RAB NAWAZ

FA18-BBA-028
Q:1
Types of contract:
Valid: The Contracts which are enforceable in a court of law are called Valid Contracts. To
attain Validity the Contract should have certain features like consensus ad idem, Certainty, free
consent, two directional consideration, fulfillment of legal formalities, legal obligations, lawful
object, capacity of parties, possibility of performance, etc.
Example: there is a Contract between X and Y and let us assume that their contract has all those
above said features. It is Valid Contract.
Void: A Contract which is not enforceable in a court of law is called Void Contract. If a Contract
is deficient in any one or more of the above features (Except free consent and legal formalities).
It is called Void Contract.
Example: there is a Contract between X and Y where Y is a minor who has no capacity to
contract. It is Void Contract.
Voidable: A Contract which is deficient in only free consent, is called Voidable Contract. That
means it is a Contract which is made under certain pressure either physical or mental. At the
option of suffering party, a voidable contract may become either Valid or Void in future. For
example: there is a Contract between A and B where B has forcibly made A involved in the
Contract. It is voidable at the option of A.
Illegal: If the contract has unlawful object it is called Illegal Contract.
Example: There is a contract between X and Z according to which Z has to murder Y for a
consideration of Rs. 10000/- from X. It is illegal contract.
Unenforceable: A contract which has not properly fulfilled legal formalities is called
unenforceable contract. That means unenforceable contract suffers from some technical defect
like insufficient stamp etc. After rectification of that technical defect, it becomes enforceable or
valid contract.
Example: A and B have drafted their agreement on Rs. 10/- stamp where it is to be written
actually on Rs. 100/- stamp. It is unenforceable contract.
Also explain the contracts which are valid without consideration?

If an agreement is in writing and registered between two parties in close relation (like blood
relatives or spouse), based on natural love and affection, then such an agreement is enforceable
even without consideration.

Q#2

Fraud is a method of misleading a person deliberately means deceit by making certain mis-
statement deliberately. Fraud includes all intentional or willful mis-representation of facts, which
are material for the formation of a contract. The most important thing in fraud is the intention to
mislead the other party.

Essential:

1. There must be a false representation of facts. To constitute of fraud there must be a

false statement of facts.

2. The representation must be made with the knowledge that it is false or with reckless
disregard about its truth or false hood. If the person
making the statement honestly believes it to be true, he is not guilty of fraud.

3. The representation must have been made by the party to the contract or with his
knowledge or by his agent. If a statement is made by a
stranger, it does not affect the contract. A fraud will make a contract voidable only if it
is committed by a party to a contract or his agent.

4. The representation must have been made with an intention to deceive the other party.

Examples of Unilateral Mistakes:

Unilateral mistakes can arise from any part of the contract. These are some of the most common
unilateral mistake examples. 

 The definition of a word or phrase: One party mistakenly believes the definition of a
word or phrase to be something different than what it actually is.
  The quantity of a product: A mistake as to the specific quantity of a product to be
delivered or served.
 The definition of terms or technical phrases: This involves a mistake as to the actual
meaning of a specific legal term or technical phrase.

Q#3

Agreement in Restraint of Legal Proceedings:

Any agreement between the two parties that debars either or both of them from going to a court
of law in case of non-compliance of the contract, is a void agreement. Section 28 of the Indian
Contract Act says that any agreement that restricts an aggrieved party from enforcing his rights
to approach a relevant court or tribunal in case of a breach of contract, or limits the time within
which he may do so, is a void agreement. It further says, any agreement that extinguishes the
rights of any party or discharges either of the parties from liability is a void agreement.

In simple terms, all agreements are void, if:

1. They render it invalid, by agreement, for a party to approach a relevant court or

tribunal if the parties rights have been violated.
2. Limit the time within which the aggrieved party can approach such a court or tribunal.
3. Make a party immune from liability by agreement.

Exceptions:

There are two exceptions to Section 28, as mentioned in the Act. Agreements in restraint of legal
proceedings are valid, if:

1. A future dispute or a past dispute is referred to arbitration. That is if there is an

arbitration clause in the said agreement.
 2. Agreements stating the limit of time as per the Limitation Act, 1963. For instance, as
per the Limitation Act, 1963, a suit for breach of contract may be brought within the
period of three years from the date of the breach.

Q#4

In the following cases, a non-owner can convey better purchaser of goods for
value:

1. Sale by one of the joint owners (Section 28): If one of several joint owners of goods has the sole
possession of them by permission of the co-owners, the property in the goods is transferred to any
person who buys them from such joint owner in good faith and has not at the time of the contract of
sale notice that the seller has no authority to sell.
2. Sale by a person in possession under voidable contract: A buyer would acquire a good title to the
goods sold to him by a seller who had obtained possession of the goods under a contract voidable on
the ground of coercion, fraud, misrepresentation or undue influence provided that the contract had not
been rescinded until the time of the sale (Section 29).
3. Sale by one who has already sold the goods but continues in possession thereof: If a person has sold
goods but continues to be in possession of them or of the documents of title to them, he may sell them
to a third person, and if such person obtains the delivery thereof in good faith and without notice of the
previous sale, he would have good title to them, although the property in the goods had passed to the
first buyer earlier. A pledge or other disposition of the goods or documents of title by the seller in
possession are equally valid [Section 30(1)].
4. Sale by buyer obtaining possession before the property in the goods has vested in him: Where a
buyer with the consent of the seller obtains possession of the goods before the property in them has
passed to him, he may sell, pledge or otherwise dispose of the goods to a third person, and if such
person obtains delivery of the goods in good faith and without notice of the lien or other right of the
original seller in respect of the goods, he would get a good title to them [Section 30(2)]. However, a
person in possession of goods under a ‘hire-purchase’ agreement which gives him only an option to
buy is not covered within the section unless it amounts to a sale.
Q#5

Negotiable instrument types

1. Cheques

Cheques are perhaps the most common negotiable instrument example. This is an instrument in
writing with a specific payment amount. Upon receipt, the payer’s financial institution pays out
these funds to the bearer, either in cash or to a chosen bank account. Cheques are used to pay
many different types of bills, from loans to university fees and rent. They’re being phased out in
favour of online banking transactions, but cheques still provide a helpful paper trail for
businesses.

2. Traveller’s cheque

Another less common form of negotiable instrument is a traveller’s cheque. These require two
signatures for the transaction to be approved. The payer signs the document at the time of issue,
with a countersignature added when payment is issued. These documents are designed for use in
foreign countries, issued by financial institutions in prepaid amounts. However, traveller’s
cheques are becoming increasingly rare and aren’t accepted by all foreign retailers.

3. Money order

Money orders offer a quick and efficient payment method. They can be issued by a financial
institution or other entity. You can pay for a money order in cash to specify its value before
sending it to the payee. It’s then exchanged for cash at the other end. The main difference
between money orders and cheques is that they usually come with a limit on issued value. They
also contain less personal information than a cheque, as no personal bank account details are
necessary.

Difference between holder and holder in due course:

Holder:

• May or May not be in possession of the instrument.

• If the title of the prior party is defective and does not have a legal right to deliver the
instrument to the holder, the holder also has no such right.

• Holder is entitled to the possession of the instrument in his own name.

• Consideration is not necessary

• A holder does not have a right to sue prior parties related to the transaction.

Holder in due course:

• Always in the possession of the instrument.

• Holder in due course is free from the defective title of prior party.

• Holder has to obtain it in good faith for some consideration.

• Consideration is necessary.

• A holder in due course has a complete right to sue the prior parties.