Contract

Agreement + Consideration + Enforceable by law

- Social Agreement

- Legal Agreement

 

Essentials of Contract

Section 2(a) Offer

When a person confesses his willingness to do something or to not do something, with a view of obtaining assent of the other person, it is called a promise.

 

Section 2(b) Acceptance

Accepted Proposal - Promise

When the person to whom the offer was made, confesses his assent, the proposal is said to be accepted.

 

Section 2(c) Parties

Offer maker - Promissor

Offer acceptor - Promisee

 

Section 2(d) Consideration

Price for the contract - Section 23, 24, 25

 

Section 2(e) Agreement

Set of promises forming consideration for each other

 

Section 2(f) Reciprocal Promises

Promises which form consideration or part of consideration are called reciprocal promises.

 

 

Section 2(g) Void Agreement

Agreement not enforceable by law

 

Section 2(h) Contract

An agreement enforceable by law.

 

Section 2(i) Voidable Contract

An agreement enforceable by law at the option of one side of practice (s) but not at the option of other. It is called voidable contract.

 

Contract = Agreement + enforceable by law

Agreement = (offer + Acceptance) +Consideration

 

Types of offer

1. Particular offer

Made to 1 person only who can accept

 

2. General Offer

Offer made to public at large

 

3. Cross Offer

Both Parties present same offer to each other without prior knowledge.

 

4. Counter Offer

Offer made in return of offer

 

5. Open offer/ Standing offer

Limited time

 

6. Expressed offer

Expressed orally/ in writing

 

7. Implied offer

Expressed by conduct

 

 

 

Rules of offer

1. Certain / Clear

2. Not invitation to offer

3. Free consent

4. Competent

5. Lawful

6. Not disqualified party

7. Intention

8. Proper Communication

9. Sound Mind

 

Rules of Acceptance

1. Proper manner

2. Reasonable time to reply

3. Capacity

4. Free Consent

5. By Correct person

6. Absolute

 

Offer

Expressing final willingness

Contractual obligation

Intention to create legal relationship

"Acceptance to offer is what lightered matches is to trail of gun powder"

- Anson

Section 3 - Communication, acceptance and revocation of proposals

- Should be through an act / omission

Section 4 - Communication when complete?

 

(A) When proposal communication ends ( No Sides)

- When proposee gets knowledge of the proposal

e.g. A sends proposal courier on 7th B receives it on 10th and reads it.

Proposal communication ended on 10th for A and B

 

(B) When acceptance is completed

e.g. B sent his acceptance on 14th. A receives the courier of acceptance on 17th.

Acceptance received by / granted to A

A's Side

- When B puts acceptance courier in transition i.e. on 14th

- When Courier sent

 

Acceptance granted by B

B's Side

- When A receives the courier i.e. comes his knowledge i.e. on 17th

- When it come to the knowledge

 

(C) When Revocation is Completed

A wants to revoke

- Can be done only before receiving acceptance from B.

- When it comes to B's knowledge that A wants to revoke

B Wants to Revoke

- Can be done only before acceptance reaches A.

- When it comes to A's knowledge

 

Section 5 When can revocation be done?

Proposer

Only before proposer receives acceptance from acceptor

Acceptor

Only before his acceptance courier reaches proposer

 

Section 6 Lapse of an offer

- Notice to revoke

- Violation of rules

- Death / Insanity of offeror

- Laps of time

 

Section 7 Absolute Acceptance

Section 8 Acceptance by performing conditions or receiving consideration.

Performance of conditions - Receiving Conditions -> Acceptance

 

Section 9 Promises, express, implied (conduct)

 

Section 10 What agreements are contracts?

Section 13-22 - Where parties are willfully entering

Section 11,12  - Parties are competent

Section 23-25 - Lawful object

Section 26-30 - Transition should not be declared void by law

 

Where parties are competent?

Section 11 - Who all are competent?

- Age 18+ (Indian Majority Act)

- Sound Mind

- Body corporation

- Diplomats

- Convict (after jail) 

- Insolvent who cleared dues

The following are not competent:

- Minor

- Alien enemy

- Insolvent who's dues are pending

- Convict (in jail)

- Insane

- Disqualified by law

 

Section 12 Eligibility for sound mind

- Capable of understanding terms of contract and its consequences

- If someone is of sound mind at times and un sound mind at ties, he can only during sound mind hours.

- If someone is of sound mind mostly but at times unsound, he can enter when sound mind

 

1. Where parties are willfully entering ( Section 13 to 22)

Section 13 Consent

Consent = Agree upon same things = meeting of minds = Consensus ad idem

 

Section 14 Free consent

Consent without the following is free consent:

Vitiating Elements

i.  Coercion (15, 19)

ii. Under influence (16, 19A)

iii. Fraud (17, 19)

iv. Misrepresentation (18)

v. Mistake - Law- Fact (20, 21, 22)

 

Section 15 Coercion

Coercion is committing or threatening to commit any act forbidden by lawor Indian Penal Code.

Unlawful detaining or threatening to detain any property to get that person to enter into a contract with you.

Section 19 Effect of coercion, effect of fraud

Contract is voidable at the option of the person victimized.

 

Section 16 Undue influence

Relations between the parties are such that one is in a position to dominate the will of the other and uses that position to obtain unfair advantage over the other.

Powerful positions:

i. Apparent authority

ii. Fiduciary Relationship

Burden of proof shall lie upon the person accused of using undue influence.

 

Section 19A - Effect of undue influence

Contract is voidable at the option of the person victimized

 

Section 17 - Fraud

Fraud refers to any of the acts committed by a party to deceive another party or to induce a party to enter into a contract.

i. False Facts

ii. Concealment of facts

iii. Promise without intention

iv. Act fitted to deceive

v. Act declared fraudulent by law

 

Illustrations

i. A sells by auction to B, a horse of unsound mind. A says nothing about unsoundness of horse. Fraud details are not discussed in auction.

ii. B is A's daughter. A wants to sell the horse to B. He doesn't tell her about unsound mind. Fraud regardless of relationship. A has concealed facts.

 

Section 18 - Misrepresentation

Pretending to be someone else to mislead a person to enter into contract.

 

Section 20 Bilateral mistake

Both parties under mistake of fact - void

 

Section 21 Effect of mistake of law

Mistake of law - valid

Mistake of Int. Law = Mistake of fact

Ignorantia fact excusat

If main essence of contract broke - void

Section 22 Unilateral mistake

One party under mistake of fact - valid

 

3. Lawful Objects

Section 23 Lawful consideration essentials

Void

i. Forbidden by law

ii. Defeats provisions of law

iii. Fraudulent purpose

iv. Injury

v. Court sees as immoral

vi. Opposes public policies

 

Section 24 Consideration / objects changed in parts. Agreement / contract void.

 

Section 25 Agreements without consideration = void

Section 23 void wale

Exceptions

i. Love and affection + Registration

ii. Promise to compensate for any act done voluntarily

iii. Promising a time barred debt

 

Section 26 Agreement in restraint of marriage void, except minors

 

Section 27 Agreement in restraint of trade - void

Every agreement by which one is restrained from exercising a lawful profession, trade or business of any kind is to that extent void.

Except : Saving of agreement not to carry on business which goodwill is sold.

 

Section 28 Agreements unrestraint of legal proceedings - void

 

Section 29Agreements void for uncertainty

 

Section 30 Agreements by way of wages, void

Except Horse racing Rs. 500>

 

Section 31 Contingent Contract

A Contingent contract is a contract to do or not to do something if some event collateral to such contract does or does not happen.

 

Section 56 Agreement to do an impossible act void

Act becomes impossible after contract is made = void

When promising person knew or with reasonable diligence, might have known+ promises did not.

Liable for damages

 

Section 68 Claim for necessaries supposed to person incapable of contracting or his account.

If a person, incapable of entering into a contract, or any one whom he is equally bound to support is supplied by another person with necessities suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.

Right of reimbursement

 

Section 69 Reimbursement of person paying money due by another ina payment of which he is interested

 

Section 70 Obligation of persons enjoying benefit of non-gratutious act.

 

Section 71 Responsibility of binder of goods same responsibility as bailee to Take care.

 

Section 72 Liability of person to whom money is paid, or thing delivered, by mistake or under coercion. Return, reply

Section 73 Compensation for loss/ damage caused by breach of contract.

Sufferer - breacher

Compensation for breach of contract where penalty stipulated for.

 

Section 75 Party rightfully rescinding contract entitled to compensation.

Person rightfully canceling the contract entitled to damages restrained through fulfillment of contract.