Branch of law

Promises made shall be legally binding on

parties to a contract

Introduces a definiteness in business

transactions
 Development of Human Civilisation

Frequency of exchanges between persons

and communities

Changes in social and economic behaviour

Need for a code to govern bilateral

transactions
General Principles of contract

Special contracts

Bailment and pledge

Indemnity and guarantee

agency
 Does not deal with

Partnership
Sale of goods
Negotiable instruments
insurance
Jus in personam

Jus in rem
 A contract is
an agreement
enforceable
by law
 Every promise and every set of
promises forming consideration
for each other
is
an agreement
When the person to whom
the proposal is made
signifies his assent thereto,
the proposal is said to be
accepted.
A proposal when accepted
becomes a promise.
 A person is said to have made a
proposal when he
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
An accepted proposal is an agreement

Agreement = Offer + Acceptance

 By express words
By implied conduct of parties

e.g. “Will you sell your car to me for Rs.

100000?”
Or
Installation of a public telephone at a public
place
 To definite person
To world at large
(Carlill v/s Carbolic Smoke Ball co)
Must be capable of being accepted
“A social invitation is not an offer”
Must be definite and certain
“I will sell you a car”. I have three
cars.
Which Car ? At what price ?
Where ? When?
 Must be communicated

No communication no
acceptance, No acceptance, no
agreement, No agreement, no
contract

Must have an intention to

obtain assent of other party
Offer should not contain a term the
non compliance of which may be
assumed to amount to acceptance

One cannot say that if the acceptance

is not communicated by certain time,
the offer would be considered as
accepted

A statement of price is not an offer

A declaration of intention and an announcement

An auctioneer announcing an auction in the

newspaper. If the auction is cancelled, one cannot
sue for cancellation

It is merely a declaration of intention or

announcement
 An invitation to make an offer or do
business

Display in a shop

Invitation to purchase

Sale of goods in malls, contract is made

when the cashier at the counter accepts
the payment
 An act of assenting to the offer.

Can be Express or Implied

At an auction sale, X is the highest bidder. The auctioneer

accepts the offer by striking the hammer on the table. This
is an implied acceptance.
 It must be absolute and unqualified

A made an offer to B to purchase a house with

possession on 25th July. The offer was followed
by an acceptance suggesting possession from 1st
Aug. There was no agreement.
 It must be communicated to the offeror

A mere resolve or determination of offeree

without any manifestation is not acceptance

A draft agreement for supply of coal

Sent to the manager of a railway company
Manager wrote on it “approved” and put it in his
drawer. Not communicated to the offeror
No contract resulted.
Deemed to be made by an act or omission
Can be done through words spoken or
written or through conduct
 When is communication complete?
In case of offer, it is complete when it comes to the
knowledge of the person to whom it is made.

In case of acceptance
As against the proposer, when it is put into
transmission to him
As against the acceptor, when it comes to the
knowledge of the proposer
 A proposes to sell his house to be at a certain price.
The offer is sent through a letter posted on 10th July.
Letter reaches to B on 12th July
Communication of Offer is complete on 12th.
B accepts to purchase at the offered price. He sends is assent
through a letter posted on 14th July.
Comm. is complete as against A on 14th.
This letter reaches A on 16th July.
Comm is complete as against B on 16th.
 Taking back, withdrawal, recalling

Comm is complete as against the person to whom it is

made, when it is put into transmission

As against the person who makes it, when the other

person comes to know of it
 Of offer
Any time before the communication
of acceptance is complete as against
the proposer

Of Acceptance
Any time before the communication
of acceptance is complete as against
the acceptor
 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
 Consideration can be

Past
Present
Future

It is an act e.g. A promises B to guarantee payment of price of

the goods which B sells on credit to C.

It is an abstinence e.g. A promises B not to file a suit against him

if B pays A Rs. 500.
 It must move at the desire of the promisor
It may move from the promisee or from any other
person
It may be an act, abstinence or forbearance
May be past, present or future
Need not be adequate.
Must be real and not illusory.
Must be something which the promisor is not
already bound to do
Must not be illegal and immoral
 Who can contract ?
A major
A person of sound mind
A person who is not disqualified from contracting by
any law to which he is subject
 Inoperative and void ab initio

A minor mortgaged his house to a money lender

To secure a loan of Rs. 20,000.
The money lender paid the minor Rs. 5000.
Subsequently the minor sued for setting aside the
mortgage.
The mortgage was cancelled ab initio.
Consent is not free when it is affected by any of the
following elements:

Coercion
Undue influence
Misrepresentation
Mistake

Valid contract requires consensus ad idem.

When consent is not free, contract is voidable.
 Coercion
 
Coercion includes fear, physical
compulsion & menace
 
 
Threat to commit suicide amounts
to coercion
 Undue Influence

When one of the parties to a contract is in a position to dominate the

will of the other
When he/she abuses this position to obtain unfair advantage

Following relationships raise presumption of Undue Influence

Parent and child
Guardian and ward
Trustee and beneficiary
Religious advisor and disciple
Doctor and patient
Solicitor and client
Fiance and fiancee
 Misrepresentation
 

It is a false statement

The person making it honestly believes it to be

true
Or he does not know it to be false

Misrepresentation includes non disclosure of

material fact without any intention to deceive
 Fraud
 
It exists when a false representation is made
Knowingly without belief in its truth &
Recklessly
 And the person making it intended the other party to
act upon it 
 
It exists when there is a concealment of a material fact
or partial statement of fact with an intention to deceive
or to induce to enter into a contract
Mistake
 
 
 Void ab initio
 
Collateral transaction become tainted with illegality
 
No action can be taken for recovery of money paid or property
transferred
 
No action can be taken for breach of agreement
 It is a contract to do or not do
something if some
Event collateral to such contract
does or does not
Happen
 
Event is uncertain
Event is collateral
 ‘A’ agreed to purchase certain shares of a company if
the company appointed him as its sole agent at a
certain place. Before the company do that, it went into
liquidation.
‘A’ was entered in the list of contributories.
Held A was not liable as the event upon which
purchase of share was to take place, never occurred.
 Performance of a contract takes
place when parties to it fulfill their
obligations within the time
prescribed and in the manner
prescribed.

The parties to a contract must either

perform or offer to perform their
respective promises unless such
performance is dispensed with or
excused
A software company enters into a contract with a mining
company to install electronic device system for dispatch
of mined lignite. The software company installs the
system.
Subsequently the mining company prevents them from
operationalizing the system.
The performance of a promise within
the specified time by a party to the
contract is essential in order to
entitle him to enforce performance
from the other party.

If the promisor fails to perform his part of

the contract within the specified time, the
contract becomes voidable at the option
of the promisee
In business and mercantile contracts, time is
of essence because business requires
certainty.

Contract for erection of hydro turbine

boilers at a hydro power stations
within a period of 12 months. If the
contractor fails to perform, the
promisee can repudiate the contract
and sue for damages
 Termination of contractual relationship between the
parties

Discharge takes place when rights and obligations created

by a contract come to an end
‘X’ let out a hall for music concert.

The hall fell through in an

earthquake before the first concert
could take place.

Contract is discharged.
 If a party breaks his obligation which the
contract imposes, there takes place a breach
of the contract.

Breach can be actual or anticipatory.

 Actual breach may take place either at the time when
performance is due
Or during the performance of the contract
Anticipatory breach may take place when the party
repudiates his obligations before the time of
performance arrives

‘A’ undertakes to supply 10 cars to B on 1st Jan. Before this

date, he informs B that he is not going to supply the
goods. This is anticipatory breach of contract.
It is a relationship resembling that created by a contract.

Constructive contracts under English law

Principle of unjust enrichment

It is created by law
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 and B go into a shop. A tells the shop owner

that let him (B) have the goods. I will see you
paid. There is a contract of indemnity between
A and the shopowner.
It is a contract to perform the promise, or discharge
the liability of a third person in case of his default.

X
GoG SSNNL issues
Bonds
Y

In case SSNNL defaults, it

will pay the principal and N
interest