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Capacity of Parties
IMT Nagpur - 2012-14 (Section B, D & E)
Capacity of Parties
All agreements are contracts, if they are made by the parties competent to contract.
Capacity of Parties means the legal ability of the parties to enter into contract.
Who is a Minor?
Who has not completed the age of 18 years.
However, on attaining maturity, he can enter into a fresh contract having the same terms & conditions. Case Study 3
IMT Nagpur - 2012-14 (Section B, D & E)
to the
Case Study 4
Company :
Objects are determined as per the MOA. A co. cannot enter into any transaction which is beyond the MOA.
IMT Nagpur - 2012-14 (Section B, D & E)
Alien Enemy :
Citizen of any country which is against India in war. If any contract is entered into with the alien enemy and war breaks down with that country, the contract is suspended until the war is over.
IMT Nagpur - 2012-14 (Section B, D & E)
Convict :
A convict cannot enter into a contract while he is undergoing imprisonment.
He can enter into contract when released from jail or granted bail.
IMT Nagpur - 2012-14 (Section B, D & E)
Insolvent :
An insolvent person cannot enter into contract relating to his property.
Consideration
Consideration???
If A promises to make a gift of Rs. 5000 to B, and subsequently changes his mind, B cannot succeed against A for breach of promise, as B has not given anything in return.
It is only when a promise is made for something in return from the promisee, that such promise can be enforced by law against promisor.
IMT Nagpur - 2012-14 (Section B, D & E)
Consideration???
Something in return.
A Coolie lifts Bs luggage & receive the remuneration.
Lifting luggage is causing detriment to the coolie but a benefit to the passenger, i.e., promisor.
IMT Nagpur - 2012-14 (Section B, D & E)
Consideration???
Consideration???
Consideration???
Consideration???
Consideration must be lawful
X promises Y to pay Rs. 5000 to beat Z. Y beats Z and claims Rs. 5000 from X. X refuses to pay.
Y cannot recover because the agreement is void on the ground of unlawful consideration.
Consideration???
Consideration should be possible to perform
A promises to discover treasure by magic if B pays him Rs. 50,000. Consideration from A is void because it is impossible to perform the promise.
Consideration???
Privity to contract: A stranger to a contract cannot sue. Means the party to the contract can sue each other but not the stranger.
Case Study 6 - 7
Consideration???
Free Consent
Free Consent???
One of the essential conditions of a valid contract is that it should be made out of free consent.
Consent???
Free Consent???
When the consent is there but it is not free, in such case, the contract is voidable at the option of one party, i.e., aggrieved party.
Free Consent???
Free Consent???
Coercion / Duress
Detention or threat to life or any other threat creating danger to life, if given to party or any family member, or relative of the party. Prohibited by IPC.
Free Consent???
Coercion / Duress
Mr. X threatens to kill Mr. A, if Mr. A does not agree to sell his property to Mr. X. Mr. As consent has been obtained by coercion. Mr. D threatens to kill Mr. A, if Mr. A does not sell his land to Mr. B. Even if Mr. D is a stranger to the transaction between Mr. A and Mr. B, the agreement is caused by coercion.
Free Consent???
Consequences to Coercion
When the coercion is employed, a contract becomes voidable at the option of the aggrieved party, and any benefit received by the other party under the contract must be paid back. If the aggrieved party has suffered from any loss, he can recover the loss from the defaulting party.
Free Consent???
Undue Influence
A contract is entered on undue influence when relations that exist between the parties are such that one of them is in a position to dominate the will of the other, and the dominant party uses his position to obtain unfair advantage over the other.
Free Consent???
Consequences of Undue Influence
Voidable at the option of aggrieved party.
Free Consent???
When a person is deemed to be in a position to dominant the will of others?
A. When a person holds real or apparent authority over other 1. Master and Servant 2. Parent and Child
Free Consent???
When a person is deemed to be in a position to dominant the will of others? B. When he stands in fiduciary relationship over others
1. 2. 3. 4. 5.
Guardian and Child Guru and disciples Doctor and Patient Solicitor and Client Trustee and beneficiary
IMT Nagpur - 2012-14 (Section B, D & E)
Free Consent???
When a person is deemed to be in a position to dominant the will of others? C. When contract is made with Mentally weak Person
Free Consent???
Case Study 8 - 9
Free Consent???
Fraud
An intentional, deliberate or willful misstatement of facts, which are material for the formation of a contract.
Or any other act to deceive the other party. The fraud means and includes: 1. Suggestion of facts which is not true; 2. Active concealment of the fact; 3. A promise made without an intention to perform; 4. Any other act to deceive.
IMT Nagpur - 2012-14 (Section B, D & E)
Free Consent???
Fraud
Furniture dealer conceals the cracks in furniture by polish work. A shopkeeper while selling ghee represents the buyer that it is pure desi ghee although he knows that it is adulterated.
Free Consent???
Effect of Fraud
A contract is voidable at the option of the aggrieved party, i.e., defrauded party. The party can cancel the contract.
Case Study 10-12
Free Consent???
Misrepresentation
False representation of the fact made innocently which is a material fact of contract. Intention is not to deceive other party.
Free Consent???
Consequences of Misrepresentation
Contract is voidable at the option of the aggrieved party.
Free Consent???
Mistake
An erroneous belief about some facts. It can be : 1. Mistake of law 2. Mistake of fact
Free Consent???
Mistake of law
Mistake in understanding the provisions of law by the party to contract.
Free Consent???
Free Consent???
Mistake of Fact
1. Bilateral Mistake 2. Unilateral mistake
Free Consent???
Bilateral Mistake
Both the parties are at mistake related to essential part of the contract.
Free Consent???
Free Consent???
Bilateral Mistake
A agrees to buy a certain horse. It turns out that the horse was dead at the time of bargain though neither party was aware of the fact. The agreement was void.
Free Consent???
Bilateral Mistake
A agrees to buy a certain horse from B. B has one race horse and one cart horse. A thinks that he is buying the race horse but B thinks that he is selling the cart horse. The agreement is void because there is bilateral mistake as to the identity of the subject matter.
IMT Nagpur - 2012-14 (Section B, D & E)
Free Consent???
Unilateral Mistake
One party is at mistake. Mistake on the part of only one party, is generally of no effect.
Free Consent???
Free Consent???
Unilateral Mistake
A made a mistake in calculating the cost therefore his offer was lower than other tenderers.
As tender was accepted. Held, it was binding contract although it was an erroneous estimate based on unilateral mistake. Case Study 13-15
IMT Nagpur - 2012-14 (Section B, D & E)
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