UNIT 1, BUSINESS LAW-

INTRODUCTION
• WHAT IS LAW?
• WHO MAKES LAW?
• WHY PEOPLE FOLLOW IT?
• TO WHOM IT APPLIES?
• DISOBEDIENCE TO LAW –CONSEQUENCIES
• NEED FOR LAW TO A SOCIETY
• TYPES OF LAW: FAMILY LAW;

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 UNIT 1. LAW OF CONTRACTS
• 1. DEFINITION
• 2. ESSENTIALS OF VALID CONTRACT
• 3. KINDS OF CONTRACT
• 4. OFFER & ACCEPTANCE
• 5.CONSIDERATION
• 6.CAPACITY OF PARTIES
• 7.FREE CONSENT
• 8. DISCHARGE, BREACH & REMEDIES.

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 U 1 BL. SEM IV
• MEANIG & DEFINITION OF CONTRACT

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U 1. BL LAW OF CONTRACT
• INDIAN CONTRACT ACT 1872
• MEANING & DEFINITION ;

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U 1 , B.L
• Contract Definition
• A contract is an agreement, either written or spoken, between two or
more parties that creates a legal obligation.

• The terms of a contract are enforceable by law, with clearly defined

penalties and remedies should the contract be breached. A breach of
contract is a failure, without legal excuse, to perform any parts of the
contract.

• A contract is created when there is an offer, consideration, and

acceptance between two or more parties.

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 UNIT 1 CONTRACT. MEANING
• a legal document that states and explains a formal agreement
between two different people or groups, or the agreement itself:
• a contract of employment
• a temporary/building contract
• They could take legal action against you if you break (the terms
of) the contract.
• My solicitor is drawing up (= writing) a contract.
• Don't sign/enter into any contract before examining its
conditions carefully.

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U1. BL. MEANING
• A contract is an agreement between parties, creating mutual
obligations that are enforceable by law. The basic elements
required for the agreement to be a legally enforceable contract
are: mutual assent, expressed by a valid offer and acceptance;
adequate consideration; capacity; and legality. In some states,
elements of consideration can be satisfied by a valid substitute.
Possible remedies for breach of contract include general
damages, consequential damages, reliance damages, and
specific performance.

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ESSENTIALS OF A VALID CONTRACT
• 1.Offer and Acceptance.

• In order to create a valid contract, there must be a

• 'lawful offer' by one party and 'lawful acceptance' of the
• same by the other party.
• Section 2 (a) of the Contract Act defines Offer as –
• ‘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 an offer'. Section 2 (b) of
• the Contract Act states that, ‘when the person to whom
• the offer is made signifies his assent there to, the offer
• is said to be accepted

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 U1. B.L ESSENTIALS OF A VALID
CONTRACT
• 2. to Create Legal
Intention
Relationship.
In case, there is no such intention on the part of parties, there is
no contract. Agreements of social or domestic nature do not
contemplate legal relations. Case :- Balfour vs. Balfour(1919)
Mr. Balfour and his wife went to England for a vacation, and his
wife became ill and needed medical attention. They made an
agreement that Mrs. Balfour was to remain behind in England
when the husband returned to Ceylon (Sri Lanka) and that Mr.
Balfour would pay her £30 a month until she returned. This
understanding was made while their relationship was fine;
however the relationship later soured. The lower court found that
there was sufficient consideration in the consent of Mrs. Balfour
and thus found the contract binding, which Mr. Balfour appealed.
Arrangements made between husbands and wives are not
generally contracts as the parties do not intend to be legally
bound by the agreements. 11
U 1. B.L. ESSENTIALS OF A VALID
CONTRACT
• 3.
3.Lawful Consideration.
At the desire of promisor, promisee or any other person has
done or abstain from doing or does abstain from doing such
act or promises is known as consideration. According to
Blackstone "Consideration is recompense given by the party
contracting to another." In other words of Pollock,
"Consideration is the price for which the promise of the
another is brought." Consideration is known as “quid proquo” or
something in return. It may be cash, kind, act or
abstinence and may be in past, present or future. It should
not be unlawful, immoral and against the public policy 12
U1. BL ESSENTIALS OF A VALID
CONTRACT
• . Competency of The
4. 4

• parties./Capacity to contract.

• The parties to an agreement must be

• competent. If either of the parties does not have
• the ability to contract, the contract is not valid. The
• following persons are incompetent to contract. (a)
• Minor: A person less than age of 18 is minor.
• Case-Mohri Bibi vs Damodar Ghosh 1903 (b)
• Unsound mind person: Any person who is unable
• to understand the term and condition of contract at
• the time of its formation is unsound mind. (c) 13
U1. BL ESSENTIALS OF A VLID
CONTRACT
• 5. Free Consent. “Consent' means the parties must have
• agreed upon the same thing in the same sense.
• According to Section 14, Consent is said to be
• free when it is not caused by- (1) Coercion
• (Case- Rangnaykamma vs Alwar Setti 1889.)
• (2) Undue Influence (3) Fraud (4) Misrepresentation (5)
Mistake. An agreement should
• be made by the free consent of the parties

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U1. BL
ESSENTIALS OF A VALID
CONTRACT
• 6. Lawful Object.

• The object of an agreement must be valid.

• Object has nothing to do with consideration. It means
• the purpose or design of the contract. Thus, when
• one hires a house for use as a gambling house, the
• object of the contract is to run a gambling house. The
• Object is said to be unlawful if- (a) it is forbidden by
• law; (b) it is of such nature that if permitted it would
• defeat the provision of any law; (c) it is fraudulent; (d)
• it involves an injury to the person or property of any
• other; (e) the court regards it as immoral or opposed
• to public policy. Or any agreement to distribute the
• money earned by robbery.

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U 1 BL ESSENTIALS OF A VLID
CONTRACT
• 7. Certainty of Meaning.
• According to Section 29,"Agreement the meaning of which is not
• Certain or capable of being made certain are void.“ For e.g. : A agree
• to sell to B a 100 tones of oil, there is nothing to show what kind of
oil
• intended, the agreement is void due to the absence of certainty. But
if
• A is dealer of coconut oil only agree to sell B,100 tones of oil, the
• nature of A’s trade is sufficient to show the kind of oil, and this will be
a

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 U1. BL ESSENTIALS OF A VALID
CONTRAT
• 8. Possibility of Performance.
• Condition for a contract should be capable for performance .If the act
• is impossible in itself, physically or legally, if cannot be enforced at
law.
• For example: If A and B makes an agreement that if B encloses a
• space with the help of two straight lines then A will pay him Rs. 1000
• otherwise B will be liable for paying Rs. 500 to A. RESULT: This is an
• impossible work. Two straight lines can not enclose a space , hence
• contract is not valid.

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 ESSENTIALS OF A VLID CONTRACT
• 9. Not Declared to be void or Illegal.
• The agreement though satisfying all the conditions for a valid
• contract must not have been expressly declared void by any law
• in force in the country. Agreements mentioned in Section 24 to 30
• of the Act have been expressly declared to be void. For example
• agreements in restraint of trade, marriage, legal proceedings etc.
• That is : If A is not willing to marry with B, law can not enforce
• him/he

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 U1 BL. ESSENTIALS OF A VALID
CONTRACT
• 10. Legal Formalities. An oral Contract is a perfectly valid contract, expect
in those
• cases where writing, registration etc. is required by some statute.
• In India writing is required in cases of sale, mortgage, lease and
• gift of immovable property, negotiable instruments; memorandum
• and articles of association of a company, etc. Registration is
• required in cases of documents coming within the scope of
• section 17 of the Registration Act 1908. All the elements
• mentioned above must be in order to make a valid contract. If any
• one of them is absent the agreement does not become a
• contract

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 U1. BL; 14 TYPES OF CONTRACT
• Express Contracts
• Implied Contract
• Quasi-contract
• E-contract
• Executed contract
• Executory contract
• Partly Executed and partly executory contract
• Unilateral Contract
• Bilateral contract
• Valid contract
• Void contract
• Voidable contract
• Illegal contract 20
U1. BL 3 TYPES OF BUSINESS
CONTRACTS
• 3 types: of Contract in Business Law
• 1. On the Basis of the Mode of Formation
• 2. On the Basis of Performance
• 3. On the Basis of validity or Enforceability

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22
 TYPES OF CONTRACTS ( mode of
formation)
• I. Express Contracts
• A contract made by word spoken or written.
• Section 9 of the Indian Contract Act 1872 provides that if a
proposal or acceptance of any promise is made in words the
promise is said to be express.
• Example: A says to B ‘will you purchase my bike for
Rs.20,000?” B says to A “Yes”.

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U1. TYPES OF CONTRACT
• II, Implied Contract
• A contract inferred by
• • The conduct of person
• • The circumstances of the case.
• By implies contract means implied by law (i.e.) the law implied a
contract through parties never intended.
• According to sec 9 in so for as such proposed or acceptance is
made otherwise than in words, the promise is said to be implied.
• Example: A stops a taxi by waving his hand and takes his seat.
There is an implied contract that A will pay the prescribed fare.

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 u 1. B.L. QUASI CONTRACT,
• Quasi Contract
• The word ‘Quasi’ means pseudo. Hence, a Quasi contract is a
pseudo-contract. When we talk about a valid contact we expect it to
have certain elements like offer and acceptance, consideration, the
capacity to contract, and free will. But there are other types of
contracts as well.

• There are cases where the law implies a promise and imposes
obligations on one party while conferring rights to the other even
when the basic elements of a contract are not present. These
promises are not legal contracts, but the Court recognizes them as
relations resembling a contract and enforces them like a contract.
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U 1. B.L, FEATURES OF QUASI
CONTRACT
• Features of a Quasi Contract
• It is usually a right to money and is generally (not always) to a
liquated sum of money
• The right is not an outcome of an agreement but is imposed by
law.
• The right is not available against everyone in the world but only
against a specific person(s). Hence it resembles a contractual
right.

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 U1. B.L. QUASI- CONTRACT
• Solved Question on Quasi Contract
• Q: Peter and Oliver enter a contract under which Peter agrees to
deliver a basket of fruits at Oliver’s residence and Oliver promises to
pay Rs 1,500 after consuming all the fruits. However, Peter
erroneously delivers a basket of fruits at John’s residence instead of
Oliver’s. When John gets home he assumes that the fruit basket is a
birthday gift and consumes them. Does John have to pay for the
goods?

• Ans: Yes, John has to pay for the fruit basket. Although there is no
contract between Peter and John, the Court treats this as a Quasi
contract and orders John to either return the basket of fruits or pay
Peter.

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 U1. BL E-CONTRACTS
• E-Contract meaning
• The contracts which are not paper-based and are created
electronically in nature are known as e-contracts. Normally, these
kinds of contracts are made for speedy entering into a contract.
These types of contracts perform the best role where the parties of
the contract live in the different places of the world and it is very
tough to meet in reality due to far distance. They can make contracts
easily and fulfil their requirement online. The e-contracts are not just
saving your time and fast the process but it is also beneficial and
easy for parties to store and manage the documents of the contracts.
If either of the party wants to recall the terms of the contract which
they forget, they can easily read it again in just a few click

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U 1. BL, E CONTRACT EXAMPLE
• E-contract example
• There are thousands of e-contract examples that we use in our daily
life. Your last product which you bought from an online shopping
website was an E-contract
• Freelancing is very popular in today’s time. Due to the decrease in
the number of many jobs, people are doing freelancing. There are
many freelancing platforms such as Upwork and Fiverr etc. which
help a freelancer to do online work for a person who is sitting far
away from that person. But due to the E-contract, you just accept his
work offer or give him your offer for that work, if the person accepts
the proposal, you can perform your part and get the specific amount
of consideration.

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U1. TYPE OF CONTRACTS (
PERFORMANCE)
• 1. executed contracts
• 2. executory contract
• 3. partly executed & partly executory
• 4. unilateral
• 5. bilateral
• 1. Contracts which are implemented are Exexuted contracts.
• 2. Contracts which are to be executed are executory
• 3. Contracts of 1 & 2 above are third category
• 4l.' In its simplest terms, unilateral contracts involve an action
undertaken by one person or group alone. In contract law, unilateral
contracts allow only one person to make a promise or agreement
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U1. BL., type of contracts: based on
validity
• 1. VALID CONTRACT
• 2. VOID CONTRACT
• 3. VOIDABLE
• 4. ILLEGAL
• 5. UN ENFORCEABLE

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unit 1. CONTRACTS BASED ON
VALIDITY. 13-5-23.
• 1. Valid Contracts
• The Valid Contract as discussed in the topic on “Essentials of a Contract” is an
agreement that is legally binding and enforceable. It must qualify all the
essentials of a contract.
• 2.VOID CONTRACTS:
• Void Contract Or Agreement
• The section 2(j) of the Act defines a void contract as “A contract which ceases to
be enforceable by law becomes void when it ceases to be enforceable”. This
makes all those contracts that are not enforceable by a court of law as void.
• We have already stated examples of these kinds of contracts in the “Essentials of
a Contract”.
• Example: A agrees to pay B a sum of Rs 10,000 after 5 years against a loan of
Rs. 8,000. A dies of natural causes in 4 years. The contract is no longer valid and
becomes void due to the non-enforceability of the agreed terms.

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U1. BL;CONTRACTS BASED ON
VALIDITY
• 4. ILLEGAL CONTRIllegal Contract
• An agreement that leads to one or all the parties breaking a law or
not conforming to the norms of the society is deemed to be illegal by
the court. A contract opposed to public policy is also illegal.
• Several examples may be cited to illustrate an illegal contract. For
example, A agrees to sell narcotics to B. Although this contract has
all the essential elements of a valid contract, it is still illegal.
• The illegal contracts are deemed as void and not enforceable by law.
As section 2(g) of the Act states: “An agreement not enforceable by
law is said to be void.ACTS:

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U1. CONTRACTS BASED ON
VALIDITY:
• VOIDABLE CONTRACT:
• These types of Contracts are defined in section 2(i) of the Act:
“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 a voidable contract.” This may seem difficult to
wrap your head around but consider the following example:
• Suppose a person A agrees to pay a sum of Rs. 10,0000 to a
person B for an antique chair. This contract would be valid, the
only problem is that person B is a minor and can’t legally enter
a contract.
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 U1. DIFFERENCE BETWEEN VOID
VOIDABLE CONTRACT
• Void Contract Voidable Contract
• “A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable”. “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 a voidable contract.”
• A contract becomes void if either it lacks the essential elements, the law changes
drastically or the terms of the contract change such that it is no longer possible to enforce
the contract in a court of law. A contract becomes a voidable contract when at least one
of the parties reserves its consent or the consent of one of the parties was not free at the
time of the formation of the contract.
• Void contracts can’t be fulfilled. The validity and enforceability of the voidable
contract depend on the choice of the unbound party. If the unbound party decides to
repudiate the contract it becomes void.
• This type of contract can’t grant any rights or considerations to any of the involved parties.
The right to rescind a voidable contract is retained by the unbound party.
• Share with friends

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U 1. BL, OFFER & ACCEPTANCE
• OFFER:

• According to Indian Contract Act, 1872 (Act No.9 of 1872) “Offer” is define under

• Read also : SC refuses to stay ECI order handing over Shiv Sena Rights to
Eknath Shinde
• Section 2(a) : “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”.
• The person who is making the proposal is called offeror or promisor or proposer
and the person to whom the proposal is made is called as offeree or promise.
• For example, “A” made an offer to” B” to buy the house. Here “A” is the offeror or
promisor or proposer and “B” is the offeree or promise

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Es
Essentials of a valid offer

• 1. Offer must be communicated :-

• Communication of offer is the most primary thing which is to be done for a valid
offer. The offeror must communicate offer to the offeree. The communication can
be either in oral or written form. The offer can directly communicate to the person
specific to whom it is offered or it can be in general in nature.
• For example : “A” wants to sell his car and he has published an advertisement in
newspaper which is a form to communicate the offer to general public. Hence it
is a valid offer.
• In case of Lalman Shukla v. Gauri Dutt [1] The High Court of Allahabad that
knowledge and acceptance of a proposal must be communicated to people are
the basic essentials in order to constitute a valid contract. The person can claim
reward if he gives his consent and perform the terms of the proposal.

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U1, BL., ESSENTIALS OF A VALID
OFFER
• 2. Must create legal relationship:-

• Read also : Tamil Nadu Govt moves Supreme Court against RSS route march in
State
• A valid offer creates a legal relationship which means there must be an intention
of the offeror to work under legal obligation or to be legally bounded by law not
under social obligation.
• For example : “X” (Father of Y) says to “Y”, if he pass the exam he will get a new
video game. “Y” passed the exam asked his father to give him video game as he
had promised to Y. Here X is not legally bound as the offer doesn’t create any
legal obligation against X.
• In case of Balfour v. Balfour [2]. They were married couple. Husband promised to
his wife to send £30 per month. But husband failed to do so. Then wife filed the
case against him and it was held that there was no intention to create legal
relation. Thus the agreement was not valid.

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U1, BL. OFFER-ESSENTIALS
• 3. Definite, unambiguous and certain in nature:

• Offer must be certain as specified in [Section 29], it must be

unambiguous means that the thing offered must clearly specified.

• For example : Mitesh offered to sell his car to Tanmay. Mitesh is

owned two cars one is of Ford & other is of BMW and Mitesh offered
his Ford car to Tanmay but Tanmay thought Mitesh if offering him his
BMW one. As in the offer it was not definite which car Mitesh wants
to sell, thus this is not a valid offer.

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 U1, BL OFFER
• 4. It must distinguished from invitation to offer:-

• The offer makes a person to enter into a legally binding contract whereas
invitation to offer invites the person to enter into contract.

• For example : A suit was displayed with a price tag in a shop. This is not a
offer it is invitation to offer.

• 5. It may be general or specific in nature:-

• The offer can be given to public at large in general by advertisement in

newspaper etc. or it can be given specific person too.

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U1, BL- OFFER
• 6. Offer must be made with a view to obtain the assent :-
• The offeror must obtain consent which should be “free” in
nature as define under Section 14 as it define it should not be
taken under coercion [section 15], undue influence [Section 16],
fraud [Section 17], misrepresentation [Section 18] & Mistake
[Section 20, 21 and 22].

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U1, BL TYPES OF OFFER
• Different Types Of Offers

• 1 . GENERAL OFFER:-

• When an offer made at large or in public or in general this offer is known as General Offer. It can be
accepted by any individual or public at large whoever is interested in the offer offered. When a person
accepts the offer given then offeror and offeree enter into contract. The reward will be given to that
person who completed the task given or fulfilled the given condition.
• CASE : CARLILL v. CARBOLIC SMOKE BALLS CO. (1893) [3]
• This is the landmark judgment of general offer. In this case it held by the Court of Appeal that
whosoever fulfills the terms and condition of the offer will be eligible for the reward of the offer.
• 2 SPECIFIC OFFER :-
• The offer which is made to an individual or to a specific group of individual is said to be Specific offer. It
can be accepted by that individuals or that group of individual.
• Example : Sandhya offer to buy a car from Sona for Rs. 10 lakh. Thus, a specific offer is made to a
specific person , and only Sona can accept the offer.

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U1. BL OFFER
• 3. COUNTER OFFER :-

• When an offeror makes an offer to offeree and offeree with some modification in it makes
converse offer which makes initial offer void and the other comes in existence, which
reverse the party from offeror and offeree to offeree and offeror respectively this type of
offer is known as counter offer.

• CASE : HYDE v.WRENCH (1840) [4]

• Defendant(offeror) offered to sell his farm for £1000 but the Plaintiff(offeree) offered him
£950 and subsequently rejected the offer. So, the offeree filed the case as the offeror was
bind by the contract but it was held that as soon as offeree put the condition the first offer
becomes void which means that the offeror is not bounded by the contract as the original
offer was rejected by the offeree.

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U1. BL OFFER
• 4. CROSS OFFER :-
• When the offeror and offeree make the same offer to one another having
same terms out of knowledge of each other is known as cross offer. In this
case there will be no contract due to acceptance of the offer offered.
• CASE : TINN v. HOFFMAN (1873) [5]
• In this case Hoffman wrote a letter to Tinn with a offer to sell 800 tons of
iron for the price of 69s per ton. On the same day without any knowledge
Tinn wrote a letter to buy the iron with the price and with same condition as
written by Hoffman. It was held by the court that it was cross offer and no
contract exist & no parties are bound by the contract.
• 5. IMPLIED OFFER :-
• When an offer is given by body posture, gesture or by action or by the
conduct of the offeror is known as implied offer. The offeree can accept the
offer by understanding the action of the offeror.
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U1 BL OFFER
• 6. EXPRESSED OFFER :-

• When an offer is express in written or in verbal form then this offer is known as
expressed offer. For example : “C” writes a letter to “D” to buy his earphone for
Rs.500. This is an expressed offer.

• 7. STANDING OFFER :-

• When tender is submitted to supply certain goods or any quantity as and when
required it will amount to standing offer. In such a case contract does not come
into existence merely when tender is accepted, but a contract takes place only
after the order is placed. Each order in such a case is acceptance and as soon as
the offer is accepted the contract comes into existence.

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U1 BL ACCEPTANCE
• It is often said that acceptance is to an offer what a lighted match is
to a barrel of gunpowder. For a successful contract, there must be a
valid offer followed by the offer being accepted. Let us learn more
about the essentials of a valid acceptance.
• The Indian Contract Act 1872 defines acceptance in Section 2 (b) as
“When the person to whom the proposal has been made signifies his
assent thereto, the offer is said to be accepted. Thus the proposal
when accepted becomes a promise.”
• So as the definition states, when the offeree to whom the proposal is
made, unconditionally accepts the offer it will amount to acceptance.
After such an offer is accepted the offer becomes a promise.
• Say for example A offers to buy B’s car for rupees two lacs and B
accepts such an offer. Now, this has become a promise.

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 U1. BL; ACCEPTANCE
• When the proposal is accepted and it becomes a proposal it
also becomes irrevocable.
An offer does not create any legal obligations, but after the offer
is accepted it becomes a promise.
• And a promise is irrevocable because it creates legal
obligations between parties.
• An offer can be revoked before it is accepted. But once
acceptance is communicated it cannot be revoked or
withdrawn.

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U1. BL, ACCEPTANCE Rules regarding
Valid Acceptance.
• ] Acceptance can only be given to whom the offer was made
• In the case of a specific proposal or offer, it can only be accepted by
the person it was made to. No third person without the knowledge of
the offeree can accept the offer.

• Let us take the example of the case study of Boulton v. Jones.

Boulton bought Brocklehurst’s business but Brocklehurst did not
inform all his creditors about the same. Jones, a creditor of
Brocklehurst placed an order with him. Boulton accepted and
supplied the goods. Jones refused to pay since he had debts to
settle with Brocklehurst. It was held that since the offer was never
made to Boulton, he cannot accept the offer and there is no contract.
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 U1. ACCEPTANCE - RULES
• 2] It has to be absolute and unqualified
• Acceptance must be unconditional and absolute. There cannot
be conditional acceptance, that would amount to a counteroffer
which nullifies the original offer. Let us see an example. A offers
to sell his cycle to B for 2000/-. B says he accepts if A will sell it
for 1500/-. This does not amount to the offer being accepted, it
will count as a counteroffer.

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U1. BL ACCEPTANCE- RULES
• 3] Acceptance must be communicated
• For a proposal to become a contract, the acceptance of such a
proposal must be communicated to the promisor. The
communication must occur in the prescribed form, or any such form
in the normal course of business if no specific form has been
prescribed.
• Further, when the offeree accepts the proposal, he must have known
that an offer was made. He cannot communicate acceptance without
knowledge of the offer.
• So when A offers to supply B with goods, and B is agreeable to all
the terms. He writes a letter to accept the offer but forgets to post the
letter. So since the acceptance is not communicated, it is not valid.

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U1. BL. ACCEPTANCE RULES
• 4] It must be in the prescribed mode
• Acceptance of the offer must be in the prescribed manner that is
demanded by the offeror. If no such manner is prescribed, it must be in a
reasonable manner that would be employed in the normal course of
business.

• But if the offeror does not insist on the manner after the offer has been
accepted in another manner, it will be presumed he has consented to such
acceptance.

• So A offers to sell his farm to B for ten lakhs. He asks B to communicate

his answer via post. B e-mails A accepting his offer. Now A can ask B to
send the answer through the prescribed manner. But if A fails to do so, it
means he has accepted the acceptance of B and a promise is made.
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U1. BL ACCEPTANCE RULES
• 5] Implied Acceptance
• Section 8 of the Indian Contract Act 1872, provides that
acceptance by conduct or actions of the promisee is
acceptable. So if a person performs certain actions that
communicate that he has accepted the offer, such implied
acceptance is permissible. So if A agrees to buy from B 100
bales of hay for 1000/- and B sends over the goods, his actions
will imply he has accepted the offer.

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 U1. CONSIDERATION- UNIT 1- BL
• Consideration meaning in law
• In the legal system, the term consideration in contract law refers
to something of value given to someone in return for goods,
services, or some other promise. A valid contract must include
consideration for every party involved. In simple terms,
consideration is the basic reason a party enters into a legal
contract. To explore this concept, consider the following
consideration definition.
• Definition of Consideration
• Something of value given in exchange for something else of
value, usually in the context of a contract.
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U1. CONSIDERATION
• What is Consideration
• Consideration is the benefit that each party receives, or expects
to receive, when entering into a contract. Consideration is often
monetary, but it can be a promise to perform a specific act, or a
promise to refrain from doing something. In order for a contract
or agreement to be legally binding, every party to the contract
must receive some type of consideration. In other words, a
contract is a two-way street, so each party must receive
something of value from the other party or parties. Illegal or
immoral acts are not legally considered to serv

54
U1. CONSIDERATION
• Example 1
• John backed into Allen’s car, damaging it. John is liable to pay
for the damages, but does not have the money right now. While
Allen could sue John for the damages to his car, he enters into
an agreement with John to give him 90 days to pay the full
amount of $1,500, plus an additional $250 for the
inconvenience. The agreement states that Allen will not file a
lawsuit before the 90 days is up, but is free to do so after that
time. This agreement, or “contract,” provides consideration for
both parties:
• John’s benefit: Allen gives up the right to sue for a period of 90
days
• Allen’s benefit: John will pay for the damages, plus an additional55
U1. CONSIDERATION. ELEMENTS
• 1. The contract must include a bargain for the terms of the
exchange.
• 2. This means there must be something that is worth
bargaining over to both the parties.
• 3. The exchange in the contract must be something of value.

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Types of Consideration UNIT 1
• 1. Money
• 2. Personal property
• 3. Real property
• 4. Promise to act
• 5. Promise to refrain from acting

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U1. CAPACITY OF PARTIES
• As per Section 10, all agreements are contracts, if they are
made by the parties competent to contract. The competency of
parties is one of the essential elements of the valid contract.
The capacity of parties to the contract means the legal ability of
the parties to enter into a contract.
• Section 11 specifies the persons who are competent to contract.

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5-6-23

59
U1. CAPACITY OF PARTIES
• It is a presumption of the law that everyone has the capacity to
contract.
• If a party does lack the capacity, the contract is usually voided
and the party without capacity will not need to comply with their
obligations to the contract.
• Both parties must have contractual capacity to create a binding
contract

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U 1. CAPACITY OF PARTIES
• Overview of Competent Parties
• A competent person is someone who is of legal age. The person must have the
mental capacity to enter into a contract knowingly. They must also understand it
is enforceable by law. Some parties are not contractually competent. These
include:

• 1. Minors
• 2. Persons influence by alcohol
• 3. Persons influenced by drugs
• 4. Mentally ill persons who are not declared insane
• 5. Those with a limited capacity to contract
• 6. Others who are completely incompetent have no legal capacity to contract.
This includes persons declared insane by a court due to mental illness.

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 U1. FREE CONSENT
• Free Consent
• In the Indian Contract Act, the definition of Consent is given in Section 13,
which states that “it is when two or more persons agree upon the same
thing and in the same sense”. So the two people must agree to something
in the same sense as well. Let’s say for example A agrees to sell his car to
B. A owns three cars and wants to sell the Maruti. B thinks he is buying his
Honda. Here A and B have not agreed upon the same thing in the same
sense. Hence there is no consent and subsequently no contract.

• Now Free Consent has been defined in Section 14 of the Act. The section
says that consent is considered free consent when it is not caused or
affected by the following, COERCION, UNDUE INFLUENCE, FRAUD,
MISTAKE & MISREPRESENTATION.
62
U1. FRAUD

63
 U1. COERCION
• For example, A threatens to hurt B if he does not sell his house
to A for 5 lakh rupees. Here even if B sells the house to A, it will
not be a valid contract since B’s consent was obtained by
coercion.
• Now the effect of coercion is that it makes the contract voidable.
This means the contract is voidable at the option of the party
whose consent was not free. So the aggravated party will
decide whether to perform the contract or to void the contract.
So in the above example, if B still wishes, the contract can go
ahead.

64
U1.UNDUE INFLUENCE
• ] Undue Influence (Section 16)
• Section 16 of the Act contains the definition of undue influence. It states
that when the relations between the two parties are such that one party is
in a position to dominate the other party, and uses such influence to obtain
an unfair advantage of the other party it will be undue influence.
• The section also further describes how the person can abuse his authority
in the following two ways,
• When a person holds real or even apparent authority over the other
person. Or if he is in a fiduciary ( duty to act in the best interest of other
party) relationship with the other person
• He makes a contract with a person whose mental capacity is affected by
age, illness or distress. The unsoundness of mind can be temporary or
permanent

65
U1. BL., DISCHARGE OF CONTRACT-
different modes

66
BREACH OF CONTRACT- meaning

67
 u1. TYPES OF BREACH
• Minor breach: A minor breach happens when you don’t receive
an item or service by the due date. For example, you bring a
suit to your tailor to be custom fit. The tailor promises (an oral
contract) that they will deliver the adjusted garment in time for
your important presentation but, in fact, they deliver it a day
later.
• Material breach: A material breach is when you receive
something different from what was stated in the agreement.
Say, for example, that your firm contracts with a vendor to
deliver 200 copies of a bound manual for an auto industry
conference. But when the boxes arrive at the conference site,
they contain gardening brochures instead.
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 U1. TYPES OF BREACH OF
CONTRACT
• Actual breach: When one party refuses to fully perform the
terms of the contract.
• Anticipatory breach: When a party states in advance that they
will not be delivering on the terms of the contract.

69
 U1. CONSEQUENCES OF BREACH
REMEDIES for Breach
• Two remedies: 1. common law remedy-damages
• 2. Equitable remedy.
• COMMON LAW REMEDIES: DAMAGES; Payable by
DEFAULTER
• 1.VARIOUS TYPES OF DAMAGES: a). General Damages, b).
• Special damages, c). Exemplary/punitive /vindictive damages
• d). Nominal damages.

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 u1. remedies for breach
• 1. General remedy:
• Example: Mr. A booked crackers from place X for a festival. But the
crackers reached after the festival. Mr. A is awarded damages .
• 2. Special damages:
• Mr. A owner of a mill handed a part of the Machine to a Transport co
to hand over to seller co for repair & bring it back without delay. Until
return of spare part mill is idle. But the transporter do not know it &
delay happened. Mr. A claimed general & special damages for loss
of profits. Court granted general damages & rejected spl. Damages
as the defendant was not aware of the spl. Circumstances.

71
 exemplary damages
• This damages is awarded to punish the guilty,but not ot
compensate the petitioner/plaintiff.
• These damages are awarded in two types ofcontrzcts;
• 1. breach of contract of marriage.
• 2. wrongful dis honour of cheques.
• NOMINAL DANMAGES.
• Namesake damages to uphold the rights of aggrieved party
• Example: Mr. A agreed to sell some shares to Mr. B at a price.
But Mr. B defaulted, A sold the shares to another at a higher
price. B is entitled to nominal damages.
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rules for granting damages

73
u1. rules for award of damages.

74
 u1. breach of contract
• Section 37 of the Indian Contract Act,1872 provides that the parties to the
contract are under obligation to perform or offer to perform, their respective
promises under the contract, unless such performance is dispensed with
or excused under the provisions of the Indian Contract Act or of any other
law.
• According to Section 39, where the party has refused to perform or
disabled himself from performing, his promise in its entirely, the other party
may put an end to the contract, , unless that other party has expressly or
impliedly signified its consent for the continuance of contract. If the other
party chooses to put an end to the contract, the contract is said to be
broken and amounts to breach of contract by the party not performing or
refusing to perform its promise under the contract. This is called
repudiation. Thus repudiation can occur when either party refuses to
perform his part or makes it impossible for him to perform his part of
contract in each of the cases in such a manner as to show an intention not
to fulfil his part of the contract.
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 U1. breach of contract
A breach of contract occurs when one party in a binding
agreement fails to deliver according to the terms of the
agreement.
A breach of contract can happen in both a written contract and
an oral contract.
The parties involved in a breach of contract may resolve the
issue among themselves or in a court of law.
There are different types of contract breaches, including a minor
or material breach and an actual or anticipatory breach.
A breach of contract is not considered a crime or even tort and
rarely results in extra monetary compensation.
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 breach of Contract- Types
• Types of Contract Breaches
• One may think of a contract breach as either minor or material.

• 1. Minor breach: A minor breach happens when you don’t receive an item
or service by the due date. For example, you bring a suit to your tailor to
be custom fit. The tailor promises (an oral contract) that they will deliver
the adjusted garment in time for your important presentation but, in fact,
they deliver it a day later.
• 2. Material breach: A material breach is when you receive something
different from what was stated in the agreement. Say, for example, that
your firm contracts with a vendor to deliver 200 copies of a bound manual
for an auto industry conference. But when the boxes arrive at the
conference site, they contain gardening brochures instead.

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Types of breach of contract
• Further, a breach of contract generally falls under one of two
categories:

• 3. Actual breach: When one party refuses to fully perform the

terms of the contract.
• 4. Anticipatory breach: When a party states in advance that they
will not be delivering on the terms of the contract.

78
U1. remedies to breach of contract
• Damages and Legal Remedies:
• Generally speaking, the goal of contract law is to ensure that anyone who
is wronged is basically left in the same economic position that they would
have been in had no breach occurred. A breach of contract is not
considered a crime or even a tort, and punitive damages are rarely
awarded for failing to perform promised obligations, with payouts limited to
the figures listed in the contract.

• For example, if you completed a job for which a contract stated you would
get paid $50,000, but you only got $20,000, you could be awarded
damages of $30,000.
• Normally, a party whose contract was breached cannot claim more than
the money they were initially owed—as laid out in

79
 U1. What Is Considered a Breach of
• WhatContract
Is Considered a Breach of Contract?
• A breach of contract occurs when one party fails to fulfill its obligations as
outlined in the contract. That could include something relatively minor, such as
being a couple of days late on a payment, or something more serious.
• Can I Sue for Breach of Contract?
• If you have a contract with another person or entity and they fail to fulfill the
contract as agreed, you can file a lawsuit to recover any damages that you lost
as a result. Before filing a lawsuit, though, you will want to speak with a lawyer
who specializes in contracts to ensure that your case has a possibility of
success.
• Is Breaching a Contract a Crime?
• Breaching a contract is generally not considered a criminal offense unless it
involves something like fraud. It is considered a matter between private parties,
rather than something that affects society as a whole.
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