novation : » new contract substitutes the existing one. with consent of all the parties » Same terms or better terms » Same parties or more parties – e. whereby all rights and obligations are created by it come to end. – Unilateral and bilateral – Actual and attempted performance (only an offer to perform). creditor and guarantor. » Should be done before expiry of the existing contract .g. parties fulfills their obligation within time and manner prescribed therein.CONTRACT ACT Discharge of Contract : (means termination of contractual relationship.

other party may rescind the contract – Alteration : change in the terms – Remission : discount. acceptance on lesser fulfillment – Waiver : – Merger : inferior right merges into a superior right .CONTRACT ACT – Rescission : » All or some of the terms are cancelled with the mutual consent » One party fail to perform.

CONTRACT ACT  By Impossibility of performance ( Doctrine of Frustration): – Impossibility at the time of execution of Contract » Known to the parties = Void ab-intio » Unknown to the parties = void on the ground of mutual mistake – Impossibility during the Term of the Contract » Void when it becomes impossible.  In the following conditions which are beyond the control of the parties the contract is deemed to be discharged: – – – – – Destruction of subject matter By Death or disablement of the parties Change of law Declaration of war Non existence or non occurrence of a particular state of things .

. – Failure of one of the objects. lock out and civil disturbance. unless there a force majure clause.CONTRACT ACT  Exception to the Doctrine of Frustration : » Impossibility as a rule is not an excuse for non performance except in the following circumstances: – – – – Difficulty of Performance Commercial Impossibility Dependency on Third party ( Job Work) Strikes.

CONTRACT ACT   Discharge by lapse of time Discharge by Operation of Law: – – – – By Death : ( Personnel skill) By Insolvency By unauthrised (unilateral) alteration merger  By Breach of Contract – Anticipatory Breach – repudiates before time – Actual Breach – repudiates at or during the time .

CONTRACT ACT  Remedy for Anticipatory breach – Rescind and damages – Specific performance & – Injunctions  Remedy for Actual breach – Damages – Time is the essence .

bet. Diff. contract price and market price » Special Damages-Likely to arose (Loss of profit)  Remote Loss/Quasi Contracts – no damages » Vindictive Damages – to punish the defaulter.CONTRACT ACT  Remedies for Breach of Contract : – Recession of the Contract – Damages ( Doctrine of Restitution) » Ordinary Damages – Usual course of business. ( Marriage and S138 of NIA) » Nominal Damages – only technical violation but no loss .

CONTRACT ACT » Loss of reputation – only bank » Damages for inconvenience » Mitigation of damages » Cost of Decree » Liquidated Damages – predetermined amount » Penalty ( Interest) – Specific performance – Injunctions – Quantun Meruit .

CONTRACT ACT Quasi ( Constructive) Contract :  Meaning – law of equity/restitution  Contract created by law  Kind of Quasi Contracts – Supply of necessaries ( S68) – Payment by interested person ( S 69) » Protection of one’s interest » The payment should not be voluntary one » The payment should be such as that other party was bound by law .

CONTRACT ACT  Kind of Quasi Contracts – Obligation to pay for non-gratuitous acts (S 70) » Act must have been done lawfully » Person doing the act should not have intended to do it gratuitously » Other person have enjoyed the benefit – Responsibility of finder of goods ( S 71) – Mistake or Coercion (S 72) .

CONTRACT ACT Quantum meruit ( as much as earned)  When the original contract is discharged  When :  – – – – An agreement is discovered or become void Completion of work is prevented by other party Contract is divisible Remuneration is not fixed .

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