w 6. yy element that creates a contract on Mrnd acceptance, that f c Mpetency: Competency refers to the capacity hoshe has reached the agi Of the panies to enter into the contact, ie € of maturity. he/she must be of sound mind. and he/she is not disqualig, A “Swalified trom contracting, as per the law like the alien enemy. foreign sovereigns, ee ing, Ce i i e Susideration: 11 implies the price agreed to be Pald for the promisor's obligation by the Promise. it must be adequate and law1ul Lawful object: "he object for which the contract is eeated must be lawful. or else itis declared AS Void, Not expressly declared as void: The law should not expressly declare the contract as void, such ®S contract in restraint of marriage. trade or legal proceedings, Classification of contract Contracts can be classified into five broad divisions namely 1 The method of formation of a contract w The time of performance of contract The parties of the contract_ 4. ‘The method of lity of the contract 1-The method of formation of a contract Under the method of formation pf a contract may be three kinds ni - 0 xpress contract «© Implied contract «0 Quasi contract‘Short Answer Questions Q no 1-What is an agreement? Ans: When an offer made consideration. by one party is acceptable tw another pany with requisite line contract? ‘Ans- The term contract is defined as an agiccinci between two or more parties which has a binding nature. in essence, the agreement with legal enforceability is said to be a contract. Q no 3-When does an agreement become a conttact? ‘Ans-A contract does not exist simply because there is an agreement between two parties. The patties to the agreement must intend to enter into a legally binding agreement. Q no 4-What are the key elements of a binding contract? {he elements of a comtract are: (i) an agreement: (ii) between competent parties: (iii) based upon tne genuine assent of the parties: (iy) supported by consideration: (v) made fora fawTul objective: and (vi) in the form required by law. Q no 5-What are the 4 types of contract Ans-Bilateral Contract Unilateral Contract Implied Contracts, Express Contracts Q no 6-What are the three things a contract needs? ‘Ans: Inorder to have a valid and binding legal contract, three elements Si required: an offer. plunce of that offer and consideration. Usually. the earnest money deposit will satisty the also be where the seller takes the property el! the market ace third requirement, but consideration ¢ in reliance on the contract. Q no 7-\Vhat do you mean by Ln" ciety over a certain ° ule of vo ev eloped by the government or society over a eet fi Ce re acran yo deal with crime. business. soelal territory. Lany follows certain practices and customs in order relationships. property. finance. ete Q no &What makes a contract null and void jis bound by the er pay jureement ae illewal as created and neith \ void contract is mull from the moment it wats created and ee ye terms tn be void for the following reasons: The terms... contrBasically Performance, in law, act of doing that which is required by a contract. The effect of successful performance is to discharge the person bound to do the act from any future contractual liability. Each party to the contract is bound to perform promises according to the stipulated terms. In case of any controversy as to the meaning of a promise, the courts have usually decided that a person must perform it as the other party reasonably understood it to be. Thus, a preference for the rights of the one who is to receive the benefit of the promise is established For instance, A visits a stationery shop to buy a calculator. The shopkeeper delivers the calculator and A pays the price. The contract is said to have been discharged by mutual performance. “The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the prov isions of this Act, or any other law.” ves of the promisor in case of the death of Promises bind the representati nless a contrary intention appears in the the latter before performance, contract. duty of each contracting party to either perform or offer to perform its promise. For performance to be effective, the courts ct it to be exact and complete, i-e., the same must match the contractual obligations. However, where under the provisions of the Contract Act or any other law, the performance can be dispensed with or excused, a party is absolved from such a responsibility. Thus, it is the primary expeExample: A promises to deliver goods to B on a certain day on payment of Rs 1,000. A expires before the contracted date. A‘s representatives are bound to deliver the goods to B, and B is bound to pay Rs 1,000 to A*s representatives. Types of Performance: Performance, as an action of the performing may be actual or attempted. These types are given below: 1.Actual Performance: When a promisor to a contract has fulfilled his obligation in accordance with the terms of the contract, the promise is said to have been actually performed. Actual performance gives a discharge to the contract and the liability of the promisor ceases to exist. For example, A agrees to deliver10 bags of cement at B’s factory and B promises to pay the price on delivery. A delivers the cement on the due date and B makes the payment. This is actual performance. Actual performance can further be subdivided into substantial performance, and partial Performance. Substantial Performance: This is where the work agreed upon is almost finished. The court then orders that the money must be paid, but deducts the amount needed to Correct minor existing defect. Substantial performance is applicable only if the contract is not an entire contract and is severable. The rationale behind creating the doctrine of substantial performance is to avoid the possibility of one party evading his liabilities by claiming that the contract has not been completely performed. However, what is deemed | to be substantial performance is a question of fact to be decided in both |~ the case. It will largely depend on what remains undone and its value i ue In. comparison to the contract as a whole. Partial Performance: This is where one of the parties has performed the contract, but not completely, and the other side has shown willingness to accept the part performed. Partial performance may occur where there is eae delivery of goods or where a service is not fully carried out. 2.Attempted Performance: When the performance has become due, it is sometimes sufficient if the promisor offers to perform his obligation under the contract. This offer is known as attempted performance or more commonly as tender. Thus, tender is an offer of performance, which of course, complies with the terms of the contract. If goods are tendered by the seller but refused by the buyer, the seller is discharged from further liability, given that the goods are in accordance with the contract as to quantity and quality, and he may sue the buyer for.breach of contract if he so desires. The rationale being that when a person offers to perform, he is ready, willing and capable to perform. Accordingly, a tender of performance may operate as a substitute for actual performance, and can effect a complete discharge In this regard, Section 38 of Contract Act says: “Where a promisor has made an offer of performance to the promisee, and the offer has not been accepted, the promisor is not responsible for non-performance, nor does he thereby lose his rights under the contract. For example, A contracts to deliver to B, 100 tons of basmati rice at his warehouse, on 6 December 2015. A takes the goods to B‘s place on the due date during business hours, but B, without assigning any good reason, refuses to take the delivery. Here, A has performed what he wasrequired to perform under the contract. It is a case of attempted performance and A is not responsible for non-performance of B, nor does he thereby lose his rights under the contract.” 5 Important Rules Relating to Time, Place and Manner of Performance under _ Pakistani Contract Act Important rules relating to time, place and manner of performance are given below So far as the time and place of performance of a contract is concerned, it must be agreed upon by the parties to the contract themselves. Sections 46 to 50 lay down rules in this regard Rules: 1. Performance within a reasonable time (Sec. 46): Sec. 46 states that “Whereby the contract, a promisor is to perform his Promise without application by the promisee and no time for performance is specified, the engagement must be performed within a reasonable time.” What is a “reasonable time?” is a question of fact. It depends upon the circumstances of the case, the usage of trade or the intention of the parties at the time of entering into the contract. Example:Supply of order for books by a bookseller to the publisher given in July should be performed within 4-5 days, it being the time for the demand of books.If such order is given in May, it may take 20-30 days or so, as the season for books will start in July. 2. Specified time and place for performance (Sec. 47)i ji Questions of topic . What is performance? . What does section 27 says about performance? . What could be the example of performance? . What are the types of performance . What are two types of actual performance? . What section of contract states the rules of place,time and manner of performance? QAnakwWwNcol oe BA Lan Werning Varn ® Kt ? \ Contents Oller and acceptance... \ ; Offer 4 a Vil-Meaning and definition of off€Fnmnnnnnsnmnnnrunnnnfrmmrntntsiinasneuenanaenanen L1.L-Ofteror 1.1.2-Oferee 1.2-Essemtial of valid offer 1.2.1- It may be express oF implied nus | It must create legal relation: 1.2.3-In must be definite & clear 1.2.4-It is different trom invitation to offer: Te, -It may be specific or general: 1.2.6-It must be communicated to the offeree: 1,2.7-It should not contain negative condition: 1.2.8-It may be subject to any terms & conditions: 1,2.9-It must not contain cross offers: 1,3-Termiation of offer 5 5 s 1.3.1, Notice of Revocation: 2 rote . i 1.3.2- Lapse of Time:... 6 6 1.3.3- Failure to Fulfill Condition: 1.3.4- Revocation of Ofler by Offeree: 1.3.5- Counter Offer by the Offeree:.... vs a - seseseseceenanneeeensqneatannanmnenvesn em 1.3.6- Death or Insanity of the offeror or Offeree cinsimenaitincasnntt al 1,3.7-Subsequent Illegality 1.3.8- Destruction of Subject Matter: 2-Acceptance. . 8 2.1-Definition of acceptance..... ae 2.2-Types of Acceptance... j 2.2.1. 1 must be given by the Offeree i 2.2.2. It must be Absolute & Unconditonal:V invites B to di 0 dinner 1 ae, aecepL the invinat a ation. It does © ae ‘eS Not create any leyal relations. so there is 2 fers >. 4 ollets 19 sell his watch to B for Rs.200 and B Th ie z agrees. There is an agreem the panties intend to create legal relations _— an 3. Three friends nn toined to enter a newspaper competition and agreed to share any wit ings. It was hi S held the intendéd to create legal relations and their agreement was therefore a contract. 1.2.3-It must be definite & clear: An otter must be definite and clear. ifthe terms of an offer are not definite and clea, it cannot be called a valid offer. If such offer is accepted it cannot create a binding contract. Example: 4 has wo motoreyeles. He offers B to sell one motoreycle for Rs.27,000. It is not a valid offer because it is not clear that which motor cycle A wanted to sell 1.2.4-It is different from invitation to offer: An offer is different from an invitation to offer. It is also called invitation to treat or invitation 10. receive offer. An invitation to offer looks like offer but legally it is not offer. In the case of an invitation to offer. the person sending out the invitation does not make an offer but only invites the other party to make an offer. His object is to inform that he is willing to deal \with anybody who afier getting such information is willing to open negotiations with him. Such invitations for offers are not offers according to law and so cannot become agreement by acceptance. Example: 1, Quotations. Catalogues of prices. display of goods with prices issue of prospectus by companies are examples of invitation to offer 3 yva Capacity of parties ¥ Table of content * Introduction * Person incompetent to contract 1. Minor. Effect of > An agreement with or by a minor is void > No ratification ~ Minor can be a promise or beneficiary No estoppel against a minor > No specific performance except in certain cases iabilities for tort > No insolvency > Partnership > Minor can be a agent > Minor cant bind patent or guardian > Joint contract by minor and adult > Surety for minor > Minor as shareholder > Liability for necessaries inor’s agreement 2.person of unsound mind. > Idiocy > Lunacy or insanity > Drunkenness - Hypnotism > Mental decay 3.person disqualified from contracting by any other Jaw. > Alien enemies > Foreign sovereigns and Amy minors ~ Insolvents > Convict + Corporations v Short questions. Ssa INTRODUCTION For a valid Contract the parties to a contract must have capacity that is competence to enter into a contract. Section 11 of the Contract Act deal with the competency of parties and provides that “every person is competent to contract who is of the age of majority according to the law to which he is subject , and who is of sound, mind and is not disqualified from contracting by any law to which he Is subject” It follows that the following persons are Incompetent to contract 1) Minor 2) Person of unsound mind 3) Persons disqualified from contracting by any other law Minor According to Indian Majority act ,1875, a minor is one “who has not completed his or her 18 year of age.” WHY SHOULD MINORS BE PROTECTED ? ‘A minor has a immature mind and cannot think what is good or bad for him .minors are often exploited. So he must be protected by law from any exploitation but at the same time, the law must not cause unnecessary hardship to the persons who deal with minors. Effects of minor's agreement 7.An agreement with or by a minor MOHORI BIBI V. DHARMO DAS GHOSE [1903] ‘A minor borrowed rs.20000 from B and as a security for the same executed a mortgaged in his favor. He became a major a few months later and filed a suit for the declaration that the mortgage executed by him during his minority was void and should be cancelled. It was held that a mortgage by a minor was void and B was not entitled to repayment of money 2.No ratification: A minor cannot ratify the agreement even on attaining majority , because a void agreement cannot be ratified ARUMUGAN V. DURAISINGA [1914] ‘A minor borrowed a sum of money executing a simple bond for it, and after attaining majority executed a second bond in respect of the original loan and interest It was held that suit upon the second bond was not maintainable 3.Minor can be a promise or beneficiary * The General American Insurance Co. Ltd. V. Madan Lal Sonu Lal [1935]59 Bom 656 X, a minor insured his goods with an insurance co. The goods were damaged .X filed a suit for claim The insurance co. Took the plea that the person on whose behalf the goods were insured was the minor. The court rejected the plea and allowed the minor to recover the insurance money. i 4.NO ESTOPPEL AGAINST A MINOR:A tort is a civil wron, Contract . But a minor cann tort. You cannot convert a Z.No insolvency: A minor cannot be declared in solvent are payable from the personal S.partnership: & minor being incompetent to contract cannot be a partner in a partnership firm , but Under section30 of the Indian Partnership Act, he can be admitted to the benefits of Partnership. 9.Minor can be an agent : A minor can act as an agent But he will not be liable to his principal for his acts . A minor can draw, deliver and endorse negotiable instruments without himself being liable 10. Minor cannot bind parent or quardian: \n the absence of authority, express or implied ,an infant is not capable of binding his parent or guardian, even for necessaries .The parents will be held liable only when the child is acting as an agent for parents 11. Joint contract by minor and adult In such a case, the adult will be liable on the contract and not the minor 12. Surety for a mino. In a contract of guarantee when an adult stands surety for a minor then he [adult] is liable to third party as there is direct contract between the surety and the third party. 13. MINOR AS SHAREHOLDER: A minor, being incompetent to contract cannot be a shareholder of the company . If by mistake he becomes a member the company can rescind the transaction and remove his name from register i 14. LIABILITY FOR NECESSARIES: A claim for necessaries supplied to a minor js enforceable by law . But a minor is not liable for any price that he may promise and never for more than the value of the necessaries . There is no personal liability of the minor but only his propery is liable ‘9. A minor is liable in tort unless the tort in reality is a breach of 'ot be made liable for a breach of contract by framing the action on Contract into tort to enable you to sue an infant. i as he is incapable of contracting debts and dues. Properties of minor and he is not personally liableCoercion may harm in order 1 caused by coercion, Threat to commit Suicide-is it coer ° reion- * NOTE: it is not necessary E that coerci Promisor only, it may ton must have been excercised avai : ag be directed at any person agains the CONSEQUENCES OF COERCION(SECTION 19 When cosent of an agreement is caused by coercion, the agreement is a contract voidable at the option of the party whose consent was so obtained. Ik other words the aggrieved party an have the contract set aside or if he so desires to insist on its performance by other party, ’ Examples of effect of coercion * A railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was illegally excessive. Undue Influence(Section 16) Undue influence is the improper use of any power possessed over the mind of the contracting party. According to section 16 a contract is said to be affected by undue influence when: The relations subsisting between the parties are such that one of the parties is in a position to dominate the will of other and uses that position to obtain an unfair advantage over the other. Following are the parties that can be affected by undue influence * Doctor and patient * Lawyer and client * Guardian and wand © Trustee and beneticiary © Teacher and student Example:- " ver him as his medical ‘A man enfeebled by disease or age is induced by B's influence ote hie rei attendant to agree to pay B an unreasonable sum for his profession undue influence. CONSEQUENCES OF UNDUE INFLUENCE(section 19-A ipoust undue oi ty x ¢ at the option of the party agreeme! xd by und ¢ is a contract voidable al i Stesimanivciused by influence is soi the option o ai eo : abated by undue influence. However. any such contract m: be set whose consentee The ct must have been committed with the intention of inducing the deceived party \o act upon it-lt implies that the assertion should be such that it would necessarily influence sn induce other party’ t0 act Effect of Fraud The party whose consent to the contract is obtained by fraud can exercised any of the following rights: He may avoid the contract and may ask for the damages suffered because of the non- fulfilment of the contract He may insist for the performance of the contract. Misrepresentation( (Section 18) Misrepresentation MY is a false representation made innocently without any intention of ceiving the other party .It may include two things: * “Tong statement of a material fact not known to be false Non-disclosure of facts where there is intention to deceive. ° S a legal duty to disclose without E: ‘ample:~ % X entered into contract with € for the sale of hops.X told Y that no sulphur has been used in Uicit Browth. Y agees to buy only if no sulphur has been used for their growth.As a matter of fact, sulphur has been used in 5 out of 100 acres which fact was evidently forgotten by X when Tepresented that no sulphur was used ' CONSEQUENCES OF MISREPRESENTATIO! In the cases of misrepresentation the party aggrieved or wronged can be- Avoid the agreement Insist that the contract be performed and that he be put in the position in Which he would have been if the representation made had been trueUnlike fraud. misrepresentation by a party does not entitle the other 10 claim damages. This. however is subject to certain exceptions. ie. ineertain cases the i to claim damages arises even in case of misrepresentation. These are ‘i ub) ch of warranty of authority of an agent- where an agent bi has no such authority, th at he has the authority to represent his principal while in fact he 1 is liable in damages. even though he is guilty of innocent isrepresentation