BUSINESS LAW PROF ANANT AMDEKAR 6TH SEPTEMBER 2007 INDIAN CONTRACT ACT 2 a – When one person signifies

his willingness to another to do or abstain from doing with a view to obtaining the assent of such other person then to such an act, promise or abstinence the first person is said to have made an offer or proposal. 5 statements with explanation and examples: 1. to another – a person other than me 2. ensure that there are two or more parties 3. one party must break the silence 4. abstain from doing – to not do something Egs: came together to not copy ans papers for students coming together NOT to use nuclear weapons International contract between 2 countries, therefore law says coming together not to do something is good LOC – indo pak line of control 5. Accent in English is a positive response, in law it could be a negative response Mere statement or mere wishful thinking is not an offer as it doesn’t include a response Offerer must communicate his offer to the offerree in a manner the offerree wants the Offerer to explain it to the offerree “Same sense” 2 b – acceptance: when the person to whom the offer is made signifies his accent there to the other person is said to have accepted the offer

customary or prescribed manner Absolute means it must be the full offer. usual. Giving of an advertisement does not bind anyone to get married for sure to someone who responds to an advertisement egs IPO .The meaning of the word accent includes the word decent Essentials of a Valid Acceptance: 1) Acceptance must be “Absolute” and “ Unqualified” 2) Acceptance must be communicated in the normal . I am not bound by my own invitation.Partial acceptance is not acceptance of offer Unqualified means as it is Or both results into a counter offer one pen instead of the whole set or price negotiation No counter offer can be defined from time to time. place to place it differs Difference between “offer “and “counter offer” Offerer and offerree change places Acceptance will always lie with the offerree Always identify the offerree In law the commercial sense and legal sense might be different INVITATION TO OFFER I invite you tot give me an offer. complete offer .

it is still a consideration Past: I start working form the 1st but the salary is next month which is a future consideration for the services rendered in the past ADDITIONAL REQUIREMENTS FOR A VALID CONSIDERATION For a consideration to be valid it must be a lawful consideration for example: 2 parties enter into a contract for killing then it is not a lawful consideration there fore in the eyes of the law it cannot be considered a valid contract. offerree or any other person has done or abstained from doing . future or a combination of either. 2) No where in the law it is said that for a consideration to be valid it must be consideration in terms of money i. present. anyone can be a 3rd party as long as both the parties mutually agree upon it. promise or abstinence there is said to have been consideration between parties 3rd party to a contract – any party who is not a direct party.CONSIDERATION When at the desire . barter exchange is a valid consideration under the Indian Contract Act .e. is not a question of law and it is best left to the parties to decide however if there is a dispute between the parties and the matter reaches to the court of law then the court can look into anything and everything with respect to the consideration 1) . promises to do or abstains from doing then to such n act. 3) What is an adequate consideration . Giving and taking of bribe is unlawful. The English contract act doesn’t consider a 3rd party Agent / Dealer (Eureka Forbes) Past.Love and appreciation is valid considerations. does or abstains form doing.

even if somewhere down the line 0. max 90 days u can keep foreign currency Excise and salt act – pay excise duty Hindu Marriage Act girl < 18.001% is illegal then the whole thing is considered to be illegal 4) The act should not be expressly declared as void under any other law which is enforced Example: Indian penal code 302 killing is a legal wrong Goods in India under the customs act payment of customs duty is contra band. processing arms is illegal Keeping dollars – foreign exchange act. through out its execution until execution should be legitimate. Parties to the contract must be competent. consideration in the contract must be lawful consideration and lawful object Objective to earn is a noble cause but pick pocketing so as to earn is illegal. An act forbidden under IPC – Indian Penal Code 2. Coercion Is explained as: 1. smuggling – Indian customs act and Indian penal code is illegal DJ Akeel – Dubai Sanjay Dutt – Arms and destructions Act. Boy < 21 1) FREE CONSENT: Consent is said to be free unless it is caused by (obtained by) either of the following: i. use of force . 2) Free consent from the parties to the contract 3) Object . she wants to pass her objective is legal but if she copies the means are illegal An act right from inception.ESSENTIALS OF A VALID CONTRACT: There must be competent parties to the contract.

He had already got the claims . threatening IPC – deals with criminal offenses. mental force is difficult to prove therefore there is no free consent and the law cannot bind the lady to raise the child. and the organization forced her to raise the child Judgment: The given circumstances amounted to mental pressure therefore the lady was not bound to groom the child . iii. 15 days after that the goods reached Mr. Intension matters the most Physical assault – jail for 3 years INTENTION MATTERS A LOT Use of Force: physical force is a force for sure. wrong mind.3. v. mental force is called DURESS A lady who lost her husband was adamant to perform the last rites. shopping dos – ownership – Indian importer. ship – Pearless. ii. iv.After the ritual the lady disowned the child. ship sank in a hurricane – news after 15 days of search – total complete loss. D’souza . people said she can’t so she was suggested to adopt a male child and under the given situation she did so in order to perform the last rites of her husband . religious leader : devotee Fraud : Misrepresentation Mistake : 1) Mistake of Identity: export – import.Insurance company claimed mistake of identity since we have paid the insurance you pay us back and take . Undue influence: It can be explained as :When one person I in such a dominant position with respect to the other person that the other person will do exactly the way the first person wants him to do and while doing so he wont even counter the basic question : Why should I do it? Etc Example : party leader : party worker. Indian importer submitted claim to the insurance company . guilty mind broad parameter.

Party should be of sound mind 3.Law entitles you to take this for granted the other person is of a sound mind. NGOs’ legal responsibility to guardian as these children don’t have the tender love and care of their natural parents they are granted 3 more years to mature 2) Party should be of sound mind: (tough criteria): unless you have a doubt you should take it for granted the person is of sound mind . homeless children without adoption . Law entitles you to take this for granted . Airlines Parties to the contract must be competent parties 2) Mistake Of Facts: Parties to the contract must be competent parties. Parties should be major 2. Transport and courier Industry. Parameters for competency of parties: 1.Two ships with the same name “Pearless” caused the mistake of Identity.your goods . party should not be expressly disqualified under any other law Parameters for competency of the parties: 1) Party should be major The age criteria for commercial contracts is 18 years and above Hindu Marriage Act: 21 years for a boy but election age is 35 to stand or fight for elections Exception: when the court appoints a guardian for a child then in that case the child turns major not at 18 but at 21 years of age Why 3 more years? What are the situations? Earthquake.

He had to continue the custodian for his monthly expenses.First payment for KBC was Rs 75 crores . Thakrey was disqualified to vote for his speeches / behavior in the society Mr. .His icon building value was high when he got arrested he couldn’t pay related bills . 2nd or 3rd floor of the high court building. Assets were sold to pay his liabilities.the person is of a sound mind unless you have a doubt .His brand value was Rs 100 crores . Arun Gaun – was sent outside municipal limits While playing international matches if you have a red card given then you are disqualified from playing international matches SEBI takes action against rigging in the stock market etc Students unqualified from giving exams INSOLVENT PERSON CAN HE ENTER INTO A CONTRACT? WHAT IS INSOLVENCY? When a person is not able to pay his debts which are due for payment then only there is a question of insolvency of a person example the day harshad Mehta died conservatively known assets were more than his liabilities. He had a big flat in worli . An administrator was handling all his assets and liabilities. Insolvency is a passing phase. When it mattered he couldn’t pay. suspicion or proof When ever there is regularity in unusual behavior – unsound mind Sources of events – consistency in irregular behavior 3) Party should not be expressly disqualified under any law: Mr. Insolvency is not a permanent disease. Example: Amitabh Bacchan couldn’t pay ABCL dues .Society office cooperated until he fell ill so they filled a case for Rs 14 lacs recovery of money form harshad Mehta judge declared him insolvent. banks cooperated ultimately the bank attached his bungalow Rs 60 – 65 crores . All assets were under the custodian.

4.Inheritance in a joint family is big but as on date one can’t sell your family assets and raise cash. WHETHER LUNETIC PERSON IS COMETENT TO ENTER INTO A CONTRACT? 1. regularity of irregular behavior normal phase in the life of a lunatic is called as “LUCID INTERVALS” If a contract is entered into in which the person passes through lucid intervals it is a valid contract OPTIONS U HAVE : alternatively get a court order to prove he is insane and attach his property to make good your loss wait until the person passes through lucid intervals again Forget it! WHETHER A DRUNKEN PERSON IS COMETENT TO ENTER INTO A CONTRACT? 1) When is a person considered to be drunk? A person who under the influence of alcohol cannot take rational decisions 2) Law says . 3. contract with a drunkard is a avoidable contract at the option of the drunkard WHETHER MARRIED WOMEN IS COPETENT TO ENTER INTO A CONTRACT? After marriage wife becomes the property of the husband so if then the property owner should decide how the wife behaves WHETHER MINOR IS COMPETENT TO ENTER INTO A CONTRACT? . What is lunacy of a person? mental toughness . 6. 5. 2.

He gets one meal and a small area. Father cannot also be held responsible When you are dealing with a minor.After 3 – 4 shoots she refuted to shoot . A case reached a court. tea maker contract. 11. TYPES OF CONTRACTS: 1.He filed a case against her father. Minor is not competent to enter into any contract. shooting must be completed. 10. can enjoy benefits but will not suffer losses. the law will put more responsibility on a major.Producer suffered losses .5 yrs. chief justice of India decided to make a law. contract between trustee and beneficiary . A servant below the age of 14 is employed the owner can be jailed HISTORIC CASE 40 YEARS BACK A minor girl child contracted with a film maker with father . Child marriage. it continued to 4 – 4. he employs minors at the age of 9. parents can be jailed.Because law says minor can enter into a contract but he can only enjoy profits and benefits but he cannot be liable for losses or liabilities 1965 – Minors were exploited wanton mark research results are stunning: Kalbadevi – business hub had 3 – 4 storied buildings. On any given day a child climbs 1000 stairs. contract of delegation of authority 2. Again a similar case reappeared. CONTRACTS OF UBERRIMAE FIDI : means contract entered into on the basis of utmost good faith Elements of contract are eon good faith examples: 1. Judgment: Minor cannot bed forced to undergo for a liability. another judge realized the plight of minors has not changed so in 1989 the law was amended as minor can enter into a contract.

Void – Abs – Initial i. Example 1. Lottery business recognized by state government. denoted the wager contracts harshness. Horse races conducted at recognized centers and betting done there at central government has recognized it at mahalaxmi race course pune etc 2. winner wins Rs 1000 Therefore all contracts of the nature of betting and gambling are called wager contracts. contract of guarantee 5. union territories. therefore the government is always right Practically .e. claim . put my money . . King is always right Long live the king. go a step forward . put my stake there at Example : it will rain heavily at 10 am SV Road . they are wrong right from the beginning. 2. All wager contracts are illegal .dean of the institute . principal of school and director of a company 4. it is used as a loop hole 3. There are a few contracts that look like wager contracts they have the color of wager contracts but they are not really wager contracts – are called Valid Wager Contracts. therefore even all the online recognize versions of lottery are legal. contract of marriage 3. WAGER CONTRACTS: It can be explained as a contract to give money or money’s worth upon ascertainment of some uncertain event Features of a Wager Contract 1) Event must be uncertain : when you know or you don’t know if it will happen 2) Knowing in my heart that it is uncertain I still try to ascertain it either way 3) I don’t stop .

9 / 10 times it has been misused in the following ways: 1 scratches a card and wins a martin 2 radio fm question answers prize 4 options 3 r definitely wrong like where is tag meal Located in India 3 options and futures are valid contracts as they are recognized by SEBI – securities and exchange Board of India. betting is an integral part of these events 8. temporary license – economy of area is under tourism to get for gain exchange – goat . casino – wager contract but last 5 yrs young dynamic politicians to give Casio the industry status 3. LA wager – In India . tournament quiz. Whether casino wager or valid wager? only if it is government recognized like in USA . entertainment goes to the extent of injury or death 7. Mumbai . crosswords. soon it will be legal not wager even in India 2. whenever you require an element of shell or knowledge then such contracts are capable of being termed as valid wager contracts It is at the discretion of the judge Intension for noble contracts. Whether cock fights and bull fights are wager? 5. whether pool parlors – keep your eyes and ears open . serpent etc are involved . It has the color of a wager contract but the government has recognize dot the commodity market as recognized it Lottery is major revenue for the state WAGER: means ascertaining something which is uncertain. collector but not legal 6.4. japer 4. Law has not defined what is betting and gambling – whenever the outcome of an event is disproportionate then 1. KBC – 3rd provision was for these.

But the moment there is a default on the part of the principle debtor the role of surety becomes immediately active as if it was always there (OMNIPRESENT ) 8.e. all the parties to the contract of guarantee must give their consent simultaneously i. for this municipality charges Rs 5000 per table per month 5. One single contract – all agree at the same time. 5 tables maximum 12 hrs – 9 am to 9 pm not late nights one frame – 10 – 15 minutes Rs 20 per frame . person to whom the guarantee is given is called as creditor 5. The role of the surety is: dormant or inactive or passive until the time there is a default on the part of the principle debtor. The words of a 3 person suggest . Flat empty – owner arrested for disposing drugs 1. only for the sake of entertainment 4. A person with respect to whom the guarantee is given is called a principal debtor 4. . you require minimum 3 parties 2. A person who gives guarantee is called as SURETY 3. Rs 7000 per day 6. It is also termed as a multi party contract 6. 7. at the same time it is called as a concurrent consent 9.shops and establishment act – pool parlor 2. CONTRACT OF GAURANTEE A contract to perform promise or discharge liability of a 3rd person in case of his default FEATURES OF CONTRACT OF GAURANTEE rd 1. Hotel – murder – owner questioned Hotel BAWA International – custody for questioning 8. entertainment license 3. statutory + illegal costs + imported tables + maintenance coat is high + VAT + Police + AC therefore betting at pool parlors is encouraged 7.

10. not good for health. steals food. if students don’t pay fees. I want to eat peppy. 3. In India. 13. i. Eg :. 1.IIPM. wife & kid go for an outing. child sees wada pav. parents say no . child is unhappy . visiting faculty. Not all conditions are for al parties. IIPM has to pay professor his fees. vendor shouts “ chor chor chor”. I m hungry . loses his patience. common goal – IIPM does’nt provide the infrastructure so the professor is not responsible for this.e thief.. Parents try to take maximum care but inspite of this the child wants pepsi . damages are given as a matter of compensation and generally not as a matter of punishment. Even if party has not suffered any material or monetory loss. kid is happy.Family of husband . people run behind child at the mid point of the junction parents realize this . 12. they solve the . gets his pray. makes a list of demands. REMEDIES FOR BREACH OF CONTRACT Criteria for damages as remedy:Party must have suffered as loss is quantifiable in monetary terms. When professor is not paid. not good for health. Liabilty against surety must be “ legally enforceable “. restless. still it may be entitled for nominal damages as remedy. Students. @ nd demand . Eg:. parents say no. 2. 11.

50. He is happy to get the attention . Parents are there to protect me so next time wen the child is wit his parents he will run to grab the things. 5. Reliance did rigging. physically handicapped gets 10. 5. The very word “compensation” means nearly equal to the loss .000 if loss of members but it hardly gets executed . but never more. Book written by the 1st lady IPS officer. but the child learns a lesson of a life i. to rob. People around are gossiping.situation to get back the custody of the child.000 . Salman Khan hit and run case who ever goes to the court has to prove his case. cigarette company paid 60 yr old lady in USA for cancer . parents loose their patience. thus this becomes a habit. Kiran Bedi – Childhood has laid petty crime foundation to make criminals. ministerval sympathise. family will get Rs. That there is a possibility of her getting cancer if she smokes their cigarettes. parents think that the child’s company is wrong. Eg:. as damages for smoking their cigarette for the last 40 yrs under the pretext for not educating her for the same.00. In India damages are given as a matter of compensation and generally not as a matter of punishment. Parents feel good to be able to handle the situation .000 as penalty. Parents must explain or punish the child mildly to teach him law and how to behave in the society. .Monsoon Konkan Accidents . Bills given by the sufferer loss of job and sufferings for months 4. 7. Philip Morris . Exemption from tax Eg.e. 6. SEBI put only Rs. commenting.

SELLER:Seller is a person who sells or agrees to sell similarly purchaser is a person who purchases or agrees to purchase. growing crops and anything which is attached to earth or forming part of land which has been agreed to be served ( to cut) before sale or under the agreement of sale. stocks. Sold & purchase suger – so sale of goods act governs it. amended it and made the sale of goods act. Section 150 and beyod in the contract act were governed by the Indian contract Act . Therefore the seller . If credit sells are greater then cash sells 180 % future contracts GOODS:Section 2(o) define goods – Every kind of movable property ( excluding actionable claims and money And includes shares . grosser delivers paste. and goods all of the contract act is related to the sale of goods are as applicable:Before 1930. But the Britishers realized it requires a differenta act . section 120 and beyond. executed and even incomplete contracts even executary contracts are under the sale of goods act. The roots of this act are in The Indian Contract Act. purchaser . . Executary Contracts:Which are agreed upon but yet to be completed are called executary contracts.SALE OF GOODS ACT 1980 As the very name suggests this law deals with the sale & purchase of goods. present and future consideration not only completed.

.Tribhuvandas Bhimji Zaveri – Sale by sample. whenever u don’t get an opportunity to use a product it is all sale by description. TBZ. debentures. raw materials.. Money is not included in moveble goods. 3.All immovable property is governed by transfer of property act – not the sale of goods act. It should be movable so intangible goods are governed by the contract act. deposit. 1. TSN:. 2. For reliance it’s a finished product. finished goods. Medium of exchange:. 4. steel it comes under the definition of good. All banks under foreign exchange 3. Sale by sample:. for me it is raw material – steel good.can be explined as it is either that very product or representatiove version thereof. 5. Eg:. by dealears of TV for a dealer it stock of the goods . Is shown to you. 3. Wheras . 4.Shres include security. chair manufacturing goods. services. There wud be more such eg. MONEY:1. Later. 2. in sale by description. stock. Use of a product shows the difference. 1. And I is not only shown to you but you also get an opportunity to use the product and then decide whether to buy or not to buy. bonds.INTERPRETATION IN THE GIVEN CONTEXT:Movable property:. at the end of the learning the meaning of goods. Hire purchase contract.Tele shopping Network – sale by description not sale by sample. And includes any such expression means there is no exhaustive definition so the better way is to give examples.RBI act 1934 2.

Actionable claims – it can be explained as claims which arise coz of action or in action on the part of one of the parties wherein there is no intended transfer of ownership and intended sale and purchase of goods ESSENTIALS OF A VALID SALE:1.4. Competent parties There must be a mutual consent there must be a transfer of ownership of both the types – physical and legal or written Buyer must pay or agree to pay the price. Mutual consent = free consent + intention to sell + intention to purchase Job Work. . 4. 2. 5. 3. 6.

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