MBA-I-A

LEGAL ASPECTS OF BUSINESS

THE INDIAN CONTRACT ACT, 1872
ASSIGNMENT

1. Agreement: Every Promise or set of promises forming consideration for each other
2. Promise: A proposal when accepted by the other party
3. Proposal/OFFER: When one person signifies to another his willingness to do or abstain
from doing anything with a view to obtain assent from that other to such an act or
abstinence , he is said to have made a proposal
4. Contract; An agreement enforceable by law.
5. Essential requirements of contract:
a. Two parties
b. An agreement
c. Legal Obligation
6. Essential Element of valid contract:
a. Agreement
b. Competent parties: not
i. Minor
ii. Person with unsound mind
iii. Person disqualified by law
c. Free Consent: not obtained by:
i. Coercion
ii. Undue influence
iii. Misrepresentation
iv. Fraud
v. Mistake
d. Consideration
e. Legal Object
f. Not expressly declared void
g. Compliance with legal formalities
Classification of Contract

1. Enforceability
a. Valid: Contracts which satisfy all essential elements of a contract
b. Void: Contracts which are valid at the time of formation but becomes
unenforceable due tp certain reasons:
i. Supervening impossibility
ii. Voidable contract becomes void on the option of one party to repudiate the
contract
iii. A contingent contract to do or not to do something on the happening of an
event becomes void when the event becomes impossible.
c. Voidable: An agreement which is enforceable by law at the option of one or more
of the parties thereto, but not at the option of other or others.
d. Illegal: should be better called as Illegal agreements, are those contracts, the
object of which is illegal
e. Unenforceable: Valid contracts which cannot be enforced because of presence of
some technical defects, like non registration, non-stamping etc.
2. Creation
a. Express: Contracts entered into by the parties by words spoken or
written.
b. Implied: Contracts which come into being on account of conduct of parties and
not by their express words, written or oral.
3. Execution
a. Executed: Where both the parties to the contract have fulfilled their respective
obligations.
b. Executory: Where on or both the parties have still to perform their obligations
i. Unilateral: When one party has performed his obligation either before or
at the time of formation of contract
ii. Bilateral: A contract in which obligations of bot the parties are
outstanding at the time of formation of the contract.

VOID AGREEMENT VOID CONTRACT

Void from the very beginning Valid at the time of formation but
VOID ABINITIO becomes void later

VOID AGREEMENT VOIDABLE CONTRACTS

Are unenforceable from the very beginning Becomes unenforceable only when the
 party at whose option contract is voidable
chooses to rescind it.
Cannot be enforced at all Can be enforced if the option is
exercised.
No effect on collateral contract, except No effect on collateral contract
when the agreement is void on account of
illegality of object

VOID AGREEMENTS ILLEGAL AGREEMENTS

All void agreements are not illegal
There is no punishment to the parties
involved
Collateral agreements are valid
Valid contracts becomes void in some
circumstances
All illegal agreements are void
Parties involved can be punished
Collateral agreements are void ab initio
Void from very beginning

ANSWER THE FOLLOWING QUESTIONS

1. Explain the essentials which must be fulfilled before an agreement becomes

enforceable by law
2. “The Law of Contract is not the whole law of agreement nor is it the whole law of
obligations.”— Salmond. Explain the scope of Law of Contracts.
3. Differentiate between:
a. Unilateral and Bilateral Contracts
b. Void and Illegal Agreements
4. Comment on the following;
a. A voidable contract is valid till the aggrieved party opts to avoid it.
b. An agreement to agree is a valid contract
c. All contracts are agreements but all agreements are not contracts (5 marks)
(Dec 2011)
d. A void contract is one which is Void-ab initio
e. All void agreements are not illegal but all illegal agreements are void
f. Collateral transactions to an illegal agreement do not become void
5. Briefly explain the essential elements of the valid contract and discuss the validity of
the oral contract between two parties to sell and purchase house property and car (15
marks) (Dec 2016)