Law of Contract

Prof. Gigimon V.S.

Acceptance
When the person to whom the proposal is made signifies his assent it is an acceptance of the proposal. Expressed Acceptance made in words spoken or written Implied Acceptance by conduct Can be made only by the person to whom its been made

Rules Regarding Valid Acceptance

Acceptance must be given by the person to whom the offer is made Acceptance must be absolute and unqualified Acceptance must be in some usual and reasonable manner, unless specified Communicated by the acceptor Acceptance must be given with a reasonable time, before its lapse Acceptance must succeed the offer Rejected offer can be accepted only if renewed

Communication of Offer, Acceptance and Revocation

When the parties are physically present and negotiate in person, agreement comes into existence Sections 4 and 5 of the Contract Act deals with rules regarding acceptance of offer through post and other communication modes

Rules of Communication
Communication of Offer complete when its reaches the offeree Communication of acceptance

As against the proposer, when it is put in course of transmission to him, so as to be out of the power of the acceptor to withdraw the same As against the acceptor when it comes to the knowledge of the proposer

Rules of Communication

A proposes by letter to the sell the house to B for 10 lakh. B accepts As proposal sent by Post. The communication of the acceptance is complete a against A, when the letter is posted, as against B when the letter is received by A. Communication of Revocation
As against the person who makes it, when it is put into a course of transmission As against the person to whom it is made, when it comes to his knowledge

CONSIDERATION

Consideration is the price for which the promise of other is brought and the promise thus given for value is enforceable
A agrees to sell his house to B for Rs.1 lakh. Here Bs promise to pay the sum of Rs.1 Lakh is the consideration for As promise to sell the house, and As promise to sell the house is the consideration for Bs promise to pay the sum of Rs.1 Lakh

Sec 2 (d) Indian Contract Act

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 abstain from doing Such act or abstinence or promise is called a consideration for the promise

Essentials of a Valid Consideration

Consideration should move at the desire of the Promisor

A sees B drowning and saves his life. A cannot demand payment for his services as it is a voluntary act on his part and B never asked his to do so

Consideration must move from the promisee or any other person

X, Y and Z enter into an agreement under which X pays Rs.1 Crore to Y and Y agreed to build a House for Z. Here Z is a party to the contract but stranger to consideration and can enforce the contract.

Consideration may be Past, Present or Future

Past Consideration - consideration for the promise is given before Present Consideration - Consideration and Promise is Simultaneous Future Consideration - Future or Executory Consideration

Essentials of a Valid Consideration

Consideration need not be adequate Consideration must be real Consideration must be Lawful Consideration must be something which the promisor is not already bound to do

Exception to the Rule No Consideration No Contract

Agreement made on account of natural love and affection

A, for natural love and affection, promises to give his son B Rs.1000. A puts his promise to B into writing and registers it. This is Contract

Agreement to compensate for past voluntary service

A rescued B from drowning in the river, and B, appreciating the service that had been rendered, promised to pay Rs.1000 to A. There is a contract between A and B.

Agreement to pay a time-barred debt. Completed gift Contract of Agency Remission by promise, of performance of the promise

Capacity of Parties
Competent Persons to contract. (Sec. 10) Every person is competent to contract who is of the age of majority according t the law to which he is subject, and who is of sound mind, and is not disqualified form contracting by any law to which he is subject.

Capacity of Parties

Minor Sec 3. of Indian Majority Act 1875 A person under 18 years of age. Absolutely - Void contracts because their mental faculties are not mature Beneficial agreements valid No ratification at the age of majority The rule of estoppel does not apply for minor Specific Performance Minor Partner Minor agent Minor and insolvency Contract by minor and adult jointly Surety for a minor Position od minors parents Minor shareholders Minors liability in tort

Capacity of Parties
Person of Unsound mind Sec.12 A person is said to be of sound mind for the purpose of making a contract, if at the time when he makes it, he is capable of understanding it and of forming a rational judgement as to its effect upon its interests. Absolutely void and inoperative against him.

Capacity of Parties Disqualified persons

Alien Enemies Foreign Sovereign and Ambassadors Convict Insolvent Married Women with regard to husbands property Joint Stock Company and corporation incorporated under a specific Act

Free Consent

Sec 13 Two or more persons are said to consent when they agree upon the same thing in the same sense. Absence of Consent void or voidable Consent to be free and caused by
Coercion threatening to commit voidable contract Undue influence (a) one party in a position to dominate the will of the other (b) Uses the position to obtain an unfair advantage over the other voidable contract

Free Consent

Misrepresentation wrongly representing of fact by one party to the other either before or at the time of the contract with the intention to induce the other to enter into the contract voidable contract Fraud intentionally deceive the other person voidable contract or restitution Mistake erroneous belief concerning something
Mistake of law not an excuse Mistake of fact bilateral mistake & unilateral mistake

Legality of Object & Consideration

Object and Consideration of agreement must be lawful Sec. 23 kinds of consideration and objects are lawful Forbidden by Law Defeat the provisions of Law Fraudulent Implies or involves injury to the person or property Immoral Opposed to Public Policy

Void Agreement

Sec. 2. (g) An agreement not enforceable by law is void. Minor Unsound person Unlawful Consideration Unlawful object With consideration Impossible events or Acts Restraint of marriage Restraint of Trade Restraint of Legal Proceedings Uncertain Meaning Wager Agreement Impossible Events Impossible Acts

Performance of Contract
A person cannot acquire rights under a contract to which he is not a party Promisee can demand the performance of Contract Exception Legal heirs Competent person to perform a contract

Promisor Agent of Promisor Legal Representatives

Quasi Contracts

Obligations resembling those created by a contract are imposed by law even though the parties have not entered into contract Claims for necessaries supplied to a person incapable of contracting or on his account. Reimbursement of person paying money due by another, in payment of which he is interested Obligation of person enjoying benefit of nongratuitous act. Responsibility of finder of goods Liability of person to whom money is paid, or thing delivered by mistake

Breach of Contract & Remedies Available

Breach of Contract is another mode of discharge When one party fails to perform the contract Anticipatory before the time fixed for performance
Expressly by words spoken or written Impliedly by conduct of parties Effects either sue for damages or make the party responsible for consequences of non performance of contract

Breach of Contract & Remedies Available

Actual Breach When one party fails to perform the contract on the actual date of the performance of the contract Injured party is entitled to
Rescission of the Contract cancel the contract file suit for damages Suit for damages
Ordinary Special Exemplary Nominal

Suit upon Quantum Meruit as much as he earned or in proportion to work done Suit for Specific Performance Suit for injunction

Indemnity and Guarantee

Contract of Indemnity A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person A person who promises to make good the loss is called the indemnifier A person whom the loss is to be made good is indemnified

Indemnity and Guarantee

Contract of Guarantee A contract to perform the promise, or discharge the liability of a third person in case of his default A person who gives the guarantee is called a surety A person in respect of whose default the guarantee is given is called the principal debtor Consideration is important

Nature and Extent of Suretys Liability

The liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. Extent of Liability

Surety is liable only on the default of the principal debtor Liability of surety arises immediately on the default of the principal debtor Principal debtor need not resort to securities before suing the surety Surety will not be liable for creditor guarantee by misrepresentation

Continuing Guarantee
When a guarantee is given for a single or specific debt single or specific guarantee When a guarantee extends to series of distinct or separable transactions continuing guarantee Revocation of Continuing Guarantee

Notice to Creditor by surety Death of the surety

Discharge of Surety
Notice of Revocation Death Variance of Terms of Contract Release by principal debtor Arrangement by creditor with principal debtor Creditors Act or omission impairing suretys remedy Loss of security Invalidation of contract of Guarantee

Problems

Problems
A invites B for a Dinner. B accepts the invitation. A makes an elaborate arrangement but fails to turn up. B sues for the loss sustained

Answer
No , A cannot sue B for the loss he has suffered, because the agreement of a social nature and hence lacks the intention to create legal relationship. Essentials of a valid contract

Problem
N agrees to pay Rs.100, and in consideration M agrees to write 100 pages of report form him in five minutes. Is it a valid contract

Answer
No, it is not a valid contract. It is a void agreement because an agreement to do an act impossible in itself is void.

Problem

A aged 15 yrs obtains a loan form B. Can A be asked to repay the money.

Answer
No, A cannot be asked to repay the money. A minors agreement is void abnitio

THANK YOU