Legal Environment of Business

BUS 7305

Law of Contract
 Law of Contract
The law of contract as practice in Bangladesh can be
divided into two broad categories:
1. General laws relating to contract: (SS: 1-75)
a) Formation of a contract;
b) Performance of contract;
c) Breach of contract & its remedies.
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2. Laws relating to some particular types of
contracts:
a) Contract of indemnity and guarantee; (124-147)
b) Contract of bailment & pledge; (148-181)
c) Contract of agency, (182-238)
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1. General laws relating to contract:
A question may arise about how a contract is to be made?
A contract may be made expressly or impliedly. An
express contract may be written or oral. However, how
does made an implied contract?
 Example: shoe shiner/ferry…

Contract: Section 2 (h) of the Contract Act, 1872

An agreement enforceable by law is a contract.
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Enforceable by law means-

 competency of parties;

 free consent of the parties;

 objective must be lawful; (the object for which the

agreement has been entered into must not be
fraudulent or illegal or immoral or opposed to public
policy or must not imply injury to the person or property
of another, S: 23)
 consideration must be lawful;

 not declared by law as void.

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Agreement: Section 2 (e) of the Contract Act, 1872
(Consensus-ad-idem means both the parties to an
agreement in the same sense and at the same time.)
 Two types of agreement –

1. Agreement enforceable by law; and ( agreement for

purchase a laptop is…)
2. Agreement not enforceable by law. (agreement for
purchase heroine is…)
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So, “all contracts are agreement, but all agreements are
not contracts” it was also held in Abdul Gani Sheikh Vs
Jagadish Chandra Mridha and others (2 BLC 121)

According to ection 2 (e) of the Contract Act, 1872:

“Every promise and every set of promises forming the
consideration for each other is an agreement”.
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Consideration: Section 2 (d) of the Contract Act, 1872

“When, at the desire of the promisor, the promisee or any
other person has done or abstained from doing or does or
abstains from doing or promises to do or to abstain from
doing something, such act or abstinence or promise is
called a consideration for the promise”. (English law has
different opinion on it, later we will discuss with research
article)
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Promise: Section 2 (b) of the Contract Act, 1872

“A proposal when accepted becomes a promise”.

Proposal: Section 2 (a) of the Contract Act, 1872

“When one person signifies to another his
willingness to do or to abstain from doing
anything, with a view to obtaining the assent of
that other to such act or abstinence, he is said to
make a proposal”.
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Acceptance: Section 2 (b) of the Contract Act, 1872
“When the person to whom the proposal is made signifies
his assent thereto the proposal is said to be acceptance”.

Voidable contract: voidable contract has been defined in

section 2 (i) of the Contract Act, 1872 as-
“An agreement which is enforceable by law at the option
of one or more of the parties thereto, but not at the
option of the other or others is called voidable contract”.
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Void contract: section 2 (j) of the Contract Act, 1872
“A contract which ceases to be enforceable by law
becomes void when it ceases to be enforceable”.
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Rules regarding proposal/how can make a proposal?
Suppose someone expresses his willingness that “I would like to sell one
of my cars for Tk. 5 lacs”- will it be an offer?
A conversation between Tom & Bob,
Tom: Have you bought another car? I just heard it from Kuddus that you
purchased a Lexus car yesterday.
Bob: O, Yeah, it's true.
Tom: But I think the second car will be really useless for you, one is
sufficient.
Bob: I am thinking to sell my old one.
Tom: For how much?
Bob: 5 lacs.
Tom: that’s nice.
Now state any legal binding between Tom & Bob for sale of such car.
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Due to make a valid proposal:
1.The proposal must intent to create legal relations---
Case: (Balfour Vs. Balfour)
Fact: Plaintiff is a businessman, living Ceylon, promised
to his wife, who was living in England due to health
reason, paying her monthly allowance.
Dispute: the dispute is raised when the Plaintiff fails to
pay the allowance to his wife.
Held: Competent court held that there was no intention to
create legal relation between them.
Similarities: suppose someone invites to dine, it is not an
offer. (Social relation does not mean a legal relationship)
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3. An offer (term & condition as well) must be definite or
certain, i.e., any vague or ambiguous statement is
incapable of giving birth to a proposal. (S: 29)
Suppose: a person indicating two cars of the same model
kept in front of him and tells that “I will sell one car for Tk.
5 lacs and another for Tk. 3 lacs”, is not an offer.
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Again: A new model BMW car and another scooter are
kept in one place and indicating that “I will sell these two,
one for Tk. 1 lac and another for Tk. 95 lacs” it may
constitute an offer.
Case: Montreal Gas Co. Vs. Vasey
Fact: Contract between A & B, where A promised that he
will be renewed the contract if he is satisfied as B’s
customer.
Held: Not create any legal obligation between A & B.
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4. An offer may be made to specific person or class of
person or even to the world at large generally in the
following way-
a) A says B to sell his computer to him for a certain
price…
b) A makes an offer to sell some computer to the student
of MBA…
c) A promise to give a reward of Tk. 1000 through a notice
published in his website to anyone who can be found his
lost pet tushi…
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5. Offer may be expressed or implied---- written is must when an
agreement to pay a time-barred debt,
Agreement to make a gift for natural love and affection S: 25
Arbitration agreement as per Arbitration Conciliation Act, 1996
Sale of immovable property as per TP Act, 1882
a) A tells B ‘I will sell my car to you for Tk. 1000—is an express but
oral offer---
b) A sends an e-mail to B offering to sell his particular land for a
certain price—is an express but writing offer---
c) Example for shoe shiner…is an Implied offer---
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6. Offer may be positive or negative.
Example—
a) A says “I will sell my car for Tk. 3lacs” ---is a positive offer
b) A tells B “ If u do not go Cox’s bazaar tomorrow, I will not give C
Tk. 3 lacs—is a negative offer.

7. Offer may be conditional or unconditional.

Ex. If A tells B that “I will sell my car to u if u recruit my nephew in ur
company as a manager—is a conditional offer.
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8. An offer should be with a clear intention:
Will u sell us Bumper Hall Pen?
Telegraph lowest cash price.
There was no clear intention.

9. Communication is essential in order to constitute an offer.

See section 3 of the Contract Act, 1872.
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10. A contract for necessaries:

In the case a necessary supplied to a minor or
lunatic, the supplier of goods is entitled to be
reimbursed from their estate.
S: 68 of the Contract Act, 1872.
11. Possibility of performance:
An agreement to do an act impossible (physically
or legally) in itself is void. S: 56.