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An agreement enforceable by law is a CONTRACT Therefore CONTRACT = Agreement + Enforceability by Law.

AGREEMENT = Offer + Acceptance +

INDIAN CONTRACT ACT, 1872


An agreement enforceable by law is a CONTRACT Therefore CONTRACT = Agreement + Enforceability by Law. AGREEMENT = Offer + Acceptance + Enforceability by Law

Essential elements of a valid contract: (Sec. 10)


Agreement - Offer & acceptance Legal consequences - rights & obligations Capacity of the contracting parties Consideration Legal object Free consent Certainty Possibility of performance Writing & registration Not expressly declared to be void.

Offer: Sec.2(a)


Essentials of offer: It must be an expression of the willingness to do or abstain from doing something. Such expression must be to another person. Such expression must be made with the intention to obtain the assent of the other person to such an act or abstinence.

Rules regarding a valid offer:


Offer may be express or implied. Must give rise to legal consequences & be capable of creating legal relationship. Terms must be certain & not vague. May be specific or general. Must not be an invitation to offer. Can be made subject to any terms & conditions. Must be communicated to offeree. Invitation to offer, cross offers & counter offers. Communication of special terms Prescribed mode of acceptance.

Lapse & revocation of an offer:


Lapse of stipulated or reasonable time. Acceptance not in prescribed mode. Rejection. Death or insanity of offeror or offeree before acceptance. Revocation. Non-fulfillment of condition precedent. Subsequent illegality or destruction of subject-matter.

Acceptance: Sec 2(b)


Acceptance must be given only by the person to whom the offer is made. Must be absolute & unqualified. Must be in prescribed mode or reasonable manner. Must be communicated. Within reasonable time. Acceptance must succeed an offer. Rejected offers can be accepted only if renewed.

Consideration: Sec2(d)
Essentials of consideration:

Consideration must move at the desire of offeror. May move from offeree or any other person. Stranger to a contract cannot sue; except in case of trust created, an addressee of an insured article; family settlement. May be past, present or future. Must be of some value. Must be real.

No Consideration, No ContractExceptions:
Natural love & affection. Agreement to compensate for past voluntary service. Payment of time-barred debt. Completed gift. Contract of agency. Contribution to charity.

Capacity of parties: (Sec 11)


          

Minor : Void & inoperative No restitution Beneficial agmts are valid No ratification on attaining the age of majority. Rule of estoppel does not apply. Minors liability for necessaries. Specific performance. Minor partner Minor agent Minor & insolvency

Unsound mind: Sec 12


 

Usually of sound mind. Usually of unsound mind


    

Causes:
idiocy Lunacy Drunkenness Hypnotism Mental decay


 

Effects:
Void & inoperative Similar to agreements entered into by minors.

Disqualified persons:
    

Alien enemies Foreign sovereigns & ambassadors Convicts Married women Insolvents

Free consent: Sec 14


    

Coercion Undue influence Misrepresentation Fraud Mistake

Undue Influence: Sec 16




A contract is said to be induced by undue influence when the relation subsisting between the parties is such that one of the parties is in a position to dominate the will of the other and he uses this position to obtain an unfair advantage over the other.

Presumption of Undue Influence:




In the following cases undue influence is presumed to exist & the burden of proof lies on the party who is in a position to dominate the will of the other:

  

The person holds a real or apparent authority over the other, e.g., master & servant, police officer & accused. Fiduciary relationship e.g., father & son, doctor & patient. The contracting parties mental capacity is temporarily or permanently affected due to age, illness, mental or bodily distress, e.g., old illiterate persons.

No presumption of undue influence:




In the following cases law does not presume undue influence & the burden of proof lies on the party alleging that undue influence existed:

    

Mother & daughter Grandson & grandfather Husband & wife Creditor & debtor Landlord & tenant.

Effects of Undue Influence:


 

Voidable Sec. 64: Court has the discretion to direct the aggrieved party to refund the benefit in part or in whole or set aside the contract without any direction for refund of benefit. There is no criminal liability in case of undue influence.

Misrepresentation:


 

A representation means a statement of fact made by one party to the other either before or at the time of contract, relating to some matter essential to the formation of the contract, with an intention to induce the other party to enter into a contract. It may be expressed by words spoken or written or implied from the acts or conduct of the parties. In law, a representation when wrongly made without an intention to deceive the other party is known as misrepresentation.

Effects of misrepresentation:
  

Voidable May choose to rescind the contract or Affirm the contract & insist that he be put in a position in which he would have been, if the representation made had been true. The remedy is lost if the other party had sufficient means of discovering the truth with ordinary diligence.

Fraud: Sec 17


1. 2.

3. 4. 5.

Fraud means & includes any of the following acts committed by a party with an intention to deceive or induce the other party to enter into a contract: A false statement made intentionally is fraud Active concealment of a material fact by a person having knowledge of the fact is fraud. However, mere non-disclosure is not a fraud, if there is no duty to disclose. A promise made without an intention of performing it. Any cat or omission declared by law to be fraudulent. Any other act fitted to deceive.

Silence & fraud:




1. 2.

Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless: Such a person is under a duty to speak or Silence is in itself equivalent to speech.

Effects of fraud:
 

 

Right to rescind the contract. Affirm the contract and ask for restitution, i.e., to be put in a position, he would have been, if the statement made had been true. The aggrieved party can also claim damages. Fraud by a stranger to the contract does not affect the contract.

Void Agreements:
      

Agreements in restraint of marriage [Sec. 26] Agreements in restraint of trade [Sec. 27] Agreements in restraint of legal proceedings [Sec. 28] Agreements the meaning of which is uncertain [Sec. 29] Agreements by way of wager [Sec. 30] Agreements contingent on impossible events [Sec. 36] Agreements to do impossible acts [Sec. 56]

Void Agreements:


Agreements in restraint of marriage [Sec 26]: Exception : an agreement restraining the marriage of a minor is valid. Agreements in restraint of trade [Sec 27]: any kind of restraint of trade, whether reasonable or not is void; however agreements restraining freedom of action necessary for carrying on a business are not void. Exception: Sale of goodwill (provided the restraint is reasonable in case of time & space), partners agreements, trade combinations, negative stipulation in service agreements.

Quasi contracts: [Sec 68-72]




In case of quasi contracts there is no offer, acceptance or consensus; in fact there is no intention on the part of either parties to enter into a contract; still the law, from the conduct & relationship between the parties, implies a promise, imposing obligation on one party & conferring a right in favor of the other party. Thus under certain special circumstances, obligations resembling those created by a contract are imposed by law although the parties have never entered into a contract.

Doctrine of unjust enrichment:




A quasi contract rests upon the doctrine of unjust enrichment which declares that a person shall not be allowed to enrich himself unjustly at others expense. A suit for damages for the breach of contract can be filed in the case of a quasi contract in the same manner as in the case of a completed contract.

Quasi-contractual obligations:
 

A claim for necessaries supplied to a person incapable of contracting [Sec. 68] A person who is interested in the payment of money (in order to protect his own interest), which another person is bound by law to pay, and who therefore pays it, is entitled to be reimbursed [Sec. 69] Obligation of person enjoying non-gratuitous act [Sec. 70] : the act must have been done lawfully in good faith; the act must be non-gratuitous & the person for whom the act is done must have enjoyed benefit of the act.

Contd..


Responsibility of finder of goods [Sec. 71]: law implies an agreement between the owner & the finder of goods. It casts duties upon the finder of the goods. Liability of a person to whom money is paid, or goods delivered by mistake or under coercion [Sec. 72]

Contingent Contracts: [Sec. 31]




 

It is a contract, the performance of which depends upon, the happening or non-happening of an uncertain event, collateral to such a contract. A collateral event is one which does not form part of the consideration of the contract, and is independent of it. An ordinary contract can be converted into a contingent contract, if its performance is made dependent on the happening or non-happening of an uncertain event, collateral to such contract.

Essentials of contingent contract:




The performance of such a contract depend on the happening or non-happening of a future uncertain event. The future uncertain event is collateral or incidental to the contract.

Rules regarding performance of contingent contracts:




Contingent contracts to do or not to do any thing, if an uncertain future event happens, cannot be enforced by law unless & until the uncertain event occurs. Where such an event becomes impossible, such contracts become void. Contingent contracts to do or not to do any thing, if an uncertain future event does not happen, can be enforced when the happening of that event becomes impossible & not before.

Contd..


Contingent contracts to do or not to do any thing, if a specified uncertain event happens within a fixed time, becomes void, if, at the expiration of the time fixed, such event has not occurred or before the time fixed, such event becomes impossible. Contingent contracts to do or not to do any thing, if a specified uncertain event does not happen within a fixed time, may be enforced by law when the time fixed has expired & such event has not occurred, Or, before the time fixed has expired, it becomes certain that such event will not happen.

Performance of contract:


Under a contract legal obligations are created, which both the parties to a contract are under a duty to fulfill. Fulfilling of such legal obligations, or performance of the promise under a contract by both the parties is known as performance of a contract. Performance of all the obligations arising out of a contract, by all the parties to a contract is the normal & natural mode of discharging a contract.

Rules regarding performance:




Only the promisee can demand performance of the promise under a contract, a third party cannot demand performance, even though it was made for his benefit. A contract involving personal skill, taste etc., must be performed by the promisor itself. Where it appears from the nature of the contract, that the parties intend that the promise of the contract should be performed by the promisor itself; then it must be performed by the promisor only.

Breach of contract:


 

Breach of contract brings an end to the obligations arising out of a contract, and hence the contract stands discharged. The aggrieved party can sue for damages. Breach of contract may be anticipatory or actual.

Actual breach:


Actual breach occurs when a party fails to perform his obligations upon the date fixed for performance of contract. There can be no actual breach so long as the time for performance has not yet arrived. The aggrieved party may sue for damages.

Remedies for breach of contract:


    

Rescission of contract Suit for damages Suit upon quantum meruit Suit for specific performance Suit for an injunction